[Illustration:

  FIFTY
  YEARS IN
  WALL STREET
  _By_
  HENRY CLEWS, LL.D.
]


------------------------------------------------------------------------


[Illustration:

  _Eng. by E. G. Williams & Bro. N.Y._
  _Henry Clews_
]


------------------------------------------------------------------------


                             FIFTY YEARS IN

                              WALL STREET


              “TWENTY-EIGHT YEARS IN WALL STREET,” REVISED
                  AND ENLARGED BY A RÉSUMÉ OF THE PAST
                   TWENTY-TWO YEARS, MAKING A RECORD
                     OF FIFTY YEARS IN WALL STREET




                                   BY


                           HENRY CLEWS, LL.D.




             SUBJECTS THAT ARE OF NECESSITY BRIEFLY TOUCHED
             UPON IN ORDER TO KEEP WITHIN THE SCOPE OF THE
          PRESENT WORK FIND FULLER EXPOSITION IN THE AUTHOR’S
                “WALL STREET POINT OF VIEW,” FOR FURTHER
                REFERENCE TO WHICH SEE NOTICE AT THE END





                       IRVING PUBLISHING COMPANY
                  POST OFFICE BOX 1915, NEW YORK CITY


------------------------------------------------------------------------




                            COPYRIGHT, 1908,
                             BY HENRY CLEWS




------------------------------------------------------------------------


                         PREFACE BY THE AUTHOR.

                         ---------------------

[Illustration]


------------------------------------------------------------------------




               15 TO 17 BROAD STREET NEW YORK.

_To My Readers_:

The following pages are intended to throw some light on imperfectly
known events connected with Wall Street speculations and investments,
and also upon the condition and progress of the country from a financial
standpoint, during the fifty years which I have experienced in the great
money center.

The theme is worthy of an abler pen, but in the absence of other
contributors to this branch of our National history, I venture the plain
narrative of an active participator in the financial events of the time
in which I have lived.

I have also made a brief retrospect of the history of Wall Street, and
financial affairs connected therewith since the origin of the Stock
Exchange in New York City.

In sketching the men and events of Wall Street, I have freely employed
the vernacular of the speculative fraternity as being best adapted to a
true picture of their characteristics, although probably not most
consonant with literary propriety.

I have simply attempted to unfold a plain, unvarnished tale, drawing my
material from experience and the records of reliable narrators.

                                                            HENRY CLEWS.

=NEW YORK, March 31, 1908.=




------------------------------------------------------------------------




                               CONTENTS.

                               ----------

                             INTRODUCTORY.

                                                               PAGE
     My Part in Marketing the United States Civil War Loans    xxxi


                               CHAPTER I.

                        MY DEBUT IN WALL STREET.

     Results of the Panic of 1857.—Creating a Revolution in       5
       the Methods of Doing Business in Wall Street.—The Old
       “Fogies” of the Street, and How They were
       Surprised.—Their Prejudices and How they
       Originated.—The Struggle of the Young Bloods for
       Membership.—The Youthful Element in Finance Peculiar
       to this Country.—The Palmy Days of Little, Drew and
       Morse.—The Origin of “Corners,” and the “Option”
       Limit of Sixty Days


                              CHAPTER II.

                      WALL STREET AS A CIVILIZER.

     Clerical Obliquity of Judgment About Wall Street            13
       Affairs.—The Slanderous Eloquence of Talmage.—Wall
       Street a Great Distributor, as Exhibited in the
       Clearing House Transactions.—Popular Delusions in
       Regard to Speculation.—What Our Revolutionary Sires
       Advised About Improving the Industrial Arts, Showing
       the Striking Contrast Between Their Views and the Way
       Lord Salisbury Wanted to Fix Things for This Country


                              CHAPTER III.

                   HOW TO MAKE MONEY IN WALL STREET.

     How to Take Advantage of Periodical Panics in Order to      19
       Make Money.—Wholesome Advice to Young
       Speculators.—Alleged “Points” from Big Speculators
       End in Loss or Disaster.—Professional Advice the
       Surest and Cheapest, and How and Where to Obtain It


                              CHAPTER IV.

                    IMPORTANCE OF BUSINESS TRAINING.

     Sons of Independent Gentlemen make very bad                 25
       Clerks.—They become Unpopular with the Other Boys,
       and must Eventually Go.—Night Dancing and Late
       Suppers don’t Contribute to Business Success.—Give
       Merit its True Reward.—Keeping Worthless Pretense in
       its True Position.—Running Public Offices on Business
       Principles.—A Piece of Gratuitous Advice for the
       Administration.—A College Course not in General
       Calculated to make a Good Business Man.—The Question
       of Adaptability Important.—Children should be
       Encouraged in the Occupation for which they show a
       Preference.—Thoughts on the Army and Navy


                               CHAPTER V.

                   PERSONAL HONOR OF WALL STREET MEN.

     Breach of Trust Rare Among Wall Street Men.—The English     33
       Clergyman’s Notion of Talmage’s Tirades Against Wall
       Street.—Adventurous Thieves Have No Sympathizers
       Among Wall Street Operators.—Early Training Necessary
       for Success in Speculation.—Ferdinand Ward’s Evil
       Genius.—A Great Business can only be Built up on
       Honest Principles.—Great Generals Make Poor
       Financiers, Through Want of Early Training.—Practical
       Business is the Best College


                              CHAPTER VI.

                      WALL STREET DURING THE WAR.

     The Financiers of Wall Street Assist the Government in      39
       the Hour of the Country’s Peril.—The Issue of the
       Treasury Notes.—Jay Cooke’s Northern Pacific Scheme
       Precipitates the Panic of 1873.—Wall Street Has
       Played a Prominent Part in the Great Evolution and
       Progress of the Present Age


                              CHAPTER VII.

         MORE WAR REMINISCENCES—BRITISH AND NAPOLEONIC DESIGNS.

     How Napoleon Defied the Monroe Doctrine.—The Banquet to     45
       Romero.—Speeches by Eminent Financiers, Jurists and
       Business Men.—The Eloquent Address of Romero Against
       French Intervention.—Napoleon shows his Animus by
       Destroying the Newspapers Containing the Report of
       the Banquet.—The Emperor Plotting with
       Representatives of the English Parliament to Aid the
       Confederates and Make War on the United States


                             CHAPTER VIII.

              FOREIGN INTRIGUES AGAINST AMERICAN LIBERTY.

     How the Imperial Pirates of France and England Were         59
       Frightened  Off Through the Diplomacy of
       Seward.—Ominous  Appearance of the Russian Fleet in
       American Waters.—Napoleon Aims at the Creation of an
       Empire West of the Mississippi, and the Restoration
       of the Old French Colonies.—Plotting with Slidell,
       Benjamin, Lindsay, Roebuck and Others.—Urging England
       to Recognize the Confederacy.—Disraeli Explains
       England’s Designs and Diplomacy.—After the Naval
       Victory of Farragut and the Capture of New Orleans
       England Hesitates Through Fear, and Napoleon Changes
       His Tactics.—Renewal of Intrigues Between England and
       France.—Their Dastardly Purposes Defeated by the
       Victories of Gettysburg, Vicksburg and the General
       Triumph of the Union Arms


                              CHAPTER IX.

                   SECRETARY CHASE AND THE TREASURY.

     The Depleted Condition of the Treasury when Mr. Chase       73
       took Office.—Preparations for War and Great
       Excitement in Washington.—Chivalrous Southerners in a
       Ferment.—Officials Up in Arms in Defence of their
       Menaced Positions.—Miscalculation with Regard to the
       Probable Duration of the War.—A Visit to Washington
       and an Interview with Secretary Chase.—Disappointment
       about the Sale of Government Bonds.—A Panic
       Precipitated in Wall Street.—Millionaires Reduced to
       Indigence in a Few Hours.—Miraculously Saved from the
       Wreck.—How it Happened


                               CHAPTER X.

                          THE NATIONAL BANKS.

     Secretary Chase Considers the Problem of Providing a        81
       National Currency.—How E. G. Spaulding takes a
       Prominent Part in the Discussion of the Bank Act.—The
       Act Founded on the Bank Act of the State of New
       York.—Effect of the Act upon the Credit of the
       Country.—A New System of Banking Required


                              CHAPTER XI.

                      THE NEW YORK STOCK EXCHANGE.

     History of the Organization for Ninety-four Years.—From     87
       a Button-Wood Tree to a Palace Costing Millions of
       Dollars.—Enormous Growth and Development of the
       Business.—How the Present Stock Exchange was Formed
       by the Consolidation of other Financial
       Bodies.—Patriotic Action During the War
       Period.—Reminiscences of Men and Events


                              CHAPTER XII.

                 “CORNERS” AND THEIR EFFECT ON VALUES.

     The Senate Committee on “Corners” and                       95
       “Futures.”—Speculation Beneficial to the Country at
       Large.—A Regulator of Values, and an Important Agent
       in the Prevention of Panics.-“Corners” in all kinds
       of Business.—How A. T. Stewart made “Corners.”—All
       Importing Firms deal in “Futures.”—Legislation
       Against “Corners” would stop Enterprise and cause
       Stagnation in Business.—Only the Conspirators
       themselves get hurt in “Corners.”—The Black Friday
       “Corner.”—Speculation in Grain Beneficial to
       Consumers


                             CHAPTER XIII.

                       THE COMMODORE’S “CORNERS.”

     The Great Hudson “Corner.”—Commodore Vanderbilt the        107
       “Boss” of the Situation.—The “Corner” Forced upon
       Him.—How he Managed the Trick of getting the Bears to
       “Turn” the Stock, and then caught them.—His able
       Device of Unloading while Forcing the Bears to Cover
       at High Figures.—The Harlem “Corner.”—The Common
       Council Betrayed the Commodore, but were Caught in
       their own Trap, and Lost Millions.—The Legislature
       Attempt the same Game, and meet with a Similar Fate


                              CHAPTER XIV.

                              DANIEL DREW.

     Drew, like Vanderbilt, an Example of Great Success         117
       without Education.—Controlled more Ready Cash than
       any man in America.—Drew goes Down as Gould
       Rises.-“His Touch is Death.”—Prediction of Drew’s
       Fall.—His Thirteen Millions Vanish.—How he caught the
       Operators in “Oshkosh” by the Handkerchief Trick.—The
       Beginning of “Uncle Daniel’s” Troubles.—The
       Convertible Bond Trick.—The “Corner” of
       1866.—Millions Lost and Won in a Day.—Interesting
       Anecdote of the Youth who Speculated outside the
       Pool, and was Fed by Drew’s Brokers


                              CHAPTER XV.

                          DREW AND VANDERBILT.

     Vanderbilt Essays to Swallow Erie, and Has a Narrow        127
       Escape from Choking.—He Tries to make Drew Commit
       Financial Suicide.—Manipulating the Stock Market and
       the Law Courts at the Same Time.—Attempts to “Tie Up”
       the Hands of Drew.—Manufacturing Bonds with the Erie
       Paper Mill and Printing Press.—Fisk Steals the Books
       and Evades the Injunction.—Drew Throws Fifty Thousand
       Shares on the Market and Defeats the Commodore.—The
       “Corner” is Broken and Becomes a
       Boomerang.—Vanderbilt’s Fury Knows no Bounds.—In his
       Rage he Applies to the Courts.—The Clique’s
       Inglorious Flight to Jersey City.—Drew Crosses the
       Ferry with Seven Millions of Vanderbilt’s Money.—The
       Commodore’s Attempt to Reach the Refugees.—A
       Detective Bribes a Waiter at Taylor’s Hotel, who
       Delivers the Commodore’s Letter, which Brings Drew to
       Terms.—Senator Mattoon gets on the right side of Both
       Parties


                              CHAPTER XVI.

                      DREW AND THE ERIE “CORNERS.”

     A Harmonious Understanding with the Commodore.—How the     137
       Compromise was Effected.—An Interesting Interview
       with Fisk and Gould in the Commodore’s Bed-Room.—How
       Richard Schell Raised the Wind for the
       Commodore.—Drew’s Share of the Spoils.—He Tries to
       Retire from Wall Street, but Can’t.—The Settlement
       that Cost Erie Nine Millions.—Gould and Fisk “Water”
       Erie again, to the Extent of Twenty-three Millions,
       but leave Drew out.-“Uncle Daniel” Returns to the
       Street.—He is Inveigled into a Blind Pool by Gould
       and Fisk, Loses a Million and Retreats from the
       Pool.—He then Operates Alone on the “Short” Side and
       Throws Away Millions.—He Tries Prayer but it
       “Availeth Not.”-“It’s no Use, Brother, the Market
       Still Goes Up.”—Praying and Watching the
       Ticker.—Hopelessly “Cornered” and Ruined by his
       Former Pupils and Partners


                             CHAPTER XVII.

                  INTERESTING EPISODES IN DREW’S LIFE.

     Incidents in the Early Life of Drew; and How he Began      147
       to Make Money.—He Borrows Money from Henry Astor,
       Buys Cattle in Ohio and Drives them over the
       Alleghany Mountains under Great Hardship and
       Suffering.—His Great Career as a Steamboat Man, and
       his Opposition to Vanderbilt.—His Marriage and
       Family.—He Builds and Endows Religious and
       Educational Institutions.—Returns to his Old Home
       after his Speculative Fall, but can find No Rest so
       Far away from Wall Street.—His Hopes through Wm. H.
       Vanderbilt of another Start in Life.—His Bankruptcy,
       Liabilities and Wardrobe.—His Sudden but Peaceful
       End.—Characteristic Stories of his Eccentricities


                             CHAPTER XVIII.

               PANICS.—THEIR CAUSES.—HOW FAR PREVENTABLE.

     Not Accidental Freaks of the Market.—We are Still a        157
       Nation of Pioneers.—The Question of Panics Peculiarly
       American.—Violent Oscillations in Trade Owing to the
       Great Mass of New and Immature
       Undertakings.—Uncertainty about the Intrinsic Value
       of Properties.—Sudden Shrinkage of Railroad
       Properties a Fruitful Cause of Panics.—Risks and
       Panics Inseparable from Pioneering Enterprise.—We are
       Becoming Less Dependent on the Money Markets of
       Europe.—In Panics much Depends upon the Prudence and
       Self-control of the Money-Lenders.—The Law which
       Compels a Reserve Fund in the National Banks is at
       Certain Crises a Provocative of Panics.—George I.
       Seney.—John C. Eno.—Ferdinand Ward.—The Clearing
       House as a Preventive of Panics


                              CHAPTER XIX.

                            OLD-TIME PANICS.

     The Panic of 1837.—How it was Brought About.—The State     175
       Banks.—How they Expanded their Loans under Government
       Patronage.—Speculation was Stimulated and Values
       Became Inflated.—President Jackson’s “Specie
       Circular” Precipitates the Panic.—Bank Contractions
       and Consequent Failures.—Mixing up Business and
       Politics.—A General Collapse, with Intense Suffering


                              CHAPTER XX.

        THE TRUE STORY OF BLACK FRIDAY TOLD FOR THE FIRST TIME.

     The Great Black Friday Scheme originates in patriotic      181
       motives. Advising Boutwell and Grant to sell
       Gold.—The part Jim Fisk played in the Speculative
       Drama.-“Gone where the Woodbine Twineth.”—A general
       state of Chaos in Wall Street.—How the Israelite
       Fainted.-“What ish the prish now?”—Gould the Head
       Centre of the Plot to “Corner” Gold.—How he Managed
       to Draw Ample Means from Erie.—Gould and Fisk Attempt
       to Manipulate President Grant and Compromise him and
       his Family in the Plot.—Scenes and Incidents of the
       Great Speculative Drama


                              CHAPTER XXI.

                     CAUSES OF LOSS IN SPECULATION.

     Inadequate Information.—False Information.—Defects of      201
       News Agencies.—Insufficiency of Margins.—Dangers of
       Personal Idiosyncrasies.—Operating in Season and out
       of Season.—Necessity of Intelligence, Judgment and
       Nerve.—An Ideal Standard.—What Makes a King Among
       Speculators?


                             CHAPTER XXII.

                     VILLARD AND HIS SPECULATIONS.

     Return of the Renowned Speculator to Wall                  209
       Street.—Recalling the Famous “Blind” Pool in Northern
       Pacific.—How Villard Captured Northern
       Pacific.—Pursuing the Tactics of Old
       Vanderbilt.—Raising Twelve Million Dollars on Paper
       Credit.—Villard Emerges from the “Blind” Pool a Great
       Railroad Magnate.—He Inflates his Great Scheme from
       Nothing to One Hundred Million Dollars.—His Unique
       Methods of Watering Stock as Compared with those of
       George I. Seney


                             CHAPTER XXIII.

                            FERDINAND WARD.

     Peculiar Power and Methods of the Prince of                215
       Swindlers.—How he Duped Astute Financiers and
       Business Men of all Sorts, and Secured the Support of
       Eminent Statesmen and Leading Bank Officers, whom he
       Robbed of Millions of Money.—The most Artful Dodger
       of Modern Times.—The Truth about the Swindle
       Practiced upon General Grant and his Family.


                             CHAPTER XXIV.

                            HENRY N. SMITH.

     How Mr. Smith Started in Life and became a Successful      223
       Operator.—His connection with the Tweed “Ring,” and
       how he and the Famous “Boss” made Lucky Speculations,
       through the use of the City Funds, in Making a Tight
       Money Market.—On the Verge of Ruin in a Pool with W.
       K. Vanderbilt.—He is Converted to the Bear Side by
       Woerishoffer, and Again Makes Money, but by
       Persistence in his Bearish Policy Ruins himself and
       Drags Wm. Heath & Co. down also


                              CHAPTER XXV.

                            KEENE’S CAREER.

     He Starts in Speculation as a “Curbstone” Broker.—A        229
       Lucky Hit in a Mining Stock Puts Him on the Road to
       be a Millionaire.—His Speculative Encounter with the
       Bonanza Kings.—He Makes Four Millions, and Major
       Selover brings him to Wall Street, where they Form an
       Alliance with Gould, Who “Euchres” Both of
       Them.—Selover Drops Gould in an Area Way.—Keene Goes
       Alone and Adds Nine Millions More to His Fortune.—He
       Then Speculates Recklessly in Everything.—Suffers a
       Sudden Reversal and Gets Swamped.—Overwhelming
       Disaster in a Bear Campaign, Led by Gould and
       Cammack, in which Keene Loses Seven Millions.—His
       Desperate Attempts to Recover a Part Entail Further
       Losses, and He Approaches the End of His Thirteen
       Millions.—His Princely Liberality and Social
       Relations with Sam Ward and Others


                             CHAPTER XXVI.

                         OUR RAILROAD METHODS.

     Deceptive Financiering.—Over-Capitalization.—Stock         241
       “Watering.”—Financial Reconstructions.—Losses to the
       Public.—Profits of Constructors.—Bad Reputation of
       our Railroad Securities.—Unjust and Dangerous
       Distribution of the Public Wealth


                             CHAPTER XXVII.

                     THE GEORGIA BOND REPUDIATION.

     How a Sovereign Southern State Cheated the Northern Men    255
       who Helped Her in Distress.—A New Way to Pay Old
       Debts.—Cancellation by Repudiation of Just Claims for
       Cash Loaned to Sustain the State Government, Build
       Public Schools and Make Needed Improvements.—Bottom
       Facts of the Outrage.—The Recent Attempt to Place a
       New Issue of Georgia Bonds on the Market while the
       Old ones Remain Unpaid.—The Case before the
       Attorney-General of the State of New York.—He
       Examines the Legal Status of the Bonds in Connection
       with the Savings Banks.—His Decision Prohibits these
       Institutions from Investing the Hard Earnings of the
       Working People in these Doubtful and Dangerous
       Securities.—A Bold Effort to have the Fresh Issue of
       Georgia Paper put upon the List of Legitimate
       Securities of the New York Stock Exchange Firmly
       Opposed and Eventually Frustrated


                            CHAPTER XXVIII.

                       ANDREW JOHNSON’S VAGARIES.

     “Swinging Around the Circle.”—How Mr. Johnson Came to      289
       Visit New York on His Remarkable Tour.—The Grand
       Reception at Delmonico’s.—The President Loses His
       Temper at Albany and Becomes an Object of Public
       Ridicule.—His Proclamation of “My Policy” Ironically
       Received.—Returns to Washington Disgraced.—The
       Massacre of New Orleans.—The Impeachment of the
       President


                             CHAPTER XXIX.

                          THE DIX CONVENTION.

     How the War Democrat, General Dix, was Elected Governor    297
       by the Republican Party.—The Candidates of Senator
       Conkling Rejected.—How Dix was Sprung on the
       Convention, to the Consternation of the Caucus.—Judge
       Robertson’s Disappointment.—Exciting Scenes in the
       Convention.—General Dix declines the Nomination, but
       Reconsiders and Accepts on the Advice of His Wife and
       General Grant.—How Dix’s Election Ensures Grant’s
       Second Term as President


                              CHAPTER XXX.

             CONSEQUENCES OF THE UTICA (DIX’S) CONVENTION.

     A Chapter of Secret History.—Conkling gets the Credit      307
       for Dix’s Nomination and His “Silence Gives Consent”
       to the Honor.—Robertson Regards Him as a Marplot.—The
       Senator Innocently Condemned.—The Misunderstanding
       which Defeated Grant for the Third Term, and Elected
       Garfield.—How the Noble “306” were
       Discomfited.-“Anything to Beat Grant.”—The Stalwarts
       and the Half Breeds.-“Me Too.”—The Excitement which
       Aroused Guiteau’s Murderous Spirit to Kill Garfield


                             CHAPTER XXXI.

                          GRANT’S SECOND TERM.

     The Best Man for the Position and Most Deserving of the    313
       Honor.—How the “Boom” was Worked up in Favor of
       Grant.—The Great Financiers and Speculators all Come
       to the Front in the Interest of the Nation’s
       Prosperity and of the Man who had Saved the
       Country.—The Great Mass Meeting at Cooper Union.—Why
       A. T. Stewart Refused to Preside.—The Results of the
       Mass Meeting and how they were Appreciated by the
       Friends of the Candidate, Leading Representatives of
       the Business Community and the Public Press
       Generally, Irrespective of Party


                             CHAPTER XXXII.

             THE TWEED RING, AND THE COMMITTEE OF SEVENTY.

     The Ring Makes Itself Useful in Speculative Deals.—How     327
       Tweed and His “Heelers” Manipulated the Money
       Market.—The Ring Conspiring to Organize a Panic for
       Political Purposes.—The Plot to Gain a Democratic
       Victory Defeated and a Panic Averted Through
       President Grant and Secretary Boutwell, who were
       Apprised of the Danger by Wall Street Men.—How the
       Committee of “Seventy” Originated.—The Taxpayers
       Terrorized by Boss Tweed and his Minions.—How
       “Slippery Dick” got Himself Whitewashed.—Offering the
       Office of City Chamberlain as a Bribe to Compromise
       Matters.—How the Hon. Samuel Jones Tilden, as Counsel
       to the Committee, Obtained His Great Start in Life


                            CHAPTER XXXIII.

                         HON. SAMUEL J. TILDEN.

     How Tilden began to make His Fortune in Connection with    337
       William H. Havemeyer.—Tilden’s great Fort in
       Politics.—He Improves His Opportunity with the
       Discernment of Genius.—How Tilden became one of the
       Counsel of the “Committee of Seventy.”—His Political
       Elevation and Fame dating from this Lucky Event.—The
       Sage of Greystone a Truly Great Man.—Attains
       Marvellous Success by His own Industry and Brain
       Power.—He not only Deserved Success and Respect, but
       Commanded them.—How his Large Generosity was
       Manifested in His Last Will and Testament.—The
       Attempt to Break that Precious Public Document


                             CHAPTER XXXIV.

     COMMODORE VANDERBILT.—HOW HIS MAMMOTH FORTUNE WAS ACCUMULATED.

     Ferryman.—Steamboat Owner.—Runs a Great Commercial         345
       Fleet.—The First and Greatest of Railroad Kings.—The
       Harlem “Corner.”—Reorganization of N. Y. Central.—How
       He Milked the Street, and Euchred His
       Co-Speculators.—His Fortune.—Its Vast Increase by Wm.
       H.


                             CHAPTER XXXV.

                           WM. H. VANDERBILT.

     A Builder instead of a Destroyer of Public Values.—His     355
       Respect for Public Opinion on the Subject of
       Monopolies.—His first Experience in Railroad
       Management.—How he Improved the Harlem Railroad
       Property.—His great Executive Power manifested in
       every stage of advance until he became President of
       the Vanderbilt Consolidated System.—An Indefatigable
       Worker.—His habit of Scrutinizing Every Detail.—His
       Prudent Action in the Great Strike of 1877, and its
       Good Results.—Settled all misunderstandings by Peace
       and Arbitration.—Makes Princely Presents to his
       Sisters.—The Singular Gratitude of a
       Brother-In-Law.—How he Compromises by a Gift of a
       Million with Young Corneel.—Gladstone’s idea of the
       Vanderbilt Fortune.—Interview of Chauncey M. Depew
       with the G. O. M. on the subject.—The great
       Vanderbilt Mansion and the Celebrated Ball.—The
       Immense Picture Gallery.—Mr. Vanderbilt Visits some
       of the Famous Artists.—His Love of Fast Horses.—A
       Patron of Public Institutions.—His Gift to the Waiter
       Students.—While Sensitive to Public Opinion, has no
       fear of Threats or Blackmailers.—The Public be
       Damned.—Explanation of the rash Expression.—The
       Purchase of “Nickel Plate.”—His Declining Health and
       Last Days.—His Will, and Wise Method of Distributing
       200 Millions.—Effects of this Colossal Fortune on
       Public Sentiment


                             CHAPTER XXXVI.

                            “YOUNG CORNEEL.”

     The Eccentricities of Cornelius Jeremiah Vanderbilt,       375
       and his Marvellous Power for Borrowing Money.—He
       Exercises Wonderful Influence over Greeley and
       Colfax.—A Dinner at the Club with Young “Corneel” and
       the Famous “Smiler.”-“Corneel” tries to make himself
       Solid with Jay Cooke.—The Commodore Refuses to Pay
       Greeley.-“Who the Devil Asked You?” retorted
       Greeley.-“Corneel’s” marriage to a Charming and
       Devoted Woman.—How She Softened the Obdurate Heart of
       her Father-in-Law


                            CHAPTER XXXVII.

               THE YOUNG VANDERBILTS AND THEIR FORTUNES.

     Remarkable for Physical and Intellectual Ability.—The      387
       Mixture of Races and the Law of Selection.—The
       Wonderful Will and the Wise Distribution of Two
       Hundred Millions.—Tastes, Habits and Social
       Proclivities of the Young Vanderbilts.—The Married
       Relations of Some of Them.—Being Happily Assorted
       they Make Good Husbands.—Their Property Regarded as a
       Great Trust.—Their Railroad System and its Great Army
       of Employes.—The Young Men Cautious About
       Speculating, and Conservative in their Expenses
       Generally


                            CHAPTER XXXVIII.

                            THE ROTHSCHILDS.

     The Beginning of the Financial Career of the Great         397
       House of Rothschild.—The Hessian Blood Money was the
       Great Foundation of their Fortune.—How the Firm of
       the Five Original Brothers was Constituted.—Nathan
       the Greatest Speculator of the Family.—His Career in
       Great Britain, and how he Misrepresented the Result
       of the “Battle of Waterloo” for Speculative
       Purposes.—Creating a Panic on the London Stock
       Exchange.—His Terror of being Assassinated.—His Death
       Causes a Panic on the London Exchange and the Bourses


                             CHAPTER XXXIX.

                                TRAVERS.

     The Unique Character of Travers.—His Versatile             407
       Attainments.—Although of a Genial and Humorous
       Disposition, He was Always a Bear.—How He was the
       Means of Preserving the Commercial Supremacy of New
       York.—He Squashes the English Bravado, and Saves the
       Oratorical Honor of Our Country.—Has the Oyster
       Brains?—It Must have Brains, for it Knows Enough to
       Sh-sh-shut Up.—The Dog and the Rat.—I d-d-don’t want
       to Buy the D-d-dog; I will Buy the R-r-rat.—Travers
       on the Royal Stand at the Derby.—How He was Euchred
       by the Pool-Seller.—My Proxy in a Speech at the Union
       Club.—If You are a S-s-self-made Man, Wh-wh-y the
       D-devil didn’t You put more H-hair on the Top of Your
       Head?—Other Witticisms, &c.—Death of the Great Wit
       and Humorist, and some of His Last Witty Sayings


                              CHAPTER XL.

                        CHARLES F. WOERISHOFFER.

     The Career of Charles F. Woerishoffer and the Resultant    425
       Effect upon Succeeding Generations.—The Peculiar
       Power of the Great Leader of the Bear Element in Wall
       Street.—His Methods as Compared with Those of Other
       Wreckers of Values.—A Bismarck Idea of Aggressiveness
       the Ruling Element of His Business Life.—His Grand
       Attack on the Villard Properties, and the Consequence
       Thereof.—His Benefactions to Faithful Friends


                              CHAPTER XLI.

                         WOMEN AS SPECULATORS.

     Wall Street no Place for Women.—They Lack the Mental       437
       Equipment.—False Defenses of Feminine Financiers.—The
       Claflin Sisters and Commodore Vanderbilt.—Fortune and
       Reputation Alike Endangered


                             CHAPTER XLII.

                   WESTERN MILLIONAIRES IN NEW YORK.

     Eastward the Star of Wealth and the Tide of Beauty Take    447
       their Course.—Influence of the Fair Sex on this
       Tendency, and Why.—New York the Great Magnet of the
       Country.—Swinging into the Tide of Fashion.—Collis P.
       Huntington.—His Career from Penury to the Possessor
       of Thirty Millions.—Leland Stanford.—first a Lawyer
       in Albany, and afterward a Speculator on the Pacific
       Coast.—Has Rolled Up nearly Forty Millions.—D. O.
       Mills.—An Astute and Bold Financier.—Courage and
       Caution Combined.—His Rapid Rise in California.—He
       Makes a Fortune by Investing in Lake Shore
       Stock.—Princes of the Pacific Slope.—Mackay, Flood
       and Fair.—Their Rise and Progress.—William Sharon.—A
       Brief Account of His Great Success.—Wm. C. Ralston
       and His Daring Speculations.—Begins a Poor New York
       Boy, and Makes a Fortune in California.—John P.
       Jones.—His Eventful Career and Political
       Progress.-“Lucky” Baldwin.—His Business Ability and
       Advancement.—Lucky Speculations.—Amasses Ten or
       fifteen Millions.—William A. Stewart.—Discovers the
       Eureka Placer Diggings.—His Success as a Lawyer and
       in Mining Enterprises.—James Lick.—One of the Most
       Eccentric of the California Magnates.—Real Estate
       Speculations.—His Bequest to the Author of the “Star
       Spangled Banner.”—John W. Shaw, Speculator and Lawyer


                             CHAPTER XLIII.

                         RAILROAD INVESTMENTS.

     Vastness of our Railroad System.—Its Cost.—Fall in the     475
       Rate of Interest.—Tendency to a Four Per Cent. Rate
       on Railroad Bonds.—Effect of the Change on
       Stocks.—Prospective Speculation.—Some Social
       Inequities to be Adjusted through Cheaper
       Transportation


                             CHAPTER XLIV.

                          THE SILVER QUESTION.

     Its Fundamental Importance.—Dangers of Neglecting          481
       it.—Attempts at Evasion.—How it must be Finally
       met.—Silver Paper Currency Schemes, and their
       Futility


                              CHAPTER XLV.

                          THE LABOR QUESTION.

     Harmony Between the Representatives of Capital and         491
       Labor Necessary for Business Prosperity.—If
       Manufacturers should Combine to Regulate Wages the
       Arrangement could only be Temporary.—The Workingmen
       are Taken Care of by the Natural Laws of
       Trade.—Competition among the Capitalists Sustains the
       Rate of Wages.—Opinion of John Stuart Mill on this
       Subject.—Compelling a Uniform Rate of Pay is a Gross
       Injustice to the Most Skilful Workmen.—The Tendency
       of the Trades Unions to Debar the Workingman from
       Social Elevation.—The Power of the Unions Brought to
       a Test.—The Universal Failure of the
       Strikes.—Revolutionary Demands of the Knights of
       Labor.—Gould and the Strikes on the Missouri Pacific,
       &c., &c.


                             CHAPTER XLVI.

                         AN IMPORTANT SYNOPSIS.

     A Resume in Brief of the Leading Events Connected with     503
       Wall Street Affairs for Seventy-seven Years


                             CHAPTER XLVII.

          INTERNATIONAL SIGNIFICANCE OF THE BARTHOLDI STATUE.

     Great as an Achievement of Art, but Greater as the         525
       Embodiment of the Idea of Universal Freedom the World
       Over.—It is a Poetic Idea of a Universal
       Republic.—Enlightenment of the World Must Result in
       the Freedom of Man


                            CHAPTER XLVIII.

                 LARGE FORTUNES AND THEIR DISPOSITION.

     How the Fortunes of the Astors were Made.—George           529
       Peabody and His Philanthropic Schemes.—Johns Hopkins
       and his Peculiarities.—A. T. Stewart and his Abortive
       Plans.—A Sculptor’s Opinion of his
       Head.—Eccentricities of Stephen Girard, and How he
       Treated his Poor Sister.—His Penurious Habits and
       Great Donations.—James Lenox and the Library which he
       Left.—How Peter Cooper Made his Fortune, and his
       Liberal Gifts to the Cause of Education.—Samuel J.
       Tilden’s Munificent Bequests.—The Vanderbilt
       Clinic.—Lick, Corcoran, Stevens and Catharine Wolf


                             CHAPTER XLIX.

                    SOUTHERN AFFAIRS IN SPECULATION.

     The Preservation of the Union a Great Blessing.—To Let     541
       them “Secesh” would have been National Suicide.—How
       Immigration has Assisted National Prosperity.—Rescued
       from the Dynastic Oppression of European
       Governments.—Showing Good Fellowship towards the
       Southern People and Aiding them in their Internal
       Improvements.—The South, Immediately after the War,
       had Greater Advantages than the North for Making
       Material Progress.—The Business of the North was
       Inflated.—The States of Georgia and Alabama Offered
       Inviting Fields for Investment.—Issuing State
       Securities, Cheating and Repudiating.—President
       Johnson Chiefly to Blame for the Breach of Faith with
       Investors who were Swindled out of their
       Money.—Revenge and Avarice Unite in Financial
       Repudiation


                               CHAPTER L.

                WESTERN AND SOUTHERN FINANCIAL LEADERS.

     Alfred Sully, his Origin and Successful Career.—Calvin     553
       S. Brice, a Financier of Ability.—General Samuel
       Thomas, Prominent in the Southern Railroad
       System.—General Thomas M. Logan, a Successful Man in
       Railroading and Mining.—Financial Chieftains of
       Baltimore.—The Garretts.—Their Great Success as
       Railroad Managers.—Portrait of Robert Garrett


                              CHAPTER LI.

                              ARBITRATION.

     How the System of Settling Disputes and                    561
       Misunderstandings by Arbitration has Worked in the
       Stock Exchange.—Why not Extend the System to Business
       Matters Generally?—Its Great Advantages over Going to
       Law.—It is Cheap and has no Vexatious Delays.—Trial
       by Jury a Partial Failure.—Some Prominent Cases in
       Point.—Jury “Fixing” and its Consequences.—How Juries
       are Swayed by their Sympathies.—A Curious Miscarriage
       of Justice before a Referee.—The Little Game of the
       Diamond Broker


                              CHAPTER LII.

                    NEW YORK AS A FINANCIAL CENTRE.

     Its Past, Its Present, Its Future.—Banking                 577
       Decadence.—Growth of Interior Centres.—Obstruction
       from the National Bank Laws.—Relief
       Demanded.—Requirements of the Future


                             CHAPTER LIII.

              EARTHQUAKE THEORIES AND WALL STREET AFFAIRS.

     The Shock of Every Calamity Felt in Wall                   589
       Street.—Earthquakes the only Disasters which seem to
       Defy the Power of Precaution.—Becoming a Subject of
       Serious Thought for Wall Street Men and Business
       Men.—The Volcanic Theory of Earthquakes.—Other Causes
       at Work Producing these Terrific Upheavals.—Why
       Charleston was more Severely Shaken Up than New
       York.—Why the Southern Earthquake did not Strike Wall
       Street with Great Force.—Earthquakes Likely to Become
       the Great Disasters of the Future


                              CHAPTER LIV.

                            AUGUST BELMONT.

     The American Representative of the Rothschilds.—Begins     595
       Life in the Rothschilds’ House in Frankfort.—Consul
       General to Austria and Minister to the Hague.—A Great
       Financier and a Connoisseur in Art


                              CHAPTER LV.

   THE SOCIALIST OBJECTIONS TO THE PRESENT ORDER OF SOCIETY EXAMINED.

     Increase of Population and the Growing Pressure upon       599
       the Means of Subsistence.—Education and Moral
       Improvement the True Remedy for Existing or
       Threatened Evils.—Errors of Communism and
       Socialism.—How Socialistic Leaders and Philosophers
       Recognize the Truth.—Growth of Population Does Not
       Mean Poverty


                              CHAPTER LVI.

                      STOCK EXCHANGE CELEBRITIES.

     How Wall Street Bankers’ Nerves are Tried.—Fine Humor,     603
       Jocular Dispositions, and Scholarly Taste of
       Operators.—George  Gould as a Future Financial
       Power.—American Nobility Compared with European
       Aristocracy.—How the Irish Can Assist to Purge Great
       Britain of her Bilious Incubus of Nobility.—The
       Natural Nobility of Our Own Country and Their Destiny


                             CHAPTER LVII.

                        A LOOK INTO THE FUTURE.

     What We Are.—What We are Preparing For.—What We are        611
       Destined to Do and to Become.—We are Entering on an
       Era of Seeming Impossibilities.—Yet the Inconceivable
       Will be Realized


                             CHAPTER LVIII.

                               JAY GOULD.

     His Birth and Early Education.—Clerk in a Country          619
       Store.—He Invents a Mouse Trap.—Becomes a Civil
       Engineer and Surveys Delaware County.—Writes a Book
       and Sells it.—Gets a Partnership in a Pennsylvania
       Tannery and soon Buys his Partner Out.—He comes to
       New York to Sell his Leather, falls in Love with a
       Leather Merchant’s Daughter and Marries her.—Settles
       in the Metropolis and begins to Deal in
       Railroads.—Buys a Bankrupt Road from his
       Father-in-law, Reorganizes it and Sells it at a
       Considerable Profit.—Henceforth he makes his Money
       Dealing in Railroads.—His Method of Buying,
       Reorganizing and Selling Out at a Large Profit.—How
       he Managed Erie in connection with Fisk and Drew.—His
       Operations on Black Friday.—Checkmated by Commodore
       Vanderbilt and obliged to Settle.—He makes Millions
       out of Wabash and Kansas & Texas.—His Venture in
       Union Pacific.—His Construction
       Companies.—Organization of American Union Telegraph,
       and his Method of Absorbing and Getting Control of
       Western Union.—The Strike of the Telegraphers and his
       Great Encounter with the Knights of Labor and Trades
       Unionist.—Gould’s First Yachting Expedition.—An
       exceedingly Humorous Story of his early Experience on
       the Water.—His Status as a Factor in Railroad
       Management


                              CHAPTER LIX.

                              MEN OF MARK.

     Cyrus W. Field.—Russell Sage.—Addison Cammack.—The         659
       Jerome Brothers.—Moses Taylor.—Chauncey M.
       Depew.—Austin  Corbin.—Anthony J. Drexel.—John A.
       Stewart.—Hon. Levi P. Morton.—Philip D.
       Armour.—Stedman, the Poet.—Stephen V. White.—H.
       Victor Newcombe.—James M. Brown.—Former Giants of the
       Street.—Henry Keep.—Anthony W. Morse


                              CHAPTER LX.

     James B. and John H. Clews                                 683


                              CHAPTER LXI.

     A Remarkable Chapter of History                            685


                             CHAPTER LXII.

     Booms in Wall Street                                       700


                             CHAPTER LXIII.

     A Glimpse into the Future                                  716


                             CHAPTER LXIV.

     My Christmas Address to Customers, December 24, 1906       724


                              CHAPTER LXV.

     Edward H. Harriman                                         726


                             CHAPTER LXVI.

     The Ups and Downs of Wall Street                           728


                             CHAPTER LXVII.

     Recent Wall Street Booms                                   744


                            CHAPTER LXVIII.

     Wall Street’s Wild Speculation, 1900-1904                  755


                             CHAPTER LXIX.

     Review of the Panic Year, 1903                             771


                              CHAPTER LXX.

     Leading Wall Street Events up to the Fall of 1907          774


                             CHAPTER LXXI.

     The Great Crisis of 1907                                   790


                             CHAPTER LXXII.

     The Causes of the Crisis of 1907                           797


                            CHAPTER LXXIII.

                          RECENT MEN OF MARK.

     Charles M. Schwab.—Daniel Gray Reid.—Thomas Fortune        801
       Ryan.—John Warne Gates.—August Belmont.—William H.
       Moore.—Anthony Nicholas Brady.—Stuyvesant Fish


                             CHAPTER LXXIV.

     Needed Publicity and Reform in Corporations                807


                             CHAPTER LXXV.

     The Monetary Situation and its Remedies                    822


                             CHAPTER LXXVI.

     Individuality versus Socialism                             836


                            CHAPTER LXXVII.

     Great Wealth and Social Unrest                             855


                            CHAPTER LXXVIII.

     The Financial Situation                                    879


                             CHAPTER LXXIX.

     Table showing Dates of Admission of the Members of the     913
       New York Stock Exchange


                             CHAPTER LXXX.

     England and Russia in our Great Civil War and the War      917
       between Russia and Japan


                             CHAPTER LXXXI.

     The Crisis of 1907 and its Causes. Was President           927
       Roosevelt to Blame?


                            CHAPTER LXXXII.

     Our Great American Panics from First to Last               943


                            CHAPTER LXXXIII.

     Wall Street as It Really Is. A Vindication                 955


                            CHAPTER LXXXIV.

     The Financial and Trade Situation, Past, Present and       964
       Future, Reviewing the Crisis of 1907, with Causes and
       Remedies


                             CHAPTER LXXXV.

     American Social Conditions                                1001


                            CHAPTER LXXXVI.

     Financial and Trade Situation and Prospects               1014


                            CHAPTER LXXXVII.

     Peace Assurances from Japan                               1033


                           CHAPTER LXXXVIII.

     The Emperor of Japan                                      1037


                            CHAPTER LXXXIX.

     The National Corporation Problem                          1045


     Conclusion                                                1063


------------------------------------------------------------------------




                             ILLUSTRATIONS.


                                                      PAGE.

             Henry Clews                       Frontispiece

             Mills Building                               5

             Parents of Henry Clews                       7

             Birthplace of Henry Clews                    9

             Map of U. S. by Henry Clews                 11

             Jacob Little                                13

             Salmon P. Chase                             39

             John Sherman                                73

             E. G. Spaulding                             81

             New York Stock Exchange                     87
               (exterior)

             New York Stock Exchange                     91
               (interior)

             Daniel Drew                                117

             George I. Seney                            175

             Henry Villard                              209

             Georgia State Bond                         255

             Samuel J. Tilden                           337

             Commodore Vanderbilt                       345

             W. H. Vanderbilt                           355

             Cornelius Vanderbilt                       387

             W. K. Vanderbilt                           389

             F. W. Vanderbilt                           393

             Three Rothschilds                          397

             Nathan Rothschild                          401

             W. R. Travers                              407

             C. P. Huntington                           451

             Leland Stanford                            455

             D. O. Mills                                457

             Charles Crocker                            459

             John W. Mackay                             461

             James C. Flood                             463

             James G. Fair                              465

             Robert Garrett                             553

             August Belmont                             595

             George J. Gould                            607

             Jay Gould                                  619

             Cyrus W. Field                             659

             P. D. Armour                               661

             Levi P. Morton                             663

             J. A. Stewart                              665

             A. J. Drexel                               667

             Leonard W. Jerome                          669

             Addison Cammack                            671

             Russell Sage                               673

             Chauncey M. Depew                          675

             James M. Brown                             677

             E. C. Stedman                              679

             H. Victor Newcombe                         681

             Moses Taylor                               683

             Thomas L. James                            685

             John H. Clews                              687

             James B. Clews                             689

             Roswell P. Flower                          691

             J. Pierpont Morgan                         693

             John D. Rockefeller                        701

             William Rockefeller                        713

             Henry H. Rogers                            729

             John D. Archbold                           735

             Edward H. Harriman                         793

             Wm. H. Moore                               821

             Daniel G. Reid                             843

             Thomas F. Ryan                             849

             John W. Gates                              853

             Chas. M. Schwab                            869

             August Belmont                             879

             Anthony N. Brady                           881

             Stuyvesant Fish                            903

             William E. Gladstone                       921

             _Fac-simile_, Gladstone letter             923


------------------------------------------------------------------------


                               DEDICATION
                                 TO THE
                        VETERANS OF WALL STREET,

                 MOST OF WHOM I HAVE KNOWN PERSONALLY.

                             --------------


MY DEAR FRIENDS:

I have attempted, in the following pages, to relate in a simple and
comprehensive manner, without any aim at elaboration, the leading
features of the most prominent events that have come within the sphere
of my personal knowledge and experience during the twenty-eight years of
my busy life in Wall street. I have never kept a diary regularly, but
have been occasionally in the habit of preserving certain memoranda in
the form of letters, and a few scraps from the newspapers at various
times. With these imperfect mementoes, I have revived my recollection to
dictate to my stenographer the matter which these pages contain, in a
somewhat crude form and unfinished style. In fact, I have not aimed at
either finish or effect, not having time for it, but have simply made a
collection of important facts in my own experience that may help the
future historian of Wall Street to preserve for the use, knowledge and
edification of posterity some of the most conspicuous features and
events in the history of the place that is yet destined to be the great
financial centre of the world.

If I can only succeed, out of all the poorly-arranged material I have
gathered, in furnishing the historian of the future with a few facts for
a portion of one of his chapters, I shall have some claim upon the
gratitude of posterity.

In my description of Drew, Vanderbilt, Gould, Travers, Keene, Conkling
and others, I have followed the advice which Oliver Cromwell gave his
portrait painter: “Paint me as I am,” he said. “If you leave out a scar
or a wrinkle, I shall not pay you a farthing.” I have given my opinion
of men and things also without any superstitious regard for the proverb
_de mortuis nil nisi bonum_.

I have also endeavored to refrain from setting down aught in malice.
Many of those referred to are now dead.

When any of those gentlemen of whom I have had occasion to speak, who
still survive, shall write a book, they can indulge in the same
privilege with my name that I have done with theirs, whether I am living
or dead at the time.

I shall ask no indulgence for myself that I don’t accord to others.

I have expressed my opinions freely from a Wall Street point of view,
from the standpoint of the much-abused operator and broker, and “bloated
bondholder.”

I have endeavored to enlighten the public on the true status of Wall
Street, as the very backbone of the country’s progress and prosperity,
instead of misrepresenting it as a den of gamblers, according to the
ignorant and somewhat popular prejudice of the majority who have
attempted to write or speak on the subject. This feeling has been
largely fostered by clergymen, on hearsay evidence, as well as by the
practices of professional swindlers, who have been smuggled into Wall
Street from time to time, but who have no legitimate connection
therewith any more than they have with the church, which repudiates them
as soon as it discovers them.

In fact, the great aim of the book is to place Wall Street in its true
light before the eyes of the world, and help to efface the many wrong
impressions the community have received regarding the method of doing
business in the great financial mart to which the settlement of accounts
in all our industry, trade and commerce naturally converges.

I have endeavored to correct the utterly erroneous impression that
prevails outside Wall Street, in regard to the nature of speculation,
showing that it is virtually a great productive force in our political
and social economy, and that without it railroad enterprise and other
branches of industrial development which have so largely increased the
wealth of the nation, would have made but slow progress.

To preserve and inculcate these ideas by putting them in what I hope may
be a permanent form, is another object of publishing this volume. I know
you can sympathize with me in this effort to set public opinion right,
as many of you have long been making strenuous endeavors after success
in the same direction.

To put the whole matter, then, into one short and comprehensive clause,
my cardinal object in this book is to give the general public a clearer
insight of the reputed mystery and true inwardness of Wall Street
affairs.

In my relation of certain reminiscences of Wall Street, and in
discussing the checkered career of certain brokers, operators and
politicians, I have endeavored to be guided by a historic aphorism of
Lord Macaulay:

“No past event has any intrinsic importance,” says the great essayist,
litterateur, historian and statesman. “The knowledge of it is valuable,”
he adds, “only as it leads us to form just calculations with respect to
the future.”

In the samples of my experience which I have given in this book I have
aimed, to some extent, at this rendition of the noble purposes of
history and biography in their philosophic and scientific application of
teaching by example. If I have fallen far short of this high ideal of
the British Essayist, as I humbly feel that I have, I must throw myself
on the kind indulgence of the readers, and ask them to take the will for
the deed. For the presentation of the facts themselves I crave no
indulgence. They are gems worthy of preservation in the light of the
above definition. I only submit that the setting might be much better.

My chapters on politics may be considered foreign to the main issue, but
as many of the events therein described were intimately connected with
my business career, I think they are not much of a digression.

                                                            HENRY CLEWS.


------------------------------------------------------------------------




                             INTRODUCTORY.

   MY PART IN MARKETING THE UNITED STATES CIVIL WAR
                             LOANS.


                         BY HENRY CLEWS, LL.D.


To a very large majority of Americans now living the great Civil
War—waged from 1861 to 1865—between the North and the South is only
known as a matter of history. But it was the greatest war the world ever
witnessed, involving the loss of nearly a million of men, and I have a
vivid recollection of it, for I was an actor in it, from its beginning
to its end, to the extent of providing some of the sinews of war for the
United States Government, without which it could not have defeated the
armies of secession, and preserved the Union.

From the time that Abraham Lincoln was elected to the Presidency of the
United States, in November, 1860, the South began to prepare for
secession from the North, peaceably if the North consented, but by war
if it resisted. It was bent on this course because it foresaw in a
Republican administration at Washington its practical loss of control of
Congress and the spoils of office—in fact, of the Government itself—that
it had so long enjoyed under Democratic administrations. James
Buchanan’s term as President having expired on March 4, 1861, Abraham
Lincoln was then inaugurated as his successor. It angered the South to
see a Republican succeed a Democrat in the White House, and it
precipitated the tremendous conflict that followed, by seizing Fort
Moultrie, in Charleston Harbor, and firing on Fort Sumter. Fort
Moultrie’s guns awoke the North to action, and made it a determined unit
in defense of the flag that had been fired upon, and its cry was, “The
Union must and shall be preserved!”

As this was the most eventful and critical period in our national
history since 1776, and so many know it only by what they have read of
it, I will give a general idea of its salient features bearing upon the
Government finances and the war loans.

When, after the bombardment of Fort Sumter by Fort Moultrie, on April
14, 1861, Major Robert Anderson, the Union commander, accepted, under
the stern necessities of the situation, General Beauregard’s terms of
evacuation, the die was cast.

The North picked up the gauntlet of war with patriotic enthusiasm, and
the great conflict had begun. But when our troops marched out of that
dismantled stronghold of the Union, with drums beating and colors
flying, it is safe to say that few or none, either in the North or the
South, foresaw the long and mighty struggle that would, for four
eventful years, follow the bombardment of Fort Sumter, during which gold
would become demonetized before the end of the year. It did so on
December 30, 1861, and in the darkest days of the conflict commanded a
premium as high as one hundred and eighty-five per cent. over United
States legal tender notes, making these worth only 54 1/20 cents in
gold, while United States bonds were selling for about 60 cents on the
dollar in gold.

When the New York Clearing House agreed, on the date named, to suspend
specie payments, the example was at once followed by all the banks in
the country, and gold immediately began to command a small premium. None
supposed then that the suspension would continue for eighteen years.

In England, during the long suspension from 1797 to 1821—through the
Napoleonic wars—the premium on gold never rose above forty-one per
cent., and that was in 1814, the year before the end of hostilities.
This was owing to the policy of William Pitt and his successors in the
management of the British finances. They raised all the money needed for
war purposes by taxation and loans, thus restricting the paper money
issues, so as to prevent currency inflation, whereas we pursued the
opposite course.

When Fort Sumter was fired upon, my firm—Livermore, Clews & Co.—was
already prominent in Wall Street, and I immediately began to devise ways
and means to help the Government to raise the money that I saw would be
necessary to prosecute the war for the Union which this bombardment made
inevitable. Fort Moultrie’s guns had united the North in a call to arms,
and men by tens of thousands left the farm, the loom, the office, and
the store, from Maine to Indiana, to join the Union army.

Money, therefore, was needed by the United States Government, and very
large amounts of it, to equip troops and purchase munitions of war.

As James Buchanan was then President, and, like a long line of his
predecessors, a Democrat, he had several Southerners in his Cabinet.
These promptly resigned their places and went South, including the
Secretary of the Treasury, Howell Cobb, who left with surprising
suddenness, and the office was filled for a brief period by General John
A. Dix, as acting Secretary.

But before leaving, Howell Cobb had offered and sold to Wall Street
bankers $20,000,000 of United States five per cent. bonds at 105,
authorized, of course, by an old law. Owing, however, to the heavy
decline in securities, and general depression following the outbreak of
the war, only about one-quarter of these bonds were taken and paid for
by those who had subscribed for them; and nothing was done by the
Government to enforce the completion of the purchase by those who had
defaulted under the severe stress of the times.

Their default was a serious matter for the Government at that time, as
it left the funds in the Treasury in a very depleted condition, and
interest payments on the public debt were about to fall due, which it
had no money in its vaults to provide for. At this crisis John J. Cisco,
the United States Sub-treasurer in New York, was instructed, from
Washington, to call a meeting of the principal Wall Street bankers at
the Sub-treasury, and after stating the situation to them, to ask for an
emergency loan on one-year United States notes, and let them fix the
rate of interest themselves to correspond with the state of the money
market.

Money was then loaning at about twelve per cent. per annum in Wall
Street. So when the bankers who responded to Mr. Cisco’s call, myself
among the number, assembled at the Sub-treasury, they, after full
discussion, agreed to take the amount of notes offered, and at this rate
of interest. It was a very high rate for the Government to pay, too high
under ordinary circumstances, but the emergency justified it; and Mr.
Cisco approved of it, in view of the market rate and the notes running
for one year only. My firm took a considerable amount of them and
induced others to do so also, and we did so, presumably like the rest of
the buyers, not merely because the rate agreed upon was so high, but
because we felt it a duty to help the Government; and at all times
thereafter during that critical period we worked no less diligently to
uphold the public credit.

The Government recognized that a default in its interest payments would
have been disastrous to the public credit, and a stumbling block in the
way of raising money to prosecute the war, besides causing general
depression of business. It therefore had to be prevented at all hazards.

Had these notes not been taken, the Treasury would undoubtedly have been
left without the means of paying this interest when due. Consequently,
it gratified me to feel that I had been instrumental in inducing others
to subscribe for a part of this urgently needed loan.

Soon afterwards Mr. Salmon P. Chase was appointed Secretary of the
Treasury by President Lincoln.

Not long afterwards Secretary Chase came to the Sub-treasury and invited
bids for $20,000,000 of six per cent. United States bonds maturing in
1884. These were authorized by an old law. He accepted all bids at 94
and over, but rejected all under 94, the result of which was that
considerably more than a third of the 1884’s remained unsold. This was
to be regretted, because the Treasury was in great need of money. I
therefore quickly bestirred myself to form a combination to purchase the
unsold bonds of 1884 at 94, my firm being willing to take a liberal
share of them, and I succeeded in getting subscriptions from banks and
capitalists who had not bought any of those sold, for the unsold amount,
subject to my own discretion as to the advisability of taking the bonds,
after going to Washington and conferring with Secretary Chase.

So I immediately went there by night train and saw the Secretary early
in the morning at the Treasury, and told him I had come on behalf of the
combination I had formed, to make him a direct offer at his own
price—94—for the unsold 1884 bonds. He was evidently pleased and
surprised by the apparent improvement in the demand for them. He said,
however, with a fine sense of probity, and consideration for the rights
of others, that while he was glad I had come to Washington, and made the
proposition to take the balance, he did not think it would be fair to
those who had bid and whose bids were thrown out, to sell the rest of
the issue without first notifying them of the new offer, and giving them
the option of taking what they wanted at the price I offered—94.

He asked me to call again the next morning, after he had given the
matter further consideration, and I did so. But meanwhile I had talked
with many Southern politicians and office-holders, Peter G. Washington,
one of the Virginia Washingtons, among them, and seen so much of the
extensive war preparations which were being made in and about
Washington, that I came to the conclusion that a long and very bitter
war lay before us, notwithstanding that Mr. Chase had the day previously
assured me that it would all blow over, with peace restored, within
sixty days, a prediction that was echoed by Secretary of State Seward a
little later. I was particularly impressed by what Mr. Washington,
himself a prominent Government official, had told me of Southern
sentiment and Southern determination to fight till all was lost or
gained, and by his and other Southerners’ absolute but mistaken
confidence that the South would establish its own Confederacy, however
long a war it might take to do it. The South in seceding from the Union
expected to be able to establish a slave oligarchy, for in Lincoln’s
election it foresaw the doom of slavery, as both he and the Republican
party were pledged to work for its abolition. Yancey and the other
leading Southern “fire eaters” were responsible for this false view.

When I made my second call upon Mr. Chase, I said: “Since I saw you
yesterday, Mr. Secretary, I have heard so much in conversation with
Southern politicians and office-holders at the hotels, and seen and
heard so much of the extensive war preparations on both sides, that I am
convinced the war will be a long one, and I fear we shall see much lower
prices for Government bonds and securities of all kinds. Feeling as I
do, therefore, in justice to those I represent and who have given me
full power to use my own discretion in the matter, I must withdraw the
offer I made you yesterday. Had you accepted my offer at the time, of
course I would have considered the transaction closed, and taken the
bonds without question, but as it is, you will admit I am under no
obligation, and free to retire.”

“Oh, certainly,” said Mr. Chase, “but I think you are making a mistake,
for the war will be over in sixty days and these bonds will go to par!”

But my sober second thought and foresight, based upon what I had seen
and heard, and the information I had gleaned in Washington, served me
well, and my associates in the combination had reason to thank me for my
sagacious action, as the bonds soon afterwards declined to 84; and the
Union disaster at the battle of Bull Run, fought at Manassas on July 21,
1861, aroused the North to a realization of the gravity and vastness of
the conflict far more than any of the warfare that had preceded it had
done; at the same time it made it more determined than before to
prosecute the war till the South was conquered into submission to the
Union forces.

Mr. Chase’s second act, in replenishing the Treasury’s funds, was to
offer for subscription six per cent. United States notes, receivable for
all payments, including customs duties, authority to issue which already
existed. He found difficulties in the way, however, and, after
conferring with the Sub-treasurer, Mr. John J. Cisco, who recommended
the appointment of three Wall Street banking houses to act as Government
agents for their sale, on commission, namely, Morris Ketchum & Co.,
Read, Drexel & Van Vleck, and Livermore, Clews & Co., he appointed them.
These were the first and sole Government agents for the sale of its
securities that had been thus far selected, and they all appreciated the
compliment, and did their work well, for they promptly sold all the
notes, of this issue, the Secretary had offered.

Mr. Chase throughout made strenuous efforts to supply the Government
with the means for carrying on the war, and he was loyally aided by the
banking interests of New York, a fact which he recognized and
acknowledged to me and others in appreciative terms.

On a subsequent memorable occasion, in the summer of 1861, Secretary
Chase appeared at the Sub-treasury after Sub-treasurer John J. Cisco had
called, at his request, a number of leading bankers and capitalists to
meet and confer with him. When we assembled there he said to us, in his
stately and impressive manner, “Gentlemen, the Government needs and must
have fifty millions of dollars, and it wants it at once to meet war
expenses. For this I am prepared to issue that amount of Treasury notes
of the two hundred and fifty million issue just authorized by
Congress—by the act of July 17, 1861—bearing interest at 7 3/10 per
cent. I am no financier, so I cannot tell you how to raise the money,
but you distinguished leaders in the world of finance well know what
means to adopt to get it. So I leave it in your hands entirely. All I
need say further is to repeat that the Government must have fifty
millions of dollars, and I leave it to you to find the way to procure
it.”

Then Mr. Chase sat down, and all of us who were present compared notes
with each other in conversation about the room; that is, we talked the
matter over for nearly twenty minutes. The result of the conference was
then announced by our spokesman, Moses Taylor, who said, addressing Mr.
Chase:

“Mr. Secretary, we have decided to subscribe for the fifty millions of
United States Government securities that you offer, and to place that
amount at your disposal immediately! So you can begin to draw against it
to-morrow!”

A general clapping of hands followed this prompt announcement, and Mr.
Chase responded by saying:

“Gentlemen, I thank you on behalf of the Government for your public
spirit in helping it so generously and so promptly in this emergency.”

The whole scene was of rare and stirring interest, and momentous
consequences hinged upon its result. As a drama drawn from real life it
would have been effective if represented on the stage, with the large
and portly form and massive head of Secretary Chase as its leading
feature.

This was the first lot, or installment, of the $250,000,000 issue of
7-30 Treasury notes put on the market.

Of these, the Secretary had the privilege of issuing $50,000,000,
payable in coin at the Sub-treasuries in New York, Boston, and
Philadelphia, without interest, to be used as currency.

After disposing of the first 50,000,000 of 7-30 notes, as I have
described, Secretary Chase communicated with the banks concerning the
sale of the remainder, with the view chiefly of saving the payment of
commission to the agents. But he was unable in that way to make sales on
satisfactory terms to them. So he added to the three Government agents
originally appointed for the sale of its securities, Fisk & Hatch, and
Vermilye & Co., of New York, and Jay Cooke & Co., of Philadelphia, and
told them the “7-30” notes would be delivered to them as fast as called
for at the New York Sub-treasury.

Thereupon the New York agents held a meeting, at which it was agreed
that Jay Cooke, of Philadelphia, should be at the head of the agency
system and take charge of the advertising of the 7-30 loan, or, in other
words, that Jay Cooke should act as Chairman of the agency system. The
agreement also specified the commission rates and other details for the
purpose of avoiding cutting, or clashing, between the agents. To this
organization and agreement Mr. Chase assented; and all the agents made
strenuous efforts to make sales from the word go.

Jay Cooke & Co. had no office in New York at that time, nor did they
establish one till after the end of the war. This really led to their
designation as the head of the agency system, as the selection of a New
York firm would have created jealousy among the New York firms.

After all the 7-30s authorized to be issued were sold, came the 5-20
loans, which were sold through the same Government agency system, and
the 5-20s were as successful as the 7-30s had been.

Mr. Munson B. Field, Assistant Secretary of the Treasury under Salmon P.
Chase, had an examination made of the books at Washington, at my
request, to see which individual firm of the Government agents sold the
most United States 7-30s and 5-20s, and he reported that Livermore,
Clews & Co. had the highest record. But I am willing that the credit
should be shared equally by the four United States war loan banking
firms, viz.: Jay Cooke & Co.; Livermore, Clews & Co.; Vermilye & Co.,
and Fisk & Hatch, as all did equally good and earnest work in financing
the Government during the Civil War. Certainly the four firms are
entitled to equal credit, and no one to a greater extent than the
others. There was sufficient glory achieved by the magnificently
patriotic work done by these four firms to admit of dividing the honors,
so that I do not hesitate to say that they did immensely valuable
service to the Nation, and made for themselves a proud National record,
which should be always greatly appreciated by the American people, as it
was at the time by the Government authorities in Washington. The
Government was thus enabled to clothe and feed a million of soldiers in
arms on the battlefield, fighting for the salvation of the Nation, and
these finally brought the war to a victorious end, thus perpetuating the
best form of government known to man.

I may here mention that Secretary Chase said:

“If it had not been for Jay Cooke and Henry Clews, I should never have
been able to sell enough of the 7-30 notes and 5-20 bonds to carry on
the war.”

This remark of his was generally published at the time in the
newspapers.

The Government had sold through its agents $150,000,000 of the 7-30
notes before the suspension of specie payments, an event that was
hastened by the Secretary’s withdrawal from the banks into the
Sub-treasuries of most of the proceeds of the sales, his call for
payment from the agents to the Treasury being in three installments: on
August 19th, October 1st, and November 2d. Moreover, the hoarding and
exportation of gold were largely stimulated by the anticipation of
specie suspension, and, after it occurred, gold suddenly disappeared
from circulation.

This obviously involved a corresponding contraction of the circulating
medium, and Mr. Chase, to neutralize it, and supply the place of the
demonetized coin, issued the $50,000,000 of non-interest-bearing notes,
which were called United States Demand Notes. He did this also to
obviate the necessity of the State Banks issuing more of their own
notes, as well as to raise money to meet the rapidly increasing demands
of the Treasury.

Congress, seeing that this contraction tended to produce stringency in
the money market, and handicapped the Government’s agents in the sale of
its securities, had, on August 5, 1861, suspended the act of August 6,
1846, “providing for the better organization of the Treasury, and for
the collection, safe-keeping, and disbursement of the public revenue.”
It did this so as to permit the Secretary of the Treasury to deposit any
of the money obtained on authorized loans in such solvent specie-paying
banks as he might select, and, in addition, it expressed this in a
resolution. The resolution was promptly acted upon by Secretary Chase,
and this, and a later law, governed the policy of the Treasury ever
afterwards. Monetary stringency was thus avoided by the Treasury keeping
as much of its money in the banks as it could, and so locking up as
little as possible in the Treasury and Sub-treasuries. The evil effects
of the Sub-treasuries system in locking money out of circulation was
thus practically acknowledged and guarded against.

When the sale of the 7-30s had been completed by the Government agents,
there was great pressure brought to bear by the banks throughout the
country, who were backed by many influential newspapers, in favor of
giving the sale of the 5-20s to the banks instead of to the Government
agents. The pressure upon Secretary Chase became so great that he
concluded to try the experiment, and authorized all the banks throughout
the country to sell the 5-20s. After giving them every opportunity to
supersede the agency system, as previously adopted with the six per
cent. and the 7-30 Treasury notes, the Secretary was finally compelled
to abandon the banks and go back again to the agents, who took hold with
vigor and made the sale of the 5-20s as brilliant a success as they had
previously made that of the 7-30s. We were friendless in Europe, but we
overcame this by patriotism and energy at home.

After a time, some of the banks, and there were only State Banks then,
threw out the Demand Notes, and so it became necessary to enforce their
circulation. To accomplish this, Secretary Chase asked Congress to make
them a legal tender for the payment of all debts, public and private,
excepting customs duties, and interest on the public debt, payable in
coin.

Congress, therefore, on February 25, 1862, remedied the difficulty by
passing the Legal Tender Act, making these and all the United States
notes lawful money. In the same act it authorized the issue of
$150,000,000 of new non-interestbearing legal tender notes. The
provision for the payment in coin of customs duties and interest on the
bonded debt was obviously as necessary as it was wise, as customs duties
furnished the means for paying the interest in specie; and the fact of
its being payable in gold created a demand for our bonds in other
countries, as well as at home, which would not have existed on paper
money interest.

Before long, the whole of the authorized $250,000,000 of 7-30 notes had
been sold to the public through the Government agents; and later, from
time to time, Congress authorized large additional amounts of these till
finally they reached their maximum, in August, 1865, when $830,000,000
of them were outstanding.

At the same date, also, the Government bond issues, which had kept pace
with the 7-30 note issues, and simultaneously reached their maximum,
showed immense totals. There were then outstanding $514,880,500, of 5-20
bonds, and $172,770,100 of 10-40 bonds. Among our own people patriotism
and profit combined to make these great United States loans doubly
attractive, and the Government agents used their best efforts to
stimulate the demand for them both at home and abroad. Livermore, Clews
& Co., in particular, sold large amounts of these in England and other
foreign countries, where they ultimately proved extremely profitable
investments. To meet the demands of the war, we—the Government
agents—were as anxious as the Secretary of the Treasury himself, and
never were men more successful in accomplishing their object and doing
good work than we were. There was patriotism worthy of Patrick Henry, as
well as profit, in this, and Wall Street can lay the flattering unction
to its soul that it rendered, through the Government agents, the best of
good service to the Government in this time of peril to the Union.

As General Grant said long afterwards to me, we were not fighting for
the Union as soldiers in the field, but we served it equally well by
helping it in its struggle for money to prosecute the war; and I felt
proud of the active part I took in thus helping to preserve the Union as
one of its army in civil life.

The campaign in Virginia having proved prolific of disaster to the Union
army, Congress, on July 11, 1862, authorized the issue of a hundred and
fifty millions more of non-interest-bearing United States legal tender
notes, and on January 17, 1863, another hundred millions to which it
added $50,000,000 on March 3d, in the same year, making $450,000,000 of
legal tender notes, or greenbacks, fifty of which were to be held as a
Treasury reserve, for the redemption of temporary loan certificates.

This was the maximum issue of non-interest-bearing legal tender notes at
any time, and by the act of January 28, 1865 Congress restricted the
total to $400,000,000, and there it remained till Hugh McCulloch became
Secretary of the Treasury, early in 1865.

Secretary Chase had meanwhile become Chief Justice of the United States
Supreme Court, and Thomas Fessenden, who succeeded him as Secretary, had
resigned. Mr. McCulloch began to contract the legal tender notes, and
had withdrawn $44,000,000 before Congress interfered to prohibit any
further contraction. It did this in response to a general protest
against any further curtailment of the greenbacks in circulation.

From that time until the panic of 1873 their amount remained at
$356,000,000. In the interval Mr. Boutwell had succeeded Mr. McCulloch,
and Mr. Richardson had succeeded Mr. Boutwell as Secretary. Mr.
Richardson, under diminished customs and revenue receipts, and the
stress of the panic, restored to circulation $26,000,000 of the
$44,000,000 of legal tender notes that had been withdrawn by Mr.
McCulloch, whereupon Congress, on June 22, 1874, provided that the
greenbacks in circulation should remain fixed at the then existing total
of $382,000,000.

The same law which thus legalized the reissue of the $26,000,000 of
legal tender notes by Secretary Boutwell abolished the National Bank
reserve, previously required to be kept on bank-note circulation, and
for this substituted the provision that the banks were to deposit five
per cent. in legal tender notes of the amount of their own note issues
with the United States Treasurer at Washington for the redemption of
their notes.

This law is still in force, and the establishment of the Redemption
Bureau at Washington has resulted, ever since, in daily receipts by it
of mutilated bank notes to be replaced by new notes, in addition to the
ebb and flow caused by banks increasing or reducing their circulation.
The five per cent. in legal tender deposited is counted by them as part
of their legal reserve. But the necessity of sending the notes to
Washington, and of receiving them therefrom, involves trouble and loss
of time to the banks, and also prevents the banks from contracting their
circulation when the demand for it is light and increasing it when
heavy, as freely and promptly as they would if every Sub-treasury was
made a redemption point for National Banks. Congress ought therefore to
authorize the equipment of the Sub-treasuries with redemption bureaus
for the banks in their respective districts, in order to facilitate this
ebb and flow of bank-note issues, and so increase the much needed
elasticity of the currency.

In addition to United States legal tender notes, large amounts of
interest-bearing legal tender notes were issued during the war. On
September 1, 1865, when the currency, like the whole National debt,
reached its greatest amount of inflation, the noninterest-bearing legal
tender notes and fractional currency stood at $459,505,311, the three
years six per cent. compound interest legal tender notes at more than
$217,000,000, and the one and two years five per cent. legal tender
notes at nearly $34,000,000, the whole aggregating $685,236,269 issued
by the Treasury.

There were also outstanding $107,000,000 of temporary loan certificates.
These, being payable after ten days’ notice, were treated as greenbacks
by the banks, and counted as part of their lawful money reserve, while
the remainder circulated as currency, and so practically increased the
volume of paper money. At the same time the new National Bank law had
put in circulation $170,000,000 of National Bank notes; and more than
$70,000,000 of State Bank notes were still circulating. The last named
were, however, soon taxed out of existence by Congress. The grand total
of the issues enumerated was ten hundred and sixty-seven millions of
paper money in circulation. Nor was this all, for there were then
outstanding $85,000,000 of one-year certificates of indebtedness; and
the $830,000,000 of 7-30 notes, called 7-30s, outstanding were
extensively used as money, and so tended to increase the inflation of
the currency and prices.

It will be seen therefore that the inflation of the currency was really
much larger than it appeared to be by the Public Debt statements at that
time. But so rapid was the contraction during the eight years following,
through the maturity and cancellation of interest-bearing notes and
certificates, that it is safe to say we had from sixty to seventy-five
per cent. less paper, used as money, in circulation when the panic of
1873 commenced than we had in September, 1865, and to this enormous
contraction of our medium of exchange that disastrous panic, the worst
this country ever had, was largely due. It was, I repeat, the worst in
its effects that this country ever experienced, not excepting the panics
of 1837 and 1857, and was aggravated by the Franco-German War, that
practically shut American securities out of the European markets, which
had previously taken them freely. This was a severe blow to the American
bankers who had undertaken to finance the railways then in process of
construction in different parts of the country, and who had relied upon
finding both home and foreign markets for the sale of the bonds issued
against the completed mileage of these railways, and it led to much
embarrassment and a number of failures. The depression following this
panic of 1873—in which Jay Cooke & Co. failed owing to their having
undertaken to finance the Northern Pacific—was prolonged, and prosperity
did not really return to us as a Nation till after the resumption of
specie payments in 1879. Meanwhile, nearly all the uncompleted railways
in the country had been reorganized through foreclosures that wiped out
hundreds of millions.

Our National debt, which had increased from $64,000,000 on June 30,
1860, and $88,409,387 on June 30, 1861, to $2,845,907,626 on September
1, 1865, had then been very largely reduced, for it was only
$2,140,695,365 on September 1, 1873. The debt and the currency had gone
up and down together under the influence of a common cause. Not till
specie payments were resumed by the Government and the banks did gold
cease to command a premium. With this the Gold Room became a thing of
the past.

The great activity and the enormous sales of the Government agents may
be inferred from the maximum amounts I have quoted, of the 7-30 notes,
and the 5-20 and 10-40 bonds outstanding five months after Lee
surrendered to Grant at Appomattox on April 9, 1865.

The total debt on which interest was payable in coin then amounted to
$1,116,658,100, while that bearing interest in lawful money was
$1,874,478,100, the first calling for $65,001,570 in gold annually, and
the other for $72,527,646 of greenback currency.

That great event—Lee’s surrender to Grant—that ended the war, was the
fitting prelude to General Grant’s election to the Presidency. It made
it certain that no other Republican candidate for the office of
President of the United States would have any chance of success at the
next general election, and, of course, no Democratic candidate could be
elected. Grant became our great National hero, and the country glorified
him for his splendid war record.

But soon after the memorable historical scene at Appomattox, while the
country was rejoicing over the advent of peace, with the Union restored,
there came that terrible tragedy at Ford’s Theater in Washington, when
President Lincoln, on April 14, 1865, was assassinated by John Wilkes
Booth, and on the following day Vice President Andrew Johnson was sworn
in as President.

Then, indeed, the Nation was plunged into mourning, and mourning emblems
from ocean to ocean testified to the National grief.

I will not dwell on the stormy career of Andrew Johnson as President,
and the impeachment proceedings against him, that for a long time made
both branches of Congress seething cauldrons of excitement. But it was a
happy relief to the country when his term expired and General Grant
succeeded to the Presidency on March 4, 1869, with Schuyler Colfax as
Vice President. The Democratic candidates who had run against General
Grant in the campaign in which he was elected in November, 1868, were
Horatio Seymour and General Francis P. Blair, Jr. But the popularity of
Grant was so overwhelming that his election was a foregone conclusion.

Till within a short time of its final termination the duration of the
war was a matter of much uncertainty, and its ultimate result had long
been the subject of doubt and gloomy forebodings by many who failed to
see that the superior money power and resources of the North were sure
to conquer and crown the Union with victory in the end. Our currency,
greatly inflated though it was, remained good throughout the trying
ordeal, whereas that of the Confederate States became utterly
discredited and worthless, thus repeating the history of the French
_assignats_.

A new era opened in our history with the ending of the war, and our
currency, which, of course, had previously no circulation in the South,
began to circulate there. This, of itself, was equivalent to extensive
contraction. The currency of one section had now to supply the currency
needs of both sections, and for a long time the drain of money from the
North to the South was felt in the money market.

The country was somewhat like a sick man accustomed to and dependent on
stimulants, to withdraw which suddenly would have been perilous. Many in
Congress recognized this danger, for it was a noticeable feature of the
debates on the subject that not a few of those who had been strongly
opposed to our excessive issues of paper money during the war, and
warned the country against them, were among those who opposed violent
contraction as being a remedy worse than the disease. The radical
contractionists, however, failed to see, or refused to acknowledge, that
the arguments which would have applied to the rising tide of the
currency while the war continued, and there was danger of indefinite
further inflation, did not apply with equal force to the altered
condition of affairs.

Although schemes of radical contraction were rejected, even the moderate
measure of contraction that was adopted proved too severe to be endured
without much complaining from business interests, so hard and painful is
the process of contraction, whereas that of inflation is always pleasant
and easy.

In later years I became very well acquainted with General Grant, and
toward the end of his first term of the Presidency, when a good deal of
opposition was manifested to his renomination by the press, including
the New York _Evening Post_, I made strenuous efforts to secure his
renomination. To that end I organized a public meeting at the Cooper
Institute, and induced William E. Dodge to act as Chairman. It was a
great popular success, and Grant’s renomination was unanimously
advocated with immense enthusiasm. The _Evening Post_ then said that
after such an overwhelming demonstration it was evident that public
sentiment was on the side of Grant, and that it was useless to oppose
his renomination. He was accordingly renominated by the Republican Party
and triumphantly reëlected. His second term as President began on March
4, 1873, and he retired from the Presidency four years later.

General Grant was well aware of the part I took at this meeting, which,
many said, turned the scale in favor of his renomination when it was
doubtful and trembling in the balance, and he also knew of my services
in connection with the Government war loans, and in organizing various
public meetings to celebrate Union victories and stimulate recruiting
for the army. He said that I deserved some public recognition of my
public services in supplying the sinews of war, and asked me how I would
like to be Secretary of the Treasury, but I said I preferred Wall
Street. Therefore, later on, he appointed me Fiscal Agent for the United
States Government in all foreign countries, in place of Baring Brothers,
of London, who had been its fiscal agents up to that time, since the
Bank of England had acted in that capacity.

When it became certain that General Grant’s death was very near, I was
anxious to see him once more, and also a strong advocate of his burial
in the city of New York, where his tomb would be a conspicuous monument,
to be seen by all, instead of burying him almost out of sight in
Arlington Cemetery or at West Point, which places were strongly urged.
The States of Ohio and Illinois also claimed him, as did the city of St.
Louis. They all made strenuous efforts to obtain the family’s consent,
as well as his, through committees sent to Mount McGregor for that
purpose.

So I went to Mount McGregor, where he was, and as delicately as possible
urged this upon him and his family. All of the members of the family
assented, and the General, being unable to speak, nodded his assent also
to what I said. Then when he was wheeled out in his chair, on the
veranda, on his way to take his regular afternoon sun bath on the
mountain side, accompanied by Dr. Douglas, he wrote on a pad that all he
demanded was that his wife should be buried by his side when her own
time came. Knowing them all well, I remained there two hours, talking
with the General and the family, and my visit, when I made its result
known, led to the selection of New York as the great soldier’s burial
place, on the conditions mentioned by him. Within three days after I had
seen him, the great General died. I had visited him on a Monday
afternoon, and he died on the following Wednesday. His death threw the
Nation into mourning.

Incidentally, I may mention that I started the organization of the
famous Committee of Seventy, that brought about the overthrow of the
corrupt Tweed Ring, that had robbed the city of New York of about a
hundred millions of dollars. I nominated sixty-five of its members, and
for my instrumentality in forming that Committee of eminent and
public-spirited citizens I received many congratulations. That Committee
not only drove the thieves out of office, but caused the prosecution of
all of them who had not fled the country, and ultimately brought back
and convicted Tweed, who died in prison. Meanwhile, it had reorganized
the City Departments, and put new men in office, with Andrew H. Green as
Comptroller. It purified, and, for a time, virtually ruled the city,
through controlling its government.

But above everything else in my business life, I regard with most
satisfaction the work I did in marketing the Civil War loans of the
Government of this great and glorious country of ours—the United States
of America—and in other ways strengthening the hands of the Government
to the best of my ability and with all my heart and soul, not only as a
banker but a patriotic American citizen; and I felt that I had my reward
when, after the memorable four years’ war, peace came bringing with it
Victory for the Union and a reunited country, a victory which gave
permanence to the best government ever known to man—a government “of the
people, for the people, and by the people,” which bids fair to be
everlasting.


[Illustration:

  MILLS BUILDING (OPPOSITE NEW YORK STOCK EXCHANGE), NOS. 11-13-15-17
    BROAD STREET AND 35 WALL STREET, OCCUPIED BY THE BANKING HOUSE OF
    HENRY CLEWS & CO.
]


------------------------------------------------------------------------




                       FIFTY YEARS IN WALL STREET

                               ----------

                         BY HENRY CLEWS, LL.D.

                               ----------




                               CHAPTER I.

           MY DEBUT IN WALL STREET.


MY advent in Wall Street was on the heels of the panic of 1857. That
panic was known as the “Western blizzard.” It was entitled to the name,
as its destructive power and chilling effects had surpassed all other
financial gales that had swept over Wall Street. The first serious
result of its fatal force was the failure of the Ohio Life and Trust
Company, a concern of gigantic dimensions in those days.

The Company had an office in Wall Street, and on the announcement of the
collapse, business became completely paralyzed. This failure was
immediately followed by the suspension of many large firms that had
withstood the shock of all ordinary collisions and had successfully
weathered many financial storms.

The panic was due in part to excessive importations of foreign goods,
and also to the rapid construction of railroads, to a large extent on
borrowed capital. There were other contributing causes. The crops were
bad that year, and the country was unable to pay for its imports in
produce, and coin was brought to the exporting point. In October, the
New York City banks suspended payments, and their example was followed
throughout the country. Bank credits had been unduly expanded
everywhere, and the time had naturally arrived for contraction. It came
with a bound, and financial disaster spread like a whirlwind, becoming
general.

The Stock Exchange had been a moderately growing concern for the ten
years previous to this calamity, and the securities there dealt in had
been rapidly accumulating in number and appreciating in value. Its
members were wealthy and conservative, with a strong infusion of
Knickerbocker blood, an admixture of the Southern element and a
sprinkling of Englishmen and other foreigners.

The effect of the crisis on the majority of Stock Exchange properties
was ruinous. Prices fell fifty per cent. in a few days, and a large
proportion of the Board of Brokers were obliged to go into involuntary
liquidation. There was a great shaking up all around.

Then came the work of rehabilitation and reorganization. Confidence
gradually returned. The Young Republic had great recuperative powers,
and they were thoroughly exerted in the work of resuming business. Much
of the old conservative element had fallen in the general upheaval, to
rise no more. This element was eliminated, and its place supplied by
better material, and with young blood, and in December the banks resumed
business.

This panic and its immediate results created an entire revolution in the
methods of doing business in Wall Street. Prior to this time, the
antique element had ruled in things financial, speculative and
commercial. This crisis sounded the death knell of old fogyism in the
“street.” A younger race of financiers arose and filled the places of
the old conservative leaders.

The change was a fine exemplification of the survival of the fittest,
and proved that there was a law of natural selection in financial
affairs that superseded old conservatism and sealed its doom.

[Illustration:

  JAMES CLEWS
  Of “The Leasows” Staffordshire, England
  Father of Henry Clews
]

[Illustration:

  HENRY CLEWS
  In 1857, at the Time of His Start in Wall Street
]

[Illustration:

  MRS. ELIZABETH KENDRICK CLEWS
  Mother of Henry Clews
]

Until that time, the general idea prevailed that those engaged in
financial matters must be people well advanced in years, even to the
verge of infirmity. It is the same idea that has been handed down, as if
by divine right, from old world prejudices, especially in the learned
professions. No doctor was considered a safe prescriber unless his hoary
locks, bald head and wrinkled brow proclaimed that he had almost passed
the period of exercising human sympathy. The same rule of judgment was
applied to the lawyer and the clergyman.

These unworthy prejudices were fostered by the character of the
Government of the old country, and nurtured by the surroundings of the
venerable monarchies of Europe, where they exist largely even to the
present day. So tenacious of life are these old-fashioned ideas, that
many of them were found in full vigor, dominating Wall Street affairs up
to the crash of 1857, fostering the antique element and choking off
salutary enterprise.

Hence the process of decay of these archaic notions and our gradual
development.

This struggle for new life in Wall Street was not successfully developed
without a serious effort to attain it. The old potentates of the street
fought hard to prolong their obstructive power, and their tenacious
vitality was hard to smother, reminding one of the nine lives attributed
to the feline species. The efforts of the young and enterprising men to
gain an entrance to the Stock Exchange were regarded by the older
members as an impertinent intrusion on the natural rights of the senior
members. It was next to impossible for a young man, without powerful and
wealthy patrons, to obtain membership in the New York Stock Exchange at
the time of which I speak.

The old fellows were united together in a mutual admiration league, and
fought the young men tooth and nail, contesting every inch of ground
when a young man sought entrance to their sacred circle.

The idea then struck me that there was a chance for young men to come to
the front in Wall Street. I was then engaged in the dry goods importing
trade, in which I received my early training. I had been kept out of the
Exchange for several years by the methods to which I have alluded. My
fate was similar to that of many others. It was only by an enterprising
effort, and by changing the base of my operations, that I finally
succeeded.

The commissions charged at that time were an eighth of one per cent. for
buying and selling, respectively.

After numerous efforts to gain admission to the Exchange, without
success, I finally made up my mind to force it. I at once inserted an
advertisement in the newspapers, and proposed to buy and sell stocks at
a sixteenth of one per cent. each way. This was such a bombshell in the
camp of these old fogies that they were almost paralyzed. What rendered
it more distasteful to them still was the fact that, while they lost
customers, I steadily gained them. The result was that they felt
compelled to admit me to their ranks, so that I could be kept amenable
to their rules and do business only in their own conventional fashion.
My membership cost me, in all, initiation fee and other trifling
expenses in connection therewith, $500. This presents a striking
contrast to the recent price of a seat, $35,000, but though this
difference seems very large, yet the changes in every other respect
connected with Wall Street affairs have been in similar proportion.
Among some of the old members of that day were Jacob Little, John Ward,
David Clarkson and others whose names may be found in the archives of
the Stock Exchange.

As an instance of the way in which membership was then appreciated, it
may be mentioned that speculators frequently offered $100 a week, or ten
times the cost of membership, for the privilege of listening at the
keyhole during the calls.

[Illustration:

  HENRY CLEWS’S BIRTHPLACE, “THE LEASOWS,”
  HILDERSTONE, STAFFORDSHIRE, ENGLAND.
]

Although the prostration growing out of this panic was very great and of
long continuance throughout the country, general confidence being shaken
to its very foundation, yet, on the whole, it was a great gain, and
marked an era of financial and speculative progress. It was the chief
cause in drawing out the young element in the business of Wall Street,
which might have lain dormant for a much longer period without this
sudden and somewhat rude awakening. It not only brought Young America to
the front in speculation, commerce and general business, but it imparted
an impetus of genuine enterprise to every department of trade and
industry, from the good effects of which the country has never since
receded.

This new element, emanating from the throes of one of the greatest
business revolutions that any country has ever experienced, has
continued to grow and thrive with marvellous rapidity. It is now getting
so large that the Exchange will soon require a whole block instead of a
basement as at its origin for its headquarters. The Governing Committee
of the Stock Exchange are now looking forward to arrangements for this
consummation. How the ancient fathers of my early days in Wall Street
would have been shocked at the bare idea of such amazing progress!

It is not the least singular phase of this evolution in Wall Street,
that the youthful element to which I have referred stands alone as
compared with the progress achieved by the same class of men in any
other nation. In America only does the youthful element predominate in
financial affairs; and results have justified the selection, which
perhaps in no other nation is possible. Thanks to the freedom of our
Republican institutions, which, in spite of some individual deductions
and the occasional obstructions of “crankdom,” make way for that
progress, in the wake of which the other nations of the world are
emulous to follow.

The Exchange was at this time situated on William street between Beaver
street and Exchange Place. That place is rich in speculative
reminiscences. It was there that Jacob Little made and lost his nine
fortunes. It was there that Anthony Morse, the lightning calculator,
operated. He could foot up four columns of figures as easily as the
ordinary accountant could run up one. He had been a clerk, and having
saved seven hundred dollars by close economy, began to deal in stocks.
His career at that time was more marvellous even than that of Keene of a
recent date. Morse made a fortune of several millions in a year, and
became bankrupt during the same period, without any available assets to
speak of. It was all honorably lost, however. There was no Ferdinand
Ward game connected with it.

Youthful speculators had not then learned the “crooked” methods of the
young idea of modern times. It was there also that Daniel Drew began to
accumulate those millions that afterward were subject to such a rude
scattering. It was there that the celebrated “corners” in Rock Island,
Prairie du Chien and Harlem were concocted. It was there that the wealth
was accumulated which built twenty thousand miles of Western railroads,
causing many millions of acres, that would otherwise have been a
wilderness, to blossom like the rose, in spite of Mr. Powderly’s opinion
that no material good can come out of speculation, and thus adding
immense wealth in real estate to the country, besides conferring
incalculable benefits on trade and commerce, and preparing comfortable
homes not only for the pioneers and surplus population of the Eastern
States, but a teeming soil that has attracted the down-trodden of every
nation to come and partake of the blessings of freedom and prosperity.

One of Jacob Little’s speculative ventures has been rendered
historically famous through the rule of limitation of sixty days for
option contracts. The necessity for this limit was brought about by one
of his celebrated attempts to manipulate the market. He was one of the
most prominent speculators in Erie in the early days of Drew’s
transactions with that property and its stocks. Mr. Little had been
selling large blocks of Erie on seller’s option, to run from six to
twelve months. This was in the early history of “corners,” before the
method of managing them scientifically had been fully developed and
while “blind pools” were yet in embryo.

[Illustration:

  THIS MAP OF THE UNITED STATES OF AMERICA IS A PHOTOGRAPH TAKEN FROM
    THE ORIGINAL PEN-AND-INK HAND DRAWING MADE BY HENRY CLEWS FIFTY-FIVE
    YEARS AGO.
]

The leading members of the Erie Board formed a pool to “corner” Mr.
Little, and ran Erie shares up to a considerable height. They imagined
that he was in blissful ignorance of their purpose, and had everything
arranged for a _coup d’etat_ which was to reach its crisis at two
o’clock on a certain day, when Little was to be completely overwhelmed
and hopelessly ruined. An hour prior to the time appointed by the clique
for his disaster he walked into the Erie office, opened a bag filled
with convertible bonds, and requested an exchange of stock for the same.
He had purchased the bonds in London and had them safely locked up for
the emergency, which he promptly met on its arrival. He got the stock,
settled his contracts, broke the “corner,” and came out triumphantly.

The option limit of sixty days was afterwards adopted in order to
prevent similar triumphs in manipulation on the “short” side.

As will be illustrated more fully in subsequent chapters, Mr. Little’s
convertible bond trick was used with signal advantage by his speculative
successors in Erie, who practically demonstrated on several occasions
that there were millions in it.

Mr. Little was generous and liberal to a fault with his brother
speculators who had experienced misfortune. He used to say that he could
paper his private office with notes he had forgiven to the members of
the Board. He was also remarkable for his great memory. He could easily
remember all the operations he made in the course of a day without
making a note or a mistake.

Like Drew, he was careless in his attire, wearing a hat like that of a
farmer, and not a very prosperous one, but he had no compeer in his day
at calculating ahead in a speculative venture.

[Illustration:

  JACOB LITTLE.
]

------------------------------------------------------------------------




                              CHAPTER II.

          WALL STREET AS A CIVILIZER.


CLERICAL OBLIQUITY OF JUDGMENT ABOUT WALL STREET AFFAIRS.—THE SLANDEROUS
    ELOQUENCE OF TALMAGE.—WALL STREET A GREAT DISTRIBUTOR, AS EXHIBITED
    IN THE CLEARING HOUSE TRANSACTIONS.—POPULAR DELUSIONS IN REGARD TO
    SPECULATION.—WHAT OUR REVOLUTIONARY SIRES ADVISED ABOUT IMPROVING
    THE INDUSTRIAL ARTS, SHOWING THE STRIKING CONTRAST BETWEEN THEIR
    VIEWS AND THE WAY LORD SALISBURY WANTED TO FIX THINGS FOR THIS
    COUNTRY.


The dense ignorance displayed by men outside of Wall Street, in regard
to the business of that great mart, is almost incredible. Even the most
intelligent men I meet in other professions and walks of life have the
most utterly crude and undefined notions about the methods of doing
business at the Stock Exchange. Many good and pious clergymen are under
the impression that Wall Street is a name for the sum total of all kinds
of infamy, and solemnly exhort their devoted flocks not to touch the
unclean thing.

Clerical obliquity of judgment is not quite so bad, nor popular
ignorance so dense in this respect, as it has been, but there is a large
field for improvement yet. The business activity of the country, and the
spirit of intercourse being so rapidly infused throughout all ranks of
the community, have demonstrated that this antipathy to Wall Street has
been simply an unworthy prejudice, in spite of the high moral authority
from which it has emanated.

I don’t wish to throw any aspersion on the noble purposes of the clergy.
The end they have been seeking has been good, but it has not always
justified the means employed. These good men have unwittingly
misrepresented Wall Street, to the great detriment of the business
interests of the country.

There is no excuse, however, for a man in this enlightened age, who
professes to be a Shepherd in Israel and a spiritual leader of the
people, to remain ignorant of an important fact, or to continue to see
that fact through a false medium, when he has the opportunity of coming
into Wall Street and seeing for himself. He has no right to set himself
up as a censor, a public detractor, and a public libeller upon a set of
men and merchants who are the bone and sinew of the commercial and
industrial interests and prosperity of the country. It is not only a
personal wrong but a public injury.

The Rev. T. De Witt Talmage has perhaps done more than any other
clergyman to make our speculators, investors and business men ridiculous
in the eyes of the rest of the community and in the estimation of John
Bull, in whose dominion his so-called sermons are extensively read.
Talmage has employed his flashing wit and mountebank eloquence to bring
financial disgrace on the business methods of the whole country by the
manner in which he has ignorantly vilified Wall Street.

He can go to the Cremorne Garden, Billy McGlory’s, Harry Hill’s and
other places of dubious reputation, and make himself acquainted with the
real condition of things there.

How far he has penetrated into the green rooms and behind the scenes in
these places it is not my business to know, but why should he not treat
Wall Street as fairly, where everything is open to inspection, as he
does these dens of vice, where midnight scenes of villainous revelry and
reckless dissipation reign supreme? Why does he misrepresent Wall Street
without knowing anything about it? He can come here and go wherever he
wishes without a bodyguard of detectives or fear of molestation. Why is
he so particular about doing justice to the brothel and the gaming den,
while he airs his ludicrous eloquence to the highest pitch to falsify
the respectable business methods of Wall Street?

I recollect the time that men in the higher walks of life, and among the
higher classes (if I may use the expression, in opposition to the
opinion of the New York _Sun_, whose editor maintains that we have no
classes in this country) would have been ashamed to be seen in Wall
Street. Now, men in the same sphere are proud of the distinction, both
socially and financially. In fact Wall Street has become a necessity as
a healthy stimulant to the rest of the business of the country.
Everything looks to this centre as an index of its prosperity. It moves
the money that controls the affairs of the world.

Take the Clearing House, for example, with its 50 billions of
transactions annually. All but a fraction of this wonderful wealth,
compared with which the stupendous pile of Crœsus was a mere pittance,
passes through Wall Street, continually adding to its mighty power. This
great power, in comparison with which the influence of monarchies is
weak, is not, like the riches of these, concentrated chiefly on itself.
It is imparted to all the industries and productive forces of the
country. Wall Street is a great distributor. It is also universal in its
benevolent effects, practically unlimited by either creed or geography.

It has taken greater advantage, for the general good, of scientific
discovery than all the scientific societies combined. Wherever the
electric wires have penetrated the Wall Street broker has followed. The
members of the Stock Exchange are, through the power of electricity, in
closer sympathy with the great heart of civilized humanity than all the
missionaries and philanthropic societies in the world. They are the
great cosmopolitans of the age. In practical sympathy they outshine the
most devoted efforts of the benevolent associations of half the
continent. They have the means to do it, and this comes chiefly from
being practical, and from their strong antipathy as a body to cant and
hypocrisy.

There are many popular delusions outside the ranks of the clergy
connected with the effort to form a correct estimate of Wall Street
affairs by the general public. It is a popular delusion that it is a
place where people who are in the “ring” take something for nothing. No
idea could be further wide of the mark in regard to Wall Street men as a
class, however true it may be of some individual instances, as in other
departments of business. Wall Street gives full value for everything it
receives, and the country at large is deeply its debtor. Some people may
think this a paradox, but there is nothing more easily demonstrated to
those who have observed the commercial and industrial progress of the
country and the age.

Wall Street has furnished the money that has set the wheels of industry
in motion over the vast continent, and in one century has brought us
abreast, in the industrial arts, of countries that had from one to two
thousand years the start of us. In this respect it has assisted nobly to
carry out the ideas of the fathers of the Constitution. Washington,
Jefferson, Madison, Franklin and Hamilton laid down the doctrine that it
would be a betrayal of the interests of posterity to limit the
productive energies of this country to raw material. With our present
experience we may think it strange that this question should ever have
been debated, but it was, even after the old tyranny had been obliged to
loosen its grasp on the struggling enterprise of the young Republic. Our
old revolutionary sires deserve credit for their foresight, but what
would have been the fate of their commercial philosophy if Wall Street
had not supplied the sinews of war to cope with the forces of nature, to
work our mines and build our railroads, and through these and other
means, to attract the teeming population from every clime to cultivate
our virgin soil and develop our wonderful industries and resources?

Apropos of the above observations, I may add that during the debate in
the British Parliament, on the recognition of the Confederacy, the great
manufacturing power in our industrial, financial and commercial progress
was clearly exhibited and thoroughly appreciated by British statesmen.
It was made one of the strongest arguments, too, by some of the
representatives of our jealous and envious cousins on the other side of
the “pond,” why Great Britain should recognize and aid the South in the
war. Lord Salisbury, then Lord Robert Cecil, at present the leader of
the Tory party in England, and the advocate of twenty years’ coercion
for Ireland, was one of the bitterest foes of the Union, chiefly on this
account. He was one of the Vice-Presidents of the “Southern Independent
Association,” for the promotion of the cause of the Rebellion, and for
supplying the Confederates with money and arms, and for the ultimate
object of founding an empire of slavery on this continent.

In his speech then, on the Southern blockade, the future Lord Salisbury
made the following touching allusion to our dangerous prosperity on this
side: “The plain matter of fact is, as every one who watches the current
of history must know, that the Northern States of America never can be
our sure friends, for this simple reason—not merely because the
newspapers write at each other, or that there are prejudices on both
sides, but because we are rivals—rivals politically, rivals
commercially. We aspire to the same position. We both aspire to the
government of the seas. We are both manufacturing people, and in every
port as well as at every court we are rivals to each other. With respect
to the Southern States the case is entirely reversed. The population are
an agricultural people. They furnish the raw material of our industry,
and they consume the products which we manufacture from it. With them,
therefore, every interest must lead us to cultivate friendly relations,
and we have seen that when the war began they at once recurred to
England as their natural ally.”

Thus we see how anxious Great Britain was to take the place which the
North has reserved for itself, and so proudly maintained in commerce and
industry.

The great coming man, Salisbury, wanted to reduce us all to the position
of hewers of wood, drawers of water and planters and pickers of cotton,
for the special accommodation of Great Britain, as the mighty centre of
the world’s manufacturing industries. This would have given a set-back
to our civilization, causing us to make a retrogressive move to the dark
ages. Since then we have afforded this noble lord and his nation ample
proof that we are very far advanced in the manufacturing arts ourselves,
and that in many things we are far ahead of England, and they are no
doubt greatly surprised that the arrangement by which England was to
have all the profit and America all the hard work, has not been carried
out.

In this wonderful development of the industrial arts, Wall Street money,
enterprise and speculation have played by far the most conspicuous and
progressive part, thus enabling us, in little more than two decades, to
outstrip the old nations that were so anxious to enslave us, in spite of
the fact that they had centuries upon centuries the start of us. It must
be galling to some of these people that we are now the most available
candidates for the commercial and industrial supremacy of the world, and
we have attained this position, in a great measure, through the
instrumentality of Wall Street as a civilizer.

------------------------------------------------------------------------




                              CHAPTER III.

       HOW TO MAKE MONEY IN WALL STREET.


HOW TO TAKE ADVANTAGE OF PERIODICAL PANICS IN ORDER TO MAKE
    MONEY.—WHOLESOME ADVICE TO YOUNG SPECULATORS.—ALLEGED “POINTS” FROM
    BIG SPECULATORS END IN LOSS OR DISASTER.—PROFESSIONAL ADVICE THE
    SUREST AND CHEAPEST, AND HOW AND WHERE TO OBTAIN IT.


But few gain sufficient experience in Wall Street to command success
until they reach that period of life in which they have one foot in the
grave. When this time comes these old veterans of the Street usually
spend long intervals of repose at their comfortable homes, and in times
of panic, which recur sometimes oftener than once a year, these old
fellows will be seen in Wall Street, hobbling down on their canes to
their brokers’ offices.

Then they always buy good stocks to the extent of their bank balances,
which have been permitted to accumulate for just such an emergency. The
panic usually rages until enough of these cash purchases of stock is
made to afford a big “rake in.” When the panic has spent its force,
these old fellows, who have been resting judiciously on their oars in
expectation of the inevitable event, which usually returns with the
regularity of the seasons, quickly realize, deposit their profits with
their bankers, or the overplus thereof, after purchasing more real
estate that is on the up grade, for permanent investment, and retire for
another season to the quietude of their splendid homes and the bosoms of
their happy families.

If young men had only the patience to watch the speculative signs of the
times, as manifested in the periodical egress of these old prophetic
speculators from their shells of security, they would make more money at
these intervals than by following up the slippery “tips” of the
professional “pointers” of the Stock Exchange all the year round, and
they would feel no necessity for hanging at the coat tails, around the
hotels, of those specious frauds, who pretend to be deep in the councils
of the big operators and of all the new “pools” in process of formation.
I say to the young speculators, therefore, watch the ominous visits to
the Street of these old men. They are as certain to be seen on the eve
of a panic as spiders creeping stealthily and noiselessly from their
cobwebs just before rain. If you only wait to see them purchase, then
put up a fair margin for yourselves, keep out of the “bucket shops” as
well as the “sample rooms,” and only visit Delmonico’s for light lunch
in business hours, you can hardly fail to realize handsome profits on
your ventures.

The habit of following points which are supposed to emanate from the big
operators, nearly always ends in loss and sometimes in disaster to young
speculators. The latter become slavish in their methods of thought,
having their minds entirely subjected to others, who are presumed to do
the thinking for them, and they consequently fail to cultivate the
self-reliance that is indispensable to the success of any kind of
business.

To the question often put, especially by men outside of Wall Street,
“How can I make money in Wall Street?” there is probably no better
answer than the one given by old Meyer Rothschild to a person who asked
him a similar question. He said, “I buys ‘sheep’ and sells ‘dear.’”

Those who follow this method always succeed. There has hardly been a
year within my recollection, going back nearly thirty years, when there
have not been two or three squalls in “the Street,” during the year,
when it was possible to purchase stocks below their intrinsic value. The
squall usually passes over in a few days, and then the lucky buyers of
stocks at panic prices come in for their profits ranging from five to
ten per cent. on the entire venture.

The question of making money, then, becomes a mere matter of
calculation, depending on the number of the squalls that may occur
during any particular year.

If the venture is made at the right time—at the lucky moment, so to
speak—and each successive venture is fortunate, as happens often to
those who use their judgment in the best way, it is possible to realize
a net gain of fifty per cent. per annum on the aggregate of the year’s
investments.

In this way it is easy to see how the rich will get richer, and the poor
poorer.

Sometimes men make money in Wall Street by strange turns in their
fortunes that appear like having been governed by a special Providence,
and this sometimes occurs when men appear to be utter wrecks.

One of the strangest examples of this kind, in my personal experience,
occurred in the summer of 1885.

A man called at my office utterly broken down in spirit, but with a few
hundred dollars left out of many thousands that he had possessed a few
months previously.

“I read your letter of the third of July,” he said, “and had some mind
to act on the advice which it contained, but was unfortunately dissuaded
therefrom by reading an article in a city paper by a very able writer,
who had got the bearish mania, then prevalent, on the brain, and who, I
am informed, is now, like myself, almost ruined.”

“I hardly know what to do,” he continued. “I have a few hundred dollars
left, which I will leave with you, and you can use your pleasure with
it. I am going out to the country for the remainder of the summer. I
will leave my address with you, and, if there is any good result, you
can let me know of it. I really don’t hope for much, and of course, I
need hardly tell you that, in the event of being ‘wiped out,’ you need
not apply to me for more margin. Let this go with the rest,” he added,
in a despairing tone.

The man walked sadly out, and I did not see him again for months. I
invested his pittance on the _carte blanche_ order which he had given
me, to the best of my judgment. The result was favorable, and his
account began to accumulate. He was duly advised, according to our
business methods, of his good luck, but I did not hear anything from him
personally for several months.

One day, a portly gentleman, with rosy health beaming in his face,
stepped into my private office, and was quite profuse in his thanks to
me.

“Well,” I said; “I have but a hazy recollection of your acquaintance, if
I know you at all.”

“Don’t you recollect,” he said, “the time I went to the country in
summer, when I told you my case, and how I had been unfortunate in
speculation?”

“And are you the man who went to the country in despair to die?” I
asked, in surprise at his changed appearance.

“I am,” he replied, “and I owe the wonderful change which you now see to
your timely advice. I staked almost my last dollar on that counsel, and
now I am comfortably fixed through your management of the small fund
placed at your disposal.”

How, this was an example of a man who did make money simply by taking
the advice that was freely tendered him.

There are others who lose, in spite of all that the most honest judgment
can do to prevent them.

Some men, when they have money, are so fearfully perverse that all
attempts to get them to do the right thing only have the opposite
effect, and they prefer to follow every wild rumor.

One day, for instance, a man gave me an order to buy a thousand shares
of Erie without limit. The order was executed at 94. I had no sooner
bought it than the stock went down.

My customer returned in a short time and ordered the stock to be sold.
It was then 92½.

In half an hour afterwards he returned again and ordered it bought back
again, without any limit as before. It was bought back at 95.

After consulting with other friends for some time he ordered it sold
again. The market by that time was 90.

He then came back the fifth time, and said: “I first saw one man who
told me to buy, and then another who told me to sell. I understand one
is called a ‘bull’ and the other a ‘bear.’ About these names I don’t
know much, but I do know now that I am a — jackass.”

This affords a good illustration of the way the average speculator is
managed and perplexed in Wall Street. There is a means of avoiding such
a peck of trouble, however, if he would only take a little wholesome
advice, wait patiently for a proper opportunity, and not rush headlong
to purchase on the “tips” of the delusive rumor mongers. He would then
begin to learn how to make money in Wall Street.

As I have pointed out in another chapter, speculation is a business that
must be studied as a specialty, and though it is popularly believed that
any man who has money can speculate, yet the ordinary man, without
special training in the business, is liable to make as great a mistake
in this attempt, as the man who thinks he can act as his own lawyer, and
who is said “to have a fool for a client.”

The common delusion, that expert knowledge is not required in
speculation, has wrecked many fortunes and reputations in Wall Street,
and is still very influential in its pernicious and illusory
achievements.

When a man wants correct advice in law he goes to a professional lawyer
in good standing, one who has made a reputation in the courts, and who
has afforded other evidence to the public that he is thoroughly
reliable. No man of average common sense would trust a case in law to a
bar room “bummer” who would assert that he was well acquainted with
Aaron J. Vanderpoel, Roscoe Conkling, and Wm. M. Evarts, and had got all
the inside “tips” from these legal lights on the law relating to the
case in question. The fellow would be laughed at, and, in all
probability, if he persisted in this kind of talk, would be handed over
to the city physician to be examined in relation to his sanity, but in
Wall Street affairs men can every day make similar pretensions and pass
for embodiments of speculative wisdom.

If speculators are caught and fleeced by following such counsel, the
professional brokers who are members of the Stock Exchange, are no more
to blame than the eminent lawyers to whom I have referred would be for
the upshot of a case that had been taken into court on the advice which
some irresponsible person had pretended to receive from these
celebrities of the New York Bar.

Professional advice in Wall Street, as in legal affairs, is worth paying
for, and costs far less in the end than the cheap “points” that are
distributed profusely around the Street, thick as autumn leaves in
Vallombrosa, and which only allure the innocent speculator to put his
money where he is almost certain to lose it.

My advice to speculators who wish to make money in Wall Street,
therefore, is to ignore the counsel of the barroom “tippers” and
“tipplers,” turn their backs on “bucket shops,” and when they want
“points” to purchase, let them go to those who have established a
reputation for giving sound advice in such matters, and who have ample
resources for furnishing correct information on financial topics, as
well as a personal interest in making all the money they can for their
clients.

There is no difficulty in finding out such reliable men and firms in the
vicinity of Wall Street, if speculators will only read the newspapers,
or make inquiry of the first messenger boy they may happen to meet.

------------------------------------------------------------------------




                              CHAPTER IV.

       IMPORTANCE OF BUSINESS TRAINING.


SONS OF INDEPENDENT GENTLEMEN MAKE VERY BAD CLERKS.—THEY BECOME
    UNPOPULAR WITH THE OTHER BOYS, AND MUST EVENTUALLY GO.—NIGHT DANCING
    AND LATE SUPPERS DON’T CONTRIBUTE TO BUSINESS SUCCESS.—GIVE MERIT
    ITS TRUE REWARD.—KEEPING WORTHLESS PRETENSE IN ITS TRUE
    POSITION.—RUNNING PUBLIC OFFICES ON BUSINESS PRINCIPLES.—A PIECE OF
    GRATUITOUS ADVICE FOR THE ADMINISTRATION.—A COLLEGE COURSE NOT IN
    GENERAL CALCULATED TO MAKE A GOOD BUSINESS MAN.—THE QUESTION OF
    ADAPTABILITY IMPORTANT.—CHILDREN SHOULD BE ENCOURAGED IN THE
    OCCUPATION FOR WHICH THEY SHOW A PREFERENCE.—THOUGHTS ON THE ARMY
    AND NAVY.


I have usually found that the sons of independent gentlemen, who have
great expectations, make very poor clerks and don’t develope into Good
Wall Street men.

Their expectations seem to dwarf the ability that might develope under
the more favorable auspices of being obliged to paddle their own canoe.
Like the light under a bushel, referred to in the Good Book, their
brilliant qualities are obscured and circumscribed by the paternal
protection in prospect. They have not a sufficient incentive to work,
because they know that all they require for their natural wants will
fall easily into their laps. The motives, therefore, which usually
develope the greatest mental qualities are absent and the qualities
themselves lie dormant, and frequently decay like poppy seeds in their
seed vessels, without being productive of the fruits which are the
result of industrial habits and the desire for acquisition. Such young
men, instead of being a help to an office into which they happen to be
thrust, often through friendship and favoritism, are a great hindrance
and a stumbling block in the path to promotion of other young men.

After many ineffectual attempts to reform and remodel them, they have
generally to be discarded, as the drone bees are ejected from the rest
of the industrious hive. And they usually become as unpopular with the
other boys as the drone does with his comrades who make the honey and
will not suffer the idle fellow to feast on the fruits of their labor.

Young men who have nothing but their own resources to depend upon will
be found far more meritorious than this higher class. There are some
eminent exceptions, but it takes a large amount of good sense to
counteract the conceit instilled by the idea of financial independence
by birth.

The latter are more liable to youthful and enervating excesses, as they
have the means to indulge in nocturnal amusements that are not conducive
either to clear brains or active habits during the day.

Night dancing and late suppers, with some of their social concomitants,
when habitually indulged, don’t contribute to business success. I know
how this is myself, and therefore speak feelingly; but I don’t lay
myself open to the charge of egotism when I say that I have never
permitted the habit to get the better of me.

I am not setting myself up as a censor of other men’s habits, nor
attempting to utter mere moral or religious cant. I am simply discussing
the question from a scientific and physical standpoint, and I say that
these habits don’t contribute to business success, but, on the contrary,
form one of the greatest hindrances to it. They make any man, no matter
how strong he may be, physically unfit for ordinary business. These
“recreations” up town, however attractive and delightful they may be,
don’t fit a young man for business down town. The line must be drawn
somewhere. Let us draw it, say, at Fourteenth street.

There has been much said and written about Civil Service Reform by
various authorities from President Cleveland down to Dorman B. Eaton and
the Custom House officials. The great rule to follow is to give merit
its true reward This draws out the best efforts of the recipient, where
real merit is found, and keeps the drones beyond the pale of
competition. It develops the qualities that are worthy of being
encouraged, and keeps worthless pretense in its true position. This is
the role I have adhered to in my office, and it works like a charm. My
office, though not quite so large as the Custom House or Post Office of
New York city, I think affords a fair test of what could be done on the
largest possible scale.

If public office is a public trust, and we have the high authority of
President Cleveland and of the New York _Tribune_ for saying so, I think
it can be administered on the same business principles that have
contributed to the success of some of the largest and most successful
firms in the world; and among these, I think I can say without egotism,
as the matter is capable of demonstration, that the house of which I
have the honor to be the head, stands second to none in the attributes
to which I have referred.

The reader may say, “This is a puff for his own house.” Well, even so.
If it is, it is true, and will bear the strictest investigation. So I
don’t see why I should feign any false modesty about the assertion. It
would be sheer affectation to do so.

Collegiate education is a great question for debate among literary men,
journalists and business men, as to its utility in forming the character
of youth for business life. As the college curriculum and training stand
at present, the ordinary course is not in general calculated to make a
good business man. It is erroneously regarded by some people as a kind
of substitute for business training in the earlier years of a young
man’s life. There could be no greater mistake in the beginning of a
business career. It is in many instances not only a hindrance, but
absolutely fatal to success. To put a young man in an office fresh from
college, on a level with one of the same age who has been training in
business methods since he left the common school, is demoralizing to
both.

I wish to have it distinctly understood that in the foregoing remarks I
have not made any attempt to cast the slightest reflection on the
personal attributes and abilities of any young man in any line of life
or status of society, and I make this statement perfectly independent of
the mere social incident as to whether the young man in question may
part his hair in the middle or assume other dudish airs. That is his
business, and I have no right to trench on the sacred precincts of his
individuality, nor do I mean to do so. As a rule I stick to my own
business. I simply intend to imply that when a dude happens to come into
my office, where I think he will find the most æsthetic appointments in
the way of furniture and the business arrangements, if he should, upon
thus entering into my employment, come to the sudden conclusion that
this æstheticism of office furnishing implied any plea for idleness or
assumption of airs on his part, he would very soon experience a rude
awakening from his charmed lethargy of conceit, and if he were not
prepared to undertake in a calm and appreciative tone of mind the first
lessons of business industry, I would politely bid him an affectionate
adieu, and on parting tell him very kindly that though his great natural
gifts might be thoroughly adapted to shine in another sphere of life, he
was both by nature and education totally unfitted to play the most
humble part in a business career, such as that of which my firm affords
a fair and most successful example.

The same remarks will apply to any other young man who does not
appreciate his vocation, and try to know himself as old Seneca taught.

I don’t insidiously single out the dude for an odious comparison. The
remark will apply just as appropriately to the young man who is better
fitted for a blacksmith or a farmer, or perhaps a preacher, than a
business man or a financier.

“All blacksmiths,” says the Rev. Robert Collyer, “can’t become
preachers, and it would be bad for the world if they did.” There is a
good deal of philosophy in the remark of this popular preacher, and
quite to the point on the subject which I am now attempting to handle.

In fact, there is nothing in this world would grieve me more than the
prospect of being obliged to reflect in future years on the fact that I
had been instrumental in keeping a young man’s “nose to the
grind-stone,” so to speak, in my office, where he would make a very poor
employee without the chance of attaining average success, while in a
career for which nature and education had fitted him, he might not only
be happy and successful, but make his mark as a star of the first
magnitude.

When viewed in this light, the question of adaptability becomes a
serious affair, for young men starting in life, and for their parents,
who often sacrifice a great deal of their worldly comforts and peace of
mind to launch their fond offspring.

The best thing for parents to do, then, as a general rule, is to
encourage their children in that occupation or avocation for which they
show a decided preference. Whatever young men do voluntarily, as a rule,
they do well. This is especially illustrated in the lives of youths who
exhibit an inclination for a military pursuit, which offers the least
inducement to human avarice, and attracts the mind through the more
sentimental motives of patriotism and the love of glory. But in our
present civilization there are national feelings that must be inculcated
and encouraged.

I entertained at my Newport residence, during the past Summer, the
officers of the 23d Brooklyn regiment of the National Guard of the State
of New York, because I felt it a matter of duty to do so, as well as a
privilege to do my part in contributing to the encouragement of the
young men who have taken it upon themselves voluntarily to be members of
that militia company.

These young men visit Newport at very great cost to each one, as they
themselves have to contribute to the expenses attending the trip, and
their presence in Newport in going through, regularly each day, their
drills and parades with as much precision and correctness as though they
all had been graduates of West Point, all well equipped and well attired
in plain but most becoming military apparel, made a most interesting
scene to witness, contributing not a little to the amusement and
gratification of the residents of that famous watering place. They are
becoming disciplined to be soldiers. They are mostly young men of good
families, of profitable occupation, many in business for themselves and
others trustworthy clerks in the employ of others, with good salaries;
consequently they make a great sacrifice to themselves in the time that
they thus bestow upon such excursions as well as ordinarily in the
drills which they have to go through, when at home, once or twice each
week, frequently oftener. What is the incentive in this personal
sacrifice on their part?

The answer is, the spirit of patriotism, and that really is what it
means, for in the event of a foreign invasion or internal disturbances,
their services are pledged to the State and to the Government. They are
therefore liable to receive at a moment’s notice a call from any quarter
to go to the front with their lives in their hands, leaving their
families, their wives, their children, their old parents, their
business, leaving all and requiring a farewell at their departure, as
the dangers they may have to encounter are threatening in character and,
not unlikely, may prevent their ever returning alive.

Taking this view of the subject, therefore, these young men should be
encouraged by all who have the means and power at their hand, and to the
full extent of their ability. Whenever they go on missions of State
defense, it is only just and fair that they should be received as
soldiers, and accorded the honors which soldiers merit. They are
entitled to it to a greater extent than the regular soldiers of the
United States standing army. These men do not make one-half the
sacrifice that the young militia do, nor do they make any better
soldiers on the battle-field.

These militia soldiers, when they go to the front, leave behind them
enough, in the way of properly, good homes and families, to make them
more enthusiastic to fight for victory, than the regular army, so that
they may return to their own domestic circles with the laurels that
victory gives.

In thin country we do not desire standing armies, for we do not wish the
expense entailed upon the Government to sustain them, but we do want the
young men encouraged to do military duty and be prepared for action when
it comes. The only money, therefore, that the Government need expend to
protect our continent is a good militia force in each of the various
States, to be well disciplined. In that case our country will be
prepared to meet foreign foes.

I am also opposed to a large standing naval force, not only on account
of the expense, but also because our country is less likely to get into
trouble with other nations, providing we have no ships to send into
their waters. Naval officers are often very impetuous and chivalrous and
sometimes fancy they have grievances to repel, which are largely
imaginary, and with them it is a word and a blow.

With a thoroughly equipped and largely efficient naval force, we might
thus not unlikely be driven into a conflict without cause or reason with
some friendly power. Our country is happily located far in the distance
from the quarrelling nations of Europe, and our being so removed is our
protection. It is not desirable to be brought in closer contact by
sending our naval vessels into their waters, to be under their fire. The
policy of this nation is peace and good will to all mankind. What gain
would it be to America to have a conflict with England, even though we
should conquer in the end, or France, or Germany, or Russia? We couldn’t
tow any of these countries to ours, nor could we hold on to our conquest
as a permanent possession; neither should we desire to do so, as we have
territory enough in the 38 States which comprise the United States of
America, already, without desiring to annex that of any of our far-off
neighbors.

And if an emergency should arise in what has been called the last resort
of kings, namely, the necessity of going to war, it would be found that
the importance of this training in the special business of war could
then be appreciated at its true value.

The importance of business training, that is, training for the special
occupation in which a man’s energies are to be developed, is always made
apparent when those energies are put to the test of competition, or are
called upon to put forth an extraordinary effort. If a man has not got
the special training, whether in the army or in civil life, he is never
reliable in an emergency, but is like that weak and vacillating friend
which old Solomon compared to a broken ankle.

I say, therefore, to the young man of the rising generation, while you
don’t relax any effort to procure all the education that your time and
means will afford, above all things, don’t neglect the paramount
importance of business training.

------------------------------------------------------------------------




                               CHAPTER V.

      PERSONAL HONOR OF WALL STREET MEN.


BREACH OF TRUST RARE AMONG WALL STREET MEN.—THE ENGLISH CLERGYMAN’S
    NOTION OF TALMAGE’S TIRADES AGAINST WALL STREET.—ADVENTUROUS THIEVES
    HAVE NO SYMPATHIZERS AMONG WALL STREET OPERATORS.—EARLY TRAINING
    NECESSARY FOR SUCCESS IN SPECULATION.—FERDINAND WARD’S EVIL
    GENIUS.—A GREAT BUSINESS CAN ONLY BE BUILT UP ON HONEST
    PRINCIPLES.—GREAT GENERALS MAKE POOR FINANCIERS, THROUGH WANT OF
    EARLY TRAINING.—PRACTICAL BUSINESS IS THE BEST COLLEGE.


There is no place in the world where people are trusted so much on faith
as they are in Wall Street; not even in the Church.

The business is one of mutual confidence, and each day there are
numerous opportunities for men to secure many millions of dollars of
other people’s money and take themselves safely off to that Paradise of
defaulters and absconders over the Border. Yet instances of this nature
are comparatively rare when we consider the large number of transactions
and the immense amount of money handled in Wall Street.

The men of Wall Street have, therefore, become world-renowned for
straightforward dealing, and have thus obtained the first position as
leading spirits in the speculative affairs not only of their own
country, but of the entire world. Wherever the speculative spirit of the
age has obtained a foothold, there Wall Street is a household word, and
Wall Street men are held in the highest esteem. It has become a term
familiar to the ears of those even who know nothing about the business
which has made its name almost universal.

“What is that Wall Street?” said an English curate to a friend of mine
who recently visited Liverpool. “What a queer place,” he continued, “for
Mr. Talmage to have his Tabernacle.”

The English divine, evidently only having “caught on” to isolated
sketches of the Brooklyn preacher’s calumnious invectives, thought they
were actually delivered among the bulls and bears, and that Talmage had
the boldness to beard these ferocious animals in their den.

It is true the honor of Wall Street is sometimes slightly tarnished,
especially in the eyes of those who reside at a great distance, owing to
the occasional delinquencies of dishonorable men, who consider Wall
Street men and Wall Street money fair game for swindling operations.
These are for the most part outsiders, who pounce upon the Street as
their illegitimate prey, after probably making a show of doing business
there.

There is no place, of course, where confidence men have the opportunity
of reaping such a rich harvest when they can succeed in establishing the
confidential relations that help them to secure their swag. But Wall
Street proper is not any more responsible for such men than the Church,
whose sacred precincts are used and abused by the same social pariahs in
a similar manner. The Street is the victim of these adventurers, and has
no more to do with nurturing and aiding them than the Church has.

What should be said of a financier who would have the temerity to assert
that the Church was an asylum for swindlers, and that thence they issued
forth to commit their lawless depredations on society? He would be
tabooed by all intelligent people. Yet there would be about as much
truth in such a statement as in most of the eloquent anathemas and
objurations launched from the pulpit every Sunday against Wall Street.

There is no place on this earth where adventurous thieves have fewer
sympathizers than in Wall Street, except perhaps in Pinkerton’s and
Byrnes’ detective bureaux.

There is another popular delusion with regard to those who don’t succeed
in Wall Street. Their failure is frequently attributed to sharp practice
on the part of the old habitues of the Street. People forget that the
business of speculation requires special training, and every fool who
has got a few hundred dollars cannot begin to deal in stocks and make a
fortune. The men who don’t succeed are usually those who have spent
their early life elsewhere, and whose habits have been formed in other
grooves of thought.

The business of Wall Street requires long and close training in
financial affairs, so that the mind may attain a flexible facility with
the various ins and outs of speculative methods. If this training is
from youth upward, all the better. It is among this class that many of
our most successful men are to be found, though there are some eminent
examples of success among those who began late in life. It will be
found, however, that the latter must have a special genius for the
business, and genius, of course, discounts all the usual conditions and
auxiliaries; but among ordinary intellects early training is generally
indispensable to financial success.

It seldom happens, moreover, that the early trained man from youth up
does any great wrong.

Ferdinand Ward may seem an exception to this rule, but he had a born
genius for evil, and though he had all the early advantages of Timothy
and Samuel the Prophet, with a higher civilization thrown in, so utterly
incorrigible was his nature that nothing but prison walls and iron bars
could prescribe bounds to his rascality. He is an extraordinary
exception, a genius of the other extreme, against whose subtle
operations society must always be on its guard; but he is only one of
the dangerous exceptions that prove the rule for which I am contending,
the rule that early training in finance more, perhaps, than in any other
field of human energy, is the great desideratum.

If such a man is unsuccessful, dishonor seldom accompanies his
misfortunes. He may pass through the whole catalogue of financial
disasters and their natural results. He may fall to the gutter through
over-indulgence in liquor and the despair attendant on a run of bad lack
or unfortunate connection with wicked partners, but he is still capable
of rising from the very ashes of his former self. He will never stoop to
swindle, no matter how low the rest of his moral condition may be
brought.

No great business can be built up except upon honest and moral
principles. It may flourish for a time, but it will topple down
eventually. The very magnitude to which the business of Wall Street has
grown is a living proof of its moral stamina. It is impossible, in the
social and moral nature of things, to unite a large number of men,
representing important material interests, except on principles of
equity and fair dealing. A conspiracy to cheat must always be confined
to a small number.

The most successful men of Wall Street, to my own personal knowledge,
are those who came to the Street young and have “gone through the mill,”
so to speak; those who have received severe training, who have had some
sledgehammer blows applied to their heads to temper them, like the
conversion of iron into steel.

These are some of the prerequisites of a successful financial career.

One of the most common delusions incident to human nature in every walk
of life is that of a man who has been successful in one thing imagining
he can succeed in anything and everything he attempts. In general,
overweening conceit of this kind can be cured by simple experiments that
bring men to a humiliating sense of their mortal condition and limited
capacity. When the experiment is tried in Wall Street, however, to these
healthy admonitions are frequently added irreparable disaster and
overwhelming disgrace.

I shall note a few examples within the memory of newspaper readers still
living. The brief panic of 1884 brought several instances of this
character to the surface. Some of them had fought our battles for
national existence and preserved the Union when this achievement seemed
almost hopeless. Their fame as generals was as extensive as history
itself. They had planned and executed projects with success on which the
destiny of a great nation, and perhaps the destiny of other nations, had
impended, yet when they attempted to manage banks, railroads and
financial operations they became hopelessly entangled.

The great captain of the Union’s salvation was as helpless as a babe
when Ferdinand Ward and James D. Fish moved upon his works. The eye that
took in the whole situation at a glance at Vicksburg, Richmond and
Appomatox was totally unable to penetrate the insidious and speculative
designs of the “Young Napoleon of finance.”

General Grant was a victim, not so much to the sincere, veracious and
unsuspecting attributes which were so largely predominant in that great
man, as to his want of early training in financial business affairs, and
to the fact that he was unable to appreciate its necessity in dealing
with sharp business men of loose morals. Generals Winslow and Porter
fell into a similar error of judgment in the West Shore Railroad matter.
Their mistake came near being a serious blow to the railroad interests
of this country. General Wilson, of the New York and New England, and
General Gordon were similarly unfortunate. The common mistake committed
by these worthy men, to whom the country owes an inestimable debt of
gratitude, was the chief cause of the “general demoralization,” to which
Treasurer Jordan facetiously but indignantly alluded when denouncing
railroad methods, and which from time to time has played sad havoc with
some of the best securities in the country.

Therefore, I say to all who have sons destined for a business career,
let your cherished offspring have the advantage of early practical
training in the particular line of business for which you may consider
them best adapted, and do so, even to the partial neglect of their
school and college education. Practical business is the best school and
college in which they can possibly graduate. I shall attempt to make
this point clearer in another chapter.


[Illustration:

  SALMON P. CHASE,
  Secretary of the U. S. Treasury during the war period.
]


------------------------------------------------------------------------




                              CHAPTER VI.

          WALL STREET DURING THE WAR.


THE FINANCIERS OF WALL STREET ASSIST THE GOVERNMENT IN THE HOUR OF THE
    COUNTRY’S PERIL.—THE ISSUE OF THE TREASURY NOTES.—JAY COOKE’S
    NORTHERN PACIFIC SCHEME PRECIPITATES THE PANIC OF 1873.—WALL STREET
    HAS PLAYED A PROMINENT PART IN THE GREAT EVOLUTION AND PROGRESS OF
    THE PRESENT AGE.


Wall Street came to the rescue of the country when the war broke out.
The Government then did not have money enough to pay the interest on the
debt, and was sorely embarrassed for a time. The Hon. S. P. Chase,
Secretary of the Treasury, sent word to Mr. Cisco, the Sub-Treasurer in
New York, to do everything in his power to raise the money required to
sustain the nation’s credit.

Mr. Cisco apprised the “Street” of the instructions he had received from
Washington concerning the empty condition of the Treasury. He showed a
number of the leading operators and financiers that within a few days
the interest on the accruing obligations would have to be paid, or the
Government paper should go to protest. It was clearly demonstrated that
if funds could not be raised the Government should be placed in a
perplexing position, that would, in all probability, greatly complicate
and prolong the struggle for national existence. It was one of the most
critical moments in the whole history of the Republic, and the emergency
required clear, decisive judgment, and promptitude of action.

Wall Street men perceived the gravity of the situation at a glance. If
the Government’s credit should collapse, it was feared that the whole
framework of our political system would be endangered.

The foundation of all securities was threatened with a destructive
upheaval, and most serious consequences were likely to ensue, menacing a
contraction of all values. The prospect was very dark. Not a ray of hope
shone through the sombre clouds that hung dismally over the Union. The
internal dissensions of our people, and the apparent destruction of our
national life, were watched with the deepest interest by European
friends and foes—the latter being then largely in the majority, and only
waiting a favorable opportunity to pounce upon what they considered
their destined prey.

Manifest destiny seemed to have leagued all her forces in opposition to
us. The stoutest hearts quailed at the prospect of our dissolution as a
nation.

At this momentous juncture, when there was no eye to pity, and when no
other arm seemed mighty enough to save, the Wall Street men were equal
to the occasion. They put their heads together, came to the front, and
resolved to extricate the Government from its perilous position. It is
true that they were well paid for it. They charged twelve per cent. for
the loan, but that was nothing when the risk is taken into account. It
was then almost impossible to get a loan at any rate of interest. By
some of the great nations of Europe the risk then involved in such a
loan was regarded in about the same light as the people of this country
now estimate the present chances for realizing on Confederate paper
money, or Georgia bonds of the old issue.

In this state of public feeling, Lombard Street was not in a favorable
mood to negotiate loans with this country, and, the whole fraternity of
the Rothschilds shut their fists on their shining shekels and shook
their heads negatively and ominously at the bare mention of advancing
money to the once great but now doomed Republic.

Money was dear at the time, and the Government was only obliged to pay
what could have been obtained in other quarters. Curiously enough,
private property then was considered better security than the Government
endorsement, on the principle—which was not a very patriotic one, though
in reality true—that the country could survive its form of government.
That form, however, the best the world has yet seen, survived the shock
and maintained its autonomy. That it did so was in a large measure due
to the prompt action of Wall Street men in raising the sinews of war at
the incipient stage of the rebellion. Had they failed to do so, it is
not improbable that the repulse at Bull Run might have proved a decisive
blow to the Union, and plunged the country into a state of anarchy from
which nothing but a despotism almost as bad could have retrieved it.

The negotiation of this loan brought out the twelve per cent. Treasury
notes. After this issue the rates fell. Then came the 11 and the 10¾ per
cent. issues, and subsequently the well-known and long to be remembered
7 3-10 Treasury notes.

After this issue had been popularized, successfully disposed of, and
finally taken up at maturity by the 5-20 loan, Jay Cooke was quick to
issue, after their pattern, his famous 7 3-10 Northern Pacific Railroad
bonds. Evidently he had a patent for negotiating that famous 7 3-10 per
cent. railroad loan, as almost every clergyman, Sunday-school teacher
and public benefactor were found to have invested in them, when the
crash came, and although the road was the means of his financial
downfall, with the ruin of an innumerable number of others besides, who
were dragged into the same speculative whirlpool, this unfortunate event
was not entirely an unmixed evil.

It is true that this was the main and visible cause of precipitating the
panic of 1873, of which I shall speak more fully in another chapter, but
the Pacific road was the great pioneer in opening up the Far West, and
developing its material resources, the great artery of the Western
railroad system, conveying vigorous and durable vitality to the
industrial life of the expansive regions beyond the Rockies.

Thus, in taking a retrospect of my twenty-eight years in Wall Street, I
find that what sometimes appeared to be great evils have been succeeded
by compensating good, fate counter-balancing fate, as the Latin poet has
it. It was so, as I have previously observed, after the panic of 1857.
It was so after the convulsion of 1873, and though I have only historic
evidence to guide me in regard to the earlier history of the Street, I
find it was so after 1837. So, the maxim that history repeats itself has
been fully verified in Wall Street.

So, now that I have relapsed into a reflective mood on this subject, a
host of important associations connected with the main issue rush upon
me. The prominent idea that stands out in bold relief is the rapid and
wonderful progress made in Wall Street during the period that I have
undertaken to chronicle. And not only so, but the rapid strides that
have been made in everything, almost universally, during that time,
present a vast theme for consideration. The part that Wall Street men
have taken in this mighty evolution is the topic that concerns me most
at present. As I attempt to progress with my subject, I observe this
division of it becoming more expansive, so that I find myself in the
position of the Irishman when he ascended to the top of a mountain.
After recovering from the first effects of his surprise, he exclaimed:
“I never thought the world was so large!”

So it is with me. I never thought that Wall Street was so big, nor that
Wall Street affairs were so extensive, until I began to write about
them. They expand, as well as improve, surprisingly on closer
acquaintance. I only hope I shall be able to impress this idea more
vividly on the minds of my clerical friends, and others who have been
misguided in this respect, chiefly on hearsay and irresponsible
evidence, and who, I am sorry to say, have been the well-meaning, but
over-zealous instruments of misleading others.

To come to an approximate deduction of facts, then, it is, I think, a
fair estimate of the general progress of humanity, to say that there has
been greater material advance in everything that relates to a higher
civilization, and the greatest good to the greatest number, during the
last thirty years, than in all the previous time that has elapsed since
the period that the father of history, old Herodotus, began to
chronicle, in his racy style, the real and imaginary events of the human
family.

The part that Wall Street has played in this amazing progress has been
comparatively large, and would, if thoroughly investigated and fully
discussed, make a larger book than I have time to write at present.

I can only glance at the prominent topics and leading events in the
extensive and somewhat sensational history of Wall Street, and sketch
briefly the conspicuous features in the lives of certain celebrities who
have been conspicuous in the history of speculation, and of those who
have been prominent in the financial affairs of the country.


------------------------------------------------------------------------




                              CHAPTER VII.

    MORE WAR REMINISCENCES—BRITISH AND NAPOLEONIC
                            DESIGNS.


HOW NAPOLEON DEFIED THE MONROE DOCTRINE.—THE BANQUET TO ROMERO.—SPEECHES
    BY EMINENT FINANCIERS, JURISTS AND BUSINESS MEN.—THE ELOQUENT
    ADDRESS OF ROMERO AGAINST FRENCH INTERVENTION.—NAPOLEON SHOWS HIS
    ANIMUS BY DESTROYING THE NEWSPAPERS CONTAINING THE REPORT OF THE
    BANQUET.—THE EMPEROR PLOTTING WITH REPRESENTATIVES OF THE ENGLISH
    PARLIAMENT TO AID THE CONFEDERATES AND MAKE WAR ON THE UNITED
    STATES.


There were other critical periods during the war when Wall Street came
to the front, besides the one in which it rendered such timely aid to
the Government in its financial embarrassment. One of these was when the
Emperor of the French, Napoleon III., showed his cloven foot and
exhibited anew the rancorous disposition which ten years previously had
crushed the Republican hopes of La Belle France by the murderous _Coup
d’Etat_. He made a bold attempt to plant that blood-stained foot on this
fair soil, in open defiance of the Monroe doctrine, and to crush the
liberties that his immortal uncle, even in the full flush of his great
conquests, dared not attack and was forced to respect.

I shall here relate an incident of this period, which, I think, has not
obtained the prominence in our national history to which, I believe, it
is justly entitled.

Senor Romero, then Mexican Minister at Washington, was invited to a
public dinner in New York, in order that proper occasion might be found
to discuss the situation with regard to the intentions of Napoleon the
Little concerning Mexico, and with a view of preventing foreign
intrusion, which was only the entering wedge for future invasion, at a
time when our nation was engaged in a family struggle to maintain its
own existence, and demonstrate the durability of Republicanism.

The dinner, at which there was a grand manifestation of sympathy in
favor of the Mexican cause against French invasion, took place on the
evening of March 29, 1864, at Delmonico’s, Fifth Avenue and Fourteenth
street. The banquet was held in four of the largest rooms. The large
dining hall was illuminated as a promenade for the families of the hosts
and guests, and a large concourse of ladies and gentlemen who were
invited to see the table and be presented to the distinguished envoy.
The rooms were elegantly decorated with flowers, grouped and festooned
with artistic skill, and the doorways arrayed with fragrant wreaths and
garlands. One room was set apart for the orchestra, and Helmsmuller
furnished the music.

Senor Don Juan N. Navarro, Consul-General of the Mexican Republic,
Ignacio Mariscal, an eminent jurist of Mexico, and Don Fernando De La
Cuesta, Assistant-Secretary of the Legation, were invited guests.
Following are the names of the Committee of Invitation:

    WILLIAM C. BRYANT,
    WILLIAM H. ASPINWALL,
    HAMILTON FISH,
    JOHN W. HAMERSLEY,
    JONATHAN STURGES,
    JAMES W. BEEKMAN,
    J. J. ASTOR, JR.,
    SMITH CLIFT,
    W. E. DODGE, JR.,
    DAVID HOADLEY,
    FREDERICK DE PEYSTER,
    W. BUTLER DUNCAN,
    WILLIAM CURTIS NOYES,
    HENRY CLEWS,
    FREDERICK C. GEBHARD,
    JAMES T. BRADY,
    GEORGE T. STRONG,
    HENRY DELAFIELD,
    HENRY E. PIERREPONT,
    GEORGE OPDYKE,
    DAVID DUDLEY FIELD,
    GEORGE BANCROFT,
    C. A. BRISTED,
    ALEXANDER VAN RENSSELAER,
    GEORGE FOLSOM,
    WASHINGTON HUNT,
    CHARLES KING,
    WILLARD PARKER,
    ADRIAN ISELIN,
    ROBERT J. LIVINGSTON,
    SAMUEL B. RUGGLES.

Hon. James W. Beekman presided. The stewards were John Jacob Astor, John
W. Hamersley and Henry Clews.

When full justice had been done to the large variety of sumptuous
dishes, the chairman called the company to order, and explained that the
object of the meeting was to do honor to the great cause of religions
and political freedom contended for by the Republic of Mexico. The chair
gave the first regular toast, “The President of the United States,” and
called upon David Dudley Field to respond, who did so in his usual
eloquent style, stating that the sentiment of the whole country was
united in sympathy with the cause of the Mexicans, and that the
Executive Department of the Government was simply the agent and exponent
of the popular will. He dwelt at some length on the French invasion of
Mexico as one of the greatest crimes of the age, and predicted the brief
reign of Maximilian. Mr. Field wound up his discourse with the following
grand peroration:

    Maximilian may come with the Austrian eagle and the French
    tricolor; he may come with a hundred ships; he may march on the
    high road from Vera Cruz to the capital, under the escort of
    French squadrons; he may be proclaimed by French trumpets in all
    the squares of the chief cities; but he will return, at some
    earlier or later day, a fugitive from the New World back to the
    Old, from which he came; his followers will be scattered and
    chased from the land; the titles and dignities which he is about
    to lavish on parasites and apostates will be marks of derision;
    the flag of the republic will wave from all the peaks of the
    Cordilleras, and be answered from every mountain-top, east and
    west, to either ocean; and the renewed country, purified by
    blood and fire, will resume its institutions, and be free.

The second toast was, “Don Benito Juarez, Constitutional President of
the Mexican Republic,” to which Mr. Charles King, President of Columbia
College, responded. He spoke of Mexico as the friend and ally of the
Union as opposed to European hostility.

His Excellency, Senor Matias Romero, the honored guest of the evening,
then made a brilliant speech on the situation, from which I take the
following extracts:

    “I am very happy to say that the kind of feeling you express for
    Mexico is fully reciprocated. In Mexico there are now but the
    sentiments of regard and admiration for the United States, and
    the desire to pursue such a course as will draw more closely all
    those powerful ties by which both nations should be united.

    “The Emperor of the French pretends that the object of his
    interference in Mexican affairs is to prevent the annexation of
    Mexico to the United States; and yet that very thing would, most
    likely, be ultimately accomplished if a monarchy were
    established in Mexico. Fortunately for us, that scheme is by no
    means a feasible one.

    “We were willing to grant to the United States every commercial
    facility that will not be derogatory of our independence and
    sovereignty. This will give to the United States all possible
    advantages that could be derived from annexation, without any of
    its inconveniences. That once done, our common interests,
    political as well as commercial, will give us a common whole
    American continental policy which no European nation would dare
    disregard.

    “The bright future which I plainly see for both nations had made
    me forget for a moment the present troubles in which they are
    now involved. I consider these troubles of so transitory a
    nature as not to interfere materially with the common destiny I
    have foreshadowed; but, as they have the interest of actuality,
    I beg to be allowed to make a few remarks in regard to them.

    “Every careful observer of events could not help noticing, when
    the expedition against Mexico was organized in Europe, that it
    would, sooner or later, draw the United States into the most
    serious complications, and involve them in the difficulty. The
    object of that expedition being no less than a direct and armed
    interference in the political affairs of an American nation,
    with a view to overthrow its republican institutions and
    establish on their ruins a monarchy, with a European prince on
    the throne—the only question to be determined by the United
    States and the other nations concerned, was as to the time when
    they would be willing or ready to meet the issue thus boldly and
    openly held out by the antagonistic nations of Europe.

    “This, in my opinion, is the situation in which the United
    States are placed with regard to Mexico. Taking into
    consideration the well-known sagacity of American statesmen the
    often-proved devotion of the American people to republican
    institutions, and the patriotism and zeal of the Administration
    that presides over the destinies of the country, I cannot
    entertain the slightest doubt that the United States will act in
    this emergency as will conduce to the best interests they and
    mankind at large have at stake in the Mexican question.

    “The United States may find that they are brought squarely to
    the issue in the Mexican question sooner than they expected,
    should the report, lately reached here, of any understanding
    between Maximilian, as so-called Emperor of Mexico, and the
    insurgents in this country, prove correct. The archduke, it is
    stated, will inaugurate his administration by acknowledging the
    independence of the South, and, perhaps, he will go further; and
    this, of course, by the advice, consent and support of the
    French Government, whose satellite, and nothing else, will the
    archduke be in Mexico.

    “Among the many events calculated to terminate immediately
    French intervention in Mexico, the European complications which
    threaten to cause a general war on that continent should be
    particularly mentioned. It is certainly wonderful that while
    Europe is in so insecure and agitated a condition, menaced by
    revolutions everywhere, and wrestling to recover its own
    existence and independence, the French Emperor should be
    thinking about arranging other people’s affairs, as if his own
    did not require his immediate and most particular attention.”

Mr. George Bancroft, the eminent historian, was next called upon to
reply to the toast, “The Eminent Statesmen of Mexico,” among whom the
chair named Guatimotzin, Hidalgo, Morelos, Ocampo, Lerdo and Degollado.
Mr. Bancroft said:

                             MR. BANCROFT.

    GENTLEMEN—Although I am not prepared to deliver an address
    worthy of this auditory, I can not refrain from replying and
    expressing my sentiments, as I have been called to reply to the
    toast which our president has just proposed to the statesmen of
    our neighboring sister republic. The struggle which for many
    long years the Mexican people have sustained against their
    interior tyrants has been an heroic struggle, worthy of a
    civilized and cultivated people, and in which the sympathies of
    the whole civilized world—of all the friends of political and
    religious liberty—ought to have been manifested in a frank and
    decided manner in behalf of the Mexican people, directed by the
    liberal party. I believe, gentlemen, that the cause of civil
    wars, not only in Mexico, but throughout all Spanish America,
    has been the clergy alone, who, when they come to acquire power
    in the State, always strive to overturn the government and to
    subordinate the temporal interests of society to their own. This
    attribute seems to belong principally to the Catholic clergy.

    “The struggle, then, in which up to this time the patriotic
    Mexicans have been engaged, was a holy struggle, and the
    sympathy of the whole people of the United States was with
    them—a people who, whatever may be their religious creeds,
    adopts as a fundamental principle the most complete religious
    liberty, and the absolute independence of the Church from the
    State.

    “But now the sympathy of the United States is increased for the
    Mexican people, when, in addition to the facts already
    mentioned, we find this people struggling for their independence
    and nationality against a European nation, which, taking
    advantage of the civil strife in which we were engaged, has
    sought to establish before our eyes a form of Government in open
    antagonism to our own. We can not do less than receive this
    project in the same way as Europe would receive it, were we to
    foment revolutions and establish republics on that continent.

    “Then it is that those statesmen in the United States who aid us
    to emerge from our present difficulties, and to restore our
    power and legitimate influence, and those who in Mexico not only
    consummate the great work of establishing religious liberty on a
    solid basis, but who succeed in driving from their country the
    foreign invader, or at least keep the sacred fire of patriotism
    and of resistance to the invader burning, while we disembarrass
    ourselves of our complications, deserve, in the highest degree,
    our success and ardent homage.

    “Gentlemen, the Egyptians used to place a burning lamp at the
    feet of their royal corpses. On descending the steep vaults in
    which the corpses were deposited, the lamp was naturally
    extinguished.

    “Let Europe place at Maximilian’s feet the weak lamp of
    monarchial power. It will not burn in the atmosphere of our
    continent.”

Mr. William Cullen Bryant was then called upon, and said, in part:

    “We of the United States have constituted ourselves a sort of
    police of the New World. Again and again have we warned off the
    highwaymen and burglars of the Old World who stand at the head
    of its governments, styling themselves conquerors. We have said
    to them, that if they attempted to pursue their infamous
    profession here they did it at their peril. But now, when the
    police is engaged in a deadly conflict with a band of ruffians,
    comes this Frenchman, knocks down an unoffending bystander,
    takes his watch and purse, strips him of his clothing, and makes
    off with the booty. This act of the French monarch is as base,
    cowardly and unmanly as it is criminal and cruel. There is no
    person, acquainted, even in the slightest degree, with the
    political history of the times, who does not know that it would
    never have been perpetrated had not the United States been
    engaged in an expensive and bloody war within their own borders.

    “We thought that we saw the dawn of an era of enlightened
    government in the administration of Juarez. That dawn has been
    overcast by the clouds of a tempest wafted hither from Europe.
    May the darkness which has gathered over it be of short
    continuance; may these clouds soon be dispelled by the sunshine
    of liberty and peace, and Mexico, assured of her independence,
    take the high place which belongs to her in the family of
    nations.” (Continued applause.)

Senor Don Ignacio Mariscal responded to “Our Guest and the Bar of
Mexico.”

Mr. George Folsom, formerly envoy from the United States to the
Netherlands, responded on behalf of the diplomacy, making special
reference to Don Jose Lopez Uraga, Mexican Minister to Berlin.

Dr. Willard Parker responded to the health of Dr. Navarro, formerly
Chief of the Medical Staff of the Mexican Army.

Mr. George Opdyke responded on behalf of the merchants.

Senor De La Cuesta replied to the Commerce of Mexico.

Mr. Jonathan Sturges spoke for the fine arts of Mexico.

Mr. Washington Hunt spoke, protesting strongly against the French
invasion of Mexico.

Mr. Frederick De Peyster, President of the New York Historical Society,
responded on behalf of the historians of Mexico. He also made some
eloquent remarks on the tyranny of French intervention.

Mr. Henry E. Pierrepont spoke, as the representative of Brooklyn,
against the French policy in Mexico.

Mr. Smith Clift responded on behalf of the Bar.

Mr. Charles Astor Bristed replied on behalf of the Literary Men.

Mr. William E. Dodge, Jr., spoke on behalf of the Young Men of America.
“The tread of a French invasion,” he said, “is to them a direct insult,
and were our own sad war over, I believe there is not a town, or
village, or hamlet, where a full company would not spring to arms to aid
our sister republic in her glorious struggle. I give, as a sentiment in
which I know all will heartily join, the “Monroe Doctrine”-“Americans
can never allow the heel of European despotism to place its imprint upon
the soil of our Western continent.”

The Chair then said, “Let us now recognize the services of our
commissariat, who have so nobly discharged their stewardship. I propose
the health of the stewards. I beg Mr. John W. Hamersley to speak in
their behalf.” Three cheers were then given for the stewards.

Mr. Hamersley delivered an eloquent address, from which I take the
following excerpts:

    “It is hardly fair, sir, to call on us while our hearts are
    beating with fervid thoughts, and your ears ringing with burning
    words. Had this toast been on the programme, one of my
    coadjutors would have prepared an address worthy of the
    compliment and the occasion. This Committee was not chosen for
    their gifts of utterance, but for those humbler tastes, which
    only lend a grace to eloquence. Our duties are æsthetic,
    industrial and artistic. We have compassed the ends of the
    earth, the depths of the sea; we have levied contributions on
    the four winds of heaven, to cluster here all that can tempt the
    appetite, or fascinate the ear and eye, and we fancied our
    mission accomplished.

    “However, there is the post-prandial law; the despotism of the
    wine cup, to which we all owe allegiance—the only despotism
    which the descendants of the Huguenots, or Pilgrim Fathers, will
    ever tolerate on this continent. We are here, sir, in menace to
    none, but firmly and respectfully, in the majesty of manhood,
    and in consciousness of power, to reassert a principle, imbibed
    with our mother’s milk, a household word, a dogma of American
    faith; but while we cordially grasp our neighbor’s hand, in the
    darkest hour of her trial, the grasp has due emphasis and
    significance.

    “With her, we have kindred traditions; each of us has hewn an
    empire from the wilderness; each of us has expelled the
    oppressor; and both of us, with tattered banners drenched in the
    gore of hero martyrs, are now appealing from treachery to the
    God of Battles.

    “We have a common future; for who can doubt that our successes
    and the death-knell of treason is already rung?—who can doubt
    that the triumph of our arms will be the signal for the eagles
    of Austerlitz “to change their base,” from the pyramids of
    Puebla for their perch on the towers of Notre Dame? And permit
    me here, sir, to express a hope, suggested by the _season_ (God
    grant it may be a prophecy), that the Easter chimes of Mexico,
    of the coming year, with the glad tidings of a Saviour risen,
    shall peal from sierra to sierra, from ocean to ocean, with the
    glad tidings of a nation risen, a nation born again. (Cheers.)

    “Sir [to the Chair], it is fitting, while the accents of sweet
    music recall tender and happy memories (man, imaged by that
    armed cactus; woman, by that graceful palm), it is holy to
    consecrate the hour to her who was “last at the cross and first
    at the sepulchre.” I propose, sir, a toast, to which your
    heart’s pulse will echo:

    ‘The daughters of Mexico—Fair as her sons are brave.’”

(Enthusiastic and prolonged applause. Music—_Viva Republica._)


                               THE CHAIR.

    “We must not permit the modesty of our banker and steward, Mr.
    Clews, to outweigh our desire to hear from the Bourse.”


                            MR. HENRY CLEWS.

    MR. PRESIDENT AND GENTLEMEN—Enough has already been said, in the
    speeches made this evening, to indicate most conclusively the
    depth of sympathy which pervades this community in behalf of the
    cause of Mexico, and I rise to express my cordial concurrence
    with the sentiments which have been avowed.

    The unanimous and determined voices of this company clearly show
    that public opinion in this country will not submit to the
    encroachments of foreign powers upon any portion of the
    territory of the continent.

    The principles of free republican government are so strongly
    implanted in the hearts of the people both of Mexico and the
    United States, that they will never consent to surrender them.

    “Human freedom and the rights of man make common cause between
    Mexico and all other American States.

    “I do not utter these words in prejudice against any government.
    In my judgment, European nations will best promote the welfare
    of their own people by carefully abstaining from all
    interference with the declared will of those who dwell on this
    continent.

    “The doctrine has been solemnly asserted, and will be maintained
    inviolate against all alliances which seek to impede the
    progress of liberal institutions, or to impair the strength of
    governments founded on the rights and intelligence of the
    people.

    “This is the doctrine of the United States, and, under the
    shield of its power and influence, the safety, prosperity and
    independence of Mexico will be maintained and made perpetual.”
    (Cheers.)

The meeting then separated, marching out to the inspiring strains of the
Marseillaise.

A few days after this meeting the House of Representatives unanimously
resolved that the United States would never consent to the establishment
of a monarchy which would arise under the auspices of Europe, upon the
ruins of a republic on the American continent.

The speeches at the Romero banquet, followed by this resolution, were
the premonitory sounds of the death knell of Maximilian’s empire, even
before he took formal possession of his evanescent throne.

To show the animus of the Emperor regarding this meeting, and how
closely he was watching the struggle, I may state that when the New York
_Herald_, which had a full account of the meeting, arrived in Paris it
was promptly seized by Napoleon’s censors and shared the fate of _La
Lantern_ and some of Victor Hugo’s most vigorous productions. It was
committed to the flames on account of the speeches made by some of our
representative men. It will be seen by reference to this incident that
our representatives in Wall Street were among the first to perceive this
threatened danger to the nation, and that they manifested their business
tact and capacity in promptly meeting it. They acted literally on the
maxim of Sir Boyle Roche, that “the best way to shun danger is to meet
it half way.”

Wall Street men were the first to make the move that checkmated the
tyrant who was ambitious to prove before the eyes of the world that
Republicanism was a failure.

A volume might be written by the student of universal history, and
probably will be by some future Herodotus, Macaulay, or Prescott, on the
far-reaching influences of this original move on the part of the Wall
Street men. There is a large field for speculative theorizing,
containing much important truth in the way the Republican spirit was
reflected in the political thought of Mexico, as the result of the
feeling manifested at this public dinner in New York. It was undoubtedly
the active precursor of the events that sealed the fate of that
unfortunate cat’s paw, Maximilian. It gave birth to the idea that
reverberated across the Atlantic, created distrust in Napoleon’s schemes
of conquest as visionary with his own people, and alarmed their Teutonic
foes, who urged forward those mighty preparations that culminated in the
terrible overthrow at Sedan.

To the mere reader of our local newspapers the connection between cause
and effect of these great events may seem far-fetched, but it is all
plain sailing to the student of general history.

In this connection it would be unjust to the genius of history to omit
the part which England played on the same chessboard with her former
political refugee, constable and Imperial protégé. Although Mr. Disraeli
has done considerable justice to the case in Endymion, he has not dealt
with it from this side of the Atlantic. And I am now going to touch on
some points of hitherto unwritten history.

There was a secret alliance formed between Napoleon and the British
Cabinet—an international conspiracy on a large scale—to demolish the
liberties of this country, pounce upon the wreck and then share the
spoils between these two powerful pirates. How this was planned and
subsequently averted would form, if fully written up, one of the most
interesting chapters in the voluminous library of statecraft, and would
take most of the political sensation out of the best efforts of
Macchiavelli, Talleyrand and Prince Metternich. I can only glance at the
leading features of the diabolical scheme, and show how Wall Street men
were again promptly in the breach at the proper moment.

The New York riots of 1863 were fomented by British, French and Southern
influence combined, as a part of the villainous plot. The design was to
give our troops enough to do in quelling local riots, so that they
should have no opportunity of going to the front. Southern passion was
predominant, and could not discern at the time that their would-be
allies were their bitterest enemies. It was hoped that the “draft riots”
would be so widespread as to afford Southern chivalry a chance to march
unimpeded to Washington and capture the Capitol, when the allied foes of
liberty, by virtue of their _entente cordiale_, should seize upon their
prey.

Everything was in readiness for raising the blockade and pouring in
armaments from Europe to complete the conquest. England had acted with
more caution than Napoleon, and was slow to move, though he was
constantly urging her forward. It is due to the villainy of his great
conception to state, that, had he been able to move his more sluggish
ally in crime with greater celerity, the result might have been
overwhelmingly disastrous to this country.


------------------------------------------------------------------------




                              CHAPTER VIII

              FOREIGN INTRIGUES AGAINST AMERICAN LIBERTY.

HOW THE IMPERIAL PIRATES OF FRANCE AND ENGLAND WERE FRIGHTENED OFF
    THROUGH THE DIPLOMACY OF SEWARD.—OMINOUS APPEARANCE OF THE RUSSIAN
    FLEET IN AMERICAN WATERS.—NAPOLEON AIMS AT THE CREATION OF AN EMPIRE
    WEST OF THE MISSISSIPPI, AND THE RESTORATION OF THE OLD FRENCH
    COLONIES.—PLOTTING WITH SLIDELL, BENJAMIN, LINDSAY, ROEBUCK AND
    OTHERS.—URGING ENGLAND TO RECOGNIZE THE CONFEDERACY.—DISRAELI
    EXPLAINS ENGLAND’S DESIGNS AND DIPLOMACY.—AFTER THE NAVAL VICTORY OF
    FARRAGUT, AND THE CAPTURE OF NEW ORLEANS ENGLAND HESITATES THROUGH
    FEAR, AND NAPOLEON CHANGES HIS TACTICS.—RENEWAL OF INTRIGUES BETWEEN
    ENGLAND AND FRANCE.—THEIR DASTARDLY PURPOSES DEFEATED BY THE
    VICTORIES OF GETTYSBURG, VICKSBURG, AND THE GENERAL TRIUMPH OF THE
    UNION ARMS.


While the events related in the previous chapter were progressing
apparently towards a result that might have proved disastrous to the
dearly purchased liberties of this country, the nation was saved by
taking advantage of a circumstance that was peculiarly providential to
the Union. The Russian fleet happened to be in South American waters at
the time. Secretary Seward was apprised of the fact by a Wall Street
man. He was quick to act on the suggestion. Alexis, the brother of the
Emperor, was in command of the fleet. Seward sent him a friendly
invitation, which he instantly accepted. The spies of Napoleon and of
Scotland Yard, who were always on the alert, and who always discerned
the evil side of everything, promptly informed their employers of the
fact. The conclusion was manifest to European statesmen, who, unlike
Wall Street men, never “copper” the points given by spies. It seemed to
them clearly an alliance between the Great Empire and the Great
Republic. Extremes had met for mutual defence and safety probably for
aggressive purposes. The conspirators were frightened with their own
shadows and foiled by their own cowardice, and an apparently imminent
calamity was thus simply averted.

As the designs of the two great European powers were craftily concealed
through their evasive system of diplomacy, it has frequently been a
subject of debate as to whether they meant to take the part of the
Confederacy for the purpose of dissolving the Union. It is necessary,
therefore, to produce some tangible evidence of the intentions of these
foreign potentates in the hour of our country’s greatest peril.

The Confederate records purchased by the Government some years ago throw
a ghastly light on this subject, and gravely warn us of the Scriptural
injunction, to put no trust in kings and rulers.

The correspondence between the officials of the Confederacy and the
Confederate Commissioners, Slidell and Mason, at Paris and London, prove
to a demonstration that the ruler of France and the rulers of Great
Britain were making preparations on a large scale to take charge of this
country as soon as the Union, through their diplomatic aid, should be
dissolved. Letters from other representatives of the Confederates of
Europe go to corroborate this view of the matter. The correspondence
between Dudley, Post, Mann and Lamar, who were commissioners in various
parts of Europe, and Judah P. Benjamin, the Confederate Secretary of
State, is conclusive on the subject of European armed intervention,
which has hitherto formed a topic of dispute in the historic circles of
the Civil War.

The correspondence of Slidell, who was on familiar relations with the
Emperor of the French, gives the inside history of the intrigues of that
potentate in such clear terms, that there can be no doubt of his
intentions towards this country.

Had it not been for the superior vigilance of Mr. Dayton, the United
States Minister at Paris, several privateers would have been launched
from French ports to prey upon the commerce of the United States, and to
do similar work to that for which the Alabama was fitted out.

It would seem from the correspondence that the managers of the affairs
of Great Britain were not so anxious to encourage the South as Napoleon
was; at least they succeeded in concealing their purpose better. The
practical diplomacy of England in this affair was superior to that of
France, though the latter has still held the palm for possessing better
diplomatic plotters, who are supposed to have no superiors outside the
royal associations of the reigning power of Russia.

There is no doubt, however, that Napoleon was anxious to take positive
steps to recognize the South, while professing the most friendly
feelings in favor of the North, but he was afraid to act except in
unison with Great Britain, and he failed to bring her to time until the
favorable moment for the execution of his plans had passed.

Slidell and Mason went to Europe in January, 1862. This was perhaps the
darkest and most critical period for the cause of the Union during the
great struggle. The Commissioners carried letters with them showing the
inefficiency of the blockade of the Southern ports, the great
disadvantages and losses suffered by England and France through cutting
off the cotton supplies, and setting forth the enormous advantages that
would result if free trade with the Confederacy were established. These
were strong arguments to arouse the spirit of commercial selfishness in
favor of the South.

The ambitious designs of Napoleon were of a very towering and extensive
character. He not only expected to recover Louisiana, which his uncle in
an hour of necessity had sold to the United States, but he aimed at the
restoration of the entire old colonial empire of France on this
continent.

The Emperor was thoroughly posted in the affairs of this country. It
seems that while he had resided in a small room in Hoboken, and took his
meals at a twenty-five cent restaurant, paying for them with money
borrowed from French patriots, on the very slim prospect of reaching the
throne of France, he made the best use of his time, and he had studied
the history and geography of the United States and Canada with great
care and accuracy.

In justice to his character for gratitude, however, it must be said, in
passing, that, like young “Corneel” Vanderbilt, he paid all the money he
borrowed, and placed some of his New York and Hoboken creditors in good
positions at the Tuileries, under the Second Empire. He never forgot a
favor nor forgave an injury.

The Emperor’s knowledge of American affairs, as well as his ambitious
designs, were briefly, but at the same time very fully disclosed, in
conversation with Mr. Benjamin, at the Villa Eugenie, at Biarritz. “He
turned with peculiar and undisguised eagerness,” said Mr. Benjamin, “to
the Mexican question. He knew the very number of guns on the Morro, the
sums the United States had spent on the fortifications in Florida, the
exports and imports of Galveston and Matamoras, in fact everything which
well informed local agents could have reported to an experienced
statesman eager for information. He examined me again on Texas and its
population, the disposition of the French residents, the tendencies of
the German colonists, the feeling on the Mexican frontier. He observed
that Louisiana was nothing but French at the bottom. I was fully
persuaded that he proposed to seek in Mexico a compensation for the lost
colonies in the West Indies, which, he said, could not be recovered,
‘_sans nous brouiller avec nòs allies_,’ (without embroiling us with our
allies). He insisted upon it that France must, sooner or later, have a
foothold (_pied à terre_) on the Florida coast, for the purpose of
protecting her commerce in the Gulf, for, he added, ‘_Nous ne voulons
pas d’un autre_ _Gibraltar de ce côté là_,’ (we don’t want another
Gibraltar on that side.”)

Mr. Slidell’s predecessor at Paris, Mr. Rost, had received assurance
from the Duc de Morny, who was then next to the Emperor in his knowledge
of State affairs, that the South would be recognized. It was only a
question of time. After consulting with M. Thouvenel, Minister of
Foreign Affairs; Persigny, Minister of the Interior; Fould, Minister of
Finance; Rouher, Minister of Commerce; Baroche, President of the Council
of State; Mocquard, Private Secretary of the Emperor; Count Walewski, De
Morny and others, Slidell was satisfied that the Emperor was all right,
and he wrote to Jeff. Davis & Co. as follows:

    “The Emperor has invited the English Government to join with him
    in recognizing the South, but the English Government, owing to
    Earl Russell, has refused to act simultaneously with him.”

This statement of Slidell was true in one sense, but it was not strictly
and diplomatically correct. There is no doubt that the English
Government would have been anxious enough to join the Emperor in any
scheme of conquest and spoliation that had a fair promise of success,
and an average chance of avenging the Boston Tea Party and the Battle of
Bunker Hill, but both powers were playing at the game of diplomacy, each
for the purpose of making the other responsible for taking the
initiative in the recognition of the South. They were both very
circumspect about committing themselves, and the Palmerston-Russell
Cabinet, with that caution which always characterized old “Pam” in
foreign affairs, would not recognize any suggestion from the Emperor
that did not bear his signature. The Emperor thought to make use of a
Mr. Lindsay, a wealthy shipowner and member of Parliament, to draw out
the English Government, but the latter was not to be committed to any
course of policy that might involve important responsibilities in the
future through any second-hand authority.

The Emperor seemed to have opened his mind very freely to Mr. Lindsay.
He told him that he would have taken steps to put an end to the blockade
of the Southern ports if the English Ministry had intimated a
willingness to act with him. He said he had forwarded intimation to this
effect through Mr. Thouvenel, but had not received a satisfactory
answer. He intimated that if England was ready, he was, and was prepared
at once to despatch a formidable fleet to the Mississippi, on condition
that England should send an equal force to demand free ingress and
egress for their merchantmen, and for the cargoes of goods and supplies
of cotton which were necessary to carry on the commerce of the world.

Napoleon was resolved to act, as he had always done, on the high ground
of conferring universal favors on humanity.

This was an old trick in his family, but it did not work effectually
this time. He said he had regarded the restoration of the Union
impossible from the first, and for that reason had deprecated the
continuance of the bloody contest, which could not lead to any other
result than separation. He authorized Mr. Lindsay to make this statement
to Lord Cowley, and to ascertain whether he would recommend the course
indicated to his Government.

It is very refreshing to reflect on the sensitive exhibition of feeling
displayed, in his ostensible attempt to stop the carnage and fratricidal
strife, by the man who planned and directed the wholesale assassinations
in connection with the sanguinary _Coup d’Etat_.

Mr. Lindsay reported back to the Emperor the substance of his interview
with Lord Cowley, who said that the English Government was not prepared
to act until further developments. It was about this time that Mr.
Seward was getting _in_ his fine diplomatic work with Earl Russell and
Palmerston, which helped materially to upset the calculations of the
Emperor.

Napoleon then requested Mr. Lindsay to see Palmerston, Russell, Derby
and Mr. Disraeli, and to gather their intentions. He desired Mr. Lindsay
to do all this of his own motion, and not as coming from him, and said
he did not wish to be embarrassed by the forms and delays of ordinary
diplomacy, because he felt the necessity of immediate action.

Lindsay again saw Earl Russell, as the accredited and special ambassador
of the Emperor, _viva voce_. The Earl informed him that he could not
receive any communications from a foreign power, except through the
regular diplomatic channel. He then sought an interview with Mr.
Disraeli, who was much more affable and communicative than the little
Lord who stood so punctiliously on ministerial ceremony.

Disraeli threw considerable light on the subject. After expressing a
deep interest in the affairs of the Confederacy, and saying that he
fully concurred in the views of the Emperor, he told Mr. Lindsay that he
had good reasons for believing that a secret understanding existed
between Earl Russell and Mr. Seward; that England, in the meantime,
would respect the Federal blockade and withhold recognition of the
South. “But if France should take the initiative,” said Mr. Disraeli in
conclusion, “any course she may adopt to put an end to the present state
of affairs will undoubtedly be supported by a large majority in
Parliament, and knowing this, Lord Russell will give a reluctant assent
to this, to avoid a change of ministry, which would otherwise certainly
follow.”

This shows that Disraeli saw very clearly through the duplicity of
English diplomacy, and that while England was profuse in her promises to
Mr. Seward, she was only waiting for the Emperor to act as pioneer in
order that she might have a safe opportunity as well as a plausible
pretext for armed intervention.

The Emperor complained that Earl Russell had divulged his views on
American affairs, as expressed through his ambassador, to Mr. Seward.
Lord Russell placed himself squarely on the “fence,” to be prepared for
any emergency. Finally, about the middle of April, the Emperor thought
it would be best that he himself should make a friendly appeal to the
Federal Government alone to open the ports, if England did not join him,
without further hesitation. He thought it would be necessary, however,
to accompany the appeal with a demonstration of force on the Southern
coasts; and if the appeal should be effective, to back it up by a
declaration of his purpose not to respect the blockade. He determined,
however, to wait a few days longer to see how England would act.

This resolution of the Emperor to make a friendly appeal to raise the
blockade was only a thin excuse to find a cause for quarrel with the
North, and it is very probable he would have acted on this determination
alone, but for an unexpected event which changed his projects, and the
apparent course of history.

About a week after this diplomatic conference, Commodores D. G.
Farragut, and D. D. Porter, with their able commanders Bailey and Bell,
had made the famous passage of forts Jackson and St. Philip, at the
mouth of the Mississippi, with the United States squadron, silenced the
Chalmette batteries and anchored in the harbor of New Orleans. After two
days’ parleying the city surrendered at discretion, or rather, the city
authorities passively and sullenly permitted Farragut, and afterwards
General Butler, to take possession of the city without shedding any
blood.

This great naval victory of Farragut’s squadron and its consequences
dampened the ardor of the Emperor. He saw the chances of backing up his
“friendly appeal” by a demonstration of force, were cut off, so far as
New Orleans and the forts of the Mississippi were concerned.

Yet, Napoleon did not totally relinquish the enterprise, on account of
this crushing defeat of the Confederacy. M. Billault, a prominent member
of Napoleon’s cabinet, after this event said to Slidell, “The cabinet,
with the probable exception of M. Thouvenel, are in favor of the South.
If New Orleans had not fallen, our recognition could not have been long
delayed, but if the Confederates should obtain successes in Virginia and
Tennessee, and hold the enemy at bay a month or two longer, we may see
an opportunity for intervention.”

The Emperor’s intentions, however, were fully revealed in an autograph
letter to General Forey, which was written in July and in which his
grasping ambition stood out in the boldest relief. He wrote: “In the
present state of civilization of the world, the prosperity of America is
not a subject of indifference to Europe, for she nourishes our
manufactures and gives life to our commerce. We are interested in having
the Republic of the United States a powerful and prosperous power, but
we are not willing to have that Republic take possession of the entire
Gulf of Mexico, command from there the Antilles as well as South
America, and monopolize the distribution of the products of the New
World. To prevent this, a stable Government must be established in
Mexico, and we will in that event have restored to the Latin race on the
other side of the Atlantic its power and prestige.”

Napoleon completely overdid the thing in this letter to General Forey.
The vaulting ambition which overleaps itself and falls on the other side
stuck out too plainly. He showed that he wanted the whole earth, and
this aroused the resentment of the South. In the following August, M.
Theron, a French consul in Texas, inspired by Napoleonic ideas of
annexation, coolly contemplated the transformation of Texas to a French
republic, and confided his project to Governor Lubbock of that State,
who apprised Jefferson Davis of the consul’s aspirations. This was too
much even for the Confederate Government, and M. Theron and the French
consul at Richmond were both politely requested to leave the Confederate
States.

Napoleon persisted in his intrigues for the purpose of getting a
foothold in this country, in spite of the rebuff which his officious
consuls had received from the Confederacy. He expressed himself desirous
of interesting some of the rest of the European powers in the cause of
the South, and again entered into confidence with Slidell on the
possibility of joint mediation on the part of England, France and
Russia. “My own preference,” said the Emperor, “is for a proposition for
an armistice for six months, with the Southern ports open to the
commerce of the world. This would put a stop to the effusion of blood”
(How tender-hearted he was!) “and hostilities would probably never be
resumed. We can urge it,” he added, “on the high grounds of humanity,
and the interests of the whole civilized world. If it be refused by the
North, it will afford good reason for recognition, and perhaps for more
active intervention.”

Mr. Slidell then suggested that if the Emperor would give some kind of
assurance that the police would not interfere, ships and munitions of
war might be sent from France to the Confederacy.

“Why could you not have the ships built as if for the Italian
Government?” suggested the Emperor. “I do not think it would be
difficult, but I will consult my ministers about it.”

Napoleon then suggested the joint appeal for the six months’ armistice
to England and Russia, which was declined by both. He then made a direct
offer of mediation to the United States Government, in the most friendly
terms, and on the “high grounds of humanity.”

The United States Government did not see it in this light, and rejected
Napoleon’s humane offer.

The Confederate agents then obtained power to build ships of war in
French ports, and to arm and equip them, and proceed to sea without
molestation from the French authorities, the Treaty of Paris forbidding
such a hostile act against a friendly power like the North to the
contrary notwithstanding. The despot of France imagined himself above
all treaties at that time.

The English Alabama was then cruising in a most successful manner. The
Emperor had a conference with Mr. Arman, a large shipbuilder, and
assured him that there would be no difficulty about building the ships
for the Confederates under the disguise of their Italian destination.
Accordingly, a contract was made for building five ships of war at
Bordeaux and Nantes, and afterwards another contract for three iron-clad
rams.

In 1863 the Emperor had a great deal of business on hand, but was still
convinced, amid all his diplomatic duties that the South should be
recognized by the European powers. He was afraid, however, of putting
his Mexican expedition in jeopardy by risking a rupture with the North.
Finally, he said: “I will make a direct proposition to England for joint
recognition. This will effectually prevent Lord Palmerston from
misrepresenting my position and wishes on the American question.”
Accordingly, he had an interview with those two worthy members of
Parliament, Messrs. Roebuck and Lindsay, at Fontainebleau, which was
said to be highly satisfactory. He authorized them to state in the House
of Commons that he was both willing and anxious to recognize the
Confederate States, with the co-operation of England.

There was a great debate in Parliament on the subject, in the midst of
which Earl Russell arose and said that Baron Gros, the French Minister,
had received no communication from his Government on American affairs.
Mr. Roebuck, who made the motion on the authority of the Emperor, was
astonished that he had been so badly fooled. It still remains a mystery,
however, why Baron Gros did not receive the advice in question from the
Emperor, because M. Mocquard, the Emperor’s Secretary, wrote to Slidell
as follows: “On the next day after the interview of Messrs. Roebuck and
Lindsay with the Emperor, the Minister of Foreign Affairs telegraphed
Baron Gros to ‘officiously’ inform Lord Palmerston that, should Great
Britain be willing to recognize the South, the Emperor would be willing
to follow her in that way.”

The only explanation that seems plausible under these circumstances is,
that the Palmerston-Russell Cabinet interrupted this telegram to Baron
Gros for diplomatic purposes, or that the Baron, seeing that the debate
in Parliament had taken an unfavorable turn, had prudently resolved to
suppress the advice from Napoleon, in order that his master might not
commit himself while England was not heart and soul with him in the
enterprise. In fact, England had begun to see that she had taken a false
position, and Mr. Gladstone’s eloquent spurt, to the effect that
“Jefferson Davis had created a nation,” was no longer the diplomatic
faith of England. She was more influenced by fear than love, as she
always is, and had begun to think, after the capture of New Orleans and
the destruction of the Confederate fleet, that the Federal Government
was capable of organizing a formidable navy. The London _Times_, which
voiced diplomatic sentiment then, said so. During this very debate on
Roebuck’s motion, Lee’s army had been beaten at Gettysburg, Vicksburg
had surrendered and victory was beginning to perch on the Northern
banners everywhere. Napoleon also drew in his horns, complaining
bitterly that “perfidious Albion” had gone back on him, and he was
afraid to permit the war ships, when finished, to leave the French ports
for any destination, and when he permitted the English privateer, the
Rappahannock, to depart, it was under the injunction that the American
minister should know nothing about it.

What Lord Palmerston called a “concatenation of circumstances”
contributed largely to force the Emperor to change his policy towards
the United States. Maximilian’s Mexican expedition was exceedingly
unpopular, trouble was brewing in several parts of the continent, and
Bismarck and Von Moltke were cunningly and deliberately weaving that net
in which the Man of Destiny, seven years later, was hopelessly entangled
at Sedan. His dream of a French American Empire beyond the Mississippi
had vanished long before his last abject act of humiliation in
surrendering the sword of France to Bismarck. And ere he died, a
miserable wreck of disappointed ambition, again a political exile, he
had the opportunity of seeing our own Republic, which he sought to
destroy, rehabilitated, and on its way to become the greatest nation in
history.

[Illustration:

  THE HON. JOHN SHERMAN,
  Who has taken a prominent part in financial matters since the
    beginning of the war, first in making treasury notes a legal tender
    in 1862; in proposing the Redemption Act in 1867, which was passed
    in 1870, and in the resumption of specie payments in 1879, which was
    the crowning success of the financial policy which established the
    Government credit on a solid basis.
]

------------------------------------------------------------------------




                              CHAPTER IX.

       SECRETARY CHASE AND THE TREASURY.


THE DEPLETED CONDITION OF THE TREASURY WHEN MR. CHASE TOOK
    OFFICE.—PREPARATIONS FOR WAR AND GREAT EXCITEMENT IN
    WASHINGTON.—CHIVALROUS SOUTHERNERS IN A FERMENT.—OFFICIALS UP IN
    ARMS IN DEFENCE OF THEIR MENACED POSITIONS.—MISCALCULATION WITH
    REGARD TO THE PROBABLE DURATION OF THE WAR.—A VISIT TO WASHINGTON
    AND AN INTERVIEW WITH SECRETARY CHASE.—DISAPPOINTMENT ABOUT
    THE SALE OF GOVERNMENT BONDS.—A PANIC PRECIPITATED IN
    WALL STREET.—MILLIONAIRES REDUCED TO INDIGENCE IN A FEW
    HOURS.—MIRACULOUSLY SAVED FROM THE WRECK.—HOW IT HAPPENED.


Soon after Mr. Chase came into the Treasury he found that money was
seriously needed. In fact the Treasury was empty. The expenditure for
the fiscal year ending June, 1861, was 62 millions, and there were only
41 millions of revenue to meet them, and even this amount was threatened
with a serious reduction on account of the traitorous and rebellious
attitude of the South.

After President Lincoln had called upon Congress to provide for the
enlistment of 400,000 men, the expenses of the Government were soon
advanced to the enormous amount of a million dollars a day. The
Secretary of the Treasury made a calculation, which he submitted to the
President, showing that the probable expenditures would amount to 318
millions for the ensuing year. He advised that 80 millions be provided
for by taxation, 240 millions by loan, and that 50 millions of Treasury
notes, redeemable in coin on demand, should be issued.

The Secretary was authorized by Congress to borrow a sum not exceeding
250 millions, on the credit of the United States, and as a part of this
loan he was, in the words of the Act, “to issue in exchange for coin, or
pay for salaries or other dues from the United States, not over 50
millions of Treasury notes, bearing no interest, but payable on demand
at New York, Philadelphia or Boston.”

When Mr. Chase advertised for bids on the bonds known as the 81 issue
all bids at 94 and above were accepted, and those under 94 were
rejected.

I got up a syndicate immediately to take the entire balance of the loan
at 94, and went on to Washington to see the Secretary. This syndicate
comprised a number of New York banks and many large capitalists. I
called upon Secretary Chase when I arrived, informed him of the object
of my visit and made him an offer of 94 for the entire balance of the
loan.

He was in favor of the proposition, but requested me to leave the matter
open until the following morning for him to consider. It was a question
with him whether he ought not to give those whose bids had been rejected
an equal opportunity with the parties I represented.

I never can forget the impression I received on my approach to
Washington that morning. As I looked through the window of the
sleeping-car my eye was met by an entire train load of brass cannon.
There were at least a dozen platform cars, each having one of those huge
guns, all apparently in order to wheel at once against the enemy. I
shall always remember the feelings that came over me at that moment. The
question of war or no war was vividly presented to my mind, and this was
the uppermost thought during my visit at Washington.

I descended from my traveling quarters as soon as the train was
announced as having arrived at the capital, and repaired to Willard’s,
then the principal, if not, in fact, the only hotel for a traveler to go
to, and it was an old-fashioned, historic hostelry. I hastened to my
room, rapidly performed my ablutions, and then found my way into the
dingy breakfast room. On inquiry, I found that ten o’clock was the usual
hour for heads of departments, including Mr. Chase, to be at the
Treasury. At that hour I went to see him. I sent in my card and was
ushered into his presence without delay. He was a man of portly frame
and distinguished bearing, and impressed me with the feeling of being in
the presence of an individual far above the average standard of humanity
in every respect.

I informed the Secretary of my mission, with the result above stated.

About seven-eighths of the people of Washington, at that time, were
Southerners. The office-holders were largely composed of the latter, and
they were expecting to be suddenly turned out of office. This rendered
the place a boiling caldron of conspiracy and treason.

As I went around collecting information, the sight of those cannon that
at first had made such an indescribable impression upon me, continued to
haunt my vision wherever I went. The air was filled with rumors of war,
and everybody was wound up to the highest pitch of hostile excitement.

As I mingled among the people, the impression was forced upon me that
war was inevitable, and that up to the very hilt of the sword. I felt
that the contest would be long and bloody.

I sent a dispatch to my firm in New York, conveying my impressions to
that effect, and advised them to clear the decks in preparation
therefor. I urged them to lose no time in selling off all the mercantile
paper on hand, and requested them to communicate to the members of the
syndicate, which I had formed for the purchase of bonds, recommending
them to withdraw therefrom, as I was convinced that war to the knife was
imminent, and that Government bonds must have a serious fall in price in
consequence.

I saw Mr. Chase the next morning, and told him that, as I believed,
there was going to be a long and bloody war, I could not
conscientiously, in the interest of my clients, renew my bid of the
previous day.

With regard to my opinion about the probable length of the war, the
Secretary took issue with me very firmly.

Mr. Chase, however, afterwards proved to be a warm and most valued
friend of mine, and it was largely due to his aid and recognition that I
achieved brilliant success in my early Wall Street career during the war
period.

The Secretary was of opinion that the bonds should command par, at
least, and they would be worth that and above it very soon, he thought.
He made this assertion on the expectation that the impending
difficulties would soon be adjusted, and that in less than sixty days
all the trouble would be at an end.

It was not so extraordinary as it may seem to some people now, with the
light of later events fully before them, that the Secretary was so
sanguine of short work being made of the South, because he only shared
the opinion of a large number of people, who greatly underestimated
Southern durability.

After leaving the Secretary, who treated me with great consideration, as
he did every one in his inimitable and dignified manner, which made such
a durable and favorable impression on all who came in contact with him,
I felt greatly pleased and highly gratified at meeting him. In fact, his
fine, magnetic presence was of a character to command the admiration of
almost every person who had the honor of an interview. He was a great
man for producing good first impressions, and, unlike many impressions
of this character they were generally lasting.

Had I not visited Washington at the time I did, and had I not obtained
the correct impression concerning the future of the then impending
difficulties, my firm, like many others that invested in Government
bonds, mercantile paper, stocks and other fluctuating properties, would
have been irretrievably ruined. I have reason to congratulate myself,
therefore, on my good fortune in narrowly escaping such a disaster,
almost at the beginning of my Wall Street career, as I was thus enabled,
at a later stage of the national trouble, to be of considerable service
to the Government, through the Treasury, in its efforts to sustain such
an army in the field as was calculated to ensure success to the Federal
arms.

My first experience in dealing in Government bonds was just prior to the
Lincoln administration, when Mr. Cobb was Secretary of the Treasury. He
advertised for sale to the highest bidders an issue of U. S. bonds
bearing five per cent. interest, having twenty years to run, and my firm
bid for $200,000 of them, hoping to make a quick turn, and a small
profit thereon. A five per cent. deposit was made, as required by
custom.

The loan was all awarded to most of the bids, mine included, and a very
large part of it was awarded to Lockwood & Co., who were then regarded
the largest and most prosperous Stock Exchange firm in the street.

George S. Robbins & Co., John Thompson, Marie & Kans, and a few others,
whose names I now forget, made also large bids.

Of those mentioned, however, my firm stood alone in taking up the bonds,
as the threatening aspect of political affairs came on so soon
afterwards as to depreciate Government securities. The original deposit
of five per cent. was lost by these subscribers, and the bonds were
permitted to remain in _statu quo_, as the Government never forced the
claim against the delinquents.

This, in a large measure, accounted for the impoverished condition of
the Treasury when Mr. Chase took charge of it, and for which Mr. Cobb
has been made an object, not wholly undeserving, of public reproach.

The $200,000 bonds my firm subscribed for at par were sold mostly at 95
and below, but the fact of taking them, and meeting the subscription,
without fail, gave my firm an excellent standing with the Government at
the beginning of the war, and enured greatly to my firm’s advantage
thereafter.

At the time I visited Washington my firm was more largely engaged in
dealing in mercantile paper than any other branch of Wall Street
business.

I had inaugurated the system at the time of my advent to the “Street” of
buying merchants’ acceptances and receivables out and out, the rate
being governed by the prevailing ruling rate for money, with the usual
commission added.

It was by this method that my firm soon became the largest dealers in
mercantile paper, which business had formerly been controlled by two
other firms for at least a quarter of a century, and whose old fogy
methods were by my innovations easily eclipsed.

The merchants at that time would go to these discount firms and leave
their receivables, bearing their endorsements, on sale there, and only
when sold by piecemeal could they obtain the avails thereof.

The more expeditious plan that I adopted, which was to give these
negotiators a check at sight, seemed generally to merit their
approbation, and enabled me to command the situation in that line of
business, very much to the chagrin of my competitors.

In this way my firm had accumulated about five hundred thousand dollars
in notes, which were hypothecated with various city and country banks.

After coming to the conclusion above referred to on my visit to
Washington, in regard to the certainty of a prolonged and desperate war,
I made quick steps back to New York to dispose of my paper. I went
vigorously to work, and succeeded in unloading all but ten thousand
dollars of short time notes made by Lane, Boyce & Co., and a note of
$500 of Edward Lambert & Co.

I had no sooner accomplished this very desirable work of shifting my
burden, and distributing it in a more equable manner on the shoulders of
others, but at higher rates than I paid, than in less than a week after
my return from Washington the exciting news arrived of the firing of the
first hostile gun at Fort Sumter.

The announcement of this overt act of war spread like wildfire, and the
wildest scenes of excitement and consternation were witnessed in Wall
Street and throughout the entire business community. The whole country
was panic stricken in an instant.

Stocks went down with a bound to panic prices. Fortunes were lost, and
millionaires were reduced to indigence in a few hours. Money was
unobtainable, and distrust everywhere was prevalent.

The two firms whose paper I was unable to dispose of were about the
first to fail, and before the maturity of any of the balance of the
paper which I had successfully negotiated both the drawers and endorsers
thereon, without a single exception, all collapsed.

The height which Gilroy’s kite attained would have been nowhere in point
of altitude to that which I should have reached had I not had the good
luck to have cleared my decks as I did, and in the nick of time.

My safety in this instance was due to my inspiration, to which I believe
myself more indebted than anything else for the privilege of remaining
in Wall Street up to the present date.

I am no spiritualist nor theosophist, but this gift or occasional
visitation of Providence, or whatever people may choose to call it, to
which I am subject at intervals, has enabled me to take “points” on the
market in at one ear and dispose of them through the other without
suffering any evil consequences therefrom, and to look upon these kind
friends who usually strew these valuable “tips” so lavishly around with
the deepest commiseration. My ability to do this, whatever may be its
source, whether human or divine, has saved me from being financially
shattered at least two or three times annually.

I do not indulge in any table tapping or dark seances like the elder
Vanderbilt, but this strange, peculiar and admonitory influence clings
to me in times of approaching squalls more tenaciously than at any
ordinary junctures.

I have known others who have had these mysterious forebodings, but who
recklessly disregarded them, and this has been the rock on which they
have split in speculative emergencies.

Therefore I say again, beware of “points.” They constitute the _ignis
fatuus_ which lure more unfortunate speculators to their financial doom
than all other influences put together.


[Illustration:

  HON. ELBRIDGE GERRY SPAULDING,
  Author of the Legal Tender Act, which authorized the issue of
    greenbacks in 1862. He was a member of Congress from New York. He
    resides at Buffalo, and is now in the eightieth year of his age, but
    still in good physical health, with his mind clear and vigorous.
]


------------------------------------------------------------------------




                               CHAPTER X.

              THE NATIONAL BANKS.


SECRETARY CHASE CONSIDERS THE PROBLEM OF PROVIDING A NATIONAL
    CURRENCY.—HOW E. G. SPAULDING TAKES A PROMINENT PART IN THE
    DISCUSSION ON THE BANK ACT.—THE ACT FOUNDED ON THE BANK ACT OF THE
    STATE OF NEW YORK.—EFFECT OF THE ACT UPON THE CREDIT OF THE
    COUNTRY.—A NEW SYSTEM OF BANKING REQUIRED.


The history of the Bank Act of 1863, improved by the Act of 1864, would
require much larger space than I can devote to it in this book. I can
only glance at its salient points, and show its great influence, not
only on the finances of the country, but upon the destiny of the nation
itself.

The Hon. E. G. Spaulding, who was one of the most prominent men in
dealing with the financial questions of that period, has written and
preserved a very full history of the legislation on the subject, and of
the interesting debates which preceded it.

After the temporary loans had been negotiated to release the pressure
upon the Government, Secretary Chase set his mind to consider the
problem of providing a currency without disturbing the business
organization of the country.

At this period he was met by a fresh difficulty, in the suspension of
specie payments, which had been hastened by the arrest of Mason and
Slidell, which, but for the wise policy of Mr. Seward, would have
precipitated a conflict with Great Britain.

Early in 1862 Congress authorized ten million more of demand notes. This
was followed by further issues, making in all 300 million United States
notes. Secretary Chase was at first opposed to making these notes a
legal tender for private debts, but in order to get the bill through, he
agreed to the legal tender clause, as the Government was greatly in need
of money.

The Secretary was also empowered by Congress to borrow 500 million
dollars on 5-20 year 6 per cent. bonds, and also to obtain a temporary
loan of 100 millions on condition that the interest on the bonds should
be paid in coin, and that the customs should be collected in coin for
that purpose.

The first bill to provide a national currency secured by a pledge of
United States bonds was introduced by Mr. Hooper, in July, 1862, but it
was not reported from the Committee to which it had been sent. At the
meeting of Congress in December the same year the financial problem had
become still more complicated, and owing to the magnitude which the war
had then assumed, the expenses amounted to two millions a day.

The total receipts for the fiscal year ending June 30, 1863, were 511
millions, and the expenditures were 788 millions, thus leaving a deficit
of 277 millions.

All the financial wisdom of the Secretary was necessary in this dilemma.
The question was whether to provide for these 277 millions by a fresh
issue of United States notes, or by interest-bearing loans.

The Secretary was opposed to increase the volume of the currency, saying
that the result would be the inflation of prices, increase of
expenditures, augmentation of debt, and ultimately disastrous defeat of
the very purposes sought to be attained by it.

He was in favor of an increase in the amount authorized to be borrowed
on the 5-20 bonds. He advised the creation of banking associations which
should secure their circulation by a deposit of Government bonds. One
object of this was to create a market for the bonds.

Congress was not in favor of this proposition, and the bill of Mr.
Hooper was again offered in the following January, but was adversely
reported from the Committee on Ways and Means.

Another new issue of 100 millions United States notes was ordered on
motion of Mr. Stevens, of Pennsylvania, to meet the constantly
increasing needs of the army and navy.

Mr. Lincoln signed the joint resolution ordering the new issue with some
reluctance, and sent a special message to the House, in which he
expressed his regret that it was necessary to add this last amount to
the currency while the suspended banks were free to increase their
circulation.

Soon after this Senator Sherman offered a bill to provide a national
currency, somewhat after the model of Mr. Hooper’s bill. The Sherman
bill was passed before the end of February. This virtually secured the
present national banking system.

In order to show more clearly the nature of the national bank
legislation, and the prominent part taken by Mr. Spaulding and a few
others therein, Mr. Chase having been the directing mind, it is
necessary to make a brief resume of the action of Congress with the
State banks in this connection.

In January, 1862, the banks applied to Secretary Chase to receive their
notes in payment for the bonds which he had for sale, but the Secretary,
thinking that this would inflate the bank currency, refused the offer.
Yet the process of inflation went on until it increased from 130 to 167
millions.

When Mr. Spaulding advocated the National Bank Act on the ground that it
would provide a permanently improved bank currency, the Hon. Roscoe
Conkling, at that time in the lower House, opposed the policy of making
war upon the twelve hundred banks in the free States, and made a very
affecting appeal for the orphans and widows who had stock therein. He
proposed to issue 260 millions of seven per cent. bonds, payable in
thirty-one years, to be exchanged for the bills of the suspended banks
of New York, Philadelphia and Boston, and also to issue 200 millions of
United States notes, payable in coin in a year. Mr. Conkling’s scheme
was assailed by Mr. Bingham, of Ohio, on the ground that it would
subject the national currency to the mercy of city bankers and brokers.
Other eminent representatives stood up for the maintenance and integrity
of the State banks, and notably Mr. Conkling opposed the measure
vigorously, which was intended to tax the State banks out of existence.

Mr. Spaulding, who advocated the bill, was followed by Mr. Fenton in an
able argument, showing the superiority of a currency secured by United
States bonds, and Senator Sherman explained the great evil occasioned by
the success attending the counterfeiting of the State bank notes.

These arguments seemed to be conclusive and overwhelming in the passage
of the bill.

It must not be forgotten, to the honor of the State of New York, that
the National Bank Act was founded on the Banking act of this State,
whose chief features were a currency secured on public funds, and that
directors and stockholders should be personally liable.

The authorship of this idea is attributed to Mr. Stillman, who is also
the well-known author of the “Stillman Act” to abolish imprisonment for
debt.

This bank act, which was especially engineered by the far-seeing
Secretary of the Treasury, Salmon P. Chase, had almost a miraculous
effect upon the credit of the country. It created a new and extensive
market for United States bonds, which immediately advanced from 93 to
par.

All the running expenses of the Government, accumulated with such
rapidity, were paid from the sale of the 5-20’s within the short period
of two months or thereabouts.

It was stated in the Treasury report at the end of the year that “The
Bank Act at once inspired faith in the securities of the Government,
and, more than any other cause, enabled the Secretary to provide for the
prompt payment of the soldiers and the public creditors.”

Mr. Hugh McCulloch, the Comptroller of the Currency, saw room for
certain changes in the law, some of which were effected by Congress in
the first session of 1864. These changes were embodied in the Act of
June, 1864.

There was a long debate and strenuous opposition, in which Secretary
Chase deeply sympathized, against State taxation of the national banks,
but despite the opposition the taxation clause was carried.

At length the modified act was passed, limiting the total amount of
United States notes to be issued to 400 millions, with such additional
amount, not exceeding 50 millions, as might be transiently required for
the redemption of the temporary loan, and thus the main features of the
Bank Act, which has served its purpose very well, became a law.

I hope, however, ere long, as I have more fully intimated in another
chapter, to see a superior system of banking, which I believe must
succeed the present system, which is now doomed to “innocuous desuetude”
through the imminent payment of the public debt.


[Illustration:

  NEW YORK STOCK EXCHANGE.
]


------------------------------------------------------------------------




                              CHAPTER XI.

         THE NEW YORK STOCK EXCHANGE.


HISTORY OF THE ORGANIZATION FOR NINETY-FOUR YEARS.—FROM A BUTTON-WOOD
    TREE TO A PALACE COSTING MILLIONS OF DOLLARS.—ENORMOUS GROWTH AND
    DEVELOPMENT OF THE BUSINESS.—HOW THE PRESENT STOCK EXCHANGE WAS
    FORMED BY THE CONSOLIDATION OF OTHER FINANCIAL BODIES.—PATRIOTIC
    ACTION DURING THE WAR PERIOD.—REMINISCENCES OF MEN AND EVENTS.


The New York Stock Exchange is not a building, as people generally
suppose. It is an Association of brokers united, but not incorporated by
law, for the purpose of buying and selling representatives of value
called “stocks” and “bonds.” Stocks, in the American sense of the term,
are properties consisting of shares in joint stock companies or
corporations, or in the obligations of a government for its funded debt.
In England, government obligations only, are called “stocks,” and the
obligations of companies or corporations are called “shares.”

The edifice in which the Stock Exchange meets, and which, in common
parlance, is designated by the name of the association of members,
occupies a large portion of the block bounded by Broad, Wall, and New
streets, and Exchange Place. Its main entrance is on Broad street, and
it has entrances also on Wall and New streets. It has a frontage of 65
feet on Broad and 158 on New, on which the back entrance is situated.
The members of the Stock Exchange have no need of a charter from the
Legislature. In fact, they have steadily resisted all attempts of the
Solons of this State to legislate in their interest. Their notion in
this respect is more fully commented upon in my chapter on “Corners.”
The Tweed Ring, in the height of its power, made a bold attempt to force
a charter upon the Stock Exchange, but it was indignantly rejected. The
irrepressible “Boss” and his henchmen, by the presentation of false
names, had a charter for the incorporation of the Stock Exchange passed
in 1871, the year prior to Tweed’s downfall, and it was signed by the
Governor. For these gratuitous services the sum of $100,000 was
impudently demanded; but the charter was refused, and the demand
repudiated by the association. Since 1879 until recently the membership,
which has been full, was limited to 1,100, but by a resolution lately
passed the limit is now placed at 1,200. The seats for the past year
have sold at from $25,000 to $30,000.

The Stock Exchange building is a fine, solid structure, devoid of
anything showy, pretentious or decorative. It was designed by James
Renwick, the architect of Grace Church and of St. Patrick’s Roman
Catholic Cathedral, on Fifth avenue at Fiftieth street. The cost of the
building was nearly $2,000,000. It costs nearly $200,000 a year to pay
the salaries of the various officials and keep the building in proper
repair. The apparatus for ventilating the building is one of the best.
It cost $30,000, and supplies an abundance of pure air and perfumes at
the same time. The heating and cooling arrangements are the best of
their kind, and the lighting is admirable. There are three chandeliers
containing 200 electric lamps, which throw a flood of beautiful soft
light around the whole interior. The building is well supplied with
rooms for members, lavatories, and closets. One great feature of the
interior consists of the large vaults, which contain more than a
thousand safes for the safe keeping of securities. About 400 of those
safes are let to persons who are not members. The vaults and safes are
considered the strongest in the country.

The growth of this institution appears marvelous when we go back to its
humble beginning in 1792, when the originators formed the association
under a button-wood tree in front of what is now No. 60 Wall Street.
Following is the text of the simple agreement into which the original
members entered: “We, the subscribers, brokers for the purchase and sale
of public stocks, do hereby solemnly promise and pledge ourselves to
each other that we will not buy or sell from this date, for any person
whatsoever any kind of public stocks at a less rate than one-quarter of
one per cent. commission on the specie value, and that we will give a
preference to each other in our negotiations. In testimony whereof, we
have set our hands this 17th day of May, at New York, 1792. Lem Bleekez,
Hugh Smith, Armstrong & Barnewell, Samuel Marsh, Bernard Hart, Sutton &
Hardy, Benjamin Seixas, John Heary, John A. Hardenbrook, Amurt Beebee,
Alexander Gunty, Andrew D. Barclay, Empn. Hart, Julian McIvers, G. N.
Bleecker, Peter Inspach, Benjamin Winthrop, James Ferrers, Isaac M.
Gomez, Augustine H. Lawrence, John Besley, Charles McIvers, Jr.,
Robinson & Hartshorn, David Reedy.”

This arrangement existed, and was the only one by which the members were
bound, until 1820, when daily meetings and the regular call of stocks
began. The Board met in various places, including the old Merchants’
Exchange on the corner of Wall and William streets, but did not take
root in permanent shape until the year 1842, when it became established
in the new Merchants’ Exchange, now the Custom House. An illustration of
the old Merchants’ Exchange is given on another page. The sight of it
will doubtless awake a host of endearing reminiscences in the minds of
some of the oldest merchants and speculators. It will be remembered by
the few survivors of that period that about the year 1820 the meetings
of the Board were held in the office of Samuel J. Beebee, at 47 Wall
Street. The Board also met in a room in the rear of Leonard Bleecker’s;
also in the office of the old _Courier and Journal_. Subsequently the
meetings of the Board were held in an upper room of the old Merchants’
Exchange. This building was destroyed by the great fire of 1835, and
afterwards the new Merchants’ Exchange was built. The Board moved into
this building in 1842, and remained there until 1853. Up to this time
the Board was the very closest of corporations, its membership being
governed by the most iron-clad rules. There was no field for financial
news agencies in those days, for the Board kept its proceedings a
profound mystery, and its members were bound to the strictest secresy on
pain of expulsion. That wonderful development of our later civilization,
the ubiquitous interviewer, was then unknown. The business of the Board
excited the most intense curiosity, and so impatient did outsiders
become to learn the mysteries of the interior, that the members of an
open Board which was organized about the year 1837, after failing to
force themselves into the regular association, engaged a building next
to the Board-room, and dug the bricks out of the wall in order that they
might see and hear what was going on.

The Board removed from the Merchants’ Exchange building in 1863 to a
room in the Commercial Exchange Bank building, at the corner of Beaver
and William. About the year 1857, memorable as the period of the great
panic, and my advent in Wall Street, the Board removed to “Dan Lord’s
building,” which had entrances on William and Beaver streets. It was
here, about the time of my advent, in Wall street, more fully described
in another chapter, that some of the great speculators of that era
figured. Among these were Daniel Drew, Jacob Little, and the lightning
calculator, Morse, who made and lost a fortune of millions in little
more than a year. In this building the rule of secresy was not relaxed,
and the fact is on record that a hundred dollars a day were freely
offered for the privilege of listening at the key-hole during the time
of the calls. The Board continued to hold its meetings in this building
during the war, and up to 1865, when it removed to the present edifice.


[Illustration:

  BOARD ROOM OF THE NEW YORK STOCK EXCHANGE.
]


It is worthy of note here that the Stock Exchange, during the war, for
the purpose of assisting the Government, passed a resolution prohibiting
members from selling Government bonds “short;” and also a resolution
forbidding all dealings in gold. The latter resolution was the principal
cause of the formation of the Gold Exchange. This action on the part of
the Stock Exchange was taken at a pecuniary loss of many millions of
dollars, the sacrifice having been made for the highest and noblest of
patriotic purposes; yet, in the face of such an historic record as this
some people still imagine that the members of the Stock Exchange never
have been anything but a selfish set of money grabbers. Is there any
other institution in the country whose members would have made such a
personal sacrifice in the interest of the Government? I doubt if there
is. Certainly, none did.

There was a second Open Board of Brokers formed in the year 1863. It
took up its quarters first in a basement in William street, called the
“Coal Hole.” The membership began to increase rapidly, and the business
accumulated so fast that the Board was soon enabled to take more
capacious accommodations on Broad street, contiguous to the Stock
Exchange. In this menacing attitude the new Board began to make serious
inroads on the business of the old one, almost one-half of which it had
acquired by the year 1869, when the old Board called a truce. It was
seen by the judicious members of the Board that the competition was
likely to work the ruin of both, and amicable negotiations were begun
which culminated in consolidation. So the Open Board, the Stock Exchange
and the United States Government Board were consolidated in May, 1869,
making the strongest public financial association in the country, and
one of the most important in the world, and placing it upon an almost
impregnable footing. Mr. William Neilson was the first President in the
new building.

The following are the names of the Presidents of the New York Stock
Exchange from 1824 until the present time:


    1824  EDW. LYDE.
    1825       “
          JOHN WICKER.
    1828       “
    1829       “
    1830  RUSSELL H. NEVINS.
    1831  JOHN WARD.
    1832       “
    1833       “
    1834  R. D. WEEKS.
    1835  E. PRIME.
    1836  R. D. WEEKS.
    1837  DAVID CLARKSON.
    1838       “
    1839       “
    1840       “
    1841       “
    1842       “
    1843       “
    1844       “
    1845       “
    1846       “
    1847       “
    1848       “
    1849       “
    1850       “
    1851  H. G. STEBBINS.
    1852  C. R. MARVIN.
    1853       “
    1854       “
    1855       “
    1856       “
    1857  J. H. GOURLIE.
    1858  H. G. STEBBINS.
    1859  W. H. NEILSON.
    1860       “
    1861       “
    1862  A. B. BAYLIS.
    1863  H. G. STEBBINS.
    1864  WM. SEYMOUR, JR.
    1865  R. L. CUTTING.
    1866  WM. ALEX. SMITH.
    1867  JOHN WARREN.
    1868  WM. SEARLES.
    1869  W. H. NEILSON.
    1870  WM. SEYMOUR.
    1871  W. B. CLARKE.
    1872  EDW. KING.
    1873  HY. G. CHAPMAN.
    1874  GEO. H. BRODHEAD.
    1875  GEO. W. MCLEAN.
    1876  SALEM T. RUSSELL.
    1877  HENRY MEIGS.
    1878  BRAYTON IVES.
    1879       “
    1880  DONALD MACKAY.
    1881       “
    1882  F. N. LAWRENCE.
    1883  A. S. HATCH.
    1884  J. EDWARD SIMMONS.
    1885       “
    1886  JAMES D. SMITH.
    1887       “
    1888       “
    1889  WM. L. BULL.
    1890       “
    1891  W. B. DICKERMAN.
    1892       “
    1893  F. K. STURGIS.
    1894       “
    1895  F. L. EAMES.
    1896       “
    1897       “
    1898       “
    1899  R. KEPPLER.
    1900       “
    1901       “
    1902       “
    1903       “
    1904  R. H. THOMAS.
    1905  H. K. POMROY.
    1906  R. H. THOMAS.
    1907       “
    1908       “

                  *       *       *       *       *


    JACOB ISAACS         was Secretary from 1824 to 1831.
    BERNARD HART         was Secretary from 1831 to 1855.
    GEO. H BRODHEAD      was Secretary from 1855 to 1870.
    B. OGDEN WHITE       was Secretary from 1870 to 1883.
    GEORGE W. ELY        was Secretary from 1883 to 1900.
    WM. MCCLURE          was Secretary from 1900 to 1905.
    GEORGE W. ELY        was Secretary from 1905 to 1908.

                  *       *       *       *       *


TEN OLDEST LIVING MEMBERS TO 1907, ALL OF WHOM JOINED THE EXCHANGE PRIOR
TO JULY 1, 1864.

    WILLIAM ALEXANDER SMITH.
    HENRY CLEWS.
    E. C. BENEDICT.
    JOHN H. JACQUELIN.
    H. S. CAMBLOS.
    L. D. HUNTINGTON.
    J. H. WHITEHOUSE.
    A. S. CLARK.
    EDWIN CORNING.
    L. J. VAN BOSKERCK.


------------------------------------------------------------------------




                              CHAPTER XII.

     “CORNERS” AND THEIR EFFECT ON VALUES.


THE SENATE COMMITTEE ON “CORNERS” AND “FUTURES.”—SPECULATION BENEFICIAL
    TO THE COUNTRY AT LARGE.—A REGULATION OF VALUES, AND AN IMPORTANT
    AGENT IN THE PREVENTION OF PANICS.-“CORNERS” IN ALL KINDS OF
    BUSINESS.—HOW A. T. STEWART MADE “CORNERS.”—ALL IMPORTING FIRMS DEAL
    IN “FUTURES.”—LEGISLATION AGAINST “CORNERS” WOULD STOP ENTERPRISE
    AND CAUSE STAGNATION IN BUSINESS.—ONLY THE CONSPIRATORS THEMSELVES
    GET HURT IN “CORNERS.”—THE BLACK FRIDAY “CORNER.”—SPECULATION IN
    GRAIN BENEFICIAL TO CONSUMERS.


The New York Stock Exchange is organized after the same manner as a
social club, such as the Union League, the Union or the Manhattan, and
not under a special charter from the Legislature. Hence it is protected
from the interference of that honorable body.

Although various attempts have been made, from time to time, at Albany,
to levy taxes upon the transactions of the Exchange, and to interfere
with the business of speculation and investment in many other ways,
these legislative designs have hitherto been happily frustrated.

Shortly after the memorable “corner” in Hannibal & St. Jo., in 1881,
another attempt was made by the Legislature to force Wall Street matters
under the jurisdiction of Albany lobbyists and “scalpers.”

The newspaper articles on the subject of the “corner” had attracted the
attention of the Legislature then in session, and naturally suggested to
some of the wiseacres of that dignified and incorruptible body that the
“corner” afforded an excellent opportunity, when the public mind was
excited on the subject, to raise an outcry against the shocking
immorality of such huge speculations.

A Senate Committee on “corners” and “futures” was therefore appointed,
and various Wall Street men were summoned to appear before it, and give
their testimony on this interesting subject. I had the honor of being
one of the witnesses cited. I promptly obeyed the subpœna in preference
to taking the risk of being hauled up for contempt and sent to durance
vile. I appeared before the Committee at the Metropolitan Hotel, and not
only answered all questions put to me, without any fashionable lapses of
memory, after the manner of certain other financiers, but I regaled the
Committee with a little dissertation on the subject of investigation. I
had letters from members of the Legislature afterwards complimenting me
for having made the points very clear. So I can say, “Praise from Sir
Hubert is praise indeed,” and therefore I am encouraged to reproduce
that effort in this volume, not so much from an intense desire to go
down to posterity as a successful orator, as from a disposition to
record my approval, in more permanent form, of the soundness of the
legislative judgment on my explanation of “corners.”

When the applause had subsided, I spoke as follows:

“Gentlemen of the Committee on Corners and Futures: Speculation is a
method now adopted for adjusting differences of opinion as to future
values, whether of products or securities. This is more common now than
in former years because the facilities for procuring information have
increased with the greater intelligence and celerity with which all
business is now conducted, and also from the greater rapidity with which
such information can be transmitted by telegraph and cable.

“In former years the results of a crop were known only when it came to
the market. Now almost everything affecting its future value is known
with a fair degree of accuracy before the crop is harvested. This
advanced information naturally becomes the subject of speculative
transactions which could not have existed in former times.

“Speculation brings into play the best intelligence as to the future of
values. It has always two sides. The one that is based principally on
the facts and conditions of the situation wins in the end, and the
result of the conflict is the nearest possible approach to correct
values. The consequences of speculation are thus financially beneficial
to the country at large.

“Speculation for a fall in prices is based upon the presumption of an
over-supply. If it succeeds, the production of the particular product is
checked until prices recover, and in the meantime production is diverted
to articles less abundant. Thus speculation proves a regulator both of
values and production. Speculation for a rise in prices is based upon a
presumption of scarcity or short supply, and its direct effect is to
quicken production and restore the equilibrium of prices.

“‘Corners’ usually come from running speculation to an excessive length,
by which the seller becomes responsible for deliveries beyond what he
can possibly make. He thereby places himself at the mercy of those with
whom he has made the contracts. These exigencies chiefly affect the
speculators themselves, and the community at large but little.

“Extreme prices usually grow out of them, but they are only momentary,
and have small effect upon regular or cash transactions, which
sympathize very remotely with these temporary and artificial quotations.

“Speculation is not to be judged by its occasional excesses, but by the
general effects which the foregoing considerations show to be
beneficial. It regulates production by instantaneously advancing prices
when there is a scarcity, thereby stimulating production, and by
depressing prices when there is over-production. It thus becomes one of
the most beneficial agents in the business world for the prevention of
panics.

“Speculation, moreover, makes a market for securities that otherwise
would not exist. It enables railroads to be built through the ready sale
of their bonds, thus adding materially to the wealth of the whole
country, and opening a more profitable market to labor. In this it
becomes the forerunner of enterprise and material prosperity in
business.

“There are ‘corners’ in all kinds of business as well as in Wall Street
speculation. Mr. A. T. Stewart, the great dry goods merchant, made more
‘corners’ during the latter part of his life than half the rest of the
business community put together. He did this mainly by contracting for
the entire and exclusive production of certain classes of goods, and as
such goods could only be bought at his establishment he had a close
‘corner’ in them, and accordingly put on his own prices.

“The greater portion of all the large mercantile firms do business in
the same way. And all the importing firms deal in futures. They sell
goods by sample, agreeing to deliver them at a future stated period,
varying from thirty days to twelve months. In the meantime the goods
have to be manufactured, and in many instances purchasers have to wait
until they are grown, and imported thousands of miles.

“If it were not for the support which comes from the ‘short’ interest in
grain and the general activity created thereby in times of depression,
which come periodically in this country, it would be in the power of the
large speculative grain dealers in Europe to manipulate prices downward,
and purchase our products every year, on raids, at prices much under the
cost of production.

“When we sell to Europe we must do so at a profit, or our transactions
don’t help to enrich the country.

“Another curious thing about ‘corners’ is that the people who organize
and manipulate them generally get most hurt in the enterprise. This was
the case with the ‘corner’ referred to in Hannibal and St. Joseph. Mr.
John Duff, of Boston, was the man in whose prolific brain that ‘corner’
originated, and the result to him was financial ruin. The stock ran up
to 350, though the short account amounted to only about 1,200 shares,
and the ‘shorts’ had to settle at 280.

“The result was similar in the ‘corner’ in Northwest in 1872,
manipulated by Jay Gould. The stock was started at 80 and it ran up to
280. It then reacted to the former figure. I believe Jay Gould was alone
in that deal, and it came pretty near crushing him, in spite of his
incomparable capacity for wriggling out of a tight place.

“Patents are ‘corners’ protected by law. The inventor has a monopoly for
seventeen years in his invention against all the world, and this gives
him a right to make and sell the article covered by his patent, often at
a profit of several hundred per cent. on the original cost, and on the
price it would bring if placed in competition in the open market, like
railroad stocks and grain.

“If it is the intention of the Legislature of this State to stop
enterprise in business, then your Committee is undertaking to accomplish
that work in the right way, but I think your success would be a public
calamity.”

I doubt the expediency of either undertaking to regulate enterprise by
law or to choke off competition by the law-making power. The result
would be woeful stagnation in business. It would crush the motives for
commercial activity and depress the creative energies of prosperity.

The law of supply and demand is the best regulator.

Congress attempted to suppress speculation in gold during the war, and
as soon as the act was passed prohibiting such dealings, the premium on
gold advanced 100 per cent. This so much terrified the wise statesmen
who concocted this sweeping measure of financial reform, that they
immediately displayed much more wisdom in hastening to have the bill
repealed.

The simple reason that such laws will not work in practice is that where
there is a will there is generally a way to evade them. This is the case
with the very best of such laws that can possibly be framed. Take the
usury laws for example. The methods of getting around these are
numerous, and there is practically no limit to the rate of interest that
can be exacted except the conscience of the lender, which is frequently
very elastic. Daniel O’Connell said he could drive a coach and six
through any act of Parliament. Jake Sharp was also of opinion that he
could run a double-track horse-car railroad through the best act that
could be framed by any Albany Legislature. Jake was checked in his
career at considerable trouble and expense, but his case illustrated
that the rule referred to holds good generally in legislation.

The fact, however, that it seldom happens that anybody gets badly hurt
in “corners,” except the conspirators themselves, is sufficient
protection for the general public, and should set the minds of
legislators at rest, if they mean to do legitimate business in their
law-making capacity.

The conspirators in “corners” are usually left high and dry without any
market for their fictitious values, and the “corner” very frequently has
the effect of putting the property out of the speculative market for a
long time. The fate of Han. & St. Jo. is a warning to those who
manipulate “corners.” The stock was seldom quoted for months afterwards.

Take the case of Black Friday for example. It was most disastrous to the
parties intimately connected with it. It came near proving Gould’s ruin,
and he has not got over the moral effect of it yet. The probability is
it will be an heirloom in his family, a skeleton in the Gould closet for
generations to come. Gould and Black Friday have become synonymous in
the minds of many people, and the further from Wall Street the more the
distinction becomes confounded.

In making these remarks I have no intention of throwing any reflection
upon Mr. George Gould, who seems to be a very promising young man for a
rich man’s son. His careful education has, no doubt, done much to
counteract the drawbacks incident to the sons of wealthy men to which I
have referred more fully in another part of this book. His maternal
training, I understand, has been of the most exemplary kind. This will
go far to offset the disadvantages to a business career, which the
accident of his birth in luxurious surroundings, according to my theory,
otherwise entails. If his brain is composed of the genuine plastic
material out of which the craniums of successful financiers are made, he
may learn to forget that he has been nursed in the lap of luxury, and
look back with due respect to the hole whence his father was digged and
the rock whence he was hewn. He may have brains enough, possibly, to
reflect with more pride on that ingenious mousetrap that first brought
his father into prominence, than the gew-gaws of the gilded palace in
Fifth avenue, the luxuries of the handsome parlors and rich
conservatories at Irvington, and the gorgeous trappings of his father’s
yacht and palace cars. I have, therefore, great hopes that George will
be a conspicuous exception to the rule I have propounded elsewhere
regarding rich men’s sons.

When a large mercantile firm buys up goods in any line so that nobody
else has the same goods, it then has a “corner” in these goods.

“Corners” in goods differ from “corners” in Wall Street in regard to
their influence on the organizers. They don’t act like a boomerang as
the Wall Street “corners” mostly do. The “corner” is sometimes sustained
during the life of the manipulator, as in the case of Mr. Stewart.

The successors of the great operators sometimes maintain it, but in this
instance Judge Hilton made a signal failure, though in some respects he
is a far abler man than Stewart was. Yet, he had not the genius, for
working “corners,” of his eminent predecessor. He is, probably, so well
learned in the law that he has too much inclination to go around the
“corners.”

One thing is certain, very few of these merchants can become wealthy
except through the medium of “corners.” It is by these peculiar methods
that nearly all large fortunes are amassed in their line, and in a
perfectly legitimate manner, too, whatever casuists and hair-splitting
moralists may say or think about the matter. The tendency to make
“corners” seems to be interwoven in our business methods, and to play an
important part in the struggle for existence. So I don’t see what we are
going to do about it without a radical change in that compendium of the
best political wisdom that the world has ever seen. I refer to the
Constitution of the United States. All the acumen and sophistry which
the most astute Philadelphia lawyer could bring to bear upon it has
hitherto failed to show that there is anything in this wonderful
document opposed to the liberty of making “corners.”

As Mr. Gladstone has truly said: “This document is the most wonderful
work ever struck off at a given time by the brain and purpose of man.”

I hold there is nothing in the Constitution opposed to the freedom of
making “corners,” and that all the evils resulting from these
speculative inventions can be met and counteracted by business methods,
and the laws regulating the ordinary concerns of life without resorting
to any rigid or special methods.

To dispose of “corners” or abolish them on the large scale to which I
have alluded would presume an entire revolution in our social system,
and to attack them piecemeal, as the Legislature frequently does,
involves a very suspicious kind of discrimination, and is at variance
with the spirit of the Constitution. In fact it often amounts to a kind
of thinly-disguised blackmail.

The truth is, that it is almost impossible to legislate against
“corners” without aiming a fatal blow at speculation itself, which, as I
have shown, is a vital principle in the regulation of values, the
stability of business, and the prevention of panics.

I believe the men of most experience, not only in Wall Street, but in
other departments of finance and commerce, will bear me out in the
statement that a market where even values are considerably inflated by
speculation, is more desirable than a period of depression. The result,
in the long run, is the greatest good to the greatest number. I don’t
believe that the ghost of Jeremy Bentham himself could rise up and
consistently condemn this statement.

I believe that speculation in grain and provisions is materially
beneficial to consumers, and that the latter are better off, one year
with another, and less liable to be menaced with periodical famines,
than if there were no speculation in these necessities of life.

Before leaving this prolific theme of “corners” I wish to say a few
words about my own experience in that line. The only “corner” in which I
have ever been materially hurt during my long business experience was
one manipulated by the State of Georgia.

This Sovereign State issued and granted altogether about eight millions
of bonds, all bearing the great seal, properly signed and legally issued
for full value. I advanced over two million dollars in good money on a
part of these bonds. Shortly after this transaction, the State of
Georgia ascertained through a garbled report of a committee sent to this
city by the Georgia Legislature, that all these bonds were held outside
of her own borders. The Legislature then passed an act of repudiation,
thereby reducing the value of the bonds from par to that of waste paper.
When I discovered that my little pile of two million dollars in what I
considered good securities would no longer exchange for greenbacks, I
had a very disagreeable sensation of having been “cornered” by the high
toned and chivalrous representatives of the State of Georgia, which,
through its lawmakers, claimed the sovereign right to do wrong to the
citizens of a sister State.

In the Harlem “corner,” which is referred to in another place, contracts
to deliver at 110 were settled at 179.

About three million dollars were taken out of the pockets of the bears.
Several prominent houses went down in the struggle. The result of the
“corner” was that the bulls were saddled with the entire capital stock
of the property.

One broker, who had sold calls at 150 and was requested to fulfil his
contracts when the stock had advanced to 250, was very much in the same
position as Glendower’s spirits, which were called from the vasty deep
but would not come. “I don’t see anything here,” he said, “about
delivering. You can call, but I don’t mind it.”

There were two “corners” in Harlem. The Common Council was cornered in
one and the Legislature in the other.

In the Rock Island “corner” the bulls bought 20,000 shares more than
existed, and the price rose from 110 to 150.

London financiers have a fearful horror of “corners.” Hence the London
Stock Exchange is very chary about listing our railroads, especially
those with a moderate number of shares.

“Corners” are seldom profitable, and the parties connected with them can
hardly escape getting badly hurt unless they are prepared to own and
carry the entire property. Even in that event, it is usually put out of
the speculative market for a considerable time.

The Hudson “corner” was one of the most successful. It paid a profit of
12 per cent. There was a profit of 4½ on the Rock Island “corner.”

The first “corner” of which there is any record in Wall Street was in
Morris Canal, an old “fancy” now almost forgotten except for its
“corner.” It had been forced upward as fancies frequently are, until it
was far above its intrinsic value, and several operators began to sell
“short.”

After this operation had gone on for some time a pool was formed to
protect it, and the pool bought it all up and locked it up in a trunk.
The operation was new to the Street and the bears were astounded, but
when called upon to settle they became furious, and accused the
manipulators of the “corner” of entering into a conspiracy. The “bulls”
asked the “bears” why they had sold what they did not possess and could
not procure.

The dispute was referred to the arbitration of the Board of Brokers, and
that eminent body, then unsophisticated in the arts of speculation, took
what seemed to them an equitable view of the case, and decided it in
favor of the “shorts,” who, on the ground of conspiracy on the part of
the clique, were relieved from fulfilling their obligations.


------------------------------------------------------------------------




                             CHAPTER XIII.

          THE COMMODORE’S “CORNERS.”


THE GREAT HUDSON “CORNER.”—COMMODORE VANDERBILT THE “BOSS” OF THE
    SITUATION.—THE “CORNER” FORCED UPON HIM.—HOW HE MANAGED THE TRICK OF
    GETTING THE BEARS TO “TURN” THE STOCK, AND THEN CAUGHT THEM.—HIS
    ABLE DEVICE OF UNLOADING WHILE FORCING THE BEARS TO COVER AT HIGH
    FIGURES.—THE HARLEM “CORNER.”—THE COMMON COUNCIL BETRAYED THE
    COMMODORE, BUT WERE CAUGHT IN THEIR OWN TRAP, AND LOST MILLIONS.—THE
    LEGISLATURE ATTEMPT THE SAME GAME, AND MEET WITH A SIMILAR FATE.


In the Hudson “corner,” the stock jumped from 112 to 180. Commodore
Vanderbilt was the “Boss” of the situation in this “corner.” He got the
“bulge” completely on all the other parties connected with it, and what
is more, he had the balance of the sympathy of the Street with him, for
he was not the aggressor in getting up the “corner.” The fighting at
first was forced upon him, but he acted on the defensive in a way that
made his opponents sorry for their rashness. Though he did not know much
about Shakespeare, he acted in accordance with old Polonius’ advice to
his son by pushing the opposition to the wall.

As soon as he gained the mastery, he became severely aggressive, as he
was in everything.

The beginning of this story of the Hudson “corner” is somewhat romantic.
The Commodore was sunning himself on a pile of logs on the Jersey side
of the Hudson while his yacht lay in the stream, and he was in the mood
for enjoying a long and well-earned vacation, attempting to lay aside
for a time the toil and trouble of eking out a precarious existence in
speculation. While basking in the noon-day sun and gazing with delight
on the luxurious foliage that arose from the New Jersey bank of the
river, he was aroused from his charming reverie by a messenger from Wall
Street, who conveyed to him the important intelligence that a wicked and
unregenerate clique of “bears” had conspired to sell Hudson stock
“short,” and that it was declining with great rapidity under the
repeated and unmerciful blows of their hammers.

The Commodore arose and shook off his lethargy, as a lion may be
supposed to shake the dew from his mane prior to his preparation for a
spring upon an unfortunate foe.

The Commodore hastened down to Wall Street and instructed his brokers to
take all the sellers’ options offered in Hudson. Cash stock was then
taken as quickly as possible until the market was bare. A brief
calculation showed that the buyers had secured either as cash or
contract stock all the Hudson stock in existence with the exception of a
small number of shares which were not expected to come upon the market.

The prolific brain of the Commodore then invented a new move in the
game. A number of leading “bear” houses were requested to “turn” Hudson,
which means to buy it for cash from the cornering party and sell it back
to them on buyers’ options for periods varying from ten to thirty days.
This able ruse was intended to impress the bears with the idea that the
cornering party was weak. It seemed as if they were short of cash. So
the leading bears grasped at the good chance, as they imagined, of
turning several thousand shares, and instantly threw the cash stock on
the market. It was privately picked up by the brokers of the great
“cornerer.”

Everything having thus far progressed in favor of the ruse the trap was
sprung upon the unsuspecting party. The sellers’ options began to
mature, and there was no Hudson to be obtained.

The “corner” was complete, and the stock rose to 180. It had been 112 a
few mornings before, when the Commodore was basking in the sun, and
found that the bears were taking advantage of his absence. The loss on a
hundred shares was $6,800.

There were about 50,000 shares contracted for to be delivered at this
rate of profit by the “cornerers.” It will thus be seen that they were
well fixed.

The bears were in terrible anguish.

But the worst part of the deal for these poor animals had yet to come.
The bears who had turned the stock were notified that they must stand
and deliver. They complained bitterly of the ingratitude of the bulls,
whom they had only sought to oblige, by turning the stock. The bulls
were implacable, however, and demanded their property. They proposed a
compromise which was most exacting. They were willing to lend stock at
five per cent. per day. Some of the bears paid this, thinking the
“corner” would be of short duration, but it continued for over two
weeks, and, after paying five per cent. a day for several days, these
poor victims bought the stock at the high rate and settled.

This double move in turning the stock was the ablest trick that had ever
been accomplished in cornering. It made Vanderbilt king of strategists
in that line.

But the best part of the stratagem was that wherein the bulls saved
themselves from being saddled with the whole stock, and made immense
profits out of the deal.

While some of the bears were purchasing to cover at 170, Vanderbilt’s
private brokers were selling at 140, the clique thus craftily unloading
at good paying figures. This was one of the best inside moves in the
whole history of “corners.”

The bulls thus saved themselves from the risk of being loaded with
probably the whole, or at any rate the greater part of the capital
stock, and through the Commodore’s able management the load was
comparatively light at the end of the deal, the property remaining as
good a speculative as before, which is a rare exception in “corners.”

The “corner” in Harlem was not less skilfully managed than the one in
Hudson, but it had fewer complications. It was all plain sailing, so to
speak, compared with the former, yet it clearly illustrated that the
Commodore had a genius for “corners.” When he managed the Harlem
“corner” he had had no experience in railroad matters, and he had
reached the ripe age of sixty-nine.

I place the Hudson “corner” first in order because it was, in several
respects, the greatest, though it happened at a later date than the
Harlem.

It is a curious fact that in nearly all “corners” with which the
Commodore was connected, he was on the defensive, and seldom the
aggressor at the beginning of the fight. He was always placed in such a
position that he had to fight hard to defend his property, or let it go
to the dogs.

Buying stock in Harlem was his first venture in railroad transactions.
He bought it as an investment. This was in 1863. Thirty years prior to
this he had been requested to go into Harlem, but he declined,
ironically remarking: “I’m a steamboat man, a competitor of these steam
contrivances that you tell us will run on dry land. Go ahead. I wish you
well, but I never shall have anything to do with ’em.”

When the Commodore went into Harlem it was selling at eight or nine
dollars a share. It had been down as low as three dollars about the time
I arrived in Wall Street. He put some money in the road, began
improvements and the stock soon rose to 30. Many people predicted that
the Commodore would lose all the money in railroads that he had made in
steamboats.

The stock, however, gradually rose to 50, and speculators began to
perceive that there was some inside movement going on. This was made
apparent when, one day in April, 1863, the Common Council of this city
passed an ordinance authorizing the Commodore to build a street railroad
down Broadway to the Battery. So Jake Sharp’s enterprise was not
original, as the Commodore was over twenty years ahead of him.

The Common Council were not immaculate in those days either, though the
Jaehnes and Waites escaped punishment. They basely deceived the
Commodore after taking his money; but he punished them severely. As soon
as the franchise was granted, Harlem advanced to 75, and the Aldermen
began to sell it “short.” They thought they had the Commodore fast in
their clutches, and took their friends into the secret. They expected to
sell enough of stock to make several millions. Their plan was to sell
“short” all that the market would take, and then repeal the ordinance,
which would cause the stock to drop probably below 50. Drew was one of
the great bears in this deal with the Aldermen.

The Commodore got wind of the scheme, went on buying, and got others to
help him, taking all the “shorts” that were offered. The operators had
soon sold a great deal more Harlem stock than there was actually in
existence. There were 110,000 shares of Harlem. When the Aldermen and
their friends thought they had made millions, they repealed the
ordinance, and Judge Brady, in the Court of Common Pleas, at the same
time issued an injunction prohibiting the laying of rails on the
Broadway road.

Everybody thought that the Commodore was hopelessly ruined. Harlem
stock, however, dropped three points only, to 72. This created surprise
among the Aldermen and the bears. They thought it should have dropped to
50. The “shorts” went into the market for the purpose of covering.
Harlem ascended with amazing rapidity to 100, to 150, to 170 and finally
to 179. The Common Council were obliged to make their final settlements
at the last figure. The Commodore had all the stock. The Common Council
lost a million, and their friends, whom they had advised to sell
“short,” lost several millions. The Commodore “raked in” five or six
millions, and went on his way rejoicing and improving Harlem, having now
taken “Bill” in with him as vice president.

One would naturally imagine that the severe lesson which the Common
Council had received in “corners” would have taught others to beware of
the Commodore in this line of speculation, although it was new to him,
but it did not. People as a rule will not learn either by precept or
example. They must go through the rough experience themselves.

The Legislature soon fell into the same trap in which the Common Council
had been caught and which they had actually set for themselves. The
following year the Commodore secured control of the Hudson River
Railroad through the purchase of its stock, and afterwards secured a
sufficient number of the members of the Legislature to pass a bill
consolidating the road with Harlem. He also won the promise of the
Governor to sign the bill.

Harlem again began to rise, and went from 75 to 150. This was early in
1864.

The members of the Legislature employed to pass the bill pocketed the
money of the Commodore and then hatched a conspiracy, after the manner
of the Common Council, to ruin him and make millions by his fall. He had
a shrewd lobbyist in the Legislature, however, who attentively watched
his interests while he came down to New York to purchase stock for the
rise that must have necessarily followed the passage of the bill. He had
not been long in Wall Street when he was informed that the Legislature
were imitating the game in which the Common Council had been so signally
defeated the previous year. The Commodore sent him word to keep close
watch at Albany, and he went on buying stock in Wall Street.

The bill was defeated. Harlem stock had a slump from 150 to 90. The
Commodore was in a dilemma, and would have been dreadfully embarrassed
only for the intense avarice of the Legislature. If they had bought and
delivered at 90, they would have made millions, which the Commodore
would have lost; but, like the horse leech’s daughter, they cried out
for more. Nothing would satisfy them until the stock should be depressed
to 50. Then they could “scoop” in several millions and the Commodore
would be wound up. This was probably the darkest hour in the Commodore’s
life. He hardly knew which way to turn. He was on the ragged edge. He
has often pathetically described his feelings at this crisis to his
intimate friends. He was almost on the brink of despair. He sent for old
John Tobin, who had been a gate keeper at the ferry-house at Staten
Island. Tobin had made quite a haul in the former deal in Harlem, and
was worth over a million. He told Tobin what the perfidious members of
the Legislature had done. John had been buying Harlem also in prospect
of a rise.

“They stuck you too, John,” said the Commodore. “How do you feel about
it?” John sighed, and replied that his feelings were not the most
enviable. “Shall we let ’em bleed us?” queried the Commodore.

John sighed again, but did not know what reply to make.

“John, don’t them fellows need dressing down?” emphatically queried the
Commodore. John answered in the affirmative, but did not see how it was
to be accomplished, as “them fellows” at that moment seemed to hold the
fort.

After a pause of deep reflection, the Commodore, again addressing John
with intensified emphasis in his tone, said: “John, let us teach ’em
never to go back on their word again as long as they draw breath. Let us
try the Harlem ‘corner’ once more.”

It was agreed to try and repeat the Harlem “corner.”

John put up a million. Leonard Jerome also went into the deal. It took
five millions to face the Legislature in this game, in which they had
every opportunity of packing all the cards. It was virtually, at first,
a silent game of whist, at which the Commodore was a noted player. He
never played with greater skill than this time, except in the Hudson
“corner,” and in both instances he almost manifested the skill of
inspiration.

The members of the Legislature completely lost their heads. The old
classic maxim, “whom the gods devote to destruction, they first make
mad,” appeared to apply peculiarly to them, in the manipulation of the
Harlem “corner.” Some of them mortgaged their houses and lands to get
money to sell Harlem “short.” They advised all their friends that it was
such a sure thing that failure was impossible, and brought all of their
acquaintances whom they could influence into the speculative maelstrom
of Harlem.

In the coarse of a few weeks, the members of the Legislature and their
friends had sold millions of Harlem to be delivered at various periods
during the summer, when they expected it would go ‘way down, probably to
8 or 9, where the Commodore had originally bought it.

They expected, moreover, that the Commodore would have appeared at
Albany either in person or by his lobby representatives to sue for terms
of settlement. They were greatly disappointed. He never left the company
of his brokers in Wall Street, and persisted in purchasing. The members
thought he must be mad, or at least in his dotage. He was then
threescore and ten, the Scriptural limit of human days.

The Commodore continued to purchase Harlem until he had
bought—paradoxical as it may seem to the general reader—27,000 shares
more than were in existence of Harlem stock.

When the members of the Legislature who set the trap to catch
Vanderbilt, but in which they themselves were now hopelessly ensnared,
went into the market to buy for the purpose of covering, there was no
Harlem to be had. Vanderbilt and his brokers had every share of it
safely secured in their strong boxes.

The members of the Legislature were paralyzed. They could expect no
mercy from the Commodore. He owed them none, and though a good Christian
prior to his death, he was then practically a stranger to the doctrine
of the great Nazarene. “Return good for evil,” or, “whosoever shall
smite thee on thy right cheek, turn to him the other also.” He was
rather inclined to follow the maxim of that practical Quaker, who, when
smitten on the cheek and asked to turn the other, replied, “Friend, thou
didst not read far enough. It is written, ‘pay what thou owest,’” and he
knocked the fellow down.

This was the rule of action to which the Commodore rigidly adhered in
dealing with the Legislature in the Harlem “corner.”

When a compromise was mooted to him, the Commodore replied, “Put it up
to a thousand. This panel game is bring tried too often.”

No doubt he would have put it up to a thousand and totally ruined the
members of the Legislature, with the Governor and their friends
included, only for the overpowering appeals of his two trustworthy
friends, Leonard Jerome and John Tobin.

Mr. Jerome had no sympathy for the Legislature, any more than Vanderbilt
had, but he had a patriotic desire to take care of the “Street,” thus
showing the large and comprehensive view of which this able financier is
capable where a broad speculative question and a variety of diverse
interests are involved.

“If you should carry out your threat,” said Mr. Jerome to the Commodore,
“it would break every house on the Street.”

The Commodore yielded to that touch of nature that makes all the world
akin, and under the magnetism of Jerome’s prudent entreaty, like Pharaoh
with the Israelites, agreed to let the Legislature go—at 285 for Harlem.

In one day 15,000 shares matured at this figure. Speculators who read
these lines, just pause and think of it for a moment! The stock that
sold at $3 when I made my debut in Wall Street in 1857, reached 285 in
1864, and could have been put to 1,000. Don’t you feel astounded at the
possibilities of speculation?

Then, again, think of the one-man power that could accomplish this
wonderful feat and prevail against a whole Legislature and its Governor,
with the choicest assortment of “crooked” lawyers in the State, versed
in all the arts of duplicity and cunning to aid and abet said
Legislature and its Governor.

Think of this, and then you will have some conception of the astute mind
that the Commodore possessed, without education to assist it, in the
contest against this remarkable combination of well-trained mental
forces. There can hardly be a doubt that the Commodore was a genius,
probably without equal in the financial world. There was hardly any
achievement of his life which he gloated over with such ineffable
delight as the cornering of the Legislature. He would say, when
referring to the matter afterwards: “We busted the whole Legislature,
and scores of the honorable members had to go home without paying their
board bills.” Thus ended the second “corner” in Harlem.

Many large houses were ruined by the “corner,” and a host of private
speculators lost all they had. Daniel Drew came very near being swamped
in it, but finally escaped with paying a million, chiefly through his
influence at court.

It is unnecessary to speak of the celebrated Erie “corners” here, as I
have treated them pretty fully in the life and speculations of Drew.


[Illustration:

  DANIEL DREW.
]


------------------------------------------------------------------------




                              CHAPTER XIV.

                 DANIEL DREW.


DREW, LIKE VANDERBILT, AN EXAMPLE OF GREAT SUCCESS WITHOUT
    EDUCATION.—CONTROLLED MORE READY CASH THAN ANY MAN IN AMERICA.—DREW
    GOES DOWN AS GOULD RISES.-“HIS TOUCH IS DEATH.”—PREDICTION OF DREW’S
    FALL.—HIS THIRTEEN MILLIONS VANISH.—HOW HE CAUGHT THE OPERATORS IN
    “OSHKOSH” BY THE HANDKERCHIEF TRICK.—THE BEGINNING OF “UNCLE
    DANIEL’S” TROUBLES.—THE CONVERTIBLE BOND TRICK.—THE “CORNER” OF
    1866.—MILLIONS LOST AND WON IN A DAY.—INTERESTING ANECDOTE OF THE
    YOUTH WHO SPECULATED OUTSIDE THE POOL, AND WAS FED BY DREW’S
    BROKERS.


One of the most singular and eventful careers in Wall Street was that of
Daniel Drew, familiarly called “Uncle Daniel.” This man affords another
remarkable instance of the possibility of attaining great success by
stubbornly following up one idea, and one line of thought and purpose.
His life also shows that education is not necessary to success in the
acquisition of money, but, as I have attempted to show in another
chapter, may be a great hindrance.

This fact is abundantly illustrated in the lives of both Drew and
Vanderbilt. In fact, everybody who knew these two men were of the
opinion that with a fair or liberal education they would never have cut
a prominent figure as financiers. It is also questionable whether either
of them, with all their ability in other respects, would have been
capable, with their peculiar predilections for other pursuits, of
receiving a common school or college education. They, probably, had not
the capacity for that kind of acquisition. Perhaps it might have been
impossible for any teacher to make Drew pronounce the word shares
otherwise than “sheers,” or convince Vanderbilt that the part of a
locomotive in which, the steam is generated should not be spelt
phonetically, “boylar.”

It is more than probable that professors in grammar would have found it
a hopeless task to convince the Commodore that there was anything wrong
in the expression, “Never tell nobody what yer goin’ to do, till you do
it,” or Drew that it was improper to say to his broker, “Gimme them
sheers,” when he desired his stocks reduced to possession. Both men
seemed to think with the character in Shakespeare, that reading and
writing, like their other attributes, came by nature. They evidently
thought that their abilities for financiering emanated solely from that
source, and results largely bore them out in that interpretation. Both
had supreme contempt for persons of less ability than themselves in the
speculative arena, yet they were terribly jealous of rivals who essayed
to compete with them in their own peculiar methods of making money.
Cunning and shrewdness were the leading characteristics of Drew. Though
illiterate himself, he, however, showed that he appreciated education in
others, by erecting and endowing a seminary in his native place.

Some people who were not inclined to give Drew any credit for the finer
and more generous and genial feelings of man’s nature, said that his
motive for this endowment was merely popularity, and a morbid desire,
like that of Vanderbilt, to perpetuate his name.

Another motive, however, less ennobling to man’s nature, seemed to be
the true one. He saw that the religious element in society was then
influential, and that many religious people of his acquaintance were in
good circumstances, and he sought to ingratiate himself with them in
order to make use of them in his speculations.

This appears clearly to have been at the bottom of his precious gift of
a seminary to his native county. It was a curious illustration of
retributive justice, if I am right about his motive, that he was obliged
to default in the payment of that gift, with the exception of the
interest.

Daniel Drew, at one time, could command more ready cash at short notice
than any man in Wall Street, or probably than any man in America. His
wealth was estimated at thirteen million dollars. He made a very large
part of this out of his speculations in Erie stock, of which corporation
he was then managing director and treasurer. Being thus on the inside,
he was enabled to leave everybody else on the outside in the ups and
downs of the market, which he himself generally engineered.

The Street was frequently amazed by fluctuations of 20 or 30 per cent.
in Erie stock, sometimes in the course of a day or two, through the able
manipulation of Mr. Drew.

It was a sorry day for Drew when Jay Gould took his place in the control
of Erie, and it was equally disastrous for the Erie property.

From this period Gould began to grow rapidly to the full stature of
speculative manhood, while Drew moved as quickly in a downward
direction, until he found himself again at the lowest rung of the
financial ladder. It was no wonder that he said of Gould, “his touch is
death.”

Drew’s losses followed one another in quick succession, until his
thirteen millions had melted away like snow off a ditch, and eventually
he died in debt and broken hearted. His last days stand out as a sad,
but eloquent warning to the avaricious. And this reminds me of a festive
event, the chief incidents of which, I think, are worthy of
reproduction.

I remember being at a dinner party ostensibly given to the old gentleman
when in the very zenith of his financial fame and prosperity. It was a
kind of mutual admiration society, Drew being the king-pin of the social
coterie. On account of his thirteen millions he was the centre of
cringing admiration, and was by a number of the assemblage almost
deified.

As is usual on such occasions, speechmaking was in order, the oratorical
talent being called out by the toasts as they went the round of the
board.

When it came my turn to speak, I followed suit, to some extent, in
picking up the thread of the general glorification extended to the
honored guest, to whom I paid marked deference.

“We are honored,” I said, “on this festive occasion, by a gentleman of
vast wealth, one who can control more ready money than any man in
America, and be it said to his honor, it has all been of his own
creation. He is a true representative of American thrift and enterprise.
His money and his genial disposition together combined make all men his
friends, and I know of only one antagonistic spirit to the continued
growth of this already marvellous fortune; but that one, in all
probability, may yet work his ruin. I refer to our honored guest, Mr.
Drew, and his one enemy which I have in mind is ‘Avarice.’”

In five years from that memorable dinner Daniel Drew was a ruined man,
and his thirteen millions had vanished like the baseless fabric of a
vision, leaving nothing but the miserable wreck of an avaricious spirit
behind.

The manner in which Drew was supposed to make religion the handmaid to
speculation was satirically touched in the following verses published in
the New York _Tribune_ about fifteen years ago:

            He was a long, lank countryman,
                And he stoppeth one of two.
            “I’m not acquaint in these yeere parts,
                An’ I’m a lookin’ fur Dan’l Drew.”

            “I’m a stranger in the vineyard,
                An’ my callin’ I pursoo
            At the institoot at Madison,
                That was built by Dan’l Drew.”

            “I’m a stranger in the vineyard,
                An’ my ’arthly wants are few;
            But I want sum p’ints on them yer sheares,
                An’ I’m a lookin’ fur Dan’l Drew.”

            Again I saw that laborer,
                Corner of Wall and New;
            He was looking for a ferry boat,
                And not for Daniel Drew.

            Upon his back he bore a sack,
                Inscribed “Preferred Q. U.”
            Some Canton scrip was in his grip,
                A little Wabash, too.

            At the ferry gate I saw him late,
                With his white hat askew,
            Paying his fare with a registered share
                Of that “Preferred Q. U.”

            And these words came back from the “Hackensack:”
                “Ef yew want ter gamble a few,
            Jest git in yer paw at a game o’ draw,
                But don’t take a ’and with Drew.”

Mr. Drew was negligent in his attire, even to the verge of slovenliness.
He dressed like a drover, having originally been employed in that
capacity. By the way, the significant term of “watering stock”
originated in the practice of Uncle Daniel giving his cattle salt in
order to create a thirst in them that would cause them to imbibe large
quantities of water, and thus appear bigger and fatter when brought to
market. Until he met with Gould and Fisk, it was difficult for anybody
to get the best of him in a deal.

He was wonderfully prolific in resources for the purpose of getting
advantage of those who attempted to overreach him.

A good story, illustrative of this trait in his speculative character,
is told of the time that he was so severely squeezed in Northwestern
stock. He was greatly grieved at his ill luck, while the brokers and
operators who had been prosperous at his expense were highly elated.
They considered it a great thing to have caught the wily old Daniel
napping. He was accordingly made the victim of much ribaldry and jesting
for several days in Wall Street. Some of the young men carried the joke
so far as to meet him and laugh significantly and irritatingly in his
face. He seemed to take it all in good part, for he had a happy flow of
animal spirits, but he had a terrible rod in pickle for these young men
who were making him an object of ridicule. He watched for his
opportunity, and one evening as several of them were enjoying themselves
in an uptown club, Uncle Daniel walked in, _sans ceremonie_. He appeared
to be looking after some man, and though invited to remain, seemed to be
in a great hurry to get away, and was apparently excited and warm. He
seemed to have something important on hand. He drew a big white
handkerchief out of his pocket a few times and wiped the perspiration
from his heated brow. When he was about to depart there came out of his
pocket with the handkerchief a small slip of white paper which floated
around apparently unseen by him, and alighted at the feet of one of the
bystanders, who quickly set his foot upon it. When Mr. Drew made his
exit the white scrap of paper was instantly scanned. It contained these
ominous words in his own handwriting: “Buy me all the Oshkosh stock you
can at any price you can get it below par.”

Here was a speculative revelation for the boys, for everybody believed
at the time that Oshkosh had already gone too high, and the point had
been circulated to sell it “short.” The mysterious words written on this
erratic slip of paper, however, convinced these operators that there
must be a new deal to give Oshkosh another “kiting.” There was no time
to be lost in taking advantage of the unexpected and highly valuable
information. They formed a pool to purchase 30,000 shares the next day.
They bought the stock according to pre-arrangement, and a new broker of
Daniel Drew’s was the man who sold it to them. They only discovered how
badly they themselves had been sold by Mr. Drew’s handkerchief trick
when Oshkosh began to decline at the rate of a dozen points a day, and
Uncle Daniel soon raked in from the jokers and their friends more than
he had lost in Northwest.

Mr. Drew first entered the Board of Directors in Erie about the year
1852, and remained there until he was squeezed out, and almost ruined,
in 1868. He held the office of treasurer to the corporation.

Drew was born in the town of Carmel, Putnam county, in the year 1797,
and was three years younger than Vanderbilt. As I have intimated above,
in early life he drove cattle from his native town to New York. He
afterward became proprietor of the Bull’s Head tavern in this city.

He never changed his style of dress from that to which he was accustomed
to wear when he was a drover, and when he was worth thirteen millions,
instead of sporting a gold headed cane, he went around Wall Street with
the handle of an old broken umbrella in his hand. While treasurer of
Erie he used every opportunity to manipulate the stock to his own
advantage, irrespective of the rights or interests of any other person.
He was the leading bear of the market for many years. Like Vanderbilt,
he was interested to some extent in steamboats, but he made Erie stock
the great medium of acquiring his vast wealth. He got the name of the
speculative director, and at the outbreak of what was known as the Erie
war he was supposed to be almost financially impregnable.

The “corner” of 1866 was the beginning of Uncle Daniel’s troubles. Up to
that period all had gone merry as a marriage bell with him, and he was
piling up the millions at a rate which no other financier or speculator
had ever dared to imitate. Erie stock was selling at 95 in the spring of
that year. The company was badly off for money. It made application to
its treasurer for the needed relief. He was ready to serve it in that
way at all times, but he wanted security for the loan. There were then
28,000 shares of unissued Erie stock. The company also claimed the right
to raise money by the issue of bonds convertible into stock at the
option of the holder.

This was an old trick in the management of Erie matters. It had saved
Jacob Little on one occasion, as I have mentioned in a former chapter,
during the earlier history of speculation in Wall Street. It was,
therefore, not original with the Drew management of Erie, as some people
have supposed.

The 28,000 shares of unissued stock then, and three millions of dollars
of convertible bonds, were placed in the hands of Mr. Drew as security,
and he advanced the loan of 3½ million dollars to relieve the pressing
necessities of the corporation.

When Drew found himself thus fortified with the convertible bonds, he
laid another trap for the boys in the Street. Erie had been rapidly
absorbed for some time, and was very strong at 95 with anxious
purchasers. The stock was, therefore, becoming very scarce. Mr. Drew had
a large number of contracts to fill, and operators were wondering where
he would get the stock to settle. Many of them were laughing in their
sleeves at his impending embarrassment, as they had done on a former
occasion, and were in ecstasies of delight at the idea of the terrific
“squeeze” which the old man was about to experience. When he seemed on
the very horns of this dilemma, upon which the rampant bulls thought
they would successfully impale him, he converted his three million bonds
into an equivalent amount of stock, threw 58,000 shares on the market,
met all his contracts, and fed the voracious bulls with all they wanted.

Hungry as the Street had been for Erie, this was an overdose that it was
utterly incapable of digesting. The bulls were paralyzed, and before
they could rally their broken ranks from the demoralizing effects of
this unexpected sortie from the stronghold of Erie, the stock had
declined from 95 to 50, wiping out the broadest margins and putting the
whole army of bulls, reserve forces and all, to utter rout.

Millions were lost and won in a day in this deal.

This was regarded as a grand _coup d’etat_, and one of Drew’s most
brilliant exploits in operating. In fact, at the time, it seemed to
throw every prior operation of this nature totally in the shade, and the
other leading operators of the street were blue with envy, green with
jealousy, and raging mad over their losses and the way they had been
entrapped and almost ruined by the deeply-laid scheme of the Erie
treasurer. Drew was despised, feared and revered on account of this
unparalleled achievement. He then essayed to rest on his oars for a
short time, but his period of repose was but short-lived.

There was a little side-show in connection with the maturing of the
operations in the pool just referred to, which is so characteristic of
Daniel’s methods that it is worth relating. There was a young man in the
Erie pool, but not in the wheel-within-the-wheel in that sacred circle,
who imagined that the purpose of the pool was to put Erie stock up, and
accordingly he borrowed money from Uncle Daniel, his credit being good
and having money in the pool funds, to purchase Erie. The accommodating
treasurer not only lent him the money, but his private brokers sold the
young man the Erie stock desired. He was duly fed from day to day with
the quantity which his speculative appetite craved. After the dump just
referred to, this unsophisticated youth and some other members of the
pool among his friends, went to Uncle Daniel and requested him, as
manager of the pool, according to the programme supposed to have been
agreed upon, to put Erie again on the line of advance, in order that the
young man and his friends might get in and out again, so as to cover
their recent losses.

Mr. Drew, however, coolly informed them that the pool had no Erie stock
and did not want any, and was not prepared to trade in that security any
more at that time.

“I sold all our Arie at a profit,” said Uncle Daniel, “and am now ready
to divide the money.”

So this youthful member had the felicity of discovering that while he
was speculating on his own account for a rise, Uncle Daniel was looking
after his interests in another direction, and had realized at the most
opportune moment.

Thus this amateur operator, whom Uncle Daniel had amused, without
letting him into the secret, in the way described, got nearly enough of
money back to pay the loss he had sustained experimenting outside the
pool on his own account, and upon his own independent but fallacious
judgment.

If he had not speculated outside, he would have had very handsome
profits from the pool, but he would not have obtained the useful
experience which was connected with his losses, and the independent
attitude he was ambitious to assume in speculations.

------------------------------------------------------------------------




                              CHAPTER XV.

             DREW AND VANDERBILT.


VANDERBILT ESSAYS TO SWALLOW ERIE, AND HAS A NARROW ESCAPE
    FROM CHOKING.—HE TRIES TO MAKE DREW COMMIT FINANCIAL
    SUICIDE.—MANIPULATING THE STOCK MARKET AND THE LAW COURTS AT THE
    SAME TIME.—ATTEMPTS TO “TIE UP” THE HANDS OF DREW.—MANUFACTURING
    BONDS WITH THE ERIE PAPER MILL AND PRINTING PRESS.—FISK STEALS THE
    BOOKS AND EVADES THE INJUNCTION.—DREW THROWS FIFTY THOUSAND SHARES
    ON THE MARKET AND DEFEATS THE COMMODORE.—THE “CORNER” IS BROKEN AND
    BECOMES A BOOMERANG.—VANDERBILT’S FURY KNOWS NO BOUNDS.—IN HIS RAGE
    HE APPLIES TO THE COURTS.—THE CLIQUE’S INGLORIOUS FLIGHT TO JERSEY
    CITY.—DREW CROSSES THE FERRY WITH SEVEN MILLIONS OF VANDERBILT’S
    MONEY.—THE COMMODORE’S ATTEMPT TO REACH THE REFUGEES.—A DETECTIVE
    BRIBES A WAITER AT TAYLOR’S HOTEL, WHO DELIVERS THE COMMODORE’S
    LETTER, WHICH BRINGS DREW TO TERMS.—SENATOR MATTOON GETS “BOODLE”
    FROM BOTH PARTIES.


One of the most interesting episodes connected with the speculative life
of Drew, in the somewhat sensational history of Erie affairs, was the
interposition of Commodore Vanderbilt in one of the famous deals of the
Erie clique. His object was to swallow up the corporation, and it came
pretty near swallowing him. He was only saved by the skin of the teeth,
after one of the most prolonged and desperate financial struggles of his
life.

In order to explain clearly the manner in which the Commodore became
involved in the Erie matter with Drew and his partners, it will be
necessary to take a brief resume of the history of a few of his other
prominent deals, more fully dwelt upon elsewhere.

In 1860 Harlem stock had sold as low as eight or nine dollars a share.
In January, 1863, when Vanderbilt got full control of the property, the
stock had advanced to 30, and in July of the same year it had bounded to
92. In August, when the “corner” was effected, it went to the remarkable
figure of 179.

It was put through a similar operation the succeeding year, and the
stock, which sold in January below 90, was settled for in the following
June at 285. Drew had been drawn into one of these transactions, and his
losses reached nearly a million.

Vanderbilt’s prospects with the Harlem property were seriously menaced
by the competition of the Hudson River railroad. He bought up the
competing line, and thus destroyed the competition. He made this
purchase when the stock was at par. He soon manifested his superior
power in management, and displayed his skill in the art of “watering,”
which he had invented. He had the stock advanced to 180 in a very short
time.

Seeing his great success with these two properties, through his novel
and unique methods of financiering, the managers of the New York
Central, thinking that discretion was the better part of valor, and
perceiving that they could not hold out against the edicts of manifest
destiny very long, offered their property to him almost at his own
price, which he very cordially accepted, approving their good judgment
and keen perception.

He obtained full control of New York Central early in 1867. As soon as
this triple amalgamation was complete he set his insatiable and
avaricious heart upon Erie, and essayed to compass his designs and
effect his purpose of reducing it to possession through the speculative
machinery of Wall Street.

It was through this channel that he had obtained Hudson, and in defiance
of the scientific maxim that lightning never strikes twice in the same
place, he was inspired with full confidence in his ability to “scoop”
Erie in the same manner. He tried first to arbitrate and consolidate,
but his efforts in that direction failed.

With all his marvellous foresight and almost unerring judgment in
speculative affairs, the Commodore was greatly at fault in his
calculation regarding the magnitude of the task he had now undertaken in
Erie. He had no idea of the immense volume of the stock which, after the
speculative battle began to rage, seemed to spring out of the ground,
spontaneously, as the reserve troops of Wellington were said to appear
to do in the eyes of Napoleon when the struggle waxed warm at Waterloo.
He had to contend with the ablest generals in speculation and finance
that ever Wall Street had produced. His first bold, flank movement was
an attempt to “corner” Drew. He knew how to manipulate the courts almost
as well as the Erie Ring did. Accordingly, he made use of the services
of Frank Work to obtain an injunction from Judge Barnard, of Tweed Ring
notoriety, restraining Drew from the payment of interest on 3½ million
bonds, pending an investigation of his accounts as treasurer of Erie.
This was followed up in a few days by another application to the court
for the treasurer’s removal from office.

These measures were resorted to by Vanderbilt to prevent the issue of
this stock, into which these 3½ million bonds were convertible, and thus
enable him to get a “corner” in the stock with greater facility. He thus
attempted to make the court instrumental in forcing Drew into a position
where he would be obliged to commit financial suicide.

The Erie Ring had managed to get legally around what in reality was an
over-issue of Erie stock and bonds in the following subtle manner:

There was a statute of New York which authorized any railroad to create
and issue its own stock in exchange for the stock of any other road
under lease to it. The Ring had obtained the Buffalo, Bradford &
Pittsburg road, which was comparatively worthless, for carrying out this
scheme. The Erie management then set about supplying themselves with the
amount of Erie stock required, by leasing their own road to the road of
which they were directors. They then created stock and issued it to
themselves in exchange under the authority vested in them by law.

The nominal price of the road with which they worked this game of
legerdemain was $250,000. They issued bonds in its name for two millions
of dollars, payable to one of themselves as trustee.

Vanderbilt, before he could get a “corner” in Erie, had to place a limit
to the issue of the stock. Otherwise he would have been throwing away
millions, like pouring water into a sieve, in his attempt to make a
“corner.”

Drew was enjoined by the Commodore to return to the Treasury 68,000
shares of the capital stock of Erie. This was the amount that was said
to remain in the unsettled transactions of the Erie corner of 1866. This
was the sword of Damocles which Vanderbilt had suspended over Drew’s
devoted head.

Vanderbilt thus undertook to play the double game of manipulating the
courts and the stock market at the same time, and against wily
opponents, who were experts in both operations.

There were at this time three competitors for the possession of Erie in
the field. The Drew party, the Vanderbilt party, and the Boston,
Hartford and Erie party. Drew had tried to appease Vanderbilt to some
extent, and had an interview with him at Vanderbilt’s own house prior to
the election of the Erie directors. He agreed to “let up” on Vanderbilt,
and offered him greater swing in purchasing Erie, while, on the other
hand, Vanderbilt consented not to press the proceedings in court against
Drew.

Before this, the Boston party and Vanderbilt had been fixing matters to
oust Drew from the Erie directory. Now, Vanderbilt changed his tactics,
and resolved to let Drew remain. The Boston party was with him, but to
keep up the appearance of what had been formerly determined, the new
board was to be elected ostensibly without Drew, and a vacancy created
afterwards by which he could be chosen in the board. This method of
whipping the Devil around the stump was adopted to put public opinion
off its guard, and help to forward Vanderbilt’s purposes of
consolidation. The election scheme was successfully effected, but the
ruse, though well conceived, fell far short of accomplishing its
designs.

There were wheels within wheels during this speculative deal. Drew and
Vanderbilt entered into a secret alliance to exclude the Boston party,
who was Vanderbilt’s ally. The new board was elected, leaving Drew out.
This was a surprise to Wall Street, but a greater surprise was in store
for it when a vacancy was created the next day, and Drew was re-elected
to the Erie Board of Directors. The Street was confused and confounded,
and at a loss to know how to act, and the Boston party was groping
around to find out where it stood. Frank Work was elected to the Erie
Board in the Vanderbilt interest. A pool was then formed to put up Erie,
as it was in a very depressed condition. Drew was to manage the pool and
manipulate the market.

The proposed plan for consolidating with the Vanderbilt interests failed
because the Erie people said that the great railroad king would only
consent to give them one-third of the earnings, while they contributed
more than half to the pool. So, when this scheme collapsed, Vanderbilt
went on the speculative war path, and determined to snatch Erie from the
hands of the Ring in the way he had obtained Hudson. He began his
operations about the middle of February, 1868, and pursued his policy in
the courts for the purpose of limiting the apparently unlimited supply
of Erie stock.

In the leasing process above referred to with the Buffalo, Bradford &
Pittsburgh, the Erie clique added $140,000 a year to its income.

Mr. Work got an additional injunction to prevent Erie from issuing stock
in addition to the 251,058 shares which had appeared in the previous
report of the road, and forbidding a guarantee by Erie of the bonds of
any other road, and Drew was further restrained from any transactions in
Erie until he should return the 68,000 shares of capital stock to the
treasury.

It will thus be seen that Vanderbilt had taken very rigid measures to
“tie up” the hands of the veteran speculator.

The case was set down for hearing in the court of the immaculate Judge
Barnard, on the 10th of March. When Vanderbilt thought he had everything
fixed to force Drew to ruin himself by the return of these shares, which
would enable Vanderbilt to effect his “corner,” he was checkmated by a
counter injunction issued in the interest of the Erie people by Judge
Balcom, of Binghamton, which stayed all proceedings in Barnard’s court.

Richard Schell then applied to Judge Ingraham and got out another
injunction in the interest of the Vanderbilt party, staying all
proceedings before Judge Balcom.

In the meantime the Erie directors were busy preparing their new issue
of stock, despite the injunctions, in order that the bulls of the
Vanderbilt party might be generously fed with Erie when the opportunity
should arrive.

The Executive Committee of Erie resolved to issue bonds for
improvements, extensions and steel rails. The bonds were convertible
into stock at not less than 72½. Five millions of these were
manufactured by the Erie paper mill and printing press, to be exchanged
for Vanderbilt’s good, solid cash.

A great difficulty presented itself at this juncture, which, even to the
majority of clever speculators, would have been insurmountable. The
genius of “Jim” Fisk was called in to cut the Gordian knot. The
certificates of the new Erie shares were in the hands of the secretary
of the company, but he was enjoined from issuing them. They had been
made out on Saturday night. On Monday the secretary directed a
messenger, in the Erie office in West street, to take the books
containing the certificates to the transfer office in Pine street. The
messenger took the books and walked out. He was hardly a minute absent
when he returned, apparently frightened, without the books. He stated
that Mr. Fisk, who had been standing at the door, took the books from
him, and ran away with them!

The certificates were then where no injunction could molest them. The
next day the convertible bonds were found upon the secretary’s desk. In
a day or two afterwards the certificates appeared in Wall Street. An
order was obtained from Judge Gilbert enjoining all the previous orders
of that legal luminary, Judge Barnard. Mr. Drew then threw 50,000 shares
of Erie stock on the market. The boldness of the operation threw the
Vanderbilt brokers off their guard, for it never struck them for a
moment that Drew would risk contempt of court, and use the new issue of
Erie in the face of an injunction, so they eagerly devoured the fresh
bait before they got time to examine the quality of it or suspect its
origin.

Erie had opened at 80, and advanced to 83. When the facts became known
the stock broke, and declined to 71; but under heavy purchases by the
Vanderbilt party, soon recovered to 78. The “corner,” however, was
broken by the large blocks which Drew had thrown on the market, and
Vanderbilt was signally defeated, and had a narrow escape from being
completely swamped. The corner proved a boomerang to Vanderbilt. In his
wrath he again applied to the courts. As the result, the Erie clique
were obliged to fly and take refuge in Jersey City. Drew crossed the
ferry heavily loaded with a big carpet bag, which contained seven
millions, which had recently changed hands from Vanderbilt to himself in
the cornering operation.

Gould and Fisk decamped by different routes. When the party had taken
refuge in “Fort” Taylor (Taylor’s Hotel), safe from the laws of New
York, they determined that no papers should be served upon them, and
gave strict orders to the host that they would not receive anything in
the shape of letters or notes. Communications of all kinds were
prohibited except through persons well known to the clique, and the
waiters at the hotel were strictly enjoined to observe this rule, on
pain of being discharged.

While Vanderbilt was working hard to reach the refugees through the
courts, the Legislature and his detectives, he discovered a method of
communicating with Drew in spite of the precautions with which the
latter was surrounded. The Commodore’s scheme would have done honor to a
first-class Nihilist of the present day. He instructed a person in his
service to play temporary detective, to go to the Taylor Hotel in the
garb of a commercial traveler from the Far West, and to watch the
movements of Drew, so as to get a note slipped into his hand in a way
that he would be certain to read it.

The amateur detective watched for a day or two, and saw that his only
chance of success was when Drew was at lunch, and that the person who
waited on him must hand him the note. He saw the waiter, and told him
what he wanted, and that when he should be discharged the Commodore
would find him a better place.

The waiter agreed to hand Mr. Drew the note. Drew was enraged, sent for
the host, and the waiter was instantly discharged, only to enter
Vanderbilt’s service, according to agreement, at much higher
remuneration. The note of the Commodore, however, had the desired
effect. What that note contained, probably, nobody but Vanderbilt and
Drew ever knew. Though the friends of Drew attempted to frighten him
from going by arousing his suspicions of being kidnapped, he came over
to New York on the following Sunday and had an interview with the
Commodore. The matter was fixed up between them, and while Gould and
Fisk were fighting Vanderbilt tooth and nail at Albany, and Gould was
arrested and arraigned for contempt of court and other high crimes and
misdemeanors in the eyes of the Vanderbilt lawyers, Drew was left
unmolested to pursue the even tenor of his way.

As treasurer of Erie, however, Drew took an active part in the progress
of legislative matters. He was the first to see that Senator Mattoon,
who was chiefly instrumental in organizing the Investigating Committee,
wanted tangible recognition of his services before the Committee made
its report. He thought he was using Mattoon, but the Senator used him,
and gave his casting vote in favor of Vanderbilt, whom he used also,
after the most approved method of Albany legislators. Mattoon was also
found on the winning side at the end of the legislative farce, when the
bill in favor of the Erie clique and its over-issue of stock was passed,
and no doubt got his fair share of the half million with which Drew
fortified Gould from the Erie treasury when this gentleman went to
Albany to conduct the war in the Legislature against Vanderbilt
concerning the extra issue of Erie stock.

------------------------------------------------------------------------




                              CHAPTER XVI.

         DREW AND THE ERIE “CORNERS.”


A HARMONIOUS UNDERSTANDING WITH THE COMMODORE.—HOW THE COMPROMISE WAS
    EFFECTED.—AN INTERESTING INTERVIEW WITH FISK AND GOULD IN THE
    COMMODORE’S BED-ROOM.—HOW RICHARD SCHELL RAISED THE WIND FOR THE
    COMMODORE.—DREW’S SHARE OF THE SPOILS.—HE TRIES TO RETIRE FROM WALL
    STREET, BUT CAN’T.—THE SETTLEMENT COST ERIE NINE MILLIONS.—GOULD AND
    FISK “WATER” ERIE AGAIN, TO THE EXTENT OF TWENTY-THREE MILLIONS, BUT
    LEAVE DREW OUT.-“UNCLE DANIEL” RETURNS TO THE STREET.—HE IS
    INVEIGLED INTO A BLIND POOL BY GOULD AND FISK, LOSES A MILLION AND
    RETREATS FROM THE POOL.—HE THEN OPERATES ALONE ON THE “SHORT” SIDE
    AND THROWS AWAY MILLIONS.—HE TRIES PRAYER, BUT IT “AVAILETH
    NOT.”-“IT’S NO USE, BROTHER, THE MARKET STILL GOES UP.”—PRAYING AND
    WATCHING THE TICKER.—HOPELESSLY “CORNERED” AND RUINED BY HIS FORMER
    PUPILS AND PARTNERS.


About the middle of April Drew emerged from his retreat in Jersey City,
and appeared openly in Wall Street, apparently without any fear of
arrest. Other members of the Erie clique had gone through the formality
of purging their contempt of court, but had not made their peace with
the Commodore, and things went forward without any special interruption
or excitement until July, when a settlement was made with Vanderbilt.

It was agreed that the Commodore should be relieved of 50,000 shares of
Erie stock at 70, for which he was to receive $2,500,000 in cash, and
$1,250,000 in bonds of the Boston, Hartford & Erie at 80. It was further
stipulated that he was to receive $1,000,000 for the privilege of
calling on him at any time within four months for the remaining 50,000
shares of Erie at 70. He was allotted two seats in the Erie Board of
Directors. All suits between the two high contending parties were to be
dismissed and all offenses whatsoever relating to the case, in the
language of the law, were to be condoned.

The manner in which the compromise was effected is not the least
interesting part of the famous deal in Erie. Some time after Drew had
got through his famous Sunday evening interview with the Commodore,
paving the way for his partners, by weeping and showing other
manifestations of deep contrition on account of his inglorious flight to
Jersey City, Gould and Fisk came over early one morning to see the
Commodore at his residence in Washington Place. Fisk told the story of
meeting the Commodore with great unction, in his bold, brazen and lively
manner. “Gould wanted to wait,” said Fisk, “until the Commodore should
have time to get out of bed, but I rang the bell, and when the door was
opened I rushed up to his room. The Commodore was sitting on the side of
the bed with one shoe off and one shoe on. He got up, and I saw him
putting on the other shoe. I remember that shoe from its peculiarity. It
had four buckles on it. I had never seen shoes with buckles in that
manner before, and I thought, if these sort of men always wear that sort
of shoe, I might want a pair. He said I must take my position as I found
it; that there I was, and he would keep his bloodhounds (the lawyers) on
our track; that he would be damned if he didn’t keep them after us if we
didn’t take the stock off his hands. I told him that if I had my way,
I’d be damned if I would take a share of it; that he brought the
punishment on himself and he deserved it. This mellowed him down. I told
him that he was a robber. He said the suits would never be withdrawn
till he was settled with. I said (after settling with him) that it was
an almighty robbery; that we had sold ourselves to the Devil, and that
Gould felt just the same as I did.”

Among the friends who adhered to the Commodore in the trying hour of the
“corner,” besides those mentioned, were William Heath, Richard Schell
and his brother Augustus, and Rufus Hatch. Richard Schell was highly
practical and remarkably shrewd in the aid which he offered the
Commodore to obtain money for the speculative fight. He managed, through
his tact and shrewdness, to get loans on Erie after the banks had
absolutely refused to lend, on account of the over-issue of the stock.
After this refusal, he made inquiry at the banks, and found that most of
them had New York Central stock. He then went to a bank and said: “If
you don’t lend the Commodore half a million on Erie at 60, he will put
Central down to 50 to-morrow, and break half the houses on the Street.
You know whether or not you will be among them.”

The threat was repeated at other banks, and, in almost every instance,
had the desired effect, and the Commodore was supplied with the sinews
of war, but he was only throwing away his ammunition.

The Erie stock from the inexhaustible fountain of over-issue was
supplied to him without stint, and his attempts to “corner” the clique
were absolutely futile.

While these gamesters were feeding the Commodore with this extemporized
stuff to order, Fisk said: “If this printing press don’t break down,
I’ll be d—d if I don’t give the old hog all he wants of Erie.”

The printing press did not break down, but did its work well until the
Commodore was nearly “burst,” and had it not been for his indomitable
courage and the hold he had acquired on the courts, he would have been
bankrupt. His escape seemed almost a miracle to the people of Wall
Street, and Gould and Fisk were not less surprised that they had met a
foeman worthy of their steel. In spite of the fact that he spilled over
seven millions like water, the Commodore managed to sustain the market
through it all, and prevented a crash that, in its local effects, at
least, would have been as disastrous as that of Black Friday.

Certain innocent holders who had been badly crushed in the collision
between the great leaders received a financial emollient for their
lacerated feelings, amounting in the aggregate to $429,250. The Boston
party, represented by Mr. Eldridge, was to be relieved of five millions
of its precious Boston, Hartford & Erie bonds, receiving therefor four
millions of Erie acceptances.

Thus, the settlement in full cost Erie about nine million dollars. The
Erie stock and bondholders were saddled with this liability in defiance
of law and justice.

Gould and Fisk pretended to be opposed to the settlement, leaving the
public to infer that it was all the work of Drew with Vanderbilt.
However this may have been, it was probably the best thing the others
could have done to relieve themselves of their various complications at
the time. No doubt the Vanderbilt note to Drew, for which the waiter was
discharged from Taylor’s Hotel, was at the bottom of the whole
settlement.

Drew was left to enjoy his share of the fruits of the “corner,” which
netted seven millions, except that he had to pay into the Erie treasury
the trifling item of $540,000 in discharge of interest and all claims or
causes of action which might be presented against him by the Erie
Company. The Erie Railway fell to the lot of Gould and Fisk as their
share of the spoils growing out of the _entente cordiale_.

Drew then retired from Wall Street in the same way that Gould has so
often retired since that time, except that Drew had probably an honest
intention so far as it was possible for him to have such a conception of
leaving the Street forever, but it would seem that he had not the power
to do so. Once in Wall Street, always in Wall Street. It is like the
doctrine of the final perseverance of the saints, as laid down in the
Westminster Confession of Faith. It is impossible to get out of it when
the speculator gets fairly into its fascinating grasp.

Drew might have enjoyed life and the consolations of religion on the few
millions he had left if he had retired in company with his Bible and
Hymn Book, to some lovely, secluded spot in the peaceful vales of Putnam
county; but he was under the infatuation of some latent and mysterious
force or attraction, the victim of some potent spell, like the one in
whose weird grasp Nancy Sykes was firmly held when she essayed to get
away from the murderous “Bill,” as described by Dickens in Oliver Twist.

Drew came back to Wall Street, and saw and was vanquished, quite unlike
Cæsar.

When he returned to the “Street” after a few months absence, the scene
was greatly changed. His two pupils had shown themselves to be such apt
scholars, that in the interim they had exceeded the wildest dreams of
avarice that ever their able preceptor had conjured up or inculcated. In
four months Gould and Fisk had inflated the capital stock of Erie from
34 millions to 57 millions. No doubt, Uncle Daniel was astounded at
their progress, and his feelings can be better imagined than described
when, in the presence of this marvellous increase of wealth, he
reflected that he was no longer treasurer of Erie, and had neither lot
nor part in its unprecedented prosperity.

His natural propensity to operate, however, was still strong, but when
he again tried his hand at speculation, it seemed to have lost its
cunning, and he felt almost as much disappointed as Rip Van Winkle did
when he awoke in Sleepy Hollow, after his twenty years’ nap, and began
to examine the changed aspect of the country in the vicinity of
Irvington, now Gould’s country seat.

The speculative tactics in operation had been changed, and he soon found
that it was a losing game to go on the bear side of the market. He was
invited into the pool by his old partners, to have a little practice at
the popular game of spider and fly. Drew had been the spider for a long
time who had inveigled the unwary flies from every direction into his
insidious net. He was now asked to assume the role of a fly, while his
former pupils played spiders. In plain terms, he was coolly requested to
go into a “blind pool” in Erie, deposit four millions, shut his eyes and
open his mouth, leaving the Erie sharpers to put taffy or candy into it,
just as they pleased.

He was no longer to have the privilege of pulling the wires, nor the
wool over other people’s eyes. On the contrary, he was to be one of the
puppets that should dance to the music of Gould and Fisk, and let them
pull the wool over his eyes. He was not to ask any questions, but pay
his money and take his choice, that is to say, whatever Gould and Fisk
chose to give him. The terms were rather humiliating, and on reflection,
Uncle Daniel revolted. He did not see the point of paying the piper
without having the privilege of choosing the tune. He, therefore,
withdrew his funds after losing a million, and undertook the task of
bearding these two young lions in their den—the den which he had
constructed for them, and the two young lions which he had so carefully
nurtured to destroy him. They were very wroth with him on account of
what they regarded as his treachery, which virtually consisted in his
refusal to be totally devoured by them. The fact is, however, Daniel
could not have been true to any one, any more than they. “Can the
Ethiopian change his skin, or the leopard his spots?”

After considering the matter prayerfully, as he always did in such
emergencies, he resolved to operate alone, and the oracle told him to go
on the short side. It was evident that the Gods had doomed him to
destruction, so he rushed in madly to sell the market, which moved
persistently upward.

In this emergency he took counsel of a Christian brother, who advised
him to pray. He tried hard to pray, but his irresistible desire to keep
constant watch on the tape of the ticker, to see the quotations,
evidently distracted his devotions. This was probably the first time
that he lost faith in the power that moves the arm that moves the world.
He went to his Christian brother with tears in his eyes, saying: “It is
no use, brother; the market still goes up.” And Uncle Daniel ceased to
pray, and despairingly fixed his attention on the ticker.

Daring November, Drew contracted for the delivery of 70,000 shares of
Erie at current prices. It was then in the vicinity of 38. He proceeded
on this line of operation until he was hopelessly “cornered.” He then
applied to the court. Application was made for an injunction in the name
of August Belmont, but Gould and Fisk offset it by applying for another
injunction to their faithful Barnard. That upright Judge not only
granted an injunction restraining all suits brought against his two
eminent protegés, but appointed Gould Receiver of Erie. He also gave
authority to the directors of Erie to use the funds of the corporation
to purchase and cancel 200,000 shares of stock, the legality of whose
issue had been questioned, at any price less than the par value, without
regard to the rate at which it had been issued.

Gould and Fisk had issued these shares in the bear interest at 40, ran
the stock down to 35, and now obtained the power to purchase it back at
par in the bull interest. This they did by the authority and permission
of a Judge of the Supreme Court, in spite of the law prohibiting members
of corporations to deal in their own stock. So these two great
manipulators “cornered” their old friend and teacher, Drew, by legally
over-riding the law.

Erie became scarce after this skilful movement was performed, and was
selling at 47. Drew made desperate attempts to cover at this price, but
the stock ran up to 57 between Monday and Wednesday. Wall Street was in
a terrible ferment, and, as the newspapers say, the greatest excitement
prevailed. Erie made still another leap and reached 62. It was evident
that it was bound to keep on the upward grade, and there was no apparent
relief for Drew, at least for two or three days, when an incoming
steamer was expected to have a considerable amount of Erie on board. It
was manifest, however, that by that time Drew would have reached the end
of his millions, and probably most of his credit would have vanished
with his own filthy lucre. His oppressors were bearing down upon him
with all their might, and were evidently determined to make short work
of him.

The struggle waxed hotter as the hour of three in the afternoon
approached, and these two young lions of speculation were determined to
crush the old bear unmercifully and effectually.

When Drew was apparently on the very brink of utter financial
destruction, and almost at the close of the market, two events happened
that preserved him from total annihilation. There had been 300,000
shares of Erie issued in ten share lots, which the operators thought
were safely secreted in London and Amsterdam. When the stock reached 60
these ten-share lots began to come out. It turned out that most of them
had never left home, but were securely had by tradesmen, mechanics,
grocers and small bankers and brokers. They were thrown on the market
with great rapidity to realize handsome profits, and the efforts of the
clique to absorb them before they got into the hands of Drew, made
serious inroads on the reserve funds of the champion operators. As
troubles never come singly, at this new juncture the banks refused to
certify their checks. Drew was, therefore, enabled to make good his
contracts at 47, but speculatively speaking, he was ruined. He came
pretty near bringing down his desperate assailants, however, in his sad
and frightful fall. The stock then fell to 42, and Erie became a drug in
the market. The victors had got the spoils, but they paid dearly for
them, and had come pretty near being destroyed in the moment of their
triumph. They had purchased their Erie at “corner” prices, and they were
obliged to carry it, for nobody wanted it. Added to this Erie was struck
from the Board for a time, and had it not been for the gullibility of
our English cousins, this stock would have ceased to be a disturbing
element in the market for a great while longer.

Although old Drew was badly treated, yet there was little sympathy for
him, since he had merely become the victim of his own avarice,
vacillation, treachery and scheming to catch others in the same net.

He could not justly complain of his former partners, and Fisk told him
so, for their methods of operation, and the immense inflation of the
Erie stock by which he was ruined had been accomplished by the machinery
which he, himself, had set in motion, only his _ci-devant_ colleagues
had improved upon it, and had received various new patents on inventions
and improvements, which they had joined to the old one invented by
“Uncle Daniel,” mating one of the best combinations for the purpose of
creating and working “corners” that had ever been devised in Wall
Street.

But the unkindest cut of all was the way in which Fisk taunted him, on
the eve of his crushing defeat, with the absurdity of his complaints
about the management of Erie matters.

“You should be the last man,” said this worthy pupil, sneeringly, to his
dear old preceptor, “that should whine over any position in which you
may be placed in Erie.”

It was a sad truth, heartlessly uttered by the generous “Jim.” Drew had
no mercy on others, and could not expect to be shown any of that “twice
blessed quality” towards himself.

The private scene in the Erie office between old Drew and Fisk and
Gould, just prior to their final and victorious charge upon him, was
deeply pathetic, yet none of the three showed more conspicuously that
they were destitute of that proverbial honor among “boodlers” than Drew
himself. He had secured Vanderbilt to assist him in the courts, and also
in the market, against the machinations of the Erie clique, and then,
turning around, he went straight to Gould. and to him betrayed his ally
and the plans he had arranged with him, expecting mercy from his old
colleague by this dastardly act of humiliation and deception.

He must have lost his head at this crisis, for he ought to have known
Gould better. He begged and pleaded with Gould and Fisk, and was ready
to throw himself at their feet. He implored them to join him, with the
remnant of his fortune, in giving the old paper mill another turn to
grind out more Erie stock, that he might be permitted to emerge from
that cruel “corner” in which he was placed like a scorpion girt by fire,
brooding over his guilty woes.

But his pupils proved that they had profited only too well by his
instructions. Just as he would have acted under similar circumstances,
they were perfectly relentless. They seemed to be a double incarnation
of Shylock personified, or two Dromios bereft of conscience and human
sympathy. Drew had no Daniel but himself, to come to judgment. There was
no fair Portia to plead his cause, and if there had been such an angelic
creature in the case, though she might have “broke up” Fisk, it is
almost certain that Gould would have successfully resisted her charms.

When Drew saw they were implacable he bade them good night, and with the
courage of despair returned to the charge in Wall Street the next
morning, with the results which have been briefly related. He lost
nearly two millions in that fatal struggle.

------------------------------------------------------------------------




                             CHAPTER XVII.

     INTERESTING EPISODES IN DREW’S LIFE.


INCIDENTS IN THE EARLY LIFE OF DREW, AND HOW HE BEGAN TO MAKE MONEY.—HE
    BORROWS MONEY FROM HENRY ASTOR, BUYS CATTLE IN OHIO AND DRIVES THEM
    OVER THE ALLEGHANY MOUNTAINS UNDER GREAT HARDSHIP AND SUFFERING.—HIS
    GREAT CAREER AS A STEAMBOAT MAN, AND HIS OPPOSITION TO
    VANDERBILT.—HIS MARRIAGE AND FAMILY.—HE BUILDS AND ENDOWS RELIGIOUS
    AND EDUCATIONAL INSTITUTIONS.—RETURNS TO HIS OLD HOME AFTER HIS
    SPECULATIVE FALL, BUT CAN FIND NO REST SO FAR AWAY FROM WALL
    STREET.—HIS HOPES, THROUGH WM. H. VANDERBILT, OF ANOTHER START IN
    LIFE.—HIS BANKRUPTCY, LIABILITIES AND WARDROBE.—HIS SUDDEN BUT
    PEACEFUL END.—CHARACTERISTIC STORIES OF HIS ECCENTRICITIES.


I had intended at first to give only a sketch of the salient points in
the speculative career of Drew, but, on reflection, I find that the
lives of great men all remind us that people want to know a great deal
of minutiæ concerning men who have made their mark in this world. Our
enterprising newspapers are encouraging this laudable curiosity more and
more every day. So in the case of Drew, I must try to furnish answers to
questions that may be asked about him in order that popular expectation
may not be disappointed. I shall endeavor to anticipate what the reader
may naturally want to know when he comes to the end of Drew’s great
speculative ventures. One of these questions will probably be, what kind
of a boy was Daniel Drew, and how did he begin to make money?

It goes without saying that Drew was the most unique figure that Wall
Street has ever seen, and a characteristic specimen of one kind of
American thrift, enterprise and speculation. Every side of his
many-sided and peculiar character, therefore, is of interest as the
representative of a class to the reader who sets his heart on making
money, and the majority of readers have this weakness. He is of special
interest to all speculators not only in this country, but throughout the
civilized world. These facts constitute my apology for dwelling so long
and minutely on his characteristics. I have an idea that his life and
adventures will be read with deep interest many years hence, and help to
prolong the existence and reputation of this book. They will also assist
to immortalize the man who was one of the most wonderful products of
American civilization, and who could hardly have been evolved from any
other soil or clime. Such prodigies of success cause the members of the
older social fabrics to stare with astonishment at the stupendous
capabilities of our great country.

There is nothing interests people so much as the start in life, probably
because there are so few who consider themselves able to get a good
start. So far as I can learn, in the case of Daniel Drew, the boy was
father to the man. He worked on a farm, going to school at intervals,
where he was unable to learn anything, except that he obtained a notion
of the current theological ideas of that day, until he was fifteen years
of age, when his father died, leaving him, a younger brother and their
mother to shift for themselves on a poor, small farm. His father was of
English and his mother of Scotch descent.

In his seventeenth year young Drew enlisted as a substitute in the State
Militia, which had then been called into service on account of the
second war with England.

The regiment was placed at Fort Gansevoort, on the Hudson, opposite New
York. Hostilities ceased between this country and England a few months
after his enlistment, and the regiment was mustered out. Daniel returned
home. His mother had taken charge of his substitute money, which
probably did not exceed a hundred dollars, the amount with which his
great rival, Commodore Vanderbilt commenced life, and which he earned
from his mother by ploughing and planting a field.

“I want my substitute money,” said Drew to his mother, one day shortly
after his return. “What are you going to do with it?” queried the old
woman, for being of Scotch descent, she was quite as thrifty in looking
after the pennies as her American contemporary, old Mrs. Vanderbilt.
They both had the gripping sense by nature, and to this transmissible
quality may probably be attributed, in a large degree, the financial
success of both of their sons.

“I am going to buy cattle, and sell them in New York,” replied Daniel.

“Are you sure you will not lose money by it?” rejoined his mother.

“I am sure I will make money,” he said.

He started to purchase cattle in the country and to sell them in New
York. His profits were at first very small, especially as his capital
was so limited. He soon discovered that if he could purchase his cattle
in Ohio he would be able to increase his profits largely, and he applied
to Henry Astor, a butcher in Fulton Market, and a brother of the great
millionaire, John Jacob Astor, for a loan to speculate in Ohio cattle.
Astor accommodated him, though he at first thought he was running a
considerable risk. He was mistaken, for Drew made money and soon
established his credit on a solid basis. He bought cattle throughout
Ohio, and drove them over the Alleghany mountains. He is said to have
been the first drover who attempted this daring experiment. It required
sixty days then to make the journey. He suffered great hardship and
privation, and would sometimes lose a third part of a drove of 600 or
1,000 in crossing the mountains. Yet, as cattle were very cheap in Ohio,
his profits were still very large.

One terrible night, in a terrific thunderstorm, the tree under which he
took shelter was shattered to splinters, his horse was killed under him,
and he himself was struck senseless for a time. But no hardship or
privation could deter him in the pursuit of making money. He afterwards
extended his operations to Kentucky and Illinois.

In 1829 Drew opened a cattle yard at Twenty-fourth street and Third
avenue and ran the Bull’s Head Tavern. He went into the steamboat
business in 1834. Vanderbilt had then been seventeen years in the
business. _Westchester_ and _Emerald_ were the names of his first two
boats, and they ran between New York and Albany, in opposition to the
Vanderbilt Line. Drew reduced the fare from three dollars to one, and
attempted to freeze out Vanderbilt. The war of rates became so fierce
that people were carried 100 miles between these two cities for a
shilling. Drew added the _Knickerbocker_, the _Oregon_, _George Law_,
_Isaac Newton_ and the _New World_ to his river fleet, and became quite
a formidable competitor of the Commodore.

In 1840 Isaac Newton organized the People’s Line on the Hudson, of which
Drew became the largest stockholder. The boats _St. John_, _Dean
Richmond_ and _Drew_ were built. The _Isaac Newton_ was burned and the
_New World_ was sunk.

When the Hudson River Railroad was opened, in 1852, Drew refused to sell
out his stock. “You can regulate your fares as you choose,” he said to
the President of the Railroad Company, “but the only way you can
regulate my steamboat fares is to buy the People’s Line, and this I
don’t believe you have money enough to do.” The railroad line merely
stimulated traffic, as the elevated railroads have done in our day, and
Drew was only a gainer instead of a loser by the apparent competition.
He also controlled the Stonington Line for twenty years.

Drew made his debut in Wall Street in 1844, just thirteen years prior to
my first appearance on the boards of this financial theatre, and he was
quite a war horse in speculation when I entered the arena. He formed a
partnership with his son-in-law, a Mr. Kelly, and Nelson Taylor, as
stock brokers and bankers. Their business was large and their credit
good. The firm continued for ten years, until it was dissolved by the
death of his partners. Drew then became one of the most daring and
successful operators in Wall Street.

Drew was married at the age of 25 to Roxana Mead, a farmer’s daughter,
by whom he was the father of three children, William H., Josephine, who
died in infancy, and Catharine, who was married to the Rev. W. I. Clapp,
a Baptist clergyman, who died and left his widow in good circumstances.
So there were very little grounds for “Uncle Daniel’s” dread that he
should probably die in miserable destitution, as it seems that his two
surviving children were very kind to him. His wife died in 1876.

Drew was a member of St. Paul’s Methodist Episcopal Church of New York
for several years. He contributed large sums to various religious and
educational institutions, but like Wilkins Micawber, he usually paid the
money in notes, which appeared in the schedule of his liabilities when
he had lost his large fortune, and had become bankrupt. He founded the
Drew Seminary at Carmel, for young ladies, at a cost of $250,000. He
built the Drew Theological Seminary, at Madison, New Jersey, also at a
cost of $250,000, and endowed it with a similar amount. He only paid the
interest on the latter. He increased the endowment fund of the Wesleyan
University, at Middletown, Conn., and the Concord Biblical Institute. He
added $100,000 to the endowment fund of Wesley University, but only paid
the interest on that also. These appear in the schedule, in the list of
his unsecured claims. He owned several large grazing farms in Putnam
county, but they were heavily mortgaged.

Drew had some intention of returning to his old home after the
bankruptcy proceedings in 1876, to spend the remainder of his days there
among his grandchildren. This desire shows that there was something
inherently soft and good, after all, in his avaricious nature, and
reminds me of the touching lines of Cowper on the same subject:

            “Be it a weakness, it deserves some praise,
             We love the play place of our early days,
             The scene is touching, and the heart is stone,
             That feels not at the sight, and feels at none.”

He went out to Putnam county in 1876, when he was sick, but he was soon
glad to get back to the city. He said: “I was troubled with visitors,
some of ’em well on to 100 years old. Some of them said I bought cattle
from them when I was young, on credit, and they wanted their bills. I
kept no books, and how was I to know I owed ’em for them critters? It
was dull outen thar,” he continued, “and yer never can tell till the
next day how ‘sheers’ is gone.”

So Uncle Daniel came back and stopped at the Hoffman House, where he
could have ready access to the ticker, and kept constantly posted on the
price of stocks. His principal broker was Mr. David Groesbeck.

The city still seemed to have certain fascinations for him that the
country was unable to afford. He often spoke regretfully, in his latter
days, of being too old to retrieve his fortune. He said he longed for
rest. Nothing seemed to weigh more heavily upon his mind than his
inability to carry out the plans connected with his religious
endowments, and he grieved deeply that he had not the means to return to
Wall Street that he might have another lucky turn that would enable him
to fulfil these religious obligations according to the original
intention.

In the bankruptcy schedule his personal property is itemized as follows:
watch and chain, $150; sealskin coat, $150; wearing apparel, $100;
Bible, hymn books, &c., $130.

Although he was economic in his domestic expenses, he entertained
friends liberally, and his house at the southwest corner of Seventeenth
street and Union Square was always open to Methodist ministers, free of
charge, from all quarters of the world.

Some years prior to his death Mr. Drew gave the following candid,
succinct and pathetic account of his embarrassment to a journalist who
interviewed him:

“I had been wonderfully blest,” said Uncle Daniel, “in money making. I
got to be a millionaire before I knowed it hardly. I was always pretty
lucky till lately. I didn’t think I could ever lose money extensively. I
was ambitious of making a great fortune, like Vanderbilt, and I tried
every way I knew, but got caught at last. Besides that, I liked the
excitement of making money, and giving it away, and am glad of it. So
much has been saved anyhow. Wall Street was a great place for making
money, and I could not give up the business when I ought to have done
so. Now, I see very clearly what I ought to have done. I ought to have
left the Street eight or ten years ago, and paid up what I owed. When I
gave $100,000 to this institution and that, I ought to have paid the
money, and I ought to have provided better for my children, by giving
them enough to make them rich for life. Instead of that I gave my notes,
and only paid the interest on ’em, thinking I could do better with the
principal myself. One of the hardest things I have had to bear has been
the fact that I could not continue to pay the interest on the notes I
gave to the schools and churches.”

“I gave my son the old homestead,” continued Mr. Drew, “and some other
small property up in Putnam, where we came from, which I hope will make
him independent at least. My daughter married a rich man, and when he
died, leaving considerable property to five children, I was made
executor of the will. For so great a trust as their property I was
obliged to give security, which I did by making over to them this house
where we are, and the North River steamboats, the Drew, Dean Richmond,
St. John and Chauncey Vibbard. This security makes them whole, and I
thank God that breach of trust is not on my conscience. Their mother, my
daughter, is, of course, well provided for, through her children and
deceased husband. My son’s principal business is now in connection with
the management of the boats, by which he is getting on very well.”

After Drew’s great disaster in the Erie “corner,” he became a special
partner in the firm of Kenyon, Cox & Co., and when this house failed,
after the panic of 1873, Uncle Daniel was compelled to make an
assignment. He had been for years on the losing side, having dropped
between two and three millions in the Erie “corner” through the
machinations of Gould and Fisk. Horace F. Clark and Gould had also
cornered him in Northwestern to the tune of $750,000. After the panic he
had made an assignment to Wm. L. Scott, of Erie, Pa., but was not
legally declared a bankrupt until 1876. His liabilities were
$1,074,131.83, and his assets were estimated at $746,499.46.

Like Vanderbilt, Drew kept his accounts in his head, and considered the
whole paraphernalia of book-keeping a confounded fraud.

His failure, which at one time would have induced a panic, did not cause
a ripple on the surface of speculation. After his discharge in the
bankruptcy proceedings, he appeared to pluck up fresh courage, and said,
“The boys think I’m played out, but I’ll give ’em many a turn and twist
yet.” He was interested in Toledo & Wabash, Canada Southern, Quicksilver
Mining Company and Canton (Land) Company stock.

Wm. H. Vanderbilt, who had received his early financial training as a
clerk in Drew’s office, still retained a kindly feeling for his old
employer, and sometimes gave him “pints” as Drew called them, on which
he made a little turn. It was said that Mr. Vanderbilt had intended to
give him another start in life about the time Drew passed suddenly over
to the majority. He died at 10.45 P. M., September 18, 1879, at the
residence of his son, Wm. H. Drew, No. 3 East Forty-second street.

His death came without any prior warning. He had been apparently in his
usual health during the day, and had dined with Mr. Darius Lawrence, of
Lawrence Brothers, brokers in Broad street, at the Grand Union Hotel, at
six o’clock in the evening. After dinner he returned to the house of his
son. About nine o’clock he complained of feeling ill, but refused to
permit anybody to sit up with him, saying he would call Mr. Lawrence,
who slept in an adjacent room, if he should feel worse. About ten
o’clock he went into Mr. Lawrence’s apartments and said he felt much
worse. Dr. Woodman, his family physician, was immediately summoned, but
before his arrival Mr. Drew had expired. The cause of his death was
apoplexy.

Among the numerous stories related of Uncle Daniel’s eccentricities, one
is noteworthy in relation to his habit of getting in a mellow mood when
prayer failed to soothe him, and covering himself up in bed after any
speculative disappointment. He was found in this condition one day at
the Sturtevant House, the year in which he died, by two Wall Street
acquaintances who called upon him, and were conversant with his peculiar
habits. He had all the windows closed, so that the atmosphere in the
room was stifling, and was enveloped in several pairs of double
blankets. His friends called for a bottle of champagne, of which he
refused to partake. When this was drunk they called for another, and
left it with him, believing that when he was left alone he might be
inclined to imbibe without any feeling of embarrassment.

Another story is related characteristic of Uncle Daniel’s methods of
making the best use of a secret, and any confidence that a person might
foolishly repose in him, in a speculative deal. During the war a young
man known as California Parker, who had more money than brains, began to
buy Erie in the vicinity of par, and put it up to 120. He went to Drew
and told him that he would let him in at fifteen per cent. below the
market, if he would only aid him with a little money to carry the price
higher. Mr. Drew blandly appeared to entertain the young millionaire’s
proposition favorably and Parker, on the strength of that, continued the
struggle until he had almost reached the end of his California gold. The
next morning when he met Drew the latter told him that he was unable to
raise the money, and appeared to be grieved at his disappointment. In
the meantime Drew had instructed his brokers to sell Erie “short,”
knowing that Parker was unable to absorb any more of that precious
paper, Erie stock. The market went down, Drew made a “scoop,” and Mr.
Parker retired from Wall Street a ruined, but a wiser man.

In personal appearance Drew was tall, strong and sinewy, and in his
latter days his face was seamed with deep lines, indicating intense
thought and worry. He had restless twinkling eyes, with a steady
cat-like tread in his gait. His general demeanor was bland, good-natured
and insinuating, with affected but well dissembled humility, which was
highly calculated to disarm any resentment, and enable him to move
smoothly in society among all shades and conditions of men. He has often
been mistaken for a country deacon.

So, now, having revived and collated the chief incidents in the
chequered career of this great speculative celebrity, I close this
sketch with the ardent hope that he may have found that peace beyond the
tomb which the ordinary speculator in Wall Street can seldom or never
hope to achieve on this side of “that beautiful shore.”

------------------------------------------------------------------------




                             CHAPTER XVIII.

  PANICS.—THEIR CAUSES.—HOW FAR PREVENTABLE.


NOT ACCIDENTAL FREAKS OF THE MARKET.—WE ARE STILL A NATION OF
    PIONEERS.—THE QUESTION OF PANICS PECULIARLY AMERICAN.—VIOLENT
    OSCILLATIONS IN TRADE OWING TO THE GREAT MASS OF NEW AND IMMATURE
    UNDERTAKINGS.—UNCERTAINTY ABOUT THE INTRINSIC VALUE OF
    PROPERTIES.—SUDDEN SHRINKAGE OF RAILROAD PROPERTIES A FRUITFUL CAUSE
    OF PANICS.—RISKS AND PANICS INSEPARABLE FROM PIONEERING
    ENTERPRISE.—WE ARE BECOMING LESS DEPENDENT ON THE MONEY MARKETS OF
    EUROPE.—IN PANICS MUCH DEPENDS UPON THE PRUDENCE AND SELF-CONTROL OF
    THE MONEY LENDERS.—THE LAW WHICH COMPELS A RESERVE FUND IN THE
    NATIONAL BANKS IS AT CERTAIN CRISES A PROVOCATIVE OF PANICS.—GEORGE
    I. SENEY.—JOHN C. ENO.—FERDINAND WARD.—THE CLEARING HOUSE AS A
    PREVENTIVE OF PANICS.


There are few subjects on which there is more loose theorizing than that
of the origin and remedy of panics. These crises are commonly spoken of
as accidental freaks of the markets, due to antecedent reckless
speculations, controlled in their progress by the acts of men and banks
who have lost their senses, but quite easily prevented, and as easily
cured when they happen.

These are the notions of mere surface observers. They may be in a
measure true, when applied to the markets of some of the older
countries, whose business moves in long-established grooves and embraces
but little of the risk attendant on new enterprises. In France and
Germany, for instance, the hazards of business are almost entirely
confined to the accidents of political events; and such nations are
comparatively exempt from panics due to purely commercial causes. In the
United States, panics arise, principally, from causes from which
European countries are exempt.

Notwithstanding our immense population and the large measure of
well-ordered consolidation that has been effected in our various
interests, we are still a nation of pioneers. In every ten years, we now
add nearly fifteen millions to our population, which means that each
successive decade we are piling up the equivalent of a first-class
European state upon our past marvellous accumulation of empire.
Inseparable from this unparalleled national growth are great ventures
and great commercial and financial risks. Our new population has to
subdue new territory. New lands have to be cleared; new mines have to be
opened; new industries have to be established; new railroads have to be
built; new banks created and new corporations founded. These new
ventures are necessarily in a measure experimental. Some of them fail
utterly; others succeed magnificently. They require large outlays of
capital in advance of obtainable results. These outlays are, in many
cases, met by borrowing; the loans being secured by liens upon the
uncertain undertakings, and therefore lacking the stability of value
that attaches to well developed investments.

We have thus a ceaseless stream of new issues of stocks, mortgages and
commercial paper, and have, therefore, at all times outstanding a large
amount of obligations which, from the uncertainty of their basis, are
liable to wide fluctuations in value. Besides these absolutely new
investments, we have also at all times an equal or larger amount of
obligations issued against enterprises which, although not properly new,
are still in an unconsolidated and experimental stage, and the value of
which is, therefore, subject to wide fluctuations. Issues of this
character naturally appeal to the adventurous instincts of our people
and elicit a vast extent of speculative activity.

It is this peculiarity in the development and trade of the United States
that renders our markets more exposed to panic than those of any other
nation, and which makes the question of panics a peculiarly American
one. In any and every commercial nation, trade is subject to regular
successions of prosperity and depression. This oscillation results from,
or constitutes a natural law.

The action of commerce, like the motion of the sea or the atmosphere,
follows an undulatory line. First comes an ascending wave of activity
and rising prices; next, when prices have risen to a point that checks
demand, comes a period of hesitation and caution; then, care among
lenders and discounters; then comes the descending movement, in which
holders simultaneously endeavor to realize, thereby accelerating a
general fall in prices. Credit then becomes more sensitive and is
contracted; transactions are diminished; losses are incurred through the
depreciation of property, and finally the ordeal becomes so severe to
the debtor class that forcible liquidation has to be adopted, and
insolvent firms and institutions must be wound up. This process is a
periodical experience in every country; and the extent of the
destructiveness of the crisis that attends it depends chiefly on the
steadiness and conservatism of the business methods in each particular
community affected. In addition to this ordinary and, I would even say,
_natural_ liability to commercial crises with a greater or lesser degree
of panic, we, in the United States, have to stand the far more violent
oscillations so inseparable from our great mass of new and immature
undertakings.

In times of crisis, the obligations issued against such enterprises
suffer instantly from the uncertainty about their intrinsic value.
Holders are anxious to get rid of them; banks which have advanced money
on them, call in their advances; and they become virtually unavailable
assets. Every panic that has happened since the beginning of the era of
railroads in this country, has been intensified many-fold by the sudden
shrinkage in the value of this class of assets; and it is precisely here
that the aggravation and the chief danger of an American panic centres.

In view of these facts, what is the use of discussing the possibility of
averting our periodic panics? Risks and panics are inseparable from our
vast pioneering enterprise; and all we can hope is, that they may
diminish in severity in proportion as our older and more consolidated
interests afford an increasing power of resistance to their operation. I
am disposed to think that, in the future, the counteraction from this
source will be much more effective than it has been in the past. The
accumulations of financial resource available for market purposes at our
monetary centres are increasing at a very rapid rate. Evidence of this
is seen in the fact that, while the magnitude of our corporate
undertakings is augmenting every year, we are also every year becoming
less dependent on the money markets of Europe, and our large corporate
loans are now made principally at home. These accumulations afford
elasticity to our financial system and serve as a buffer against the
violence of great financial disturbances.

I do not see how we can in any other way satisfactorily explain how it
is that, while we have had two distinct waves of commercial depression
since the great crisis of 1873, such as have ordinarily been attended
with more or less panic, we have had no disturbance that can be regarded
as a fully developed panic. The only approach to it was the disturbance
brought about by the Grant & Ward failure in May, 1884, which was merely
a restricted and comparatively temporary affair.

But, whilst maintaining that panics cannot be avoided in a country
situated as ours is in its present incomplete development, I cannot
avoid expressing the opinion that conditions are permitted to exist
which needlessly aggravate the perils of these upheavals when they do
occur. In every panic very much depends upon the prudence and
self-control of the money lenders. If they lose their heads and
indiscriminately refuse to lend, or lend only to the few unquestionably
strong borrowers, the worst forms of panic ensue; if they accommodate to
their fullest ability the larger and reasonably safe class of borrowers,
then the latter may be relied upon to protect those whom the banks
reject, and thus the mischief may be kept within legitimate bounds.
Everything depends upon rashness being held in check by an assurance
that deserving debtors will be protected. This is tantamount to saying
that all depends on the calmness and wisdom of the banks. They may
easily mitigate or aggravate the severity of the crisis, according as
they are prudently liberal or blindly selfish. It is, perhaps, safe to
say, that the banks never do all they may; but the banks of this city
must be credited with having shown great sagacity under repeated
derangements of this kind within the last twenty-five years. They have
largely succeeded in combining self-protection with the protection of
their customers; and the antecedents they have established will go far
toward breaking the force of any future panic.

But, unfortunately, the law imposes restraints upon the national banks
which seriously interfere with the wise discretion of those
institutions. As the law now stands, the banks are liable to be wound up
at the order of the Government if they permit their lawful money
reserves to fall below 26 per cent. of their legal deposits. This
establishes a “dead line” which is so dreaded when approached that it
becomes almost a panic line. When that limit is reached, the banks are
compelled to contract their loans; and, in certain conditions, the
contraction of loans means forcible liquidation, without regard to
consequences. Thus the very contrivance designed to protect the banks
becomes a source of most serious danger to their customers and therefore
to the banks themselves; and, in times of monetary pressure, it is the
most direct provocative of panic. Were the banks allowed to use their
reserves under such circumstances, a fund would be provided for
mitigating the force of the crisis, and the danger might be gradually
tided over; but, as it is, the banks can legally do little or nothing to
avert panic; on the contrary, the law compels them to take a course
which precipitates it; and when the crash has come, they have to unite
in common cause to disregard the law and do what they can to repair the
catastrophe that a preposterous enactment has helped to bring about.
This is one of not a few unwise restrictions upon our national banks
which needs to be stricken from the statute book. These periods of the
breaking-down of unsound enterprises and of the weeding out of insolvent
debtors and of liquidation of bad debts can never be wholly averted; nor
is it desirable that they should, for they are essential to the
maintenance of a sound and wholesome condition of business; but it is a
grave reproach to our legislators if, when the day of purgation comes,
the law treats the deserving and the undeserving with equal severity.

                            GEORGE I. SENEY.

The most prominent characters in the short lived panic of 1884, as every
observing person knows, were Ferdinand Ward, James D. Fish and a few
others who acted minor parts in connection with the methods of
financiering which precipitated the crisis in Wall Street.

There are many people who think that Ward—the Young Napoleon of finance,
as he was popularly called—was able to dupe everybody, his accomplices
included, and that he was chiefly responsible for all the trouble. But
this is an exaggerated and unscientific view of the case.

Among the financiers who came to grief in the general embarrassment
caused by the peculiar methods of the two financiers referred to, was
George I. Seney. Seney gave his money away, and it was placed in the
wrong quarters for any tangible return. He was a great patron of the
churches and religious institutions. If he had studied the life of
Daniel Drew, he might have discovered that investments in such
enterprises as these were not particularly profitable. In his financial
difficulties, Seney was left high and dry without friends who would come
to his rescue. The result was, that the two financial institutions, the
Metropolitan Bank and the Brooklyn bank with which he was thoroughly
identified, had to go under as the result of Mr. Seney’s misfortunes.
And an insurance company in Brooklyn, which had loaned about all of its
surplus to Mr. Seney, taking Metropolitan Bank stock as collateral, was
swamped as well.

There are few of the speculative magnates who succumbed to the crash of
1884, whose financial histories are more interesting than that of Mr.
Seney. He is the son of a Methodist minister, and was born at Astoria,
Long Island, about sixty years ago. He has always manifested the deepest
devotion to his paternal church, and in the very height of his
prosperity the church was the first object of his financial care. He was
educated at the University of the City of New York, and shortly after he
graduated, and when about 22 years of age, entered the Metropolitan Bank
as a clerk. He was afterwards teller and then cashier. This was when Mr.
Williams was President and when Mr. Jacques was Vice-President. Mr.
Jacques resigned that position several years ago and made a prolonged
journey to Europe. Mr. Williams died a few years ago, and Mr. Seney
became his successor as President of the bank.

Mr. Seney’s wonderful financial abilities were a comparatively recent
outgrowth of his mental evolution, at an age when very few men exhibit
signs of new developments.

Up to a date shortly prior to the panic, he was generally regarded as
slow and phlegmatic, without manifesting any special parts that
indicated superior brilliancy as a financier. He first distinguished
himself in Wall Street during the speculative furore of 1879, and came
to the front then with sudden and surprising activity. He carved out an
original course for himself in speculation—so original, in fact, as to
stamp the enterprises with which he became identified with his name. The
Seney properties became almost as familiar to the financial world as the
Goulds, the Vanderbilts and the Villards.

Mr. Seney’s chief securities (so-called through the courtesy of
speculative parlance) were Ohio Central, Rochester and Pittsburgh, East
Tennessee, Virginia & Georgia, and the celebrated “Nickel Plate” Road.
These were known as the Seney Syndicate properties, and the system of
handling them was entirely novel in the history of Wall Street, causing
the financial veterans of Wall Street to stand and stare at the boldness
and rapidity of the Seney movements.

Instead of starting with moderate issues in amount, as has usually been
the custom of most men handling railroad and telegraph properties, and
doing the watering process by degrees, Mr. Seney boldly began the
watering at the very inception of the enterprise, pouring it in lavishly
and without stint. There was nothing mean or niggardly about his method
of free dilution, the sight of which threw some of the old operators
into a fit of consternation. The stocks were strongly puffed, and as
they were so thoroughly diluted their owners could afford to let them
get a start at a very low figure. The future prospects of the properties
were set forth in the most glowing colors, the public took the bait, and
the stocks became at once conspicuous among the leading active fancies
of the market.

The cause of the vigorous life and amazing activity so suddenly imparted
to the stocks of the Seney Syndicate can only be revealed by a careful
perusal of Mr. Seney’s checkbook, which, if still in existence, will
show commissions paid for the execution of the orders to buy and the
orders executed to sell, both by the same pen and in the same
handwriting.

These transactions, in the language of the “Street,” are called washed
sales. In this way Mr. Seney was understood to have made a very large
amount of money, and from being almost one of the poorest men in
Brooklyn, he soon became marked as the richest. While he continued to
thrive it was a singular fact that the majority of his financial friends
seemed to fall into a decline.

When the affairs of the Seney enterprise were wound up, it was
discovered that these people had little left except the certificates
which bore the high-sounding term of the Seney Syndicate Property.

One peculiarity about Mr. Seney in his social relations was, that while
he appeared almost bereft of sympathy for used-up friends whom his
schemes had ruined, he drew largely on his immense gains for
philanthropic purposes, and in the aggregate must have distributed over
$2,000,000 in a very magnanimous manner.

It would seem that Mr. Seney at one time aspired to be a great
philanthropist, and had it not been for the unfortunate exposé which was
the result of the panic, he might one day have stood in as high and
lordly a position as the renowned Peabody, with even a greater
reputation as a financier. It is sad to picture the contrast presented
by the _denouement_ with what might have been, in a career which began
with so much promise, dating from the time that Mr. Seney was installed
as President of the Metropolitan Bank, whose standing and credit were
the highest in the State.

Mr. Seney’s speculative career affords an example of the way in which
this kind of speculation reflects on the stability of our best banking
institutions. The lesson is one that should be carefully taken to heart
by the financiers of this country.

It is due, however, to Mr. Seney to state that he alone was not
responsible for the misfortunes of the Metropolitan Bank, although he
was the ruling spirit; for it could hardly be possible that the
directors of that institution could have been ignorant of its affairs in
connection with the Seney speculations. The Metropolitan Bank cannot be
compared with the Marine Bank, which met a similar misfortune, for it
was no family affair, and Mr. Seney had none of his relatives connected
with it, as Mr. Fish had with the Marine Bank.

It appears that it was chiefly owing to the fact that Mr. Seney had so
little personal interest in the Metropolitan Bank that he was so anxious
to gut the concern, knowing that the loss would fall upon others.

The most important point for speculators and investors, however,
connected with the enterprises of these men is, that the terrible
shrinkage of Stock Exchange values at the time, amounting to over
$1,000,000,000, was in a large measure brought about by a foregone
conclusion on the part of the sagacious bear cliques that disaster would
sooner or later overtake the institutions over which Mr. Seney and Mr.
Fish presided.

This should afford a wholesome lesson, through the medium of practical
experience, to speculators and investors for all future time. For this
very reason the facts are worthy of being put on permanent record as a
reminder and a guide, particularly to Wall Street men, who are too often
prone to forget the past and thus leave themselves liable to be caught
in a similar net again.

The transactions of the four prominent speculators who played the most
conspicuous part in the events which resulted in the panic of May, 1884,
should be preserved for reference, as a guide when similar cases arise,
for in spite of the deep disgrace, shame and misery that have followed
in the wake of their enterprises, these men will have hosts of imitators
for many years to come. Ward, Fish, Seney and Eno, with probably the one
exception, Fish, are, by many, considered smart men, who simply had the
misfortune to become involved, but who had a fair chance of coming out
of all their troubles, great millionaires and publicly honored for their
ability and success.

It must be admitted that there are some examples in the financial world
whose careers will fully support this theory and belief but they are the
exceptions which only prove the rule in speculation, as in other lines
of business, that “honesty is the best policy.” These men, who have been
apparently so successful through dishonest methods, are never free from
dread of being tripped up at any period of their inflated prosperity.
They are always subject to be called upon by the application of the
stern methods of honest financiering to give an account of their
stewardship, and to have the transactions of a lifetime eventually
gauged by the standard of public honesty. It is the winding up that
tells the tale, and exposes the duplicity of the ablest financiers, who
vainly imagine that dishonest methods will always prevail.

                              JOHN C. ENO.

Of the four famous “financiers” mentioned who were most prominent in the
Summer panic of 1884, the speculative history of John C. Eno was in some
respects the most remarkable and most interesting.

Eno was a young man, not more than twenty-six years of age, and a
representative of that class of ardent and youthful speculators who
plunge into the market with all the recklessness incident to young and
sanguine imaginations, with many roseate schemes of wealth and
greatness, for which inexperienced youth is proverbial. Eno was a victim
of that rashness, impulsiveness and desire for extravagance, by which
the possessors of these attributes frequently get themselves and many of
their associates embroiled in numerous difficulties and embarrassments.

Another point of interest in the curious career of Eno was his position
as President of the Second National Bank of New York, up to the time of
the panic. Seldom does it fall to the lot of a youth of his tender years
to have conferred upon him a position of such responsibility and
dignity. The manner in which he made use of this position of trust, for
appropriating money which did not belong to him, was notable for its
peculiar ingenuity.

Most of the money lent by the bank was upon collateral securities,
which, for convenience, as well as for safety, were kept, not at the
bank, which was situated under the Fifth Avenue Hotel, but in a vault
down town.

The capital stock of the bank was $100,000, and it had $4,000,000 of
deposits, all of which was appropriated to speculative use by this smart
young man, who decamped to Canada in company with a Roman Catholic
priest.

Eno happened to have a rich father, who had made his money by thrift and
economy during a long and prosperous life. To his credit, it must be
said, that he came promptly to the rescue of this wayward and erring
son, and paid the bank, of which he was director, three and one-half
millions of dollars, on condition that the other half million should be
contributed by the other directors, all of whom were very rich men. The
directors willingly accepted the proposition, and thus the entire
deficiency was made good by this generous arrangement, so that none of
the depositors suffered the loss of a dollar.

The methods which Mr. John C. Eno, the President, resorted to for the
purpose of capturing the institution root and branch, were ingenious and
unique in their character, inasmuch as they had a tendency to inspire
the fullest confidence in his vigilance and honesty regarding the
affairs of the bank, instead of exciting any suspicion.

He discouraged the custom of keeping the securities of the bank in its
own vaults, on the pretense that they were not sufficiently secure, and
suggested that a safe should be rented in one of the down town safe
deposit companies. This was done at his request. He argued, further,
that the funds on hand being mostly family deposits, the depositors were
not of a class that often required to be accommodated with discounts,
and that the money was not taken by the bank to be locked up and kept on
hand so as to have the name of having it, but to be used to the best
possible advantage consistent with safety, to make profitable returns
through interest. Consequently, he was allowed to use the money of the
bank freely to make loans to Wall Street brokers on interest, with
approved collaterals, and he represented to the directors that he was
carrying out this course.

As the bank was located so far up town, (at Twenty-third street,) the
distance from Wall Street made it extra hazardous to send securities
back and forth, as adventurous thieves might seize the messenger on the
way. This has frequently happened in this city. It was, therefore,
desirable to have the safe deposit vault in close proximity to Wall
Street. Of the combination to the safe in this vault Mr. John C. Eno was
the sole possessor. Having things fixed in this manner it was
indispensable that the President himself should go down town every day,
so as to accommodate the brokers in the loaning of money. The directors
were by this plan convinced that the risks, through the careful methods
adopted by the President, were no greater than if the bank was located
in Wall Street. These conservative methods, so skilfully planned and
plausibly explained, increased the confidence of the directors in the
able and careful management of Mr. Eno, and nobody was so much surprised
as they, when the wool was raised from their eyes and they discovered
that these various and ostensible “safeguards” were ingeniously devised
for the sole purpose of screening their skilful inventor in the
accomplishment of his huge defalcations.

Instead of loaning the money to Wall Street brokers, as he represented
to the directors, he placed it as margin with his own brokers in various
speculative ventures, and in that manner he made away with the entire
$4,000,000 of the bank’s deposits without exciting the least suspicion
in the confiding breasts of the directors.

Such another instance of a clean sweep of the deposits of a bank by any
of its officials, is probably not on record in the whole history of this
kind of manipulation.

When the President represented to the Cashier, every evening, that he
had lent specified sums on certain securities, his word was taken, and
his checks for the amounts duly honored, without exciting a feeling of
suspicion. Thus, by degrees the books of the bank showed $4,000,000 of
call loans upon unexceptionable collaterals, when in fact the money had
all gone to the President’s private account.

Eno speculated with the greater portion of the money in stocks that were
continually declining in price, and at length the time arrived when he
was obliged to make a clean breast of the terrible condition of his
affairs to his father. As I have stated, the old gentleman, Mr. Amos R.
Eno, nobly came to the relief of his prodigal son, and saved the bank
from suspension.

As Eno senior is still worth about $25,000,000, he will never suffer the
pangs of poverty through this great loss; but it will take a long time
to enable him to survive the disgrace which the flagrant acts of his son
have brought upon an honest and highly respected name.


              THE CLEARING-HOUSE AS A PREVENTER OF PANICS.

In this panic the boldest and most remarkable instance of self-sacrifice
on record was manifested by the Clearing-House banks. The panic of 1884,
in its incipient stage, was different to any that had preceded it—at
least any of the financial convulsions within my recollection—owing to
the influence exercised upon it by the prompt and liberal policy of the
banks. In every respect their action was notable, showing that those at
the head of their management had largely profited by the lessons of
former panics.

It was chiefly due to the masterly management of the banks, together
with the magnanimous conduct of Mr. Amos R. Eno and his associate
directors of the Second National Bank, that the panic was short-lived
and so narrowly circumscribed. Had it not been for the determinate and
instantaneous joint action of these parties there would have been a very
serious crash, which would have been far-reaching in its results.

The results of the timely action taken on the part of the managers of
these institutions in this crisis, proves that panics can be arrested by
proper methods, and that quick and determined action is indispensable in
the incipient stage of the emergency. If bank presidents could only be
relied upon by the business community to act promptly and in unison with
the business men, as they did in this instance, threatened panics need
have but little terror for the people, who now live constantly in dread
that these outbursts of business disaster may be sprung upon them at any
time in any decade.

In the past history of panics bank managers, as a rule, have acted
without system, without judgment and almost entirely without any well
defined plan of action. There has been an astonishing lack of vigor in
their methods and purposes, which were weak and vacillating in their
character—frequently more like the acts of children than those of
business men.

If the panic of 1873 had received the same vigorous treatment in its
origin as that of 1884, it could just as easily have been checked as the
latter, and the entire country would have been saved a large portion of
the depressing effects of that serious collapse and its attendant
disasters, which caused a state of general prostration for five or six
years succeeding the event. These years, from a business standpoint,
appear as a blank in the history of the country’s progress. Indeed, they
constitute a black mark.

In 1884 the bears indulged in much adverse criticism in regard to the
action of the Clearing-House in taking Mr. Seney’s pictures as
collateral. At the time, this method of financiering was without
precedent; but the result has fully justified the policy of the
Clearing-House Association and its management. Such an exceptionally
fine collection of paintings in a country like this, now filled with
connoisseurs who have sufficient wealth to gratify their tastes,
stimulates the demand for these luxurious articles of value and
transforms them into the best collateral to be found in the market. When
the Seney pictures were offered for sale at auction they attracted
greater competition in the purchase, at good prices, than could have
been obtained for almost any class of railroad securities connected with
Wall Street for months afterwards. While Mr. Seney seems to have been as
much of a virtuoso as the late Mrs. Morgan, he did not permit his love
of the beautiful to rise to such a pitch of exaltation as would cause
him to pay the extravagant prices which almost ruined that eccentric
woman. He never forgot that the picture had a “market” value, and never
permitted his enthusiasm for the fine arts to make him a victim of sharp
and unconscionable dealers. In fact he appeared to have been more
wide-awake in picture buying than banking, and demonstrated that the
former, rather than the latter, was his forte. If the bank presidents
had not acted in the praiseworthy manner referred to, the financial
revulsion of that panic would have been very serious. Several millions
of deposits in the Metropolitan and Second National were promptly drawn
out, and forthwith entered into circulation. This saved the community
from the evil influence of a large number of panic makers in the persons
of the depositors of these banks. Instead, therefore, of helping to stir
up the excitement—as they would have done by pursuing the selfish policy
formerly resorted to in similar circumstances—every person with funds in
these two institutions, assisted very effectively to allay suspicion and
create confidence, instead of distrust.

It was the disturbing element of panic makers, who generally constitute
one of the most potent factors of disruption to be dealt with in seasons
of business trouble, that caused the greater part of the trouble at the
time of Jay Cooke’s failure. The holders of the Northern Pacific bonds
then, finding that the security was no longer equal to that of
Government bonds (as they had been taught to believe), but was
apparently worthless, became panic-stricken at their losses, and were
all transformed into panic-makers, infusing the spirit of distrust into
every person with whom they came into contact, until, like a fatal
virus, it inoculated the whole country, spreading business disaster far
and wide.


[Illustration:

  _G. I. Seney_
]


------------------------------------------------------------------------




                              CHAPTER XIX.

               OLD TIME PANICS.


THE PANIC OF 1837.—HOW IT WAS BROUGHT ABOUT.—THE STATE BANKS.—HOW THEY
    EXPANDED THEIR LOANS UNDER GOVERNMENT PATRONAGE.—SPECULATION WAS
    STIMULATED AND VALUES BECAME INFLATED.—PRESIDENT JACKSON’S “SPECIE
    CIRCULAR” PRECIPITATES THE PANIC.—BANK CONTRACTIONS AND CONSEQUENT
    FAILURES.—MIXING UP BUSINESS AND POLITICS.—A GENERAL COLLAPSE, WITH
    INTENSE SUFFERING.


The first panic of any great importance was that of 1837. This panic had
its origin in a misunderstanding between the United States Bank, with
headquarters located at Philadelphia, and President Jackson, whose
election the officials of the bank had opposed.

The bank had been chartered in 1816, and went into operation in 1817.
Its charter had twenty years to run. The bank had been kept in operation
with varying success until 1830, when it was considered to be on a very
stable footing, so that the Finance Committee of the United States
Senate were enabled to testify to its efficiency as follows: “We are
satisfied that the country is in the enjoyment of a uniform national
currency, not only sound and uniform in itself, but perfectly adapted to
the purposes of the Government and the community, and more sound and
uniform than that possessed by any other nation.”

This was the second United States Bank; the first had been chartered in
1791.

The bank applied to Congress, in 1832, for a renewal of its charter,
which would expire in 1836. A bill was passed by Congress to re-charter
the bank. The bill was vetoed by the President for the reason above
stated. In the following year the Treasurer announced, by order of the
President, that the public funds, amounting to $10,000,000, would be
drawn from the custody of the bank because it was an unsafe depository.

The transfer of the Government funds to the State banks created great
agitation in political and financial circles. The State banks, under
this favorable turn of Government patronage, quickly assumed a thriving
condition and began to expand their loans and circulation. This
stimulated speculation in all parts of the country, but especially land
speculation. Large purchases of land were made from the Government, and
payment was made in notes of State banks.

With the rapid sales of its lands the Government was soon able to pay
off the public debt, and had still a surplus of $50,000,000 in the
Treasury. This apparent prosperity continued for the next year or two,
money was plenty and speculation was greatly stimulated and values
became inflated.

The crisis came in 1837, and was hastened by the “Specie Circular,”
which was the last official act of President Jackson, and which pricked
the bubble of inflation. This circular, which was issued from the
Treasury in July, 1836, required all collectors of the public revenue to
receive nothing but gold and silver in payment. The purpose of the
circular was to check the speculation in public lands, but it caused too
sudden a contraction in values, and created widespread disturbance in
business circles generally.

The public protest against the “Specie Circular” was so strong and
universal, that a bill went through both houses of Congress partially
repealing it. “Old Hickory” did not yield to Congress, however, and
though he did not veto the bill, he delayed signing it until after
Congress adjourned, thus preventing it from becoming a law.

The State banks sought to tide over the troubles arising from the
Jacksonian method of financiering by loans of public money to certain
financial concerns and individuals, but this plan only made matters
worse. There was a sudden expansion of paper money, which encouraged a
wild spirit of speculation and excessive importations, and imparted an
unnatural stimulus to business and commercial affairs. This state of
over-trading and reckless speculation was suddenly checked by bank
contractions, and in the spring of 1837 there were failures amounting to
$100,000,000 in New York city alone.

The shock was communicated to the entire country, and a state of general
paralysis in business circles ensued.

In the meantime the Bank of the United States continued in operation,
and did not even suspend in 1836, when its charter expired, but obtained
another charter from the State of Pennsylvania, which was entitled “An
Act to repeal the State taxes on real and personal property, and to
continue and extend the improvement of the State by railroads and
canals, and to charter a State bank to be called a United States bank.”

This United States bank did not expire until 1839, though it suspended
specie payment with the State banks in 1837, when by this method they
escaped a general collapse, and dragged through an agonising existence
for two years longer. The circulating notes and deposits of the Bank of
the United States were paid in full, but the $28,000,000 of capital were
a total loss to the stockholders, who never obtained a dividend. Such
were the good old times of financiering when General Jackson and his
successor, Martin Van Buren, sat in the Executive chair.

The entire capital stock of the bank was $35,000,000, of which
$7,000,000 were to be subscribed by the Government.

The real cause at the bottom of the failure of this bank was its error
of mixing up its legitimate business of banking with politics and
speculation, showing that keeping those matters as distinct as possible
is one of the great secrets of success in each of them.

The panic of 1837 was further aggravated by the action of the Bank of
England which, in one day, threw out all the paper connected with the
United States. The banks on this side refused to discount paper, and as
a retaliatory measure in self-defense the business men and speculators
withdrew their deposits from the banks. This had a tendency to cripple
business still more, and cause utter prostration. In their selfish
frenzy bankers and merchants completed the ruin of each other, hastening
the catastrophe from their inability to take a broad, cool and generous
view of the situation.

There was a general suspension of the New York banks on May 10, 1837,
and the banks throughout the country followed in their wake within a
week afterwards, producing a financial convulsion unparalleled in the
history of the Republic. The country was brought to the verge of
bankruptcy from the effects of which a long time was required for
recovery.

After two years’ struggle to regain the credit and stability lost
through false methods of financiering, the banks suffered a relapse, and
underwent a severe process of weeding out the weakest, nearly one-third
of which happened to be of this description. Out of 850 banks, 343
closed their doors permanently.

The Sub-Treasury at New York was established the following year, 1840,
by an act of Congress which provided that the officers of the Government
should keep the public funds in their own custody, that coin alone
should be received in payment to the United States, and bank notes were
to be no longer received and paid out at the Treasury.

While this short chapter deals with matters which go back beyond my
personal recollections of twenty-eight years in Wall Street, still as
the panic of 1837 was the first of the great upheavals of its kind, that
had a marked effect on Wall Street affairs, it properly falls within the
scope of this book to chronicle the chief incidents of that great
business convulsion.

For this reason, therefore, I find room for it, in some measure
commensurate with its importance, and the space which can be afforded to
it, as a matter of financial history, the facts of which were still
fresh in the recollection of several speculators, bankers and business
men, with whom I had the honor of being acquainted shortly after my
advent in Wall Street immediately succeeding the panic of 1857.

Of those who gave me lively descriptions of their vivid recollections of
that panic, but few now survive.

I think, therefore, it is well for me to do my part in helping to
preserve the leading features of this important episode in the early
history of Wall Street, as there will soon be none of those, who took an
active part in the exciting events of that period, left to tell the
tale.


------------------------------------------------------------------------




                              CHAPTER XX.

        THE TRUE STORY OF BLACK FRIDAY TOLD FOR THE FIRST TIME.


THE GREAT BLACK FRIDAY SCHEME ORIGINATES IN PATRIOTIC MOTIVES.—ADVISING
    BOUTWELL AND GRANT TO SELL GOLD.—THE PART JIM FISK PLAYED IN THE
    SPECULATIVE DRAMA.-“GONE WHERE THE WOODBINE TWINETH.”—A GENERAL
    STATE OF CHAOS IN WALL STREET.—HOW THE ISRAELITE FAINTED.-“WHAT ISH
    THE PRISH NOW?”—GOULD THE HEAD CENTRE OF THE PLOT TO “CORNER”
    GOLD.—HOW HE MANAGED TO DRAW AMPLE MEANS FROM ERIE.—GOULD AND FISK
    ATTEMPT TO MANIPULATE PRESIDENT GRANT AND COMPROMISE HIM AND HIS
    FAMILY IN THE PLOT.—SCENES AND INCIDENTS OF THE GREAT SPECULATIVE
    DRAMA.


In the year 1869 this country was blessed with abundant crops, far in
excess of our needs, and it was apparent that great good would result
from any method that could be devised to stimulate exports of a part, at
least, of the surplus.

Letters poured into Washington by the thousand from leading bankers,
merchants and business men, urging that the Treasury Department abstain
from selling gold, as had been the practice for some time, so that the
premium might, as it otherwise would not, advance to a figure that would
send our products out of the country, as the cheapest exportable
material in place of coin, which, at its then artificially depressed
price, was the cheapest of our products, and at the same time the only
one undesirable to part with. So the Government decided to suspend gold
sales indefinitely.

Jay Gould and others, being satisfied that this was to be the policy of
the Administration, commenced at once buying large amounts of gold,
actuated, doubtless, by the purest of patriotic motives, namely, to
stimulate cotton and cereal exports. They succeeded in accumulating a
considerable amount of gold at prices ranging from 135 to 140, covering
a period of three months’ steady buying.

This was the honest foundation on which the great Black Friday
speculative deal was erected.

The eruption on Black Friday was really caused by the erratic conduct of
James Fisk, Jr., who actively joined the movement on Thursday, the day
before, and became wild with enthusiasm on the subject of high gold. He
began on Friday, early in the morning, to buy large blocks through his
own brokers, William Belden and Albert Speyer, running the price up very
rapidly.

The original syndicate consisted of Jay Gould, Arthur Kimber,
representing Stern Brothers, of London, and W. S. Woodward, of Rock
Island corner notoriety. The two latter, however, sold out their
interest to Gould, who directed the deal to the end, with the assistance
of several able and wicked partners. Their office was located in Broad
street, on the present site of the Drexel Building.

When the excitement arising from the above causes was at its height, I
sent a telegram to Secretary Boutwell, and one to President Grant,
representing the exact condition of affairs in Wall Street, and urging
the sale of gold without delay. I also prevailed upon General
Butterfield, the New York Sub Treasurer, and Moses H. Grinnell, the
Collector of the Port, to send similar telegrams, which they did, and
timely action was taken at once by an order coming to sell $5,000,000.
The moral effect of this Government action was to strike terror to the
holders of gold, and a general rush was made to sell out, thereby
driving down the premium from 160, in less than two hours, to 132. The
down grade produced an excitement quite equal to the early furore in the
up movement. Albert Speyer had from Fisk a verbal _carte blanche_ order
to buy, in million lots, all the gold he could get at 160; while he was
thus buying millions upon millions at this figure, on the opposite side,
and in other sections of the room, sales were freely made in moderate
amounts at 140, 145, 147 and 150, almost simultaneously; and even when
135 was reached, which was soon thereafter, Speyer still kept on bidding
160 for a million at a time, making one of the wildest and most
ludicrous spectacles ever witnessed among men not idiots. Fisk
afterwards repudiated the contracts made on his account by Speyer &
Belden, simply denying having given the orders, and as they were not in
writing, they could not well be proven, hence both brokers failed,
throwing immense losses upon an innumerable number of others. Quite a
noted firm sold Speyer some of his million lots, which they bought back
at 140, being satisfied with the profit of 20 per cent.; when they had
finished buying, the price instantly broke to 132, and the announcement
of Speyer’s failure, which was made before the close of the day, caused
them also to fail, as well as half the members of the Gold Room. Owing
to the serious complications prevailing and the disaster being so
widespread, it was found impossible to continue the clearances through
the Gold Bank, and the Governing Committee of the Gold Room were at once
convened, and passed a resolution to suspend all dealings in gold for
one week, in order to enable the members to adjust their difficulties
and differences between themselves privately. The Gold Bank also
suspended business in the meantime. While Albert Speyer was vigorously
buying and continuing to bid 160 for one million after another, the
clique were as actively engaged in selling all the market would take at
ten points less, and also busy making private settlements with the
shorts.

As the transactions were purely phantom in their nature, the great
parties in the speculative contest did not really lose much. Contrary to
popular opinion about such transactions, they did, virtually, incur
heavy losses, but in one way or another they managed to evade them.
Gould’s losses were estimated at over four millions. Fisk’s were equally
large, but he repudiated all of them. Others were heavily saddled,
however, with the burden which he should have borne.

Importing merchants were among the greatest sufferers, and a large
number of them were forced to cover at high figures.

The suspension of the Gold Board caused many important failures. Private
settlements were made during a period of sixty days following, in many
instances on the basis of a compromise.

When Fisk heard that Secretary Boutwell had ordered gold sold, he
exclaimed that it would knock spots out of phantom gold, and send him
and others with their long stuff “where the woodbine twineth.” The full
effect of the disaster became more fully realized when the Gold Board
and Gold Bank suspended and the numerous large failures were announced;
then it almost seemed that a general state of chaos reigned, and how to
unravel the complications was the problem to be solved. No one that had
any connection with gold dealings during the eventful day could
positively tell how they actually stood, or how to estimate their losses
or gains; such was the uncertainty as to future results, and the doubt
as to who was, and who was not, going to pay the differences due. The
Board Room was crowded almost to suffocation, and the scene just prior
to its close partook of the appearance of Bedlam let loose; in fact, it
had not been much different during the entire day. Late in the
afternoon, a formidable body of enraged sufferers assembled at the doors
of Smith, Gould & Martin’s office, and many and boisterous were the
threats that were indulged in against the members of the firm, in
consequence of which a police guard was detailed for their protection.

The gold furore brought many Israelites to Wall Street, who since, by
their numbers and natural shrewdness, have become quite formidable in
our midst.

One of them, being very long of the precious metal, on its break from
160 to 140, fainted; water was soon obtained to bathe his feverish brow,
and rubbing was also adopted. When, finally, he had sufficiently
recovered to raise his head and open his eyes, looking all around he
said: “What ish the prish now?” Upon finding it still lower, he closed
his eyes again, and fell into another swoon. He was finally carried from
the Gold Room a sick and ruined, but a wiser Hebrew, and is now in the
“ole cloe” business on the East side.

This is the history in brief, but the scenes and incidents of that day
would furnish material for an interesting volume.

Although I am not much given to the sensational, I have collected a few
of the leading events in detail, which I think are worth putting in
permanent form, if I may presume that this book itself may happily
partake of that character.

The inside history of the conspiracy to put up the price of gold is also
full of interesting material, and shows how deeply laid the scheme was
to take advantage of the circumstances and of the feeling which existed
in favor of stimulating our exports at the time. I shall, therefore,
give an epitome of the salient points behind the scenes of the great
speculative plot, and the bold attempt made to involve President Grant
and his family in the conspiracy.

As I have intimated, Jim Fisk, Jr., or Jim Jubilee Junior, as he was
then popularly called, was eventually put forth as the active member of
the manipulating coterie. The clique made very good use of him, also, at
intervals during the period they were concerting their plans.

Fisk had originally been a peddler in New England, as his father had
been. He appeared in Wall Street a few years previous to the great gold
conspiracy as one of the confidential men of Daniel Drew. Having shown
that he was too sharp for some of the people in the broker’s office
where Mr. Drew made his headquarters, he received a polite hint that his
presence there was undesirable. Mr. Fisk then opened an office of his
own, and united his speculative fortunes with those of Mr. William
Belden. The name of the firm was Fisk & Belden. It was of but short
duration. It seems that they had difficulty in finding bankers to
accommodate them to the extent required, and they closed up the
business. But though Fisk failed of success in this instance as a
broker, his resources were not by any means exhausted. He made himself
generally useful to Mr. Drew, who still adhered to him.

As the result of this friendship and his own smartness, in a short time
afterwards Mr. Fisk was elected to the directory of the Erie Railroad
Company, and Mr. Drew, who had forwarded his interest in that direction,
was left out. This is an instance of the way Fisk made the best use of
his friends.

As the result of Fisk’s election to the Erie Board, forty thousand
shares of new stock were issued. Bold attempts were made to gobble up
other railroads through the same instrumentality. Fuller information on
these matters is given in my chapters on Drew, Gould, and the struggle
with Vanderbilt.

Fisk began to be considered a universal genius at that time, and had
acquired the sobriquet of Prince of Erie. Though he had no money to
operate with when he made his debut in Wall Street, soon after this
large issue of Erie stock, he began to show signs of wealth very
rapidly. He had the reputation of being the fortunate owner of several
railroads and steamboats, an opera house, at least one bench of judges,
an unlimited number of lawyers and a bevy of ballet girls.

The Head Centre of this gold conspiracy needs no introduction here, as I
have attempted to do him ample justice in another chapter. He was also
the power behind the throne in Erie as well as in the Gold clique. He
pulled the wires while Fisk was the imposing factotum who was exhibited
to an admiring public. He managed the courts, the judges and the
lawyers, while Fisk got the reputation of doing this fine work, but was
simply the mechanical executive. He had made himself solid with the
Legislature also, and had acquired a hold on Erie that enabled him to
use that property just as he pleased for his own personal benefit,
ambition and purposes.

Erie was a mighty power at that time, with a wonderful leverage for
raising money. When cash was needed to purchase another railroad, a
legislature or a court, all that was necessary was to sell a few hundred
thousand of Convertible Bonds and turn them into Erie shares. Mr. Gould
was thus fortified with ample means of raising money on call at the time
he played the heavy role in the events which culminated in the disaster
of Black Friday.

Though the circumstances at that time were all in favor of success in
such a plot, it required a mind with great grasp and wonderful powers of
generalization to take advantage of all the bearings of the situation,
and to utilize everything toward the great end in view. Gould did his
work as chief of the conspiracy with rare tact and marvellous sagacity.

A resume of the conspicuous points in the situation and the plot will
make this clear.

The supply of gold in the New York market then did not exceed 25
millions. The Government held less than 100 millions, and about
one-fourth of this was in the form of special deposits represented by
gold certificates, part of which were deposited in the banks and the
remainder circulating throughout the country. Gold was then being sold
by the Treasury at the rate of a million a month, in accordance with a
plan that had been adopted as the best financial policy, both for the
administration and the prosperity of the country. This had always a
tendency to keep the price down, but on account of the circumstances
briefly related in the beginning of this chapter, this policy of selling
gold, owing to our commercial relations, was no longer considered for
the best interests of the country, and Mr. Boutwell, with his coadjutors
in the Treasury, were bound to give ear to the opinions of the bankers
and business men in the interest of our export trade.

Although the policy of stopping the sale of gold had been agreed upon in
deference to the views of the best financiers of the country, yet Mr.
Gould and his fellow strategists thought it was best to make assurance
doubly sure on this point, in order that nothing might stand in the way
of the great speculative intrigue, to get a “corner” in gold. President
Grant was conservative on the subject. The conspirators, therefore,
conceived the design of arranging things so that Secretary Boutwell
could not depart from this policy, no matter what emergency might arise.

This bold and wicked strategy could only be successful by first getting
President Grant convinced that the theory of stopping the gold sales was
the only commercial salvation for the country in the then condition of
business stagnation and the possible panic threatened. The theory was
then to impress him with the necessity of giving Secretary Boutwell an
absolute order not to sell gold, and afterwards to fix things so that it
would be impossible for the President to revoke that order until the
brilliant speculative purposes of the clique in cornering gold should be
accomplished.

The scheme was but little short of treason, regarded from a patriotic
point of view, and it is very questionable if the perpetrators would
have stopped short of this dastardly act, had they not been convinced
that their purpose was fully compassed by a method less villainous and
shocking. It was considered indispensable by the conspirators, for the
consummation of their plans, that Grant should be got out of the way by
some means or other. Fortunately for him, and for the honor of the
nation, the plan succeeded without the necessity of offering him any
violence.

Before explaining how this was done it is necessary to describe briefly
a few of the preliminary events which formed a portion of the plot.

It was arranged that General Grant should accompany a party, one
beautiful evening in the middle of June, who were going to attend the
great Peace Jubilee of Patrick Sarsfield Gilmore in Boston. Jim Fisk did
the executive work in the arrangement. There was a fine champagne supper
on board the Boston boat, and several gentlemen were present who were
thoroughly conversant with financial questions, and could talk glibly on
the state of the country. The subject of exports and the policy of
stopping the sale of gold were thoroughly discussed. It was a feast of
reason, and those who have imagined that it was all flow of soul, on
that festive occasion, do very scant justice to the intelligence that
was at the bottom of the deep design of the nocturnal excursion, planned
by Gould, Fisk & Co. General Grant was an eager listener to all that was
said on the most interesting subject of that day, but his mind, it would
seem, was not then thoroughly made up that the best policy for the
prosperity of the country was to stop the sale of gold. He was undecided
on that point, and it required well directed reasons to convince him.
Mr. Gould observed this and foresaw what was necessary to be done. The
drift of the conversation, when this point was brought clearly out, was
very succinctly described by Mr. Gould in his testimony before the
Garfield Investigating Committee. He said: “The President was a
listener. The other gentlemen were discussing. Some were in favor of
Boutwell’s selling gold, and some were opposed to it. After they all
interchanged their views, some one asked the President what his views
were. He remarked that he thought there was a certain amount of
fictitiousness about the prosperity of the country and the bubble might
as well be tapped in one way as the other. That was the substance of his
remark. He asked me what I thought about it. I remarked that I thought
if that policy was carried out it would produce great distress and
almost lead to civil war; it would produce strikes among the workmen,
and the workshops, to a great extent, would have to be closed; the
manufactories would have to stop. I took the ground that the Government
ought to let gold alone, and let it find its commercial level; that, in
fact, it ought to facilitate an upward movement of gold in the fall. The
fall and winter is the only time that we have any interest in. That was
all that occurred at that time.”

It may be necessary to observe that I am merely quoting Gould from the
report, and am not by any means responsible for his confusion of ideas
and grammar.

This is sufficient to show how ably Mr. Gould played his part in
attempting to get the President into the proper frame of mind to enable
him to endorse a policy so vital to the interests of the country and to
the success of the gold clique.

“I took the ground,” says Gould, “that the Government ought to let gold
alone and let it find its commercial level.”

This reference to “its commercial level” is rich, coming from the
head-centre of the plotters who wanted to put the article up to 200.
Then, in another afterthought, he says: “It (the Government) ought to
facilitate an upward movement of gold in the fall.”

How artfully insinuating was this suggestion in the interest of our
foreign commerce! It showed clearly the power the man possesses of
rising to the patriotic height of the occasion. This is a characteristic
of Mr. Gould that few people know how to appreciate at its true worth.
It has stood out conspicuously in his character in many other
exigencies. It reminds one of the unkind but vigorous remark of the
famous old English critic, Dr. Samuel Johnson: “Patriotism, Sir,” said
the old cynic, “is the last refuge of a scoundrel.”

About the time the above events were transpiring, the Assistant
Secretary of the Treasury, Mr. H. H. Van Dyck, resigned his office in
this city. Mr. Gould’s chief ambition at that time was to name his
successor, in order that he might be able to control the Treasury when
the time to get a “corner” in gold should be ripe. Mr. Abel R. Corbin
came in quite handy at this juncture to help to further the designs of
Mr. Gould. He was a man of fair education and considerable experience
both in business and politics. He had been a lobbyist in Washington for
some years. He was well informed on financial matters, a pretty good
writer, and could “talk like a book.” His wife was a sister of Mrs.
Grant, and he had good opportunities for reaching the Presidential ear,
which he employed to the best advantage.

A gentleman named Robert B. Catherwood, who was married to a
step-daughter of Mr. Corbin, was approached by Gould and Corbin on the
subject of the assistant-treasuryship. They were anxious that Mr.
Catherwood should take the office, and told him he could make a great
deal of money in a perfectly legitimate manner if he were once
installed.

So Mr. Catherwood stated in his testimony before the Investigating
Committee, but he adds, “My ideas differed from theirs in what
constituted a legitimate manner, and I declined the office.”

The office then sought another man in the person of General Daniel
Butterfield. He received the intimation of his appointment in a very
different spirit from Mr. Catherwood, showing that he was fully equal to
the occasion. He wrote a letter to Mr. Corbin thanking him kindly for
the offer, saying that he was under numerous obligations to him, and
expressing a hope that he would be eminently successful in his
undertaking. General Butterfield received his commission in due course.

This made perfect another link in the chain of Mr. Gould’s speculative
design, as he supposed. It made Corbin “solid” with Gould also, a
position which they both highly appreciated. Mr. Gould paid the
following tribute of admiration to the true value of Corbin in the
enterprise: “He was a very shrewd old gentleman. He saw at a glance the
whole case, and said he thought it was the true platform to stand on;
that whatever the Government could do legitimately and fairly to
facilitate the exportation of breadstuffs and produce good prices for
the West, they ought to do so. He was anxious that I should see the
President, and communicate to him my views on the subject.” Corbin
talked with Grant until he received a positive assurance that Boutwell
was not to sell any more gold. At a meeting in Grant’s house, where
Gould and Corbin were present, the President said: “Boutwell gave an
order to sell gold, and I heard of it, and countermanded the order.”

It was not until Gould had received positive assurance from the
President’s own lips, that he considered his scheme perfect. But the
links of this strategic chain were now nearly all forged. The bankers
and merchants were largely in his favor through commercial necessity,
the Sub-Treasury was “fixed,” as he thought, and the Executive fiat had
placed the Treasury of the United States itself where it could not spoil
the deal if Grant did not change his mind. There were reasons, of
course, to apprehend that he would do so in case of an emergency; for he
never was privy to the scheme, no matter what his traducers and
political enemies may have said.

To ensure perfect safety, then, Grant must be put out of the way
temporarily. This was the crowning effort of the conspirators. After the
Boston Peace Jubilee, this Cabal spent the remaining part of the summer
in maturing its designs. Large enterprises of this nature always require
time and patience. I am told that “Billy” Porter, “Sheeny” Mike and
other eminent burglars will work assiduously from six to twelve months
studying all the ins and outs of a bank or other financial concern
before coming to the point of using the “jimmy,” blowing the safe or
chloroforming the janitor.

It seemed necessary that all the members of the Cabal should be fully
acquainted with the combination to Grant’s purposes as regarded his
orders to Boutwell, and that his ideas should remain fixed on the theory
of increasing exportation for the country’s safety. Accordingly it was
arranged that Jim Fisk should visit the President at Newport, where he
was on a visit, some time about the middle of August, a month or so
prior to Black Friday. It would seem that Grant at this date was still
wavering, and adhering to his policy of selling gold in spite of the
order which he had given Boutwell. He may have been suspecting that the
anxiety of Gould, Corbin & Co. for the prosperity of the country was not
altogether genuine. The necessity of bringing further pressure to bear
upon him was therefore clearly manifest.

Referring to the interview at Newport, Fisk said: “I think it was some
time in August that General Grant started to go to Newport. I then went
down to see him. I had seen him before, but not feeling as thoroughly
acquainted as I desired for this purpose, I took a letter of
introduction from Mr. Gould, in which it was stated that there were
three hundred sail of vessels then on the Mediterranean, from the Black
Sea, with grain to supply the Liverpool market. Gold was then about
thirty-four. If it continued at that price, we had very little chance of
carrying forward the crop during the fall. I know that we felt nervous
about it. I talked with General Grant on the subject and endeavored, as
far as I could, to convince him that his policy was one that would only
bring destruction on us all. He then asked me when we should have an
interview, and we agreed upon the time. He said: ‘During that time I
will see Mr. Boutwell, or have him there.’”

The President was carefully shadowed after this by the detectives of the
clique, and great care was taken to throw men across his path who were
fluent talkers on the great financial problem of the day, the absolute
necessity of stimulating the export trade and raising the premium upon
gold for that patriotic purpose. In this way, President Grant began to
think that the opinion of almost everybody he talked with on this
subject was on the same side, and must, therefore, be correct.

About the 1st of September it was considered that the opinions of the
President had been worked up fairly to the sticking point, and Gould
bought $1,500,000 in gold at 132½ for Corbin. Gould, however, was timid
in his purchasing at first, as he had heard that a number of operators
who were short of gold were making arrangements to give Secretary
Boutwell a dinner. On further assurances from Corbin that the President
had written Boutwell to sell no gold without consulting him, Gould
prepared to go ahead with the execution of his great scheme. Nothing
remained to be done in the completion of the plot except to stow away
the President in a place of safety until the financial storm should blow
over.

Things were so managed that the President was placed in a position that
his honor was seriously in danger of being compromised, yet so ably was
the matter engineered that he was perfectly unconscious of the designs
of the plotters.

He was prevailed upon to go to a then obscure town in Pennsylvania,
named Little Washington. The thing was so arranged that his feelings
were worked upon to visit that place for the purpose of seeing an old
friend who resided there. The town was cut off from telegraphic
communication, and the other means of access were not very convenient.
There the President was ensconced, to remain for a week or so about the
time the Cabal was fully prepared for action.

Sometime about the period of the President’s departure for Little
Washington, Fisk bought seven or eight millions of gold. Gould then said
to Fisk: “This matter is all fixed up. Butterfield is all right. Corbin
has got Butterfield all right, and Corbin has got Grant fixed all right,
and in my opinion they are all interested together.”

This was patriotism with a vengeance. Just think of the audacity of it!
Gould enters into a scheme to place the President in a position where he
could not interfere with the plan of getting a “corner” in gold, and
then he turns around and accuses the first Magistrate of the Republic
with being privy to a plot that was calculated to create a panic, and
cause widespread disaster in business circles, and render him an object
of universal contempt.

Gould and Fisk, through Corbin, also attempted to compromise Grant’s
family, as well as his private Secretary, General Horace Porter. This
intention was fully disclosed through the interview of Fisk with Corbin.
Fisk testified: “When I met Corbin he talked very shy about the matter
at first, but finally came right out and told me that Mrs. Grant had an
interest; that $500,000 in gold had been taken at 31 and 32, which had
been sold at 37; that Mr. Corbin held for himself about two millions of
gold, $500,000 of which was for Mrs. Grant and $500,000 for Porter. I
did not ask whether he was General or not. I remember the name Porter.
This was given out very slowly. He let out just as fast as I did when he
found that Gould had told me about the same thing. I said: ‘Now, I have
had nothing to do with your transactions in one way or the other. We
have embarked in a scheme that looks like one of large magnitude. Mr.
Gould has lost as the thing stands now. It looks as if it might be a
pretty serious business before getting out straight again. The whole
success depends on whether the Government will unload on to us or not.’
He said: ‘You need not have the least fear.’ I said: ‘I want to know
whether what Mr. Gould told me is true. I want to know whether you have
sent this $25,000 to Washington, as he states?’ He then told me that he
had sent it, that Mr. Gould had sold $500,000 in gold belonging to Mrs.
Grant, which cost 32, for 37 or something in that neighborhood, leaving
a balance in her favor of about $27,000, and that a check for $25,000
had been sent. Said I: ‘Mr. Corbin, what can you show me that goes still
further than your talk?’ ‘Oh, well,’ the old man said, ‘I can’t show you
anything, but,’ said he, ‘this is all right.’ He talked freely and
repeated: ‘I tell you it is all right.’ When I went away from there, I
had made up my mind that Corbin had told me the truth.”

An attempt was made to prove, before the Garfield Committee, that a
package containing $25,000 was sent to Mrs. Grant through the Adams
Express Company, but expert testimony failed to decide whether the
amount was that or $250, as the two noughts at the extreme right were
crowded into the cents column, and it was difficult to determine whether
or not a very light “period” was placed between them and the “$250.”

The design of the clique was manifest, however, to implicate the family
of the President in some way or other, in order that they might make use
of the Executive influence to help accomplish their great speculative
purpose. But as the Garfield Committee truly said in its report: “The
wicked and cunningly devised attempt of the conspirators to compromise
the President of the United States or his family utterly failed.”

The scheme might have succeeded if Fisk had been possessed of the
coolness and penetration of his partner, but his impetuosity, anxiety
and enthusiasm aroused suspicion and partially spoiled the plot.

Fisk was so eager to be satisfied that Grant was all right that he
overdid the thing by urging Corbin to write Grant a letter to stand firm
and not to permit the Treasury to sell gold under any consideration. The
outcome of this afforded clear proof, if any were wanting, that Grant
had no guilty knowledge of the base purposes for which he was being
used. Fisk had this letter from Corbin sent by a special messenger from
Pittsburgh, who rode twenty-eight miles on horseback, and delivered it
in person to the President. He read the letter, and had his suspicions
at once aroused. He said laconically to the messenger, “It is
satisfactory; there is no answer.” He began to see through the game, and
at once desired Mrs. Grant to write to Mrs. Corbin requesting her
husband to have nothing more to do with the Gould-Fisk gang.

Mrs. Grant wrote to Mrs. Corbin to say that the President was greatly
troubled to learn that her husband had been speculating in Wall Street,
and that she should desire him to disconnect himself immediately with
the party who were attempting to entrap the President.

Corbin hastened to obey the mandate from Little Washington. He was
greatly agitated, but the ruling passion of avarice was strong; in
bidding Gould farewell, and before taking his final adieu of the clique,
he requested the arch plotter to hand him over his share of the profits.
Referring to this incident, Gould said: “I told him I would give
$100,000 on account, and that when I sold, if he liked, I would give him
the average of my sales. I did not feel like buying any gold of him
then.”

This was the denouement of the plot against the President, who
immediately hastened to big Washington.

Now, let me again ask the reader to turn his attention for a moment to
the concluding scenes in the speculative drama in Wall Street on Black
Friday. How the clique tried to manipulate Assistant-Secretary
Butterfield was kept as profoundly secret as possible, and as it turned
out, he did not have as much power over the events of that great day as
was expected. When somebody charged Fisk with tapping the telegraph
wires, however, to obtain information from the Government, he replied:
“It was only necessary to tap Butterfield to find out all we wanted.”

This was very likely a vain boast of Fisk.

On Wednesday, the 22d September, two days preceding Black Friday, the
clique, it is believed, owned several millions more gold than there was
in the city outside the vaults of the Sub-Treasury. Belden bought about
eight millions of gold on that day, while Smith, Gould, Martin & Co.
were also heavy purchasers. The clique held a caucus in the office of
William Heath & Co., in Broad street, and concluded that it had gold
enough to put the price to 200, if it could carry the gold without
lending and compel the “shorts” to purchase. But the idea of finding a
market for over thirty millions of gold was also a gigantic problem, and
they felt the risk of being ground between the upper and the nether
millstones of their scheme.

On the morning of Thursday another council of war was held in the office
of Belden & Co., on Broadway. At this meeting, Gould, Fisk, Henry N.
Smith and William Belden were present. The proceedings of this meeting
were kept a profound secret, but one result of it was that Belden gave
his clerk the famous order to put gold to 144 and keep it there. On that
day Belden purchased about twenty millions of gold, the price opening at
141½ and closing at 143½.

The chiefs of the Cabal had another private meeting up town that
evening. The great question of closing up the transactions on the
following day was the chief topic of discussion. These operators held
contracts for over $100,000,000 in gold. Gould said that the “short”
interest was $250,000,000. The total amount of gold in the city did not
exceed $25,000,000, and the difference between this and the aggregate
amount of the contracts of the clique was the enormous amount that would
have to be settled in the event of a “corner.”

Fisk proposed that the clique show its hand, publish the state of
affairs, and offer to settle with the shorts at 150. His plan was
rejected by his brother conspirators.

On the morning of the fatal day, Belden and William Heath had an early
breakfast together at the Fifth Avenue Hotel, and repaired immediately
to their offices. Belden announced that gold was going to 200. “This
will be the last day of the Gold Room,” he added. Moved by Belden’s
threat, a large number rushed to cover. In the language of Henry N.
Smith, “They came on with a rush to settle.” He was settling in the
office of Smith, Gould & Martin, at 150 to 145, while Albert Speyer,
acting as broker for Fisk and Gould, was bidding up to 160 for a million
at a time. It was only when the price came down to 133 that Speyer
realized the humorous absurdity of his position. He had then bought 26
millions since morning at 160.

A voracious demand for margins about midday brought the work to a
crisis. The scene at the office of Heath was indescribable when Belden
went there to see Gould and his confederates, to find out what was to be
done next with the frenzied purchasers. An eye-witness thus describes
the scene at Heath’s office: “I went outside while Belden went in. I
walked up and down the alley-way waiting for him to come out. Deputy
sheriffs, or men appearing to be such, began to arrive and to mount
guard at Heath’s office to keep out visitors. After waiting a prodigious
long time, as it seemed to me, Jay Gould came creeping out of the back
door, and looking round sharply to see if he was watched, slunk off
through a private rear passage behind the buildings. Presently came
Fisk, steaming hot and shouting. He took the wrong direction at first,
nearly ran into Broad street, but soon discovered his error, and
followed Gould through the rear passage. Then came Belden, with hair
disordered and red eyes, as if he had been crying. He called: ‘Which way
have they gone?’ and, upon my pointing the direction, he ran after them.
The rear passage led into Wall Street. At its exit the conspirators
jumped into a carriage and fled the Street.”

They did not fly the Street, however, but went to the Broad street
office of Smith, Gould & Martin, where the crowd assembled, evidently
with riotous intent, apparently bent upon an application to Judge Lynch
for justice; and had any of the gentlemen appeared outside the confines
of the front wall, the chances were that the lamp-post near by would
have very soon been decorated with a breathless body. To ensure their
safety inside, however, a small police force kept guard outside, which
made the barricade complete. These gentlemen remained under this shelter
until the small hours of the morning, busily endeavoring to find out
where they stood in the result of the gold deal, and the more they
pondered over it, the greater grew the doubt in their minds whether they
were standing on their heads or their heels.

Although the Black Friday “corner” was a temporary calamity, perhaps it
was worth all it cost, in teaching us a useful lesson in financial and
speculative affairs. In my chapter on “Panics, and How to Prevent Them,”
I think I have made several points clear that can be utilized by
financiers, speculators and investors to advantage, in ease of an
impending panic or “corner.”

------------------------------------------------------------------------




                              CHAPTER XXI.

        CAUSES OF LOSS IN SPECULATION.


INADEQUATE INFORMATION.—FALSE INFORMATION.—DEFECTS OF NEWS
    AGENCIES.—INSUFFICIENCY OF MARGINS.—DANGERS OF PERSONAL
    IDIOSYNCRASIES.—OPERATING IN SEASON AND OUT OF SEASON.—NECESSITY OF
    INTELLIGENCE, JUDGMENT AND NERVE.—AN IDEAL STANDARD.—WHAT MAKES A
    KING AMONG SPECULATORS?


As there is always a class of speculators whose operations, in the long
run, leave a net result of loss rather than profit, it may not be amiss
if I state what experience has taught me as to the causes of this want
of success.

Undoubtedly, many who enter the arena of speculation are in every way
unfitted to take the risks against such wily opponents as they must
encounter. They are either too ignorant or too wise, too timid or too
bold, too pessimistic or too sanguine, too slow or too hasty, too
diffident or too conceited, too confiding or too incredulous. These are
constitutional defects, any one of which may easily cost an operator a
fortune. And yet self-knowledge, with self-control, may prevent these
natural disqualifications from seriously interfering with success. There
is no mental discipline more severe and exacting than that of
speculation. There is no pursuit in which a man can less afford to
indulge in whims, or prejudices, or pet theories, than that of staking
his money against the prospective changes in financial values. He must
be as calm and as impartial as a judge, not less in respect to the risks
he incurs than in regard to the integrity of his own judgment. I should
lay it down as the first rule necessary to success, that the judgment be
not warped by any natural idiosyncrasies; this being secured, a man may
succeed in spite of his constitutional defects.

Singular as it may seem, there are no advantages beset with greater
dangers than information—the one thing most largely sought after and
most highly prized. Very naturally, most men object to taking a risk
without possessing some knowledge of the conditions that determine the
risk; and yet how few take care that their knowledge is adequate enough
or certain enough for the formation of a safe judgment. In some cases,
knowledge is unattainable and the operation must be a leap in the dark;
and in such instances a man is unwise to step in unless his experience
satisfies him that he is uncommonly sagacious in guessing.

Many speculators lose because the information on which they base their
operations is _insufficient_; more because it is _false_; and others
because, while their information is correct, they do _not know how to
turn it to account_.

Between one or other of these difficulties in the use of information
must be distributed a very large proportion of the losses incurred in
speculation. Incomplete or insufficient information is especially
dangerous. One-sided knowledge is nowhere so deceiving as here. A
railroad, for instance, may report an increase of gross earnings which
is construed as making its stock worth two or three per cent. more than
its current price; but the improvement may be due to transient special
causes, and the road’s current expenses may be growing at a rate which
makes the net increase show a decrease. A financially embarrassed
company may announce an assessment of its stockholders, upon which there
is a rush to sell the stock; a little further explanation shows that the
proceeds of the assessment will so improve the facilities of the
company, or so enable it to reduce its fixed charges, as to make the
stock intrinsically far more valuable than it was before; this discovery
causes a sharp advance in the shares, and the “short” sellers have to
cover their sales at a loss. A stock is bought up freely at New York
because London is taking large amounts of it; a day or two later, the
deliveries show that large holders connected with the management are
unloading on the foreign market upon knowledge of facts damaging to the
prospects of the property; the late buyers then rush to realize, and
pocket a loss instead of a profit. Every day furnishes new instances of
speculations undertaken on this incomplete kind of information, and
which end disastrously because the operators did not wait to be informed
on all sides of the case, but were satisfied to take a pound of
assumption with but an ounce of fact.

One of the strongest anomalies of speculation is in the facility with
which men are induced to take large risks on false information and
manufactured “points.” Considering the readiness with which a numerous
class of “outside” operators buy or sell on sensational rumors, it is
not surprising that the professional operators should keep the market
well supplied with such decoys; and it is not easy to say which most
deserves condemnation—the heedless credulity of the dupes, or the
deliberate lies of the canard-makers. There is, however, a third party
not less blameable than either of the foregoing. I refer to those who
make it a part of their business to circulate false information.
Principal among these caterers are the financial news agencies and the
morning Wall Street news sheet, both specially devoted to the
speculative interests that centre at the Stock Exchange. The object of
these agencies is a useful one; but the public have a right to expect
that when they subscribe for information upon which immense transactions
may be undertaken, the utmost caution, scrutiny and fidelity should be
exercised in the procurement and publication of the news. Anything that
falls short of this is something worse than bad service and bad faith
with subscribers; it is dishonest and mischievous. And yet it cannot be
denied that much of the so-called news that reaches the public through
these instrumentalities must come under this condemnation. The “points,”
the “puffs,” the alarms and the canards, put out expressly to deceive
and mislead, find a wide circulation through these mediums, with an ease
which admits of no possible justification. How far these lapses are due
to the haste inseparable from the compilation of news of such a
character, how far to a lack of proper sifting and caution, and how far
to less culpable reasons, I do not pretend to decide; but this will be
admitted by every observer, that the circulation of pseudo news is the
frequent cause of incalculable losses. Nor is it alone in the matter of
circulating false information that these news vendors are at fault. The
habit of retailing “points” in the interest of cliques, the volunteering
of advice as to what people should buy and what they should sell, the
strong speculative bias that runs through their editorial opinions,
these things appear to most people a revolting abuse of the true
functions of journalism. But patent as these things are to those
educated in the ways of Wall Street, there is a large class who accept
such effusions as gospel, and are easily led by them into the clutches
of the sharks. It is but just, however, to acknowledge that with these
very serious drawbacks, both these classes of news agencies render
valuable service to Wall Street interests, and it is to be hoped that
experience will convince them that their enterprises would attain a
higher success through emulating a higher standard.

Another source of losses in speculation lies in the speculator not
holding back a cash reserve sufficient to protect him against an adverse
course of prices. Ordinarily, the man who speculates is of a sanguine
temperament, and apt to take risks without sufficient provision against
contingencies. Hence, it is common with inexperienced operators to use
all their available resources in their original margin. The result is
that, if prices go against them, they are liable to be closed out and
saddled with a loss they can ill afford. Such persons should never
pledge more than one-half of their available means at the beginning of a
transaction; the remaining half should be kept as a guarantee against
their being “sold out,” or to enable them to duplicate the transaction
at the changed price, so as to make an average likely to yield a profit.
The violation of this rule creates a class of weak holders, who offer a
constant inducement to “room-traders” to raid the market; knowing, as
they do, that when they have impaired these unsupported margins, there
is sure to be a rush of selling orders calculated to break down prices.
It is safe to say that if better provisions were made for keeping
margins good, the power of the “bears” and the wreckers would be broken;
one-half of the losses of “outside” operators would be obviated, and
one-half the risks of speculation would be obliterated.

Another class especially exposed to losses are those who always operate
in the same direction. Wall Street has its optimists and pessimists;
they are such from a constitutional bent; and they are “bull” or “bear”
in season and out of season. As a rule, those that follow a natural
disposition, rather than the course of the market and the conditions
that mould it, are sure to bankrupt themselves sooner or later. I do not
mean to maintain that there is no chance for an operator who clings
continuously to one side of the market; for in times when conditions
favor higher prices there is always some profitable work to be done by
the “bear” in checking excesses of a rise; and, when events favor
decline, the “bull” may find his chances in intervals of excessive
decline. But the man who can thus successfully steer his craft against
the winds and the tides must be a thoroughly trained navigator, cool in
temperament, capable of reining his natural proclivities, and above all,
the possessor of means large enough to control, if necessary, the course
of the market by sheer money power. It is needless to say that
nine-tenths of this stereotyped class are devoid of these requisites to
success. One cannot but pity the man with sallow face and sluggish gait
so suggestive of the blue pill, who, when everybody else is feeling the
happy impulse of a common prosperity, persists in believing that the
country is going to the dogs, and steadily sells stocks while everybody
else is buying them. He is simply ruining himself through
unconsciousness that he views everything through bilious spectacles.
Equally is the man to be commiserated who, from a constitutional
intoxication of hope, keeps on buying and holding when it is manifest
that the country has passed the summit of an era of prosperity and is
destined to a general reaction in trade and values. Of course, such men
never remain long in Wall Street; their pockets are soon emptied, and
they retire to reflect on the folly of refusing to appreciate and to
follow the natural drift of the conditions that regulate values.

A minor source of losses lies in operating at times when the market is
so evenly balanced between opposing forces that there is no chance for
making profits. At such times, operators get disgusted at the
sluggishness of the market; they change their holdings from day to day,
with no advantage except to their broker; and their monthly statement
shows a heavy list of charges for interest and commissions, with no
offset of profits. These intervals of stagnancy sometimes run for weeks,
sometimes for months; and at such times a wise speculator would take
care to keep out of the market and hold himself in readiness for
anything that may turn up.

It is necessary to the avoidance of loss that the operator should
maintain an intelligent watch upon the influences that control the
market. Those influences are two-fold—such as are intrinsic to the
market, and such as are external to it. Of the former class are those
that relate to the spirit and tone of the market; the position and
disposition of the cliques; the action of the large operators; the
overloaded or over-sold state of the market, as indicated by the loaning
rates for stocks; the influence exerted by the upward or downward
movements in stocks which at the moment are specially active; the
possibility of closing out holders on “stop orders” or on the impairment
of margins; the unloading of influential cliques and the covering of
important lines of short sales, &c., &c. Influences of this kind are
very frequently sufficient of themselves to control the market for a
considerable period in direct opposition to the tendency indicated by
external conditions. It is, however, no easy matter to form a correct
conclusion as to the drift resulting from this set of factors. They are
so concealed and so changeful, and the symptoms are so vague, that it
requires long experience, added to unusual sagacity, to determine what
may be the tendency resulting from the complex action and counteraction
of this set of conditions. Some exceptional operators enjoy an
instinctive faculty for weighing these shadowy indications with almost
unerring certainty. Such men usually care little about outside
influences, except so far as they may affect the market for the moment.
From the nature of the case, their transactions are apt to be brief
ones, and follow quickly the momentary course of the market They are
reckoned among the most sagacious speculators, and are usually very
successful. But their success is the result of a special natural gift,
and therefore cannot be won by others.

The second class of influences above alluded to as external to the
market are of a very broad and varied character. They embrace almost
everything that affects the welfare of the country. Those, however,
which are most potent are, the state of the crops; the condition of
manufacturing industries; the state and prospects of trade; the earnings
of the transportation companies; the course of the imports and exports;
the attitude of the foreign markets towards American securities; the
movements of the precious metals; the condition of the London and
Continental money markets; the position of the New York banks and the
course of currency movements; the action of Congress, of the
Legislatures and of the Courts on matters affecting the value of
investments; the acts of labor unions and the drift of labor agitations,
and the course of political and social issues. This may be considered a
rather startling list of topics for a man to keep himself well informed
upon, but there is not one of them which may not any day become a
controlling factor in the condition of the stock market. For a man,
therefore, who aims to keep his knowledge abreast with his business, it
is necessary that he should be a close observer of events. Undoubtedly
few possess this breadth of information, and most men think it
sufficient to get their knowledge as best they may when the events
happen. The misfortune in such cases is, that those better informed
utilize the event while the others are “getting posted.” Considering how
many half-informed or wholly ignorant persons engage in speculation with
more or less success, it cannot be pretended that to keep informed on
the foregoing set of conditions is essential to a fair degree of
success. But it must be maintained that such knowledge is of
incalculable value and that a man who has it is in a position to act
with more intelligence, assurance and success than one without it. To
those who desire to turn to account all coming changes, and to stand
always prepared for the good or evil events of the future, this
intelligent comprehension of the status of all the forces that make or
unmake values is absolutely indispensable. And yet it is one thing to
possess this information; another to know how to draw correct
conclusions from it, and yet another to know how best to use it in the
area of speculation. Failure at any one of these points may be fatal to
success and result in disaster.

I conclude, then, that for a man to be a thoroughly equipped speculator,
it is necessary that he be possessed of extraordinary parts and
attainments. He must be an unceasing and intelligent observer of events
at large, and a sagacious interpreter of symptoms on the Exchange; his
judgment must be sound, not only as to existing conditions, but as to
coming tendencies, and he must possess the calmness and nerve to face
unflinchingly whatever emergencies may arise. Whoever enjoys these
qualities in the highest degree must be the King of Speculators. As to
others, their rank must correspond to the degree of their conformity to
this ideal standard.


[Illustration:

  _H. Villard_
]


------------------------------------------------------------------------




                             CHAPTER XXII.

         VILLARD AND HIS SPECULATIONS.


RETURN OF THE RENOWNED SPECULATOR TO WALL STREET.—RECALLING THE FAMOUS
    “BLIND” POOL IN NORTHERN PACIFIC.—HOW VILLARD CAPTURED NORTHERN
    PACIFIC.—PURSUING THE TACTICS OF OLD VANDERBILT.—RAISING TWELVE
    MILLION DOLLARS ON PAPER CREDIT.—VILLARD EMERGES FROM THE “BLIND”
    POOL A GREAT RAILROAD MAGNATE.—HE INFLATES HIS GREAT SCHEME FROM
    NOTHING TO ONE HUNDRED MILLION DOLLARS.—HIS UNIQUE METHODS OF
    WATERING STOCK AS COMPARED WITH THOSE OF GEORGE I. SENEY.


The return of Mr. Henry Villard to Wall Street, after two years’ absence
in Germany, his native land, renews the public interest in the career of
that bold speculator. My reminiscences of Wall Street affairs would be
incomplete without a sketch of the daring railroad operations of this
gentleman, which so fully illustrate some of the evils to which I have
referred in my chapter on “Railroad Methods.”

The culminating point in the speculative history of Mr. Villard, which
covered a period of five years, from 1879 to 1884, was the famous blind
pool in Northern Pacific.

Instead of taking up the events of his life in detail, and carrying my
readers to this point, I shall depart from the usual course of
biography, and present the more interesting facts of the career of my
hero at the beginning.

In his capture, of Northern Pacific he seems to have followed the
methods of the elder Vanderbilt very closely, with the important
exception that he failed in the consummation of his purpose. Vanderbilt
always, eventually, triumphed.

Villard was the chief agent in forming the Oregon Railway and Navigation
Company, which was organized for the purpose of consolidating the
business of the Oregon Steam Navigation Company with that of the Oregon
Steamship Company, and for the purpose of buying, building and operating
railroads, as stated in the circular setting forth the objects of the
company. The lines of the Oregon Railway and Navigation Company extended
from Portland west to Wallula Junction.

The value of this property was seriously menaced by the project of the
Northern Pacific to extend its lines west, with a terminus at Tacoma.

President Billings, of the Northern Pacific, rejected a proposition from
Mr. Villard to accommodate the Northern Pacific by permitting it to
reach the Pacific coast over the lines of the Oregon Railway Navigation
Company.

It was at this juncture that Villard resorted to the old Vanderbilt
tactics, by attempting to purchase stock enough of the Northern Pacific
to enable him to control the property. For this purpose he formed a
blind pool, in which Messrs. Woerishoffer, Pullman and Endicott, and a
host of other solid men, were the original members. A fund of $8,000,000
was subscribed to purchase Northern Pacific stock. During the spring of
1881 the pool kept on buying steadily, and continued their operations
until the middle of summer, when it was discovered that the treasury of
the pool was almost exhausted without having effected its purpose of
acquiring control of the Northern Pacific property.

Mr. Villard then called a meeting, explained matters, proposed to extend
the scope of the pool’s operations, and to increase its membership. By
showing the enormous profits to be gleaned in the future, he succeeded
in getting $12,000,000 more subscribed. This secured the control of the
road, and in September, 1881, Mr. Villard was elected President of
Northern Pacific.

Villard at once emerged from this blind pool into a great railroad
magnate, in a manner, to the eye of the general public, as miraculous as
the springing forth of Minerva fully armed from the brain of Jupiter.

The stock of Northern Pacific advanced rapidly in price, and Villard and
his friends were supposed to be accumulating millions with unprecedented
celerity. Villard appeared to have realized all the financial dreams of
Monte Cristo, and he was fast looming up into a proud and dangerous
rival of Gould, Vanderbilt and Huntington.

He went forward with the building of the Northern Pacific road, which
was finished two years after his success in capturing it through the
medium of his blind pool. His phenomenal success induced him to enter
largely into the extension of other investments. He became lavish in his
personal expenses also, although he had formerly been accustomed to the
closest economy in his mode of living, and he built a palace at Madison
Avenue and Fiftieth street.

When seemingly on the highest tide of prosperity, Villard suddenly
became embarrassed, and when an accounting of the cost of finishing the
road was made, he was found to be away behind. There was a
miscalculation of $20,000,000 somewhere. Villard explained it by
declaring that the estimate of the engineers for finishing the road was
$20,000,000, whereas the real cost reached $40,000,000.

For the $20,000,000 subscribed by the blind pool the subscribers
received the stock of the Oregon & Transcontinental. This company had
been organized to build branch lines to the Northern Pacific, as the
charter of the latter did not permit it to build such lines.

This is the speculative history, in brief, of Mr. Villard from the time
he took hold of the Oregon & California Railroad up to the juncture of
his grand collapse. There were several incidents, however, of more than
ordinary interest in his railroad history prior to the time he set his
heart upon Northern Pacific. As a stock-waterer he had, probably, no
superior, and was only equalled by Mr. George I. Seney, in that
important department of railroad management. His methods in obtaining
control of the Oregon Steam Navigation Company and the Oregon Steamship
Company amply illustrate his remarkable ability in this respect. When
Villard proposed to purchase these two companies he had no money, but he
had unlimited confidence in his own ability. He asked each company to
give him an option to run a year for $100,000. They agreed to do this,
and Villard forthwith consulted a number of capitalists, who came
together and filed articles of incorporation of the Oregon Railway &
Navigation Company, a consolidation of the two companies above-named.
When this company, with such a high sounding name, was organized, it had
no assets, and the prospects of acquiring any seemed exceedingly blue.
The names of the incorporators were as follows: Henry Villard, James H.
Fry, Artemus H. Holmes, Christian Bors, W. H. Starbuck and Charles E.
Brotherton, all of the city and State of New York, and W. H. Corbett, C.
N. Lewis, J. N. Dolph, Paul Schulze and N. Thielson, all of Portland,
Oregon. The capital was nominally six million dollars, divided into
60,000 shares. This arrangement was made in June, 1879.

The next problem to be solved after the reorganization was how to raise
money to run the concern.

The Board of Directors, under the management of Mr. Villard, were equal
to the occasion. They met at Portland a few days after the organization
and executed a mortgage to the Farmers’ Loan and Trust Company of New
York, and under this mortgage issued 6,000 bonds of $1,000 each, payable
in thirty years after July 1, 1879, with interest at 6 per cent.

Mr. Villard then paid the $100,000 bonus money to the companies which
had been incorporated, took his option, stock and bonds and came East to
negotiate his securities. It is said he presented them to Jay Gould, who
refused to touch them, as he believed there was not much stamina in the
scheme, and he wished to avoid trouble with the Northern Pacific, which
he plainly saw the project involved. Villard was more fortunate with Mr.
Endicott, Jr., of Boston, Mr. George Pullman and others whom they
interested in the enterprise.

The property of the two companies, out of which the new company had been
formed, whose securities were so boldly placed upon the market, was not
in reality purchased until March of the following year.

After the organization was complete, the visible assets of the Oregon
Railway and Navigation Company did not exceed $3,500,000, while the
total liabilities amounted to $21,000,000. This was made up as follows:

                         Original    $6,000,000
                         stock

                         Water        3,000,000

                         Water        6,000,000

                         Mortgage     6,000,000
                         bonds

It will thus be seen that there were seven dollars of liabilities for
every dollar of assets, and the intrinsic value of the stock was
represented by a minus quantity of 20 per cent., having no positive
value at all. In other words, it was 20 per cent. worse than nothing.

In spite of these facts, however, Mr. Villard had the stock listed at
the Stock Exchange, and through a carefully prepared report, showing
immense and unprecedented earnings, he had the stock bulled up to 200.
It was when it reached this high figure that the $9,000,000 of water
(noted before) were thrown in to prevent it from becoming top-heavy.

This was the preparatory and successful process of watering which
preceded the transactions of Mr. Villard on a more magnificent scale in
his manipulation of Northern Pacific, as described at the opening of
this chapter. Mr. Villard excelled Mr. Seney in one respect which is
noteworthy. As I have shown in a former chapter, Mr. Seney poured the
water in lavishly at the reorganization, and prior to having his
properties listed on the Stock Exchange.

Villard improved upon this process by employing Seney’s method liberally
in the first instance, and also by a free and copious dilution after the
stocks had been inflated to the very point of bursting.

There is probably no instance in the whole history of railway
manipulation in which a man has presented to the public, and with such
amazing success, such a specious appearance of possessing solid capital
where so little existed in reality.

He began with nothing in 1879 and succeeded in the course of a year in
possessing himself, by various adroit methods, as described, of
$3,500,000 of assets in railroad securities. With this as a basis of
operation, in five years he managed to obtain temporary control of
property aggregating in value over $1,000,000,000.


------------------------------------------------------------------------




                             CHAPTER XXIII.

                FERDINAND WARD.


PECULIAR POWER AND METHODS OF THE PRINCE OF SWINDLERS.—HOW HE DUPED
    ASTUTE FINANCIERS AND BUSINESS MEN OF ALL SORTS, AND SECURED THE
    SUPPORT OF EMINENT STATESMEN AND LEADING BANK OFFICERS, WHOM HE
    ROBBED OF MILLIONS OF MONEY.—THE MOST ARTFUL DODGER OF MODERN
    TIMES.—THE TRUTH OF THE SWINDLE PRACTICED UPON GENERAL GRANT AND HIS
    FAMILY.


In making a fair estimate of the part that Ferdinand Ward, of the firm
of Grant & Ward, played in the panic of 1884, I can only say that Ward’s
methods, taken altogether in their conception and execution, constituted
a huge confidence game. He built up confidence by deceiving a few
eminent men in financial and social circles, who, from his insinuating
and plausible demeanor, were induced to place reliance upon his
representations.

His presence was magnetic, and his manner deceitfully unassuming. He had
the art of dissembling in great perfection and was possessed of
extraordinarily persuasive powers, without appearing to have any selfish
object in view. So highly developed in him were these social gifts,
through the power of cultivation, that he could convince his unhappy
victims that he was actuated with a single purpose for their welfare.

By practicing in this way on the credulity of certain people, Ward
managed to get into his hands, for his own personal use, sums of money
aggregating millions. Some of the richest financiers became his victims,
chiefly induced by promises of high rates of interest and large profits
on various ventures.

Ward would ascertain the names and circumstances of certain people who
had large balances in their banks and were unable to make satisfactory
and paying investments with them. He would bring certain influences to
bear upon them to take their money out of the bank and invest it through
him in “Government contracts,” which he said afforded immense returns,
but were of a delicate character, and required some secrecy in the
manipulation. This circumstance naturally prevented him from going into
an explanation of the details of the enterprise, which it was not
necessary for the investors to know when their profits were secured
through such a stable investment. It was sufficient for them to be
assured that the returns would be very large.

As an instance of the successful manner in which Ward’s specious
pretences worked, I will relate the experience of one gentleman
who deposited $50,000 with him, on the strength of these
representations—just as an experiment.

This gentleman was going on a trip to Europe and he left the amount
stated in the possession of Mr. Ward to be used to the best possible
advantage during his absence, and invested in his own way.

About six months after the date of this deposit, the gentleman returned
from Europe and called at the office of Grant & Ward to learn what
progress had been made with his investment. He saw Ward, and called his
attention to the fact.

The young Napoleon of finance recollected the appearance of his customer
at a glance, for he is admirably developed in what phrenologists term
individuality, and never forgets a face, but in the immense rush of his
speculative business he had forgotten the circumstance until he referred
to his books. He was but a few minutes absent in the interior office
when he returned and informed the gentleman that his $50,000 had been
invested with the ordinary turn of luck that usually accrued under his
management, and he was very happy to be able to hand him a check for
$250,000, after deducting the ordinary commission, as the result of the
investment.

The man was overpowered with this unexpected turn of luck, and the
enormous profits taxed his credulity to its utmost capacity. This was a
speculative mine that he had never dreamed of, and instead of sleeping
any that night he set his entire mind to calculate the profits on
$250,000 in the same ratio that his $50,000 investment had been
transformed into this amount.

It required very little mathematical knowledge to arrive at the
conclusion that with such another turn of speculative prosperity, he
would, within the next six months, be a millionaire and have the
original investment left intact. Then if he should make this on three
turns, which seemed not unlikely, when he should be present to look
after his own business, he might pile up millions by the dozen.

The mind of this fortunate speculator being filled with such thoughts as
these, he lost no time after breakfast in taking the train on the
elevated road and arrived at Ward’s office before business had begun.
When Ward arrived he met his customer with a gracious smile, took the
check in the most handsome manner and made a note of it in his book.

The investor had not very long to wait this time before he knew the
result of his venture. It was only a few days prior to the 12th of May,
1884, at which date the failures of Grant & Ward and the Marine Bank
were announced in Wall Street, as the _avant courier_ of a sudden panic.
So, the only thing that interfered with the second check producing
similar results to those of the first, was the unfortunate panic, but of
course Mr. Ward could tell his customer that he was not responsible for
that.

In this connection an important financial question arises. Would there
have been any panic had it not been for Ward, Fish, Eno & Co.? However
this may be, there is one thing very evident, namely, that Mr. Ward must
be accorded the power of ability to control men with whom he came in
contact in a remarkable manner, and of being able to get the best of
them in all financial matters. Old and astute financiers, who were
considered experts in every method of speculation, and who knew all the
artifices of making a sharp bargain, became helpless in the mystical
presence of Ward, and were completely non-plussed by his superior acumen
in taking advantage of every situation that offered the least
opportunity of practicing his peculiar methods of chicanery and fraud.

Ward seems to have been very much of a mind reader. He knew when he
passed that check over to the gentleman referred to, for $250,000, that
it would come back again, that it would keep burning that man’s pocket
while he kept it there, and that sooner or later he was bound to return
it to the mysterious place of its issue. Doubtless this was not the
first case that Ward had experimented upon in this way. He had evidently
made a regular practice of it, and could calculate the proportion of his
victims with as much accuracy as tables of mortality are made out for
insurance companies. There was no blind chance about Ferdinand’s
methods. He worked according to a rule, having calculated to a nicety
the exceptions that proved it, and his success showed that he had not
wasted much time over stubborn cases.

Ward displayed marvellous tact in discovering, at a glance, those who
were sufficiently credulous to be entrapped into acquiescence with his
schemes, and manifested great executive ability in pouncing upon his
prey at the proper moment. His methods of operation were admirably
suited to his purposes. He saw, for instance, that this man would not
put the money in any other kind of investment, and would not be likely
to operate, except through Ward himself, as no other man could be found
anywhere who could make himself the instrument of realizing such
stupendous returns for the money invested.

It is marvellous how the idea of large profits, when presented to the
mind in a plausible light, has the effect of stifling suspicion.

The specious pretexts of Ward appeared equal to the task of overcoming
the most obdurate cases of incredulity. So, it is not so singular, after
all, that men utterly unacquainted with business methods and sharp
practice in speculation, were so easily victimized by the sinister
methods, conciliatory manners and seductive schemes of this consummate
imposter.

Ward was so successful in his arts of persuasion that he could not only
succeed in getting possession of all the available capital, for his own
practical use, of many eminent financiers, but he had the power of
transforming them into walking advertisements for the promotion of his
nefarious designs, and turned them to the best account in drumming up
business and customers for him while they were blissfully ignorant that
they were all the time the subservient mediums of swindling projects. In
fact, they made themselves the willing instruments of “roping” in others
for Ward’s purposes, inspired by the purest motives of gratitude toward
him as their confidential broker and benefactor.

In this way General Grant and his sons became the helpless victims of
Ward’s deeply designing duplicity.

People who have blamed General Grant fail to reflect on the fact that
the famous soldier and able tactician was no better than a raw recruit
in the hands of a disciplined warrior when he was placed in contact with
Ferdinand Ward’s superior financial tactics.

One great point in the confidence game worked on joint account between
Fish and Ward was to obtain men of well known reputation to vouch for
the genuineness of the enterprises in which they were engaged. This
enabled them to solidify and extend their credit. It was for this
purpose that General Grant was inveigled into signing the well-known
letter No. 2, addressed to Fish, which has been the subject of so much
criticism and comment. Following is a copy of this letter:

                                                No. 2 Wall Street, }
                                                Room 6,            }
                                             NEW YORK, July 6, 1882.

    MY DEAR MR. FISH:—In relation to the matter of discounts, kindly
    made by you for account of Grant & Ward, I would say that I
    think the investments are safe, and I am willing that Mr. Ward
    should derive what profit he can for the firm that the use of my
    name and influence may bring.

                                            Yours very truly,

                                                 U. S. GRANT.

This letter was written in answer to one from Jas. D. Fish, President of
the Marine Bank, saying he had negotiated notes for the benefit of Grant
& Ward, to the amount of $200,000. He said in explanation: “Those notes,
as I understand it, are given for no other purpose than to raise money
for the payment of grain, &c., to fill the Government contracts.”

This letter, signed by General Grant was designated by his counsel as
“only an ordinary letter in the course of business,” and that is all it
is where a man placed confidence in another as General Grant did in Ward
and Fish.

It was Ward who wrote the letter, through the instruction of Fish, and
got General Grant to sign it.

In an interview with a reporter of the New York _World_, in July last,
Ward explained the circumstances under which the letter was signed, as
follows:

    “Do you know anything about that letter addressed to Mr. Fish
    and signed by Gen. Grant, regarding the Government contracts?”
    asked the reporter.

    “Of course I do,” quickly replied Ward. “I made the original
    draft. It was by Mr. Fish’s direction, and he asked me to do it,
    suggesting what I should write. He had had some trouble in
    getting Grant & Ward’s paper discounted, for he attended to that
    and raised millions of dollars. He wanted something to show to
    Mr. Cox, President of the Mechanic’s Bank, and others from whom
    he tried to get money for the firm. The contract business was
    the great thing, and he said if he only had something from the
    General to show that he knew about the contracts, it would be
    easier for him to go to these men. I distinctly remember the
    circumstances under which this letter was prepared. Fish gave me
    an idea what it ought to be like and I wrote it. Then Mr. Fish
    went over it and made some corrections in his own handwriting.
    It was scrawled on a piece of paper that happened to be handy in
    the office, and after he had it to suit him he handed it to me
    and I gave it to Spencer, our cashier, to copy. I am not sure
    but that I have got that draft somewhere among my papers. I
    think I have seen it since the failure, and if it is still in
    existence it can plainly be seen that Mr. Fish knew all about it
    before it received Gen. Grant’s signature. The General was in
    the habit of signing papers I asked him to without paying much
    attention to what they were. So when I asked him to sign this
    one he did so without much if any questioning. I understood well
    enough what Fish wanted it for, because he told me, and I have
    no doubt that Mr. Cox and other gentlemen from whom he borrowed
    money saw the letter.”


------------------------------------------------------------------------




                             CHAPTER XXIV.

                HENRY N. SMITH.


HOW MR. SMITH STARTED IN LIFE AND BECAME A SUCCESSFUL OPERATOR.—HIS
    CONNECTION WITH THE TWEED “RING,” AND HOW HE AND THE FAMOUS “BOSS”
    MADE LUCKY SPECULATIONS, THROUGH THE USE OF THE CITY FUNDS, IN
    MAKING A TIGHT MONEY MARKET.—ON THE VERGE OF RUIN IN A POOL WITH W.
    K. VANDERBILT.—HE IS CONVERTED TO THE BEAR SIDE BY WOERISHOFFER, AND
    AGAIN MAKES MONEY, BUT BY PERSISTENCE IN HIS BEARISH POLICY RUINS
    HIMSELF AND DRAGS WM. HEATH & CO. DOWN ALSO.


I have already had occasion to speak of Henry N. Smith, who was a member
of the firm of Smith, Gould & Martin, but I consider him of sufficient
importance, speculatively speaking, for a separate biographical sketch.
pi This gentleman is a native of Buffalo, and had been in the mercantile
business there before coming to Wall Street. He was familiarly known as
the young man from Buffalo. He had then a decidedly Hebrew aspect; was a
strawberry blonde, with full beard of auburn hue, sharp, piercing eyes,
and an air of self-confidence. He had made some money in Buffalo, and
was lucky in his first ventures in Wall Street, being one of the few who
emerged from the panic of 1864 on the winning side. Smith became a bold
operator, and accumulated considerable money. He was invariably
successful in his transactions whenever he was governed by his own
judgment. The first disaster overtook him in the panic of 1873.
Immediately prior to that he had been under the influence of Commodore
Vanderbilt, who put him into Western Union, and the loss which he
sustained by its terrible fall in that year almost ruined him. He lost
all his ready money, being left without anything but his New York
residence and a stock farm.

He did not lose courage, however, by this speculative blow, but picked
himself up again and soon became quite a power in the Street, and in
spite of the ups and downs of speculation and the various panics, Smith
kept clearly ahead of the market for many years, and became a successful
and comparatively wealthy operator.

He always managed to ingratiate himself with wealthy connections in his
various operations, and was able to command an enormous amount of credit
in comparison with his actual means.

A few years ago, on his return from Europe, he met W. K. Vanderbilt, and
they began to discuss the probable future of the market. Vanderbilt had
been a bull for some time previously. They entered into an agreement to
operate on the bull side together. The result was that Vanderbilt lost
several millions, and came pretty near running the risk of exhausting a
large part of his then anticipated share of his father’s estate. The
deal was disastrous to Smith also.

Soon after this discomfiture, one day, on his way to Long Branch, Mr.
Smith met the late Mr. Woerishoffer, who was the great bear on the
market, while Smith and Vanderbilt were still then the leading bulls.
Woerishoffer succeeded in convincing Smith that his position on the
market was wrong—that he had better make a clean sweep of it in selling
out the stocks which he held, and join hands with him on the bear side.

Smith was impressed with Woerishoffer’s advice, earnestness and
personality.

The great bear was also in a position to back up his theory by examples
of his success, the best and most convincing argument that could
possibly be employed, especially by a Wall Street speculator. As the
result of this bearish counsel, Smith soon recuperated from the effect
of his former losses, and, in consequence, got bearish notions so badly
on the brain that he was prepared to swear by Woerishoffer’s judgment,
and considered his own equally infallible. He could see nothing but
disaster ahead any more than his general, and was recklessly prepared to
follow wherever the champion bear should lead in the destruction of
values.

Smith seemed to have the same abiding faith in Woerishoffer that
Ignatius Loyola reposed in the Pope of his day. “If the Holy Father,”
said that eminent Jesuit, “should command me to row several leagues into
the ocean in an open boat, in the midst of a terrific gale, I should
straightway obey his mandate without asking why or wherefore.”

Such is hardly an exaggerated illustration of the thorough appreciation
which Smith entertained of the perfection of Woerishoffer’s bearish
discipline, and the exact certitude of his judgment in all matters of a
speculative character. It is almost impossible for a man who has had no
experience in Wall Street matters to estimate the extremes of fanaticism
in speculation to which a man is prepared to go when he is seized with a
monomania either on the bull or the bear side, but especially on the
latter.

The evidence of his senses counts for nothing, and the evidence of other
people’s senses, if possible, goes for less. He is a consistent bull or
bear, as the case may be, and that settles it. He is Sir Oracle on the
stock market and when he speaks let no dog bark.

This inveterate combination of egotism and fanaticism has ruined many
hundreds, to my own knowledge. The disease is contagious, and Smith had
a very obstinate form of it. His symptoms were even worse than those of
Woerishoffer, by whom he was smitten, a peculiarity that very often
occurs in the recipient of this financial malady.

Like Woerishoffer, Smith fought the market with desperation on every
advance. He adhered steadily to the policy of attacking prices on every
rally during the summer of 1885, while values were constantly advancing,
with occasional healthy reactions. When his own money was exhausted he
began to incur cumulative liabilities with the house of Wm. Heath & Co.,
until that famous firm had become almost depleted of its available
resources in replacing margins as fast as they were wiped out by the
persistent tide of advancing prices in speculation.

Thus Mr. Smith proceeded, in obedience to the spirit of bearish
fanaticism, until his loss became so great that he not only had to pay
out all his own money, but was in debt to the firm of Wm. Heath & Co. in
a million dollars, which was the cause of their failure, and which
crippled or caused to collapse several smaller houses.

When Mr. Smith appeared before the Governing Committee of the Stock
Exchange to make application for the extension of time on his seat, he
made the following extraordinary statement: “On January 1, 1885, I was
worth $1,400,000. I had $1,100,000 in money, and the balance, $300,000,
in good real estate. On the following January I had lost the whole
amount, and was $1,200,000 in debt, a million of which I owed to Wm.
Heath & Co.”

Many people were surprised that Mr. Smith was enabled to obtain such an
enormous and unlimited amount of credit in one house. I took the ground
at the time, and I am still of the same opinion, that the animal
magnetism or psychologic power of Henry N. Smith over the elder Heath
was the real cause of all the trouble.

Mr. Heath had been in bad health for some time, consequently he left the
general management of the business to Mr. McCanless, the head clerk and
general manager of the firm, through whom the orders of Mr. Heath were
strictly executed.

Mr. Heath being weak in both body and mind, yielded his opinions to
those of Mr. Smith, by virtue of the superior mental force of the
latter.

In conducting a large Wall Street business it is necessary that a man
should have the mental stamina to say “no” firmly, and stand to it. In
order to be able to do this he must be backed up by a vigorous, healthy
physique.

The power to utter a negative in a determined manner requires,
generally, a fair degree of physical force, and it is absolutely
necessary to the success of a Wall Street broker that he should be able
to do it when occasion requires. A deficiency either in will power or
physical force to pronounce this small negative distinctly and firmly
may result in financial ruin, as it did in the case of Wm. Heath & Co.

Henry Nelson Smith made many successful turns in speculation during the
Tweed regime, owing to the facilities which the municipal bankers
belonging to that famous coterie afforded him for manipulating the money
market.

There were great fluctuations in stocks while William Marcy Tweed was
the power behind the throne in the government of the city of New York.
Mr. Tweed contributed largely towards these fluctuations. He and his
trusty companions pulled the wires at the City Hall while the puppets in
several of the brokers’ offices in the vicinity of Wall Street danced to
the sweet will of the managers in the municipal building.

One of Tweed’s three famous maxims was, “The way to have power is to
take it.” The other two were, “He is human,” and “What are you going to
do about it?” In conformity with the first maxim, Mr. Tweed took control
of the city funds, besides a number of the city savings banks, and other
financial institutions, which he had organized through special charters
from the Legislature, which he also owned during the period of his
Boss-ship.

These funds were so managed that a very tight squeeze could, at almost
any time, be effected in the money market. The city funds on hand were,
at that time, usually about from six to eight millions of dollars, and
were deposited in the banking institutions of the “Boss.” They were
ostensibly under the control of the City Chamberlain, who was under the
control of Tweed.

Henry N. Smith and a few other favorite members of the syndicate would
draw their balances from these banks, making money scarce to the general
public, and the money market would suffer a sudden squeeze, and
consequently the stock market would break, sometimes with such rapidity
as to produce disastrous results to a number of brokers, business houses
and other financial concerns outside the Tweed Ring.

On one of these occasions Mr. Smith drove up to the Tenth National Bank,
the Black Friday ring institution, in a cab, and drew his balance
therefrom, amounting to $4,100,000. He took it home and kept it there
several days under lock and key. In the meantime Mr. Tweed and his
companions withdrew from circulation the greater portion of the amount
under their immediate control, making a tie-up, on the whole, of nearly
twenty millions of dollars. At that time this was an amount sufficient
to make a very stringent money market, and cause Wall Street operators
to feel very uncomfortable. It was then a mighty power to be wielded by
a few unscrupulous men. At that time Mr. Smith considered himself worth
at least five million dollars. He lost most of this in the panic of
1873, largely in Western Union stock, as above stated, into which
Commodore Vanderbilt had kindly put him.

I have referred to the prominent part which Mr. Smith played in the
great speculative drama of Black Friday, in the scenes and incidents of
my chapter on that ever-to-be-remembered day in Wall Street

I shall, in another chapter, briefly review some of the methods to which
the Tweed Ring resorted to make speculation and politics play into each
other’s hands, and show how a bold attempt was made to add the control
of the National Treasury to that of New York.

------------------------------------------------------------------------




                              CHAPTER XXV.

                KEENE’S CAREER.


HE STARTS IN SPECULATION AS A CALIFORNIA BROKER.—A LUCKY HIT IN A MINING
    STOCK PUTS HIM ON THE ROAD TO BE A MILLIONAIRE.—HIS SPECULATIVE
    ENCOUNTER WITH THE BONANZA KINGS.—HE MAKES FOUR MILLIONS, STARTS FOR
    EUROPE AND STOPS AT WALL STREET, WHERE HE FORMS AN ALLIANCE WITH
    GOULD, WHO “EUCHRES” HIM AND OTHERS.—SELOVER DROPS GOULD IN AN AREA
    WAY.—KEENE GOES ALONE AND ADDS NINE MILLIONS MORE TO HIS FORTUNE.—HE
    THEN SPECULATES RECKLESSLY IN EVERYTHING.—SUFFERS A SUDDEN REVERSAL
    AND GETS SWAMPED.—OVERWHELMING DISASTER IN A BEAR CAMPAIGN, LED BY
    GOULD AND CAMMACK, IN WHICH KEENE LOSES SEVEN MILLIONS.—HIS
    DESPERATE ATTEMPTS TO RECOVER A PART ENTAIL FURTHER LOSSES, AND HE
    APPROACHES THE END OF HIS THIRTEEN MILLIONS.—HIS PRINCELY LIBERALITY
    AND SOCIAL RELATIONS WITH SAM WARD.


One of the most remarkable up-and-down lives known to Wall Street is
that of James R. Keene. His rise and fall are both of recent date.

Mr. Keene is of English parentage, and was born in London, about 48
years ago. He came to this country at the age of 17, lived in the South
and studied law there. He removed to San Francisco in 1853, and became
well informed in mining matters through several mining cases that were
put into his hands while practising at the bar in that city. I am told
he was also connected with a Western newspaper for some time. He caught
the speculative fever shortly after his arrival in California, and, as
it seems, abandoned both law and journalism to become a broker.

Keene had hard work for some time to make both ends meet, and his
struggle for existence in the wild West made serious inroads on his
health. His physician told him he must give up work, and advised him to
take a long sea voyage if he intended to prolong his life. Acting on
this advice, he secured his passage to the East. This was the turning
point in both his health and fortune.

Prior to his departure, Mr. Keene was urged to invest a few hundred
dollars in a mining stock then selling very low. The length of his
journey and the change of scene caused him almost to forget about his
investment, and the methods of communication between the far West and
the far East in those days were so very slow that he had hardly any
chance of being informed of his lucky venture until his return. As an
illustration of this slow transit of news at that time, it may be stated
that gold was discovered January 19, 1848, but the news did not reach
the Eastern States until the following December. It was authoritatively
announced in the President’s annual message, and created great
excitement. Mr. Alfred Robinson, with about twenty companions, were the
first to leave New York for the scene of the new El Dorado, on the bark
“John Benton.”

After nearly a year’s absence Keene was surprised to find, on his
return, that mining stocks had taken a prodigious bound upward and
carried the one in which he had invested with them. The mine had turned
out to be a veritable bonanza, and the stock which had cost him only a
few hundred dollars was then worth over $200,000.

Had Mr. Keene’s health not required his absence from the scene of
speculation the chances are that he would have disposed of his stock as
soon as it should have realized a few thousand dollars.

This was a wonderful realization for one who had been comparatively
poor, and was sufficient to turn the head of any ordinary man; but it
only made Keene more anxious for greater success, which he set himself
diligently to achieve.

The speculative craze was then intense and epidemic. Waiters and
chambermaids bloomed into millionaires with the rapidity of mushroom
growth. Mr. Keene secured a seat in the Board, and began to do an
immense business.

Flood, Mackay, Fair and O’Brien were then the prominent operators. The
speculative contagion spread rapidly over the coast, and soon imparted
its influence to the entire continent. Keene’s further investments were
crowned with similar success to that of his first venture, and even in a
greater ratio of profit.

Seeing the great and rapid advance in the stocks of the Comstock mines,
he naturally reasoned, like old Daniel Drew, that what had gone up so
high and so fast was bound to come down. There were but few people on
the coast at that time, however, in a mood to reason so soberly, and it
required more than ordinary nerve to make the experiment of selling
“short.” Mr. Keene, however, had the courage of his convictions, and
made an onslaught upon the market.

There Was a strong contingent to oppose him, for the wealthy syndicate
just named, with the Bank of California behind them, were his bitter
foes, and they did their best to crush him. In spite of their efforts,
however, the market began to yield under the pressure of Keene’s “short”
sales. In a little while the list gave way and stocks began to topple
from their dizzy eminence, even quicker than they had climbed to that
unprecedented height. Keene netted millions in their fall. He cleared
two and a-half millions in the Belcher and Crown Point mines, and over
half a million in Ophir.

So, in a few years, this poor lawyer, journalist, curbstone broker and
invalid, found himself the happy possessor of millions, his name covered
with speculative glory, and the fame of his fabulous fortune heralded in
every city, town, hamlet and mining camp between the two oceans.

Keene was still found on the right side of the market when the great
bubble burst, when the Bank of California went under, and its president,
Mr. Ralston, committed suicide while pretending to take a bath in the
Pacific Ocean.

In 1877 Mr. Keene started on a voyage for Europe for the good of his
health, and made a friendly call in Wall Street to see how business was
transacted there. He found the speculative attraction irresistible.
Mahomet had come to the mountain and was held by its magnetic power.

Although Mr. Keene had been a grand success in California, he had a good
deal to learn when he came to Wall Street. He soon discovered that
California tactics would not do here. He began to sell “short,” but
found the market failed to yield to the touch of his bearish wand as it
had done in San Francisco. When he sold ten thousand shares of a certain
stock the decline, instead of being a slump, as he expected, was only an
insignificant fraction, and the market soon reacted. Mr. Keene quickly
discovered that he was throwing water into a sieve, and stopped
sacrificing his California gold so lavishly.

A pool was then formed by Mr. Keene and Jay Gould to put down Western
Union. Keene and Selover sold the stock in large blocks, but it was
absorbed by some party or parties unknown as fast as it was thrown out.
It was gravely suspected that Mr. Gould was the wicked partner who was
playing this absorbing game behind the scenes. Major Selover brooded
over the matter so seriously that his suspicions began to take tangible
form and “body themselves forth” in violence.

The Major and Keene met one morning at the rear entrance of the Stock
Exchange, in New street, and interchanged intelligent glances on the
subject, after the fashion of those passed between Bill Nye and his
companion at the card table with the Heathen Chinee. Selover walked down
the street with blood in his eye, and meeting Mr. Gould on the corner of
New street and Exchange Place, caught him up by the collar of the coat
and a part of his pants and dropped him in the area way of a barber’s
shop.

The little man promptly picked himself up, went quietly to his office,
and made a transaction by which Selover lost $15,000 more. This was his
method of retaliation.

Mr. Keene next went into the Atlantic and Pacific Telegraph pool, and
was again fortunate. It has been frequently asserted that he lost
heavily in this deal, but I have it on good authority that he came out
ahead. In the deal with Gould in Western Union, he and Gould netted on
joint account $1,300,000. It is popularly believed that Gould “euchred”
Keene in this pool, but these are the bare facts.

Keene looked over the speculative field, and found that there had been
great depreciation in values prevailing here since the panic of 1873. He
had arrived in the nick of time to take advantage of the situation. He
was backed by four millions of money, and the few losses which he at
first sustained were not felt by him, and only seemed to initiate him
properly.

This new blood was just what Wall Street then wanted to put the wheels
of speculation in motion. Mr. Keene informed himself about the principal
stocks dealt in at the Exchange. He did so with remarkable rapidity.
They were all down to panic prices, and seeing that most of them were
intrinsically cheap, he bought heavily. Soon the turn came which
resulted in the high tide of speculation which continued with but slight
reactions all through 1879-80.

The advance was immense, as can be seen in the tabular statement at the
end of this book, and the profits were enormous.

Keene’s millions were doubled and trebled. He must have felt himself a
modern Crœsus.

Fully nine millions were added to the four which he brought from
California. He stood in the centre of that great pile, figuratively
speaking, the cynosure of all eyes from Maine to California, and his
fame was noised abroad in Europe.

Gould and other old speculators began to grow green with envy at Keene’s
unprecedented success. He seemed likely to exceed the wildest dreams
that ever the avarice of Monte Cristo or Daniel Drew had conjured up,
and with him the imaginary profits of Col. Sellers had become material
realities. His investments were nearly all in good, reliable securities.
No dubious paper acceptances nor rotten railroad items were mixed up
with his tangible fortune, which was without parallel in Wall Street for
its size and rapidity of accumulation.

The history of speculation was ransacked in vain for an illustration of
such amazing success in so short a period. But here, I regret to say,
this marvellous prosperity ends.

In an evil hour Mr. Keene was induced to spread himself out all over
creation, while he still retained his immense interest in stocks. He was
so flushed with successive victories that he began to regard failure
impossible, and thought he was a man of destiny in speculation, such as
Napoleon considered himself in war. He speculated in everything that
came along—in wheat, lard, opium and fast horses.

Keene’s attempt to get a corner in all the grain in the country,
however, was a signal failure. The very week that Foxhall won the Grand
Prix in Paris he himself was sadly beaten in the speculative race by the
steady going farmers of the West, who sent their wheat to market quicker
than he could purchase it with his thirteen million dollars, and all the
credit which that implied.

All of a sudden, reversal in the tide of speculation set in. Mr. Cammack
was quick to perceive that Mr. Keene was extending his lines and his
ventures. He had a conversation with Mr. Gould. They became convinced
that the Californian must soon be obliged to leave some of his
enterprises in a weak and unguarded position. It was impossible that he
could take care of them all. These two champion bears united their
efforts to upset the market, and each day brought additional force to
their aid. By dint of perseverance their efforts commenced to bear
fruit, and it was apparent that they would soon be rewarded with
success. The bears began to multiply while the bulls diminished, and the
remnant of the latter that were left were anything but rampant at that
time.

The bankers became timid. The brokers were inspired with the same spirit
and were still calling out for more margin. Loans were called in as a
part of the programme of a bear campaign, and all the machinery of
depression was put in active motion. Prices were torn to pieces.
Properties that had been considered good as solid investments for a long
turn, were mercilessly raided, and some of them shattered to fragments.
In fact, there was a regular panic. In the general slaughter, many of
the brokers sold Mr. Keene’s stocks out. His wheat was also sold in
immense quantities at great sacrifice, and his load was lightened all
around, even more quickly than it had been heaped up.

His losses are said to have amounted to seven millions of dollars at
this time.

The manly efforts of Mr. Keene to recover these losses, as is usually
the case in such instances, only resulted in further misfortune.
Disaster followed disaster, and as he became desperate in his efforts to
get back something, his losses became constantly greater, until nearly
the whole of his immense pile was buried in fruitless efforts to recover
a portion of it.

Great sympathy has been felt in Wall Street for Keene since his failure,
for the Street had never before found such a liberal man. By general
consent he decidedly took the palm in this respect, not only from all
his speculative contemporaries, but the archives of Wall Street since
the days of the first meetings of the brokers in the Tontine Coffee
House, opposite the sycamore tree, early in the century, can furnish no
such parallel of princely liberality as that of James R. Keene during
the period of his matchless prosperity.

The parasites that waxed fat on his bounty and business are numerous. At
least a score of Wall Street brokers were raised from penury to wealth
by the commissions which they made out of him. Many of them are to-day
living in luxury who started with a desk and a few plain office chairs
to do business for the California millionaire, and now he is
comparatively poor, and thrown on the slender resources of his wife.

Keene arose from nil to be worth thirteen millions. He is now back where
he started.

A full and correct history of Keene’s beneficences would fill this
volume, and however much I admire him, I cannot afford to give him so
much space.

I shall relate one remarkable instance of his unbounded generosity,
however, as the object has been so universally known, and was himself
such a popular society man.

Long prior to Mr. Keene’s advent in Wall Street, Sam Ward had been a
conspicuous figure in Washington and Wall Street, and had acquired a
society reputation in Europe.

This gentleman was originally forced into prominence by his marriage
with Miss Astor.

Mr. Ward had changed from one thing to another until finally he took up
his abode in Washington, and became a lobbyist.

When Mr. Keene came to New York with his four millions of dollars, which
he had made when the majority of New York investors had been on the
losing side, dropping their money almost as fast as water runs down
hill, through the unprecedented shrinkage in values, there was a wide
field for profitable investment. This shrinkage had been going on from
the panic of 1873, step by step downward until 1878, when society had
reached a stratum by dint of levelling down that placed almost everybody
upon an equality. Property, in many instances, became a serious
encumbrance instead of a benefit, and many were glad to be rid of the
responsibility of their holdings for what was sufficient to settle the
mortgage. Everybody felt poor, and was really so, with a few fortunate
exceptions.

Mr. Keene arrived here at the most fortunate moment for investment.
Everything was down to bed-rock prices. He, therefore, became an object
of actual curiosity, and was as much of a lion in our midst as he had
been in San Francisco.

He was not only the favorite of fortune, but a favorite of society,
which generally go together with curious inconsistency in our social
democracy.

One of the first acquaintances Mr. Keene made on his arrival was this
great society man, the celebrated Sam Ward, who at once recognized his
social worth, not only in dollars and cents, but in considerable
liabilities, genuine representatives of dollars and cents. The more
tangibly he realized this fact the more tenacious was his attachment,
until Mr. Keene found Mr. Ward the very _beau ideal_ of Scriptural
fraternity, namely, “a friend that sticketh closer than a brother.”

Wherever Keene appeared, though apparently alone, it was safe to bet
that Ward’s shadow could soon be seen.

It is said of Seneca, when he observed a house falling, and nobody near
it, that he asked: “Where is the woman?” So Keene’s presence naturally
suggested Ward to the mental vision of every Wall Street man and every
sporting man.

Whether it was up-town or down-town, at Newport, or in London, at the
Derby, or the Grand Prix, it was all the same, where Keene was, there
Ward soon appeared with the promptitude of the genius that stood before
Aladdin when he touched his wonderful lamp or rubbed his magic ring.

This self-sacrificing friendship and ardent devotion on the part of Mr.
Ward was recognized by Mr. Keene in the most tangible manner. He made an
investment for his protege, of $50,000 in solid securities, placing them
in the hands of trustees, so that his ward received the income therefrom
of three thousand dollars, as an annuity, for life.

Mr. Keene bestowed numerous benefits on other newly made acquaintances,
of which this is a fair sample.

A Pacific coast biographer draws the following graphic sketch of Keene,
some time after his departure from California, which is curious reading
in the light of the events which I have related:

    “No series of sketches of men, prominently identified with the
    stock interests of the Pacific coast, would be complete without
    a pen portrait of James R. Keene, the free lance operator of the
    San Francisco stock market, who dared to beard the Bonanza Kings
    in their den, and came off victorious with many shekels of gold
    and silver. Mr. Keene is no longer with us. Some time since,
    after having realized largely on his stock ventures, he
    concluded to take a trip East, to be extended to Europe, unless
    on the Atlantic seashore he regained the health which too active
    exertions on the Pacific had impaired. And so he went with his
    family. Those who bade him God-speed expected to see him return
    within a few months, certainly within a year, with recovered
    health, new ambitions, new conquests to make. But he comes not.
    New York has presented more attractions than his old love, San
    Francisco. Railroad stocks, Jay Gould, Sam Ward, Rufus Hatch,
    Long Branch, Trenor W. Park, Newport, have been too many
    attractions for Jim Keene. He fell into the New York market as
    easily as any man generally falls among thieves—but he seems to
    have got the best of the thieves in every issue. When it was
    rumored that Keene contemplated making Wall Street his
    headquarters, his old San Francisco friends generally wrote out
    their calendars, and figured up when ‘Jim’ would be back,
    bursted out and out, looking for a job. A few who had abiding
    faith in Keene, who knew his pluck, who had gauged his
    capacities, who had measured his horse sense, consulted their
    calendars and said: ‘Jim is gone! He never will come back to
    couch his lance in such a narrow field as ours. New York is big,
    Wall Street is big—just about the size of institutions that
    Keene wants to tackle.’ The few were right. Keene hasn’t come
    back to look for a job. He has tried conclusions with the
    smartest of the Wall Street operators, and, novice that he was,
    came out triumphant. The California goose that was to be plucked
    wasn’t plucked. Even Jay Gould, with all his shrewdness, gave it
    up as a bad job; and Vanderbilt condescends to confer with Keene
    on momentous occasions.

    “Keene started in his career as a stock operator years ago in
    San Francisco. He first was conspicuous as an impulsive,
    dare-devil sort of a street broker, acting for big firms, with
    an occasional dash for liberty and himself. Gradually he worked
    his way from steerage to cabin, from the private’s ranks to the
    position of the lieutenant of the watch, then to officer of the
    day, and finally, boss of the stock concern. No man in the stock
    market exercised so much influence as Mr. Keene. He had hosts of
    friends, friends whom he grappled with hooks of steel, ready to
    swear by him on any and every occasion. Generous to a fault,
    brusque in manner at times, but with the heart of a woman, ready
    to melt at a moment’s notice, open-handed and open-hearted to
    the appeal of even an acquaintance, no wonder that Jim Keene was
    the ideal of the market.”

It is not generally known that Keene was chiefly instrumental in
rehabilitating the Bank of California after the death of Ralston. He
raised a large subscription in the Stock Board, and got the Hon. William
Sharon, D. O. Mills and “Lucky” Baldwin to subscribe a million each, and
he put in a million himself. The bank was thus enabled to meet all
immediate demands, and a threatened panic was averted.

At the time of Keene’s failure he was chief of a syndicate which had
purchased 25,000,000 bushels of wheat, which would soon have netted many
million dollars of profit, if it had been firmly held, but one or two of
his partners in the pool became timid and sold out. The syndicate went
to pieces, and both profits and capital vanished. He laid his misfortune
mainly to the newspapers which raised such a universal cry about the
immense “corner” that was being manipulated in wheat, threatening a
famine in the great staple of human life.

Keene was next shaken out of his stocks. This was done chiefly by an
ably concocted scheme of the bears, and he had the mortification of
seeing the stocks which he had held advance within a few months’ time to
a point that would have enabled him to realize ten million dollars, if
he had been able to hold them.


------------------------------------------------------------------------




                             CHAPTER XXVI.

             OUR RAILROAD METHODS.


DECEPTIVE FINANCIERING.—OVER-CAPITALIZATION.—STOCK “WATERING.”—FINANCIAL
    RECONSTRUCTIONS.—LOSSES TO THE PUBLIC.—PROFITS OF CONSTRUCTORS.—BAD
    REPUTATION OF OUR RAILROAD SECURITIES.—UNJUST AND DANGEROUS
    DISTRIBUTION OF THE PUBLIC WEALTH.


The following chapter, on the subject of “Our Railroad Methods,” was
delivered by me as a Fourth of July address at Mr. H. C. Bowen’s Annual
Symposium at Woodstock, Conn., to an assemblage of over 3,000 people. It
was so favorably received by the press and the public in general, that I
have been encouraged to publish it in this book without any material
changes:

    In the whole range of our law-making there is no one branch in
    which there has been such an utter lack of judgment, foresight
    and just regard for the rights of the citizen, as in the
    legislation provided for our railroads and railroad companies.
    For the most part, the statutes relating to this class of
    corporations are a set of general enactments, loosely defining
    the large powers granted to the incorporators, comparatively
    silent on the duties and obligations of the companies to the
    public, and conferring upon them a virtual _carte blanche_ as to
    their methods of finance and of conducting their business.

    In a country whose products are mainly bulky, and have to be
    carried to markets hundreds or thousands of miles distant, it is
    of the first moment that its railroads should be built with the
    strictest economy and on the lowest possible capitalization. The
    low cost of land and the cheapness of material for road-bed are
    especially favorable to our securing this advantage; but the
    laws have permitted a system of inflated financiering which
    neutralizes these natural adaptations and immensely increases
    the cost of transportation.

    As railroads have to be largely built with borrowed money, their
    construction in this country afforded an opportunity for
    establishing credit relations with the great lending centres of
    Europe, which might have been of incalculable value in promoting
    the development of our vast resources in various directions.
    England, Holland and Germany have indeed loaned us very large
    amounts for railroad enterprises; but the law has permitted
    these undertakings to be conducted with so much concealment,
    misrepresentation and actual fraud, and has so disregarded the
    rights of the bondholders, that American credit has become a
    scandal and a by-word on the European bourses. The result is,
    that foreign capitalists are seeking other fields of investment;
    and their respective Governments are encouraging them by opening
    up new colonies, and thus getting fresh sources for the supply
    of products which otherwise would have continued to be readily
    taken from the United States. Such are the rewards of immoral
    financiering; and these bad methods are directly traceable to
    the encouragements afforded by our negligently constructed
    railroad laws.

    Perhaps I may best succeed in making myself understood on this
    subject by illustrating the way in which our railroads are
    usually built. Under the laws of the State of New York—which are
    a fair sample of the laws of most other States—a number of
    persons form a company under the general railroad laws,
    registering at Albany the proposed route of the road, the amount
    of capital stock and bonds to be issued, and a few other
    particulars required in the papers of incorporation. The
    incorporators then proceed to form themselves into a syndicate
    or company, for the purpose of contracting to build and equip
    the road. Here comes the first step in the system of “crooked”
    financiering. In their capacity of incorporators, the same men
    make a contract with themselves, in the capacity of
    constructors. Of course, they do not fail to make a bargain to
    suit their own interests. They would be more than human if they
    did. Usually, the bargain is that the construction company
    undertakes to build the road for 80 to 100 per cent. of the face
    value of the first mortgage bonds, with an equal amount of
    stock, and sometimes also a certain amount of second mortgages
    thrown in, virtually without consideration. The first mortgages
    are supposed to represent the real cash outlay on the
    construction and equipment; but, as a matter of fact, the true
    cash cost of the work done and materials furnished ranges from
    60 to 80 per cent. of the amount of first lien transferred to
    the constructors. The Construction Company disposes of the
    bonds, partly by negotiating their sale to the public through
    bankers, at an advance upon the valuation at which they had
    received them, and partly by using them in payment for rails and
    equipment. Beyond the profits made from building the road for
    the first mortgage bonds, there remains in the hands of the
    constructors the entire capital stock and any second mortgage
    bonds they may have received, _as a clear bonus_, to be held for
    future appreciation, and to keep control of the Company and be
    ultimately sold on a market deftly manipulated for that purpose.

    This is the way in which a large majority of our railroads have
    been and others are still constructed. It will thus be seen that
    the actual cash cost of a railroad is ordinarily less than 60
    per cent. of the stock and bonds issued against the property,
    and that its first mortgage exceeds the amount of the legitimate
    actual cost of the road.

    The basis of all the discredit, the embarrassments, the
    bankruptcies and the robberies of our railroad system is thus
    laid at the inception of the enterprises. They rest upon an
    intrinsically rotten and dishonest foundation; and the evil is
    far from having reached the end of its mischief to the
    financial, political and social interests of the country. In
    some few cases, railroads thus exorbitantly capitalized have
    proved able to earn the interest on their debt, provide for
    additional outlays on construction and betterments, and even to
    pay dividends on their stock; but, in a large majority of cases,
    they have had to undergo a process of financial reconstruction,
    in order to bring the debts of the Company within its ability to
    meet its fixed charges. It is not a risky estimate to suppose
    that of our present 125,000 miles of railroad, with its
    $7,500,000,000 of stock and debts, 60 per cent. has undergone
    this process of debt-scaling and rehabilitation. Were it not
    that the new roads have opened up new country for settlement,
    which has become an immediate source of traffic, these bad
    financial results would have been more general and worse than
    they have proved to be. The risks attending the building of
    lines into unsettled regions ought to have been a reason why
    they should be constructed upon conservative principles; but, in
    reality, the prospects of settling new populations and of
    tapping new sources of wealth, have been so magnified to the
    eyes of distant and credulous lenders as to enable the
    speculative constructors to easily consummate their illegitimate
    schemes.

    The general result of this system of financiering has been to
    deprive the legitimate original investors of their chances of
    making a fair return out of their investment. As a rule, the
    bondholders have provided all the capital expended, and the
    stockholders have invested nothing. The bondholders incur all
    the risks; the stockholders have no responsibilities. If the
    enterprise proves a success, the bondholders get their interest,
    while the stockholders, without a dollar of original outlay, get
    vastly more than ever falls to the mortgage creditors through
    the stock becoming an instrument of profitable speculation. If
    the enterprise is a failure, the bondholder has to forego
    interest and finally to accept a new mortgage for a less amount
    and at a lower rate of interest; whilst the original stockholder
    has, in the meantime, made money out of artificially “booming”
    the shares in Wall Street.

    The profits realized on these speculative constructions are
    enormous, and have constituted the chief source of the
    phenomenal fortunes piled up by our railroad millionaires within
    the last twenty years. It is no exaggeration to characterize
    these transactions as direct frauds upon the public. They may
    not be such in a sense recognized by the law, for legislation
    has strangely neglected to provide against their perpetration;
    but, morally, they are nothing less, for they are essentially
    deceptive and unjust, and involve an oppressive taxation of the
    public at large for the benefit of a few individuals, who have
    given no equivalent for what they get. The result of this system
    is that, on an average, the railroads of the country are
    capitalized at probably fully 50 per cent. in excess of their
    actual cost. The managers of the roads claim the right to earn
    dividends upon this fictitious capital, and it is their constant
    effort to accomplish that object. So far as they succeed, they
    exercise an utterly unjust taxation upon the public, by exacting
    a compensation in excess of a fair return upon the capital
    actually invested. This unjust exaction amounts to a direct
    charge and burthen on the trade of the country, which limits the
    ability of the American producer and merchant to compete with
    those of foreign nations, and checks the development of our vast
    natural resources. In a country of “magnificent distances,” like
    ours, the cost of transportation is one of the foremost factors
    affecting its capacity for progress; and the artificial
    enhancement of freight and passenger rates due to this false
    capitalization has been a far more serious bar to our material
    development than public opinion has yet realized. The hundreds
    of millions of wealth so suddenly accumulated by our railroad
    monarchs is the measure of this iniquitous taxation, this
    perverted distribution of wealth.

    This creation of a powerful aristocracy of wealth, which
    originated in a diseased system of finance, must ultimately
    become a source of very serious social and political disorder.
    The descendants of the mushroom millionaires of the present
    generation will consolidate into a broad and almost omnipotent
    money power, whose sympathies and influence will conflict with
    our political institutions at every point of contact. They will
    exercise a vast control over the larger organizations and
    movements of capital; monopolies will seek protection under
    their wing; and, by the ascendancy which wealth always confers,
    they will steadily broaden their grasp upon the legislation, the
    banking and the commerce of the nation.

    The illegitimate methods by which the wealth of this class has
    been accumulated cannot always remain a mystery to the masses.
    The time will come when every citizen will clearly perceive how
    his interests have been sacrificed for the creation of this
    abnormal class; and, when that time comes, a series of public
    questions will arise that will strain our political institutions
    to their very foundations. Already the working masses begin to
    see the dim outline of the gigantic wrong that has been
    inflicted upon them in common with all other classes. If they do
    not understand the exact method by which a portion of the
    rewards of labor has thus been diverted from them, they clearly
    comprehend which is the class responsible. The labor troubles
    that have so seriously shaken confidence during the spring of
    this year have been largely stimulated by an idea that a serious
    wrong has been done to the workman in the creation of these
    abnormal fortunes. It is not surprising—although it may lead to
    disappointing results—if workingmen should reason that, if
    railroads can afford to make a few men so wonderfully rich, they
    can afford to pay their employees higher wages and for shorter
    hours. Nor can we wonder if, when capitalists are on every hand
    piling up their wealth by the tens of millions, the laborer
    should conclude that he ought to be able to get a few dollars a
    week more, or deduct an hour or two off his day’s work, without
    very seriously hurting the employing class. This may be and is
    very fallacious reasoning; but it is what might very naturally
    be expected under these circumstances, from a class who are not
    trained to think beyond surface depth. It will be of no avail to
    tell the workmen that this unjust distribution of wealth is
    final and irrevocable; that there is no power of redress by
    which a wrong of this nature can be righted; or that, as voting
    citizens, they are as much responsible as anybody else for
    permitting the neglects and defects of legislation that have
    made these inequalities possible. This class never reason either
    calmly or logically, and it will take a great deal of fruitless
    agitation to satisfy them of the hopelessness of their methods
    of seeking reparation.

    The Socialistic seductions which have captivated such large
    masses of the working population of Europe will all the more
    readily find acceptance among our millions of laborers because
    they have before their eyes such conspicuous instances of the
    unequal division of wealth and of the overwhelming power of
    organized capital. Certainly, if any facts could be supposed to
    justify the doctrines of Socialism and Communism, it would be
    the sudden creation of such fortunes as those which, within a
    very few years, have come into the hands of our railroad
    magnates. A few years later, the public will understand much
    better than it now does how facts like these have contributed to
    the raising of questions of government which will dangerously
    test the cohesion and endurance of our political institutions.

    Artificial methods of establishing our railroad corporations
    have naturally led to artificial methods of regulating their
    operations. Over-capitalization incapacitates the roads for
    competition; for it necessarily holds out a temptation to
    parallel existing roads by others at a lower capitalization. As
    roads running between the same points were multiplied,
    competition for “through” business became more active, until not
    only were dividends threatened on some of the best lines, but
    some roads were driven into default on their mortgages. At this
    point the “pool” was introduced—a device by which all lines
    running between the same points agree to put their business from
    through traffic into a common aggregate, to be distributed among
    the several members according to certain accepted percentages.
    It was hoped that, in this way, uniformity of charges could be
    maintained, at such rates as were necessary to make the business
    satisfactory to each member. This, however, was soon found to be
    a step “from the mud into the mire.” The pool was discovered to
    operate as a premium on the construction of new parallels.

    Speculators were quick to perceive that they could build new
    lines on the same routes for much less cost than the old ones,
    and that, with a lower capitalization, they could easily compel
    the pool to admit them to membership, with all the privileges of
    a ready-made traffic and with all the guarantees the pool could
    afford of exemption from competition, and of ample charges.
    Thus, the pools that, in the first instance, were made necessary
    through the evils of speculative methods of construction,
    became, in turn, the source of a new and even worse form of the
    same evil. New roads were built, or sets of old detached ones
    were connected, so as to afford additional parallels to the
    existing trunk lines, with no other object than to compel the
    latter to support them by dividing with them a portion of their
    traffic, or to accept the alternative of a reckless cutting down
    of rates. The end to this viciously excessive system of
    construction can only come when the pools have been reduced to
    such a low condition that they will no longer care to take
    newcomers into their co-partnership; in which case speculative
    builders will see no chance for profit in such ventures. The
    fate of the “Nickel Plate” and of the West Shore speculations,
    by which nearly 1,000 miles of needless road was built to divide
    traffic with the Vanderbilt system, serves as a warning against
    the danger of building roads to live upon pool support; but,
    nevertheless, the Eastern trunk pool still stands exposed to a
    great deal of harassing outside competition from possible and
    contemplated new combinations of existing detached links. Routes
    of the latter kind are even more formidable competitors than new
    lines, because they can be provided at a lower capitalization,
    and have already the support of an established way traffic. It
    would not be surprising if, within the next three or four years,
    several new routes should in this way be established between New
    York and Chicago.

    It will thus be seen that the very contrivance intended to stave
    off the vicious effects of artificial capitalization is
    contributing, by a sort of punitive process, towards the end of
    reducing earnings to a just ratio to the true value of the
    properties. The weakness of the pool, arising from its
    temptations to new competitors to enter the field, is not the
    only cause of its failure. Up to this time it has been found
    impossible to find a form of pool stringent enough to restrain
    the members from cutting rates against each other. The modes of
    possible evasion are so numerous, the sacrifices of special
    advantages that each member has to make are so galling, the
    small share that remains to each road in a numerously divided
    business is so small, and the temptations of agents to get
    freight “by hook or by crook,” in dull times are so
    irresistible, that the strictest watching and the severest
    penalties fail to secure a faithful observance of the pool
    agreements. Much forbearance is shown towards transgressions,
    and deliberate violations have to be condoned or connived at;
    but, all the time, the pools are in imminent danger of
    jealousies and breaches of faith causing their disruption. No
    sooner have they won public confidence by maintaining harmony
    through a period of prosperous business, than the public wake up
    to find that some member has been secretly “cutting,” and the
    agreements are torn to pieces.

    The result is, that the public have lost all confidence in the
    ability of the pool to regulate competition; and, still worse
    for the railroads, their managers are losing faith in them also.
    The great crucial test of this expedient so far as respects the
    Eastern lines, is likely to come when the number of smaller
    outside competitors, of the character just alluded to, comes to
    be increased. The pool will not be likely to admit them into its
    fold, which already includes too many diverse interests to
    permit of harmony; and if it did, the danger of disagreements
    and disruption would be only thereby increased. And yet, if
    those routes are shut out, they will act as so many free lances,
    attacking the older lines in every direction, and doing business
    at rates which will leave the pool companies no alternative but
    to follow suit. In this dilemma, the outlook for some time ahead
    is not an encouraging one for the older companies. To my view,
    it seems very probable that their original sins of construction
    and their subsequent transgressions of stock “watering” are
    about to find them out. The natural law of competition is a
    terrible foe to the violators of commercial justice. It is the
    inevitable police power of trade. Its working may be evaded for
    a time; its final conquest over wrongs and monopolies may
    sometimes be delayed beyond the limits of human patience, and
    men may at such times lose confidence in its power to right the
    wrongs of society; but its ultimate success in the restoration
    of equity and fair-play is as certain as the rising of the sun.

    My absolute confidence in the ultimate triumph of this principle
    prompts me to venture the assertion that, _at no very distant
    period_, the wrongs practised in the original construction of
    our railroads and in the subsequent “waterings” of their stocks,
    will be compensated through competition adjusting the profits of
    the companies to the equivalent of a fair return upon a _true
    valuation_ of the properties; that is, a value measured by what
    they are able to earn under the conditions of free competition
    and the now current cash cost of providing like facilities.
    That, it appears to me, is the solution towards which our
    railroad problem is now steadily working; and neither
    Congressional legislation, nor State regulation, nor the
    resistance of organized capital, can be expected much longer to
    stave off that result.

    It may, however, be very properly asked, whether legislation
    has no duty in the premises? To me, it appears that it has a
    very weighty one. The consequences of the original neglect
    to prescribe proper regulations for the construction,
    capitalization and financial management of railroads has
    been so fully exposed by their past history, that the
    Legislatures will greatly err if they neglect to impose
    restrictions upon future corporations that will prevent
    farther repetition or perpetuation of the evils. When the
    Government bestows upon railroads important privileges and
    franchises, under which fundamental private rights are held
    in abeyance for the common good, it is due to the public
    protection that the recipients of these favors should be
    held under restrictions which will prevent them from abusing
    the privilege to the public disadvantage.

    When a railroad company capitalizes its property at double its
    actual cost, and seeks to collect charges calculated to yield
    dividends upon such false capital, it grossly perverts and
    abuses the privileges conferred by its charter, and virtually
    perpetrates a public robbery. This appears to be a perfectly
    plain proposition, and yet this glaring wrong has been so long
    tolerated that not only the railroads, but a portion of the
    public even, have come to regard it as a sort of right inherent
    in these corporations. One of the first duties of the State
    Legislatures, therefore, is to enact laws requiring that the
    stocks and bonds issued against any railroad hereafter built
    shall, in no case, exceed in the aggregate the _true cash cost_
    of the property; the penalty for the violation of this
    restriction to be forfeiture of charter. The responsibility of
    managers should be definitely fixed. All extensions, betterments
    or improvements should be provided for by issues of stock or
    bonds on like conditions. The issue of mortgages should be
    restricted within 60 per cent. of the true cost of the property.

    In order to prevent wrongful speculative profits being realized
    by the incorporators, they should be prevented from becoming the
    constructors of their road, directly or indirectly; and all
    contracts for construction, equipment, extensions or
    improvements should be made upon open competitive bids, the
    lowest bid to be accepted, with substantial guarantees for the
    faithful performance of the contract. Also, it should be made
    the duty of a board of State railroad commissioners to see to it
    that all these conditions are strictly complied with.
    Regulations should be provided prohibiting issues of stock for
    any other than construction or equipment purposes, forbidding
    the payment of dividends not actually earned, and enforcing the
    amplest publicity of details relating to current traffic and the
    financial affairs of the companies.

    Had our original railroad laws incorporated provisions of this
    character, our railroads would have all along ranked as the
    safest and most stable investments of the country; the discredit
    that hangs over our corporate enterprises would have been
    averted; transportation would have been done at lower rates with
    steadier charges, and we should have been saved the social and
    political excrescence of an aristocracy based upon ill-gotten
    wealth. After our bitter experience of the dangerous results of
    neglecting to guard the railroad interest by some such
    restraints as the foregoing it surely is not too early now to
    apply these safer methods to all future enterprises of this
    character. Not only is such legislation due as a measure
    necessary for the protection of our commerce and investors, but
    it would go very far towards remedying the evils that have grown
    up under the old and badly regulated system. To a man of
    business it is hardly necessary to point out what would be the
    competitive advantages of roads constructed under the proposed
    regulations. As a rule, their capitalization would not exceed 50
    to 60 per cent. of that of the older companies, and they could,
    therefore, be run upon a much lower rate of charges.

    The thoroughly conservative nature of their organization would
    bespeak fer them a degree of public confidence which would
    enable them to get all the capital needed for really legitimate
    undertakings, whilst purely speculative ventures would be put
    under conservative check. Under these circumstances new roads
    could do a profitable business, and yet compete disastrously
    with the old excessively capitalized companies. The ultimate
    result of this competition from the new order of roads would
    inevitably be to reduce the earnings of the older class to a
    point which would admit of interest and dividends being earned
    _only on the same rate of capitalization as existed among the
    new-system companies_. In other words, the effect of the honest
    method of capitalization here suggested would be to squeeze all
    the “water” out of the old companies, and to bring them in
    effect, though possibly not in form, to the same financial level
    as the new.

    If my reasoning here is correct, there is cause for our great
    railroad capitalists to look out for the security of their
    investments. The basis for their wealth may prove far less
    certain than they have imagined it to be. With the prevailing
    and steadily increasing public feeling against the methods of
    railroad capitalists and the working of our railroad system,
    what assurance can there be that, when a remedy for these
    corporate wrongs comes to be clearly propounded, it will not be
    eagerly urged upon the attention of the Legislatures and adopted
    without much ceremony? The dash of a Governor’s pen is,
    therefore, all that stands between the railroad millionaire and
    the sudden extinction of a large portion of his inflated paper
    wealth. Is this a chimerical conclusion? The question, it seems
    to me, deserves a far more serious consideration than those most
    vitally concerned have yet bestowed upon it. No man can
    confidently deny the possibility of such a result as is here
    indicated. No one familiar with the present public temper on the
    subject of railroad monopoly can reasonably question _the
    probability even_ of a settlement of this kind being ere long
    resorted to. Under these circumstances, it is a question very
    pertinent to the times, whether the foundation of our railroad
    aristocracy is as broad or as firm as it has been supposed to
    be, and whether a healthy solution of the great railroad problem
    is as difficult and as remote as some despondent people have
    represented it to be.


[Illustration:

  A ONE THOUSAND DOLLAR BOND OF THE STATE OF GEORGIA.
  Repudiated.
]


------------------------------------------------------------------------




                             CHAPTER XXVII.

          GEORGIA REPUDIATION BONDS.


HOW A SOVEREIGN SOUTHERN STATE CHEATED THE NORTHERN MEN WHO HELPED HER
    IN DISTRESS.—A NEW WAY TO PAY OLD DEBTS.—CANCELLATION BY REPUDIATION
    OF JUST CLAIMS FOR CASH LOANED TO SUSTAIN THE STATE GOVERNMENT,
    BUILD PUBLIC SCHOOLS AND MAKE NEEDED IMPROVEMENTS.—BOTTOM FACTS OF
    THE OUTRAGE.—THE RECENT ATTEMPT TO PLACE A NEW ISSUE OF GEORGIA
    BONDS ON THE MARKET, WHILE THE OLD ONES REMAIN UNPAID.—THE CASE
    BEFORE THE ATTORNEY-GENERAL OF THE STATE OF NEW YORK.—HE EXAMINES
    THE LEGAL STATUS OF THE BONDS IN CONNECTION WITH THE SAVINGS
    BANKS.—HIS DECISION PROHIBITS THESE INSTITUTIONS FROM INVESTING THE
    HARD EARNINGS OF THE WORKING PEOPLE IN THESE DOUBTFUL AND DANGEROUS
    SECURITIES.—A BOLD EFFORT TO HAVE THE FRESH ISSUE OF GEORGIA PAPER
    PUT UPON THE LIST OF LEGITIMATE SECURITIES OF THE NEW YORK STOCK
    EXCHANGE FIRMLY OPPOSED AND EVENTUALLY FRUSTRATED.—REFLECTIONS ON
    THE BAD POLICY WHICH ADVOCATED REPUDIATION AND HAS INJURED GEORGIA
    CREDIT IN THE EYES OF THE WORLD.—GENERAL OBSERVATIONS UPON THE
    NATURE OF REPUDIATION OF STATES’ DEBTS, AND THE MORAL INFLUENCE ON
    THE GENERAL CREDIT OF THE UNITED STATES.—SUCCESSFUL APPEAL OF
    BONDHOLDERS OF THE REPUDIATED BONDS TO THE STOCK EXCHANGE.


One of the saddest events of my business experience arose from the
purest motives on my part, to aid the South in the work of
reconstruction, in the way of which, as I have stated in the previous
chapter, President Johnson threw the greatest obstacles.

I ventured my money and offered my friendship at a time when that
section of the country stood in need of both money and friendship, and
used my best efforts to bring about the return of such feelings of
fraternal harmony as should exist among all the citizens of this great
country. For these kindly offices I was treated with the basest
ingratitude by some of the Southern States.

I held a large amount of Southern securities, all issued for full value
received, which went into the internal improvements of that section,
enhancing the taxable value of its property. These securities bore the
great seals of the Sovereign States of Georgia and Alabama.

The dishonor attaching to repudiation in these instances has been
brought out in more glaring colors, from the fact that these States have
long since become abundantly able to liquidate their obligations, and to
erase the black spot from the escutcheons of their chivalrous people.

The people themselves are not so much to blame as the disreputable
politicians into whose hands the management of their affairs had fallen.

It is of the sovereign and high-toned State of Georgia that I have most
occasion to complain. On account of the bad faith of that State, through
her political managers, I suffered a terrible reverse in my fortune,
which came near crushing out my financial existence.

It is not, therefore, surprising, I think, that having placed my faith
in the integrity of that State and the promises of its officials and
governing power, and having been so basely deceived, that I should now
be aroused to act in self defence, fight for my rights and do all in my
power to cause the bonds or securities for which I paid good money to be
redeemed, and to have my just claims satisfied. It has therefore, been
incumbent upon me to leave no stone unturned in fighting this battle,
with the hope of recovering the money, or a part of it, that was filched
from me through the ostensible defalcations of these sovereign and
chivalrous States.

About thirteen years ago the repudiation which has reflected such
disgrace upon the South became prevalent in that section, and took the
character, for a time, of a severe financial epidemic.

It was for this reason that the Legislature of the State of New York, as
well as the legislatures of several other States, considered it
necessary for the protection of the savings banks, which are the
custodians of many hundreds of millions, chiefly of the hard earnings of
the working people, to prohibit these institutions from investing in, or
loaning upon, the securities of any State in the Union that had within
ten years previously repudiated any of its lawful obligations.

The laws of the State of New York, in chapter 409, section 260, of the
laws of 1882, provides that savings banks shall be prohibited from
investing money in stocks or bonds of any State which, in the language
of the statute, “has within ten years previous to making such investment
by such corporation defaulted in the payment of any part of either
principal or interest of any debt authorized by any legislature of such
State to be contracted.”

It was for this reason that the newly issued securities of some of the
Southern States have been unable to find a resting place in the monied
institutions of the North.

The State of Georgia, recently finding that she had some obligations
becoming due, and seeing that money was cheap in the North, and that
more than ten years had expired since she repudiated her former
obligations, thought there was a good opportunity of issuing a fresh
batch of these so-called securities, similar to those that had been
dishonored in 1873.

The politicians of Georgia thought there was a good opening in the State
of New York to remove the restriction placed upon the savings banks in
1882. They saw that the Governor and the Legislature were both
Democratic, with a Democratic Attorney-General also, and therefore
determined to take advantage of this political condition, which they
supposed was highly favorable to their scheme of stealing a march upon
the holders of the old repudiated bonds of Georgia, who had been chiefly
instrumental in getting the act passed for the safety of savings banks’
depositors in the State of New York.

The Georgia politicians aimed at having the restriction of the savings
banks removed, so far as it related to their State, in order to afford
them an opportunity of issuing several millions of 4½ per cent. bonds
for the purpose of taking up an old issue of the 7 per cent. bonds, thus
effecting a considerable saving to the taxpayers of their State in this
reduction of interest.

With the purpose of having this matter arranged as quietly as possible,
two of the ablest lawyers of the State of Georgia were surreptitiously
sent to Albany to make argument before the Attorney-General, Mr. Denis
O’Brien, and to attempt to convince that official, in a very plausible
manner, why the restriction should be removed from the savings banks in
the case of Georgia. No opposition was expected, and the enthusiastic
hope was indulged by those who were engineering the scheme that upon
this _ex-parte_ statement of these astute Georgia lawyers a favorable
opinion would be elicited from the Attorney-General of this State, which
would justify the Superintendent of the Bank Department in issuing an
order to remove the restriction which precluded the savings banks of New
York from investing in Georgia bonds, on the ground that the State had
not repudiated within ten years. The repudiation could be traced back
thirteen years, instead of ten.

Pursuant to this application, a small item of a few lines appeared in
one of the Atlanta papers, which stated that Mr. Calhoun had just
returned from Albany, having made a very strong and forcible appeal to
the Attorney-General there, urging him that the restriction on the part
of the savings banks be removed so far as Georgia was concerned.

This item was telegraphed to me, and on receiving the despatch I
notified the holders of the repudiated bonds, and wired the
Attorney-General asking him when a hearing of the other side could be
had.

When the day arrived for the hearing before the Attorney-General, Mr.
Calhoun was surprised to find that there was any opposition to his
application, as the business had been so quietly managed that it was
supposed by the Georgia members of the Bar that the bondholders would
hardly be apprised of it until everything should be fixed according to
the pre-arranged programme, and in favor of the repudiating State
obtaining fresh and unlimited credit without settling up the old score.
Mr. Calhoun was assisted in his able argument on the sovereign right of
repudiation by the Hon. N. J. Hammond, Member of Congress and
ex-Attorney-General of Georgia.

In reply to these great lights of the Southern Bar, whose genius would
have shone more brilliantly in an honest cause, I made the following
address:

Henry Clews’ speech before the Attorney-General of the State of New
York, June 20, 1885:

    The original act of repudiation by the State of Georgia has been
    repeated each six months since that period to the present date,
    by the refusal of the State to recognize and pay the coupons on
    said bonds as they matured. This alone repeats the repudiation
    of that State twice each year for the past ten years at least,
    and therefore is a continuance of the repudiation from the time
    of the original vile act up to the present date; besides which,
    the bonds repudiated had twenty years to run. The maturity of
    said bonds does not expire until 1890. The repudiation should be
    considered, therefore, as continuous during the entire period,
    from the date of the issue of said bonds until 1890, five years
    hence. If it is to be accepted that the test of a State’s credit
    is to be able to show a record free from fresh repudiation for a
    period of ten years, and that repudiation is not a continuous
    repudiation until such obligations are fully settled and
    provided for, what is to prevent a State from negotiating a
    fabulously large amount of bonds, and thereby place an amount
    sufficiently large in her treasury to admit of bridging over for
    the required ten years, and, after making such ample provision,
    then pass an act, as heretofore, repudiating the bonds issued,
    and keep repeating it each decade? Supposing the same rule held
    good with a bank robber—and there is, as far as integrity goes,
    really no great difference between the two, only one seeks
    protection in Canada and the other behind her sovereign rights,
    which is her Canada refuge. The robber breaks into a savings
    bank, guts it of several millions of dollars, flees to Canada,
    and there lives in affluence for ten years. How silly it would
    appear if, after ten years, provided he could show a record free
    from thieving during that time, he had the legal right then to
    come back, and thereby be entitled to a clean record as an
    honest man, and in consequence be accorded a high credit. The
    position of the State of Georgia in assuming such a role, in
    coming here at this time to ask our savings banks to aid her in
    such a nefarious business, simply lacks a parallel for audacity.
    The management of savings banks must be conducted so as to
    inspire confidence with the depositors and with the entire
    community also. It is necessary, especially at panic periods,
    for full confidence to be felt in the investments of such
    institutions. If the prohibition is removed, as is now sought to
    be, and savings banks be permitted to invest in Georgia
    securities, and one of them should buy $500,000 of the bonds, I
    venture the prediction that such an investment will sooner or
    later form the basis of a rumor which will cause a panic among
    its depositors and break that institution. This would result in
    a most serious disaster to probably thousands of poor people
    whose money had been lodged there for safe-keeping. The mere
    whisper during a panic that a certain institution had $500,000
    of Georgia bonds, and they were about to be repudiated, would
    bring about just such a disaster as I have stated.

    I ask your Honor if it would be wise for any savings bank to be
    permitted by the Superintendent of the Banking Department to
    become thus exposed to ruin? A State that is abundantly able to
    meet her obligations and dishonors them is too despicable for
    either credit or tolerance in a civilized community, and it is a
    disgrace to the nation that States comprising it have the power
    to make such obligations and repudiate them at will and screen
    themselves behind their sovereign rights, whereby they cannot be
    sued, and in consequence leave the outrageously wronged innocent
    bondholders without means of redress whatsoever. If the United
    States Government ever expects to obtain that permanent high
    credit in the money markets of the world to which the immense
    resources of this magnificent country justly entitle her, the
    great and growing evil of State repudiation must be remedied.
    For States to repudiate with impunity, as the State of Georgia
    has done, leaving no means whatever for redress on the part of
    the victimized creditors, is a blot upon the escutcheon of the
    whole country. This is not a fight, your Honor, on the battle
    field against the South; it is a fight on the financial field,
    and, as it is second only in importance to the other, it must be
    settled, and now is the time to strike the blow, as it will do
    the most good in that direction. We, the creditors of Georgia,
    have not only borne the loss and hardship of having our
    securities made valueless by a legislative body, and many of us
    ruined thereby, but we have also been vilely defamed—being
    branded as conspirators to rob the State—simply because we were
    found to be holders of these dishonored bonds. This has been
    done by the State to cover up her own infamy, and make it appear
    that we were the guilty parties and not the State. The attitude
    of the State of Georgia, your Honor, is not unlike that of a
    pickpocket, who, after rifling his neighbor’s pockets, is the
    first to cry “stop thief” to elude detection. All that the
    bondholders ask and claim is to have the entire case submitted
    to a proper judicial tribunal. This right we have been denied by
    the State, and the Constitution leaves us powerless to enforce
    it. The State simply says, the bonds are fraudulent and we will
    not pay them. It is a very remarkable circumstance, however,
    that there has not been a single one of the numerous officials,
    from ex-Governor Bullock down, who were connected with the issue
    of these so-called fraudulent bonds, prosecuted to conviction in
    the thirteen years that have intervened since their issue. Still
    these bonds are all repudiated on the ground of being
    fraudulently issued, and the innocent bondholders alone are made
    to suffer the harsh penalty imposed for having staked their
    money on their belief in the honor and integrity of the people
    of Georgia, which it is quite apparent are now _non est_.

    I addressed a letter to your Honor on May 27th last, which
    contains important information in connection with these
    repudiated bonds. I ask permission to read this letter at the
    present time, so that it may become a part of the evidence in
    this case.

The following circular letter contains a variety of opinions analyzing
the true relations of the State of Georgia to her creditors, and clearly
setting forth the nature of her liability in the matter of the
repudiated bonds in connection with the house of which I was the head:

        REPUDIATION ROBBERY BY THE “SOVEREIGN” STATE OF GEORGIA.

    “_The divine doctrine of State Sovereignty, which makes a State
         too dignified to be sued for its debts, ought to make
            it also too respectable to cheat its creditors_”

NOTICE.—Managers of Insurance Companies or Savings Banks should be and
are likely to be held responsible, by stockholders and depositors, for
any losses incurred in the event of their buying or loaning upon any
bonds issued hereafter by States which are under the cloud of
repudiation.

                  *       *       *       *       *

                                             NEW YORK, May 27, 1885.

    HON. WM. A. POST, _Deputy Attorney-General, Albany, N. Y._:

    DEAR SIR:—I deferred answering your telegram of Saturday until
    this morning for the purpose of ascertaining whether the
    bondholders’ counsel would be in readiness to meet you at the
    time proposed, and only ascertained the fact this morning that
    he would, so I wired you accordingly. I presume that this
    Georgia repudiation question comes before you for the purpose of
    removing the prohibition from the savings banks of this State to
    their buying or loaning upon Georgia State bonds, owing to that
    State being under the cloud of repudiation. The prohibition of
    the savings banks, issued by Mr. A. B. Hepburn, the former
    Superintendent of the Banking Department, was based upon a
    thorough and exhaustive examination in reference to all matters
    appertaining thereto. This I have reason to know, as that
    gentleman visited New York and took my testimony and others in
    the case. The State of Georgia has always charged, as the
    justification for repudiation, that R. B. Bullock, Governor at
    the time of the issue of said bonds, had issued the bonds
    without proper legislative authority, and besides had stolen or
    misappropriated most of the avails. About three years since
    Governor Bullock visited Atlanta, Ga., and demanded his trial
    under the several indictments against him. The trial came up
    soon thereafter, and he was acquitted on all the charges. This
    gentleman is now a resident of Atlanta, Ga., and is to-day one
    of its most prominent citizens. It has been also charged that as
    he was a Northern born man, that he was a “carpet-bag” Governor,
    and for that reason the bonds were not a legal issue. That
    attitude is also unwarrantable, as the ex-Governor remained
    South during the period of the entire war, and took a prominent
    part on the Confederate side, in giving aid and comfort, and
    thereby can justly be considered as being a Southerner and not a
    Northerner in his interests and feelings. Most of the bonds
    repudiated were passed upon as legally issued and properly
    signed, by our best lawyers, such as Messrs. Evarts, Southmayd &
    Choate, ex-Judge Emott, Abbott Bros., E. Randolph Robinson, the
    brother of Judge Sedgwick, of this city, and others.

    Some of these repudiated bonds were also passed upon by the New
    York Stock Exchange, and because repudiated were afterwards
    stricken from the list of securities to be dealt in. The face of
    these securities were worth par a few days prior to their
    repudiation, and immediately after that Act was passed were
    reduced to no more than the value of the paper upon which they
    were engraved. The same may at any time be the fate of any new
    securities to be issued by that State. Those who had these bonds
    were and are innocent parties, and among the sufferers are Trust
    Companies and savings banks. The Metropolitan Savings Bank holds
    $100,000 of the 7 per cent. Georgia gold bonds, bought about
    par; the Brooklyn Trust Trust Co. holds $100,000; the Union
    Trust Co. holds $100,000; the Commercial Warehouse Co. held
    between $300,000 and $400,000 of the bonds, and their
    repudiation caused the failure of that institution. The New York
    State Loan and Trust Co., Henry A. Smyth, President, also had
    $100,000 of the bonds, which loss was largely instrumental in
    causing the collapse of that concern. The Broadway National Bank
    holds $200,000 of these bonds as collateral, upon which they
    loaned $160,000; Morton, Bliss & Co., Morris K. Jesup, Drexel,
    Morgan & Co., Ezra A. Boody, George Morgan, son-in-law of J. S.
    Morgan, of London; J. Bowman Johnson & Co., Richard Irvin & Co.,
    L. Von Hoffman & Co., Russell Sage and many other first-class
    parties that I can name are prominent sufferers resulting from
    Georgia’s repudiation; besides which, my firm in 1873 held over
    $2,500,000 State of Georgia securities, all of which had been
    paid for or advanced upon, and my firm’s suspension at that time
    was attributable thereto.

    The only way to do, in my judgment, is to make the Southern
    States which are now under the serious cloud of repudiation,
    understand that their credit is impaired and facilities for
    obtaining money materially lessened because of it. Then,
    realizing _that_ as their position, and finding that they are
    shut out of the financial markets of the world owing thereto,
    they will soon make a compromise with their lenient creditors,
    and remove the blot from their escutcheons. The Federal
    Government is comprised of the various States of the Union, and
    to-day enjoys as high a credit as any nation in the world. If
    the various States comprising the United States are permitted,
    however, to repudiate with impunity and screen themselves behind
    their sovereign rights so that creditors have no recourse, the
    odium will soon fall upon the General Government, and its credit
    will finally become tarnished if not crippled in consequence.
    The State of Georgia, as can be proven, received full value. The
    internal improvements in Georgia bear testimony of this. The
    taxable property of the State has been immensely enhanced by
    these improvements, and the debt repudiated is a mere bagatelle
    as compared with the ability of the State of Georgia to provide
    for it. She has become rich in late years, and if the stain of
    repudiation should be wiped out, would stand an excellent chance
    of becoming a favorite resort for emigration and for the flow of
    capital. Emigrants from other countries to this, in locating,
    first look to the credit enjoyed by the State their attention is
    called to, and if found high, their conclusion is that there is
    safety for property, and if so, corresponding safety for life;
    but they will not go to a repudiating State, and in this way the
    South is held in check in the development of her resources,
    owing to the want of new blood. The bondholders of the State of
    Georgia have frequently offered to leave all points at issue in
    reference to Georgia’s repudiation to the Courts of that State,
    to the United States District Judge, or to arbitration, the
    parties to be selected by both sides, all of which has been
    denied, the reply being the “bonds are repudiated, and we simply
    will not take any steps to provide for their recognition or
    payment, and what are you going to do about it?” Under the
    circumstances, creditors are powerless, of course, to do
    anything, as the State cannot be sued. If you desire it, I will
    send you a sample bond of some of the issues repudiated, so that
    you may see how beautifully the signatures are written, and how
    firmly fixed the seal of the Commonwealth is placed upon them,
    besides the magnificent steel engraved workmanship of the
    Continental Bank Note Company of this city. If there was not a
    prospect of the State of Georgia being forced by public opinion
    to provide for these bonds at some future time, they would be
    worthy to be framed and hung up in our parlors as a complete and
    fine work of art.

    Judge Lochrane, former Chief-Justice of the State of Georgia,
    has wired me that he will appear before you on Wednesday;
    Colonel R. A. Crawford, of Georgia, will also do so; Messrs.
    Abbott Brothers, of this city, and others will appear before
    you.

    You will please append this communication as a part of the
    testimony, and should you desire more on the subject, call upon
    me therefor.

                        I have the honor to remain,

                             Your obedient servant,

                                  HENRY CLEWS.

                  *       *       *       *       *

    EDWARD BRANDON, ESQ., _Chairman of the Committee on the
    Admission of Securities to the N. Y. Stock Exchange_:

    DEAR SIR:—It is currently reported that the State of Georgia is
    about to apply to your Committee to list a new issue of bonds.
    In behalf of myself and others who have suffered most seriously
    by that State’s unwarrantable repudiation of bonds, which have
    as full a right to an equal standing as representing the credit
    of the State of Georgia as possessed by the new bonds to be
    issued, and fully realizing that the cruel fate of the former
    merely represents what may be that of the latter, I claim the
    right, as a member of the New York Stock Exchange, as a sufferer
    to the extent of several millions of dollars by the State of
    Georgia’s bad faith, to protest against the admission of any new
    securities hereafter to be issued by that State until her
    repudiated bonds are recognized and provided for.

                        Yours very truly,

                             HENRY CLEWS.

Ex-Governor Bullock’s Democratic successor, soon after he was elected to
that position, appointed as Attorney and Agent for the State of Georgia,
one of the State’s ablest lawyers, a gentleman distinguished as having
been a member of the Confederate Congress, to investigate all the
business transactions between Henry Clews & Co. and the State of
Georgia. Under his signature as Attorney and Agent for the State, he
makes the following statement: “I would say, with a great deal of
pleasure, that after a very thorough and complete examination of the
books of account, papers and correspondence of Messrs. Clews & Co., so
far as they relate to transactions of that house with the State of
Georgia during Governor Bullock’s administration, I am satisfied that in
all the dealings of that firm with the State of Georgia, they have acted
with both fairness and liberality, and I am convinced that in all these
matters Mr. Clews did nothing that would not bear the closest scrutiny,
and he did nothing, in my opinion, to affect his character for integrity
and fair dealing. I make this statement with the more pleasure because I
began this examination of accounts of Clews & Co. under impressions very
unfavorable to Mr. Clews.”

                  *       *       *       *       *

The opinion of ex-Governor Brown, now our able senior United States
Senator, was asked by thirty-five members of the Legislature of 1873. In
the course of a comprehensive and exhaustive argument, the distinguished
Senator says: “The State will be driven to abandon this position
(legislative repudiation) and to permit a case to be made by her
creditors to test the validity of these bonds in the courts of the
country, or she must stand dishonored in the estimation of all good men,
and her credit must sink to a ruinous depth.”

                  *       *       *       *       *

The late ex-Governor Alexander H. Stephens, ex-Vice-President of the
Southern Confederacy, is on record as saying, in reference to this
repudiation, that it is “nothing short of public swindling. Not less
infamous than obtaining money under false pretences.” But the partisan
feeling was then so intense that even the lamented ex-Governor Jenkins
was hardly accorded a respectful hearing in the Constitutional
Convention, of which he was president, when he plead against sweeping
repudiation without granting the holders a judicial hearing. Ex-Governor
Jenkins said on that memorable occasion: “Now, sir, I take this ground:
that for the proper examination and investigation oi these claims,
neither the Legislature nor this Convention, nor the people themselves,
are a proper tribunal to decide these matters. They ought to be examined
and determined judicially. It will now, I presume, be admitted that the
five years’ time between legislative and constitutional convention
repudiation was not allowed to pass unnoticed by the parties having
these bond claims against the State. Having waived our sovereignty in
the past to allow the State to be sued in every county in the State on
claims for small-pox expenses, I submit that our sovereignty ought not
to be plead to bar so important an issue as that now under
consideration. The State can, in no event, be put to loss. The whole
State has been largely benefited by the legislation and by the executive
action which was subsequently repudiated. We have been for fifteen years
past collecting annual taxes on fifty millions of enhanced value of our
taxable property; an increase which is directly traceable to the good
effects of the new railroads built under that legislative and executive
authority. Shall we—can we honestly receive these benefits and repudiate
our liabilities?”

                  *       *       *       *       *

An interview with ex-Governor Rufus B. Bullock, of Georgia, May 29th,
1885:

A reporter called upon ex-Governor Bullock at his rooms, Fifth Avenue
Hotel, and obtained the following interview:

    Governor Bullock: “Any information in my possession is at your
    service. I have published from time to time, over my own
    signature, my views on this subject, and I have no objections to
    repeating them. I desire to say, however, that I am in no wise a
    party to the recent proceedings which have been had before the
    Attorney-General of New York. I was in the city on private
    business and without any previous knowledge of the proposed
    hearing. I attended the hearing out of curiosity, expecting to
    hear an argument by ex-Chief Justice Lochrane, and while there
    was invited by the Acting Attorney-General to respond to his
    inquiries. This I did with the result as reported in your
    valuable paper. During my administration in 1868-’69-’70 and
    ’71, bonds of the State were issued for State purposes, and the
    endorsement of the State was placed upon certain railroad bonds
    under the authority of law.

    During the wild excitement that resulted in and followed the
    overthrow of the Republican government in Georgia, nearly all
    the acts of Republican administration were repudiated, among
    them its financial transactions, and up to this day and hour the
    questions of fact have never been permitted to reach any
    judicial tribunal.

    The people of New York State are fair-minded, law-abiding and
    honest, and whenever they can be informed of the truth will
    fearlessly follow it; but with regard to the real merits of this
    repudiation, no light has reached them because our courts have
    been closed.

    It is asserted by the holders of these repudiated
    obligations—and in this assertion I concur—that every bond was
    issued in accordance with law, and that the State is now in the
    enjoyment of the benefits resulting therefrom. In the exciting
    times to which I have referred, a majority of the then
    Legislature decided that the State was not bound by the acts of
    its predecessors, and therefore these obligations were null and
    void.

    This is, of course, a question of law, and not of legislation. I
    am sure that now, when partisan passion has subsided, both
    parties to this controversy would cheerfully acquiesce in any
    decision reached by our Supreme Court, and that the holders of
    these defaulted securities would accept whatever is awarded them
    in a long term bond at a low rate of interest, and on such an
    adjustment all parties, at home and abroad, could unite in
    maintaining the high financial credit to which the Empire State
    of the South would then be entitled.

    In December of last year the Atlanta _Constitution_, discussing
    this subject, used the following language: “The burden of his
    complaint is, that the bonds have never had a hearing in court.
    This comes with poor grace from the ex-Governor, who, when the
    validity of the bonds issued under his administration was being
    discussed by the legislative committee, was absent from this
    country, his whereabouts unknown, and his testimony not
    procurable. The bonds were ‘in court’ then, and as Governor
    Bullock was not present with his evidence when it was needed, he
    should not complain that a new hearing is not had for his
    benefit.” To this I made reply, which the _Constitution_ kindly
    published, and I will thank you to copy as follows: “I desire to
    say that I was not absent from the country. My whereabouts were
    known, and my testimony was before the committee in the full and
    complete report of the financial condition of the State which I
    made to my successor, sustained by the official records of the
    Executive and State Departments. I never received a request from
    that committee to come before them in person, and my presence
    would not have added to the information in their possession.
    Every request received by me from my successors, to aid in their
    investigations, has been promptly complied with. In accordance
    with such request I met Dr. Bozeman, financial agent,
    Attorney-General Hammond and Governor Smith, in New York, and
    also subsequently, Colonel Snead, Attorney for the State, and
    Colonel Kibbe, chairman of committee. No fact within my
    knowledge has ever been withheld, nor have I ever neglected any
    proper opportunity to contradict the statement that any of the
    bonds issued during my administration and reported to my
    successor were ‘bogus.’ But, Mr. Editor, the question is, shall
    a debtor pass on the validity and enforce judgment against his
    own indebtedness? I submit that a legislative investigating
    committee is not ‘a court’ in the sense that its findings are
    conclusive on questions of law. To hold a question so decided to
    be _res adjudicata_, is to sustain a legislative usurpation of
    the judicial functions of the government. If your position be
    well taken, that because the Legislature has decided against the
    bonds, the case is _res adjudicata_, and the judiciary is
    precluded—of what avail is our constitutional guarantee that the
    executive, legislative, and judicial branches of the government
    shall be separate and distinct, and that neither shall encroach
    upon the functions of the other? What protection has a citizen
    for his property if a legislative decision upon a legal question
    must be regarded as final _res adjudicata_?

    Does not the taking of other people’s money to build up our
    railroads, and refusing those people a hearing in courts of our
    own creation, before judges of our own election, indicate a want
    of confidence in the justice of our cause? The Territory and
    State of Minnesota used other people’s money to open up her
    lands by the construction of railroads, just as Georgia did,
    pledged the faith of the State for repayment, and then
    repudiated, just as Georgia did. After twenty years’ delay,
    justice has been done, and her obligations, as ascertained
    through her court, have been paid. I have faith to believe that
    the Empire State of the South will eventually keep pace with her
    sister States in the Union in meting out exact justice through
    her courts to every man, come from whence he may.

                  *       *       *       *       *

    Hon. Wm. A. Post, Deputy Attorney-General of this State, by
    appointment, visited this city last Friday to take evidence on
    the Georgia repudiated bond question, the object being to
    determine the legal status of a new issue of bonds by the State
    of Georgia in connection with the savings banks of this State.
    Owing to the repudiation of that State, at present these
    institutions are debarred from investing in bonds of any
    repudiating State, and the effort now is being made by the
    representatives of the State of Georgia to remove that barrier,
    so that the savings banks can be gutted of their surplus means
    and filled up with the bonds issued by that State, which are
    more than likely to share the wicked fate of repudiation, as
    previous issues to the extent of $8,000,000 have done. The
    savings banks managers, even in the event of obtaining a
    decision authorizing them to take Georgia bonds for investment,
    should be held personally liable for any losses that may fall
    upon such institutions if they hereafter invest the funds of
    widows and orphans in a security which, judging from past
    experience, is almost sure to be wiped out and made worthless.
    Mr. Clews charged that Mr. Calhoun’s appearance in representing
    the State before the Attorney-General at Albany was a
    surreptitious proceeding, and was only heard of by mere chance
    by the holders of the repudiated bonds through a squib in a
    Georgia paper. He also stated that the bondholders had patiently
    waited twelve years for their money, and no body of creditors
    had ever been so lenient as those of the State of Georgia, and
    justice demanded that these long-suffering and much-defamed
    creditors should be settled with prior to the financial world
    according to the State of Georgia a sufficiently high credit to
    admit of her floating any new issues of bonds. A motion was made
    to adjourn the meeting until the 20th, which Mr. Post said he
    would accede to after asking ex-Governor Bullock a few questions
    in relation to the connection of the firm of Henry Clews & Co.
    and the State of Georgia during the time he was its Governor. He
    desired to make these inquiries now, as the ex-Governor was
    present and might not be at the adjourned meeting. Mr. Clews
    requested permission to state that his firm—Henry Clews &
    Co.—had never been agents for the State of Georgia, but merely
    acted for her as bankers and brokers. The agent of the State
    during the entire period of Governor Bullock’s term of office
    was the Fourth National Bank of this city. He stated that his
    firm received no bonds, excepting by purchase or as collateral,
    and advanced money to the State as it was needed. At one time
    the State owed for said advances as much as $1,650,000; the
    money so advanced was stated by Georgia’s officials as required
    to meet the expenses of the government of the State. Ex-Governor
    Bullock fully ratified Mr. Clews’ statement. He admitted that
    the Fourth National Bank was the State financial agent, and that
    he had placed a large quantity of bonds with Henry Clews & Co.
    to market and as collateral for advances. “I will say,” said the
    Governor, “that every dollar secured on the sale or pledge of
    these bonds was received by the State, and it was expressly
    agreed that the firm of Henry Clews & Co. should hold all the
    bonds in their hands as security for the indebtedness due them
    by the State of Georgia.”

                  *       *       *       *       *

                       GEORGIA’S OUTLAWED BONDS.

    Newspapers in Atlanta, Savannah and other parts of Georgia have
    violently assailed _The Graphic_ for its comments on the new
    issue of Georgia State Bonds as affected by the repudiation of a
    former issue. These journals are short-sighted, as are the
    people of Georgia who imagine that they save money by outlawing
    the obligations of their State issued in the usual manner. We
    will not impute deliberate dishonesty to them, but they
    certainly do not place their own motives in a favorable light
    when they exclude the holders of the repudiated bonds from even
    the right to present their claims before the civil courts of
    Georgia. Ex-Governor Bullock has been berated in the same
    connection, and he cogently replies:

    “I have no pecuniary interest in the repudiated bonds or
    obligations. I have no lot or part in any scheme or combination
    by or through which public attention is or has been called to
    this matter. My attitude is that of a private citizen who has as
    high a regard for the honor and good name of Georgia as any man
    within her borders. I never obtrude “the bond question” upon the
    public attention. But when my official action is attacked in
    that connection I shall never fail to assert and re-assert that
    the financial statement made by me to my successor in office was
    the exact truth and that its correctness never has and never
    will be successfully controverted. In that financial statement
    were many of the State obligations, which in a time of great
    public excitement and partisan zeal were ‘outlawed’ by the
    action of a political body, and up to this day and hour the
    holders of such obligations have been denied that cool,
    dispassionate hearing of their claims which our courts alone can
    give. My ‘attitude’ is that Georgia is too great, that she
    stands too prominent in this country and in the world at large
    to accept the position of being a semi-annual defaulter and
    refusing to the creditor a hearing in her own courts. It is idle
    for me to assert or for you to deny the validity of the
    defaulted securities. That is a question of law, and no Georgian
    can defend his State while she slams the door of our courts in
    the face of our creditors. I assert that it does make a vast
    difference to Georgia whether her new securities are listed at
    the Exchange in New York. Our own people or other people can, of
    course, buy and own them, and I know the interest and principal
    will surely be paid, but unless the bonds are ‘listed’ they are
    not, in mercantile parlance, a ‘good delivery,’ and will not
    stand abroad as they should, equal with the best State in the
    Union.”

    A State which once repudiates its obligations cannot be trusted
    not to do the same thing again. What guarantee can any investor
    have that the bonds which Georgia is now trying to put upon the
    market may not be outlawed by the next Legislature? The
    _Graphic_ has no interest in the matter beyond that of upholding
    public morals, the good name of the State and the rights of
    swindled creditors. The State which repudiates is as foolish as
    the imbecile who cut off his nose to spite his face.—_N. Y.
    Graphic_, June 6th, 1885.

                  *       *       *       *       *

    The extreme care with which so-called securities or new issues
    of bonds are scrutinized in this market nowadays is shown in the
    opposition which has sprung up to the proposed listing on the
    New York Stock Exchange of $3,500,000 new Georgia State bonds.
    While money is a glut in the markets and our banks are now
    carrying a larger idle reserve than ever before known in the
    history of business, there is no disposition to permit Southern
    repudiators to come in and secure any part of the funds. The
    application to the Attorney-General to permit our savings banks
    to “invest” in the bonds, and the request that they be listed in
    the Stock Exchange, aroused New York bankers to action, and
    their opposition has been so far very effective. It has had this
    good, at least, that it has revived attention in regard to the
    repudiation of old obligations of Southern States. By its act of
    repudiation, Georgia mulcted the New York investors to the tune
    of millions. I know of one banker who now holds more than
    $2,500,000 of these bonds, on which there is an interest
    accumulation of twelve years’ duration, and at least three
    leading financial institutions were carried to the wall by the
    same means. Now, it is considered very poor grace for the modern
    Christian statesmen of Georgia to pass around the hat again. Let
    the State first repudiate its repudiation, pay up old scores,
    and then it will be quite early enough to ask for further loans.
    The argument that the credit of the State is really benefited by
    the repudiation, as she has so much less obligations to meet, is
    a quaint one, and worthy the source from which it emanates. This
    is not the sort of “prosperity” that invites further investment
    of Northern funds.—_Syracuse, N. Y., Sunday Herald._

                  *       *       *       *       *

                             GEORGIA BONDS.

    When a Georgia bond is put on the market, our Democratic friends
    cry out “Great is the Credit of Georgia.” They claim that
    Georgia pays all of her obligations whenever they are due,
    knowing their claim to be utterly false. Georgia has not only
    repudiated legal obligations, in the hands of innocent
    purchasers, but she denies the parties who have paid value for
    her bonds the right to take the judgment of her own courts on
    the validity of those bonds. So in the bond business the State
    of Georgia acts not only the role of the thief and robber, but
    also of the coward. The man who claims that Georgia meets all
    her obligations is simply a liar.

                  *       *       *       *       *

    Respecting State securities, investors are showing a very proper
    discrimination against the issues of States tainted with
    repudiation. The action of the Superintendent of the Banking
    Department of this State, in forbidding savings institutions
    from investing in the new issues of the bonds of Georgia, has
    attracted attention to the danger of investments thus tainted,
    and is very generally approved by the investing public as a
    check to future acts of this kind. The disposition shown by
    certain managers of savings banks to put the funds in their
    charge into such doubtful securities should be strongly
    condemned; and it is a question whether it is not necessary, as
    a protection to such depositors, to make such a use of the
    deposits of the poorer classes a penal offence.—_Weekly
    Financial Circular of Henry Clews & Co., June 6th, 1885._

                  *       *       *       *       *

                 HOW THE GEORGIA BONDS WERE NEGOTIATED.

The following circular explains the manner in which the Georgia bonds
were negotiated with my firm:

                                             NEW YORK, July 3, 1885.

    HON. WM. A. POST,

    _Deputy Attorney-General, State of New York_:

    The firm of Henry Clews & Co. did not solicit the account of the
    State of Georgia, but it was opened at the request of Mr. I. C.
    Plant, the leading private banker of Macon, Ga., and the most
    influential and affluent banker of the State of Georgia then and
    at the present time. Mr. Plant was brought to my office by Mr.
    P. C. Calhoun, President of the Fourth National Bank, which
    institution was the financial agent of the State of Georgia at
    the time. Mr. Calhoun introduced Mr. Plant to me, by giving that
    gentleman a very strong endorsement, and stated that Mr. Plant
    was in this city for the purpose of raising money for the State
    of Georgia, which money was required to pay off the members of
    the Legislature. Mr. Calhoun stated that his bank had loaned to
    Mr. Plant $400,000 on currency 7 per cent. Georgia bonds, and as
    money was very stringent at the present time and the calls were
    very numerous, he felt as though $400,000 was as much as he
    ought to loan in any one quarter. “But if you have any money,
    Mr. Clews, that you are willing to loan at the present time, if
    you will accommodate Mr. Plant, it may result in your doing some
    good business with the State of Georgia. I would say,” said he,
    “that you cannot advance money in any quarter where it would be
    safer than to loan on the Georgia State bonds which Mr. Plant
    will offer you. I know the State of Georgia well. I have ridden
    on horseback over almost every foot of ground in the State in my
    early life in my collecting trips. My father was in the saddlery
    and hardware business, and the larger part of his business was
    in that State. I know the people of this State; and as an
    evidence of my opinion of the future of this State and its
    bonds, I will say that if I had my choice to put my money into
    these bonds of the State of Georgia, or those of the State of
    New York, to leave to my family, I would give the bonds of
    Georgia the preference, for the reason that her debt is so small
    as compared with the debt of the State of New York at the
    present time, and the future of the State of Georgia is destined
    to be one of great prosperity.” Mr. Plant then said: “Mr. Clews,
    Mr. Calhoun has advanced $400,000 towards the amount I need, and
    I want $250,000 in addition. I know the money market is very
    tight [as it was at that time, money being worth 7 per cent. per
    annum and 1 per cent. per day commission]; still, I think, if
    you will loan this money to the State of Georgia, that it will
    enable you to make a connection which will prove profitable to
    you in the end.” I said: “Very well, Mr. Plant, I will make the
    loan to the State of the $250,000 which you require.” Mr. Plant
    then said: “Well, place it to the credit of the State of
    Georgia, and I will bring in 500,000 of Georgia 7 per cent.
    currency bonds, the same character of bonds which have been
    lodged as collateral with the Fourth National Bank. I will go at
    once to the Fourth National Bank, where they are, and bring them
    down here;” which he did. The $250,000 was then placed to the
    credit of the State and a telegram to that effect was sent to
    the Governor, and it was at once drawn out on the official
    drafts of the State. This started a correspondence with Governor
    Bullock, in his official capacity, he being entirely unknown to
    me before. Other applications were then made direct by the
    Governor for additional loans, which were made from time to
    time, until the amount so advanced reached to $1,650,000. After
    receiving, in addition to the 500,000 bonds referred to, 800,000
    more of similar bonds came into our possession from time to time
    as collateral, being put up at 50 cents on the dollar; and when
    we afterwards received a large installment of the gold quarterly
    7 per cent. bonds, having at that time an excess of collateral
    in our hands, we voluntarily forwarded to the State 500,000 of
    the Currency 7s. This was precisely and exactly the way my
    firm’s connection was commenced with the State of Georgia. Mr.
    I. C. Plant, who is still a banker of Macon, Ga., I am sure,
    will testify to the correctness of my statements.

    The State of Georgia gold 7 per cent. quarterly interest bonds
    were placed by the Governor of Georgia in my firm’s hands as
    additional collateral against the advances made to the State,
    with full instructions to sell same and credit avails.
    Application was made by request of Governor Bullock to have this
    issue of bonds placed on the regular list of the New York Stock
    Exchange, and after a full investigation by that body, they were
    admitted. A portion of these gold bonds were sold in this
    country and the balance in Europe. When the Georgia Bond
    Committee came here 77,000 of these bonds were in Europe in the
    banker’s hands there for sale, and my New York firm held 25,000,
    all others received having been sold. These 102 bonds were
    reported to this committee as unsold at that time, but soon
    thereafter, and before the Act of repudiation was passed by the
    Georgia Legislature, these 102 bonds were sold and reported as
    sold, and I think the price was 97½, and the State’s account was
    credited with the avails, and the proper authorities of the
    State were duly notified thereof. Up to the time of sale of
    these 102 bonds our standing order to sell continued and was
    never revoked; because, however, these 102,000 had been reported
    to the Georgia Bond Committee when in this city as being on hand
    at that time, they were repudiated, together with the other
    bonds which we were supposed to still hold. The New York Stock
    Exchange was called upon by the Treasurer of the State of
    Georgia to order struck from the list these 102 bonds, and the
    Exchange was compelled to be governed thereby, as official
    notice had been received of their repudiation. The following
    were the numbers of these bonds * * * * You will perceive that
    the numbers are not consecutive, thus showing that they were not
    the last of the bonds placed in our hands. The low numbers were
    received first and the highest numbers last, in the deliveries
    made to us by Governor Bullock. Under this statement of facts,
    which I am prepared to prove, I insist that these 102,000 bonds
    are as binding upon the State of Georgia as any of those which
    are now recognized. My fellow members of the Stock Exchange who
    have made investigation fully confirm this opinion. A large
    number of the coupons of these bonds were paid by the State on
    these 102,000 bonds, thus showing the State’s recognition of
    them at one time. My firm repeatedly called upon the officials
    of the State of Georgia to pay the balance due, but we could get
    no response. After waiting patiently a very long time, we called
    in eminent counsel for advice in this matter, and under said
    advice the Governor and Treasurer of the State of Georgia were
    notified in the regular legal form that if the said indebtedness
    was not paid on or before a specified date the collateral in our
    hands, each item being specified, belonging to the State, would
    be sold at public auction at the Merchants’ Exchange Rooms, 111
    Broadway, at 12 o’clock, by A. H. Muller & Sons, auctioneers.
    This notice of said sale, together with list of securities, was
    inserted in the newspapers; the sale took place, and the 800,000
    Currency and other bonds were disposed of to the highest
    bidders, and the State’s account credited with the avails. All
    these securities should be considered, therefore, as having
    passed out of my firm’s possession and in the hands of other
    holders for value. The State of Georgia in this matter is
    certainly amenable to New York laws, and the entire business was
    conducted in accordance with said law. Governor Bullock’s
    successors did all they could to depreciate the securities
    issued by their predecessors, and are responsible for the low
    prices which the State of Georgia bonds afterward sold for, as
    during Governor Bullock’s administration the State 7s were at
    about par and the first mortgage Brunswick & Albany bonds,
    guaranteed by the State, sold at 90 and upwards. As an evidence
    of the high credit which my firm had worked up for the State, we
    bought out the first million issued of Brunswick & Albany First
    bonds guaranteed by the State of Georgia, in the Berlin and
    Frankfort markets at 104, and there were seven millions of bids
    therefor, and the one million had to be distributed _pro rata_
    amongst the said bidders. In testimony of the correctness of
    this statement, I refer you to Mr. Budge, the head active
    partner of Hallgarten & Co., and Mr. Schiff the head active
    partner of Kuhn, Loeb & Co., of this city, who were interested
    with me, and through these two gentlemen the bonds were sold.
    After this great success, I ask you, or any fair-minded man, was
    not my firm entitled to continue to advance upon Brunswick &
    Albany first mortgage bonds endorsed by Georgia? and as the 275
    Cartersville & Van Wert bonds, endorsed by the State of Georgia,
    were offered to my firm shortly after this signal success as
    collateral, were they not also equally justified in advancing
    167,000 upon them? and _in that_ way, and in that alone, these
    securities came into our hands. I most positively assert that my
    firm never had any other pecuniary interests but as herewith set
    forth in these two enterprises. At the time of the repudiation
    of the State, my firm held

            750,000 Brunswick & Albany first mortgage bonds,
                      endorsed             by State of Georgia.

            275,000 Cartersville & Van Wert first mortgage bonds,
                      endorsed             by State of Georgia.

            587,000 State of Georgia Gold 7s.

            350,000 Brunswick & Albany first mortgage bonds.

            400,000 Coupons cashed by us on the State of Georgia
                                 securities, but a legal claim
                      against the State.

            800,000 State of Georgia Currency 7s.

                 ——

          3,162,000

    Also, a judgment of 525,000 obtained in favor of Henry Clews &
    Co. in the State courts of Georgia against the Brunswick &
    Albany Railroad Company, being an amount due my firm over and
    above all securities in our hands. My firm also obtained in the
    United States District Court of Georgia a judgment to secure our
    advances of 167,000 to the Cartersville & Van Wert Company.
    Neither of these judgments have ever been satisfied.

    This leaves out entirely the 102,000 Georgia 7s (quarterlies),
    as well as many other scattering lots of different issues of
    the State of Georgia securities. The past due bonds referred
    to by Mr. Hammond were being hawked about, both here and in
    London, for the purpose of forcing their payment, and the
    holders threatened to use them to interfere with the sale of
    the gold 7s which we were about to bring out in this and
    foreign markets. I mentioned this matter to Governor Bullock
    when on a visit here. He then directed me to buy up such of
    these bonds which were in troublesome hands, and as they were
    a demand claim against funds then in the State Treasury, all
    you have to do, he said, is to charge up the amount which you
    paid for said bonds to the State’s account and retain in your
    hands the bonds as collateral, and when the State is flush
    enough I’ll see that you are paid direct from the Treasury.
    These past due bonds belonged to us, and were taken up by our
    money and not the State’s; the 98,000 which were cancelled,
    which Mr. Hammond refers to, were so cancelled by error, which
    I am fully prepared at any time to prove. The depreciation in
    Georgia State bonds which Mr. Hammond refers to did not exist
    during Governor Bullock’s administration, but was brought
    about by his successors in office, as they did all they
    possibly could to depreciate the bonds of the State authorized
    and issued by the previous Legislature.

                             I have the honor to remain,

                                  Your obedient servant,

                                       HENRY CLEWS.

                  *       *       *       *       *

             GEORGIA SECURITIES AND NEW YORK SAVINGS BANKS.

    The efforts that are being made to place Georgia securities in
    the savings banks of New York ought to be resisted for two very
    good reasons: First, such investment would be contrary to the
    law of the State; second, even if it were legal it would be
    imprudent and unsafe.

    As to the authority of our savings banks to invest in these
    securities, it is understood that the opinion of the
    Attorney-General has been asked. On this point there is not much
    room for question. Savings banks are prohibited by law from
    investing in the stocks or bonds of any State that has within
    ten years defaulted in the payment of any part of the principal
    or interest of its debt. By a constitutional amendment adopted
    in 1877, Georgia ratified previous acts of the Legislature
    repudiating more than eight millions of its obligations. The
    excuse given for this proceeding was that the State’s
    obligations had not been lawfully contracted, and therefore were
    not binding. On this ground it is claimed that Georgia
    securities do not fall within the prohibition put by the law
    upon the savings banks of New York. There would be some force in
    this view if Georgia were sustained by any judicial decision
    holding the bonds invalid. But it took advantage of that
    principal which protects a State against suit by a citizen. It
    decided the question by its own arbitrary edict It gave its
    victimized creditors no voice in the matter. In the absence of
    judicial support or warrant, its action can be regarded only as
    a repudiation.

    But if there were no legal obstacle in the way, prudence alone
    should deter any savings institution from investing in the bonds
    of a State that has so recently broken its faith and repudiated
    its obligations. The managers of a savings bank hold an
    exceptional trust. These institutions are the depositories of
    the earnings of the poor. The first consideration in their
    management is safety. With that end in view the law imposes the
    most stringent regulations on their supervision and the
    disposition of their funds. Their investments are properly
    restricted to the safest and most unquestionable securities.
    There is neither authority nor excuse for taking any risk. Let
    individuals, if they wish, invest in Georgia bonds. That is
    their own business. But the managers of a savings bank cannot
    run any such risk without failing in their duty to thousands of
    poor depositors.—_N. Y. Herald, July 17, 1885._

                  *       *       *       *       *

                    THE ATTORNEY-GENERAL’S DECISION.

The decision of the Attorney-General, as was expected, wisely prohibited
the savings banks of this State from risking any of the hard earnings of
their large number of depositors in such an uncertain security as
Georgia bonds.

The Bank Superintendent, Willis S. Paine, referring in his report of
March, 1886, to this decision, says:

    “For some time there has been a determined effort to have the
    bonds issued by the State of Georgia accepted as a lawful
    investment for savings banks of this State. My predecessor in
    office declined to recognize their legal right to invest in
    bonds of the State mentioned. Late in 1885 the State issued a
    considerable amount of bonds, which were offered to the savings
    banks on terms advantageous to them, and there was a desire on
    the part of some of the banks to purchase the bonds. The matter
    was by me referred to the Attorney-General to determine whether
    the State had defaulted. Several hearings were had, at which the
    various interests involved were represented by eminent counsel.
    The conclusions reached by the Attorney-General were based upon
    a consideration of the facts and circumstances relating to the
    issue by the State of Georgia of its guarantee of $1,500,000 of
    bonds of the Brunswick and Albany railroad, which he holds are
    in default of interest, the principal not yet being due. He
    reaches the conclusion that at least in the case of the bonds
    issued or indorsed in aid of the Brunswick and Albany railroad
    it has defaulted, and this brings the case within the
    prohibition of the statute of New York regulating investments by
    trustees of savings banks. He therefore concludes that the
    savings banks of New York may not lawfully invest their deposits
    in the bonds of the State of Georgia.”

                  *       *       *       *       *

                          GEORGIA’S NEW ISSUE.

An attempt was made last summer to have several millions of the new
issue of Georgia bonds listed on the Stock Exchange in a second hand
style, through the instrumentality of Mr. Fred. Wolf, who was presumably
an innocent holder of these bonds. On this occasion I addressed to the
Governing Committee the following protest:

                                            June 22, 1886.

    _To the Governing Committee of the N. Y. Stock Exchange_:

    DEAR SIRS:—I have just been informed, whether correctly or not,
    that, not the State of Georgia, but a person by the name of Mr.
    Fred. Wolf, of this city, has applied to your Committee to list
    $3,300,000 State of Georgia 4½ per cent. bonds, and sets forth
    that said bonds are to take up those of the State maturing in
    February, April and July. I am advised that the bonds which
    matured, during the two months first named, long since past,
    have already been taken up by the State, so there remains but
    those which mature on the 1st of July next outstanding of the
    class of bonds referred to. At the time I was instrumental in
    defeating the State of Georgia from removing a very necessary
    restriction imposed by a New York State law from lodging these
    same bonds upon the savings banks, the officials of the State of
    Georgia exulted over the fact that the said defeat in no way
    injured the State of Georgia, as the bonds had already been
    disposed of at a satisfactory price to the State, and therefore
    no longer belonged to them; thus showing that the State of
    Georgia does not make the application for the admission of these
    bonds to the Exchange, but clearly shows that they are in
    possession of the avails of these said bonds to provide for; not
    only those that had matured but those that are due on the 1st of
    July next, consequently it takes away the necessity of the State
    having the application now made favorably acted upon by your
    Committee. Mr. Wolf, therefore, makes the application in his own
    behalf, doubtless to enable him to extricate himself from his
    own speculative venture in these so-called securities, which he
    was in hopes when he took them of turning over to certain saving
    banks who, by the Attorney-General’s opinion, were precluded
    from buying these identical bonds, which misfortune, from the
    statements made by the officials of the State of Georgia, falls
    not upon them but the party who has bought the bonds. As the
    original plan of lodging these bonds in the savings banks was a
    failure and the poor people’s money on deposit there was saved
    from wreck thereby, it is now sought to land them upon others,
    providing the New York Stock Exchange can be secured to give
    character to them by listing them as is now attempted. My firm
    represents two seats on the New York Stock Exchange and has
    large interest there and I protest against the proposition to
    list these Georgia bonds for regular dealings at the Exchange,
    as the State of Georgia is not only in default in payment of her
    bonds, both principal and interest, and long since past due, but
    besides has repudiated eight millions of her bonded debt which
    were issued for value received under the great seal of the
    commonwealth, properly signed, legally issued and in the hands
    of innocent parties who have acquired vested rights therein,
    and, therefore, are the victims of a gigantic robbery by the
    repudiation of said bonds. It is but fair to assume that a State
    which undertakes to blot out by a legislative act, without being
    willing to submit any questions at issue to the judiciary—who
    alone have the right to decide upon such questions—find _that_
    to be so simple a method of paying debts will not unlikely be
    tempted to repeat repudiation often in the future. These bonds
    now attempted to be foisted on the public cannot, by any
    possibility, be expected to have any greater permanency of value
    than those that have already received the shameful fate of being
    reduced by repudiation to the value of brown paper. I foresee,
    therefore, that if the N. Y. Stock Exchange lists this new issue
    of bonds, that by fictitious methods quotations may be obtained,
    and in all probability the members of the N. Y. Stock Exchange
    be induced to deal in them and suffer the cruel loss that has
    already been my fate. The State of Georgia, with interest to
    date, owes me and my old firm at least five million dollars;
    therefore, I have a right, owing to my large interests in the
    Stock Exchange, to urge that the application to list these new
    Georgia bonds be denied, for I fear that should it be otherwise,
    many of the members whose seats are in part security for
    transactions, may be tempted to deal in these so-called
    “securities” and suffer great loss if not ruin thereby, for when
    the time of repudiation takes place the security in their seats
    at the Exchange may be made valueless through said loss to
    honest creditors. When the State of Georgia wipes out the
    disgraceful blot of repudiation which now stains the escutcheon
    of the commonwealth, she will then be entitled to have the
    facility which the New York Stock Exchange has the power of
    granting, to aid her in restoring her credit to rank alongside
    others. She will then be entitled to credit on a 3 per cent.
    basis similar to the States of New York, Massachusetts, Maryland
    and many others, _but not before_.

                                  Respectfully yours,

                                       HENRY CLEWS.

                  *       *       *       *       *

                    SHALL REPUDIATION BE RECOGNIZED

                                            NEW YORK, June 25, 1886.

    _To the Governing Committee of the N. Y. Stock Exchange_:

    DEAR SIR:—I send you an exact copy, published in the _Graphic_
    newspaper under date of June 15th, 1886, of a bond issued by the
    State of Georgia, which you will perceive is an out-and-out
    State bond and represents an issue of 1,800 bonds of $1,000
    each. The act of authorization of the State was passed upon by
    the eminent legal firm of Evarts, Southmayd & Choate, also by
    the late Judge Emott as being in conformity with law and in
    every respect a regular and legally issued bond of that State.
    The innocent holders of these bonds are the following:

                  The Broadway National       $200,000
                    Bank

                  The Metropolitan Savings     100,000
                    Bank

                  The Brooklyn Trust Co        100,000

                  Russell Sage                 200,000

                  Henry Clews & Co             486,000

                  The Union Trust Co           100,000

                  Ezra A. Boody                200,000

                  Richard Irvin & Co           133,000

                  The Commercial Warehouse     200,000
                    Co. about

    The balance is in small lots scattered in numerous hands. None
    of these bonds was disposed of for less than 90 cents in money.
    The Broadway Bank loaned $160,000 upon theirs, taking them as
    collateral. Some other institutions held them as collateral
    against advances similar to that of the Broadway Bank. The whole
    of this issue was repudiated by the State.

    The State of Georgia also notified the Exchange that a large
    number of bonds known as Quarterly Gold Georgia Bonds were also
    repudiated. The numbers of these bonds were scattered in amongst
    an issue of two and one-half millions of that class of bonds,
    all of which were long previously admitted to dealings at the N.
    Y. Stock Exchange. The N. Y. Stock Exchange having received
    notice from the State that they had been repudiated, ordered
    them stricken from the list. These bonds are all in the hands of
    innocent, _bona fide_ holders, who paid in the neighborhood of
    par for them in all instances and the avails therefor were
    received by the State.

    Those not repudiated of these issues have since and are now
    daily quoted at the N. Y. Stock Exchange, the price being at the
    present time nominally about 112.

    I have only noted a part of the bonds repudiated by the State of
    Georgia, so that you may be convinced of the fact that the bonds
    are out-and-out State bonds and just as good an obligation
    issued under the great seal of the commonwealth of Georgia and
    as absolutely binding upon the State as the new bonds which are
    now attempted to be listed; and should the latter be listed, the
    chances are that they will share the same fate as those noted.

    If a State can issue such obligations, and wipe them out by an
    act of repudiation with impunity, and the Stock Exchange ignore
    such shameful conduct, there will then be no safety in buying
    bonds issued by any State, as it is thereby made to appear that
    there is no stain left upon her escutcheon, the evidence of
    which is that the N. Y. Stock Exchange has backed them up in
    their action. Under the Constitution which gives sovereign
    rights to States a citizen holding these repudiated obligations
    cannot sue a State, therefore there is no redress for a great
    wrong done.

    I shall be glad to appear before your Committee and give you all
    the evidence in the case before you decide upon the application
    now before you to admit $3,300,000 Georgia 4½ per cent. bonds.

                                  Very respectfully yours,

                                       HENRY CLEWS.

                  *       *       *       *       *

                     A REMINDER TO SENATOR EVARTS.

In connection with this Georgia bond affair, even at the expense of
stringing the subject out to a considerable length, I cannot omit the
following communication to Senator Evarts on the subject:

                                           NEW YORK, April 13, 1886.

    _Hon. William M. Evarts, Washington, D. C._:

    DEAR SIR—It is quite generally understood, from information
    lately received here from Washington, that there is soon to be
    sprung upon Congress a bill providing for large appropriations
    for the improvement of rivers and harbors and other so-called
    public improvements in the South. There is a feeling of strong
    opposition in financial circles in this city against the justice
    of the General Government making such appropriations to many of
    the Southern States at the present time. This opposition is
    based upon the fact that the State of New York contributes by
    taxation about one-fifth of all the revenue raised in this
    country which provides for the expenses incurred in carrying on
    the Government, so that whatever moneys are spent for the
    so-called public improvements, at least one-fifth of the amount
    is extracted from the pockets of the citizens of this State,
    through taxation; and as many of our citizens have been so
    villainously victimized by the repudiation of the Southern
    States, especially by the State of Georgia, it is but just and
    fair to these victims, therefore, that no appropriations of
    money for the purposes named should pass Congress for the
    benefit of any State which is at present under repudiation. It
    is eminently proper that Congress should take a stand against
    this, as the very people who have been so robbed are to pay the
    cost. A large number of them have been ruined, as a penalty for
    believing in the honor and good faith of Southern States, and
    while such claims remain unpaid, it certainly does appear harsh
    that these citizens should be taxed by the General Government
    and compelled to contribute to funds to be appropriated for the
    benefit of States now in default of both principal and interest
    for bonds issued by them under proper legislative authority and
    bearing the great seal of the commonwealth. The money paid for
    these bonds by confiding people has gone into public
    improvements in those States. If the Government desires to make
    appropriations, they should be made to the holders of these
    bonds, and the share to the various States be in their own bonds
    in place of money. The States thereby would take the place of
    the present holders. When repudiated bonds are all extinguished
    it will be time for the Government to begin the appropriation of
    money direct. No greater public improvement for the South, as
    well as for the credit of the entire country, would equal the
    removal from the various States of the blot of repudiation which
    now stains their escutcheons, and reflects most injuriously upon
    the credit of the General Government itself.

                                  Yours very respectfully,

                                       HENRY CLEWS.

                  *       *       *       *       *

                        ANOTHER STRONG PROTEST.

                                                  September 2, 1886.

    _James D. Smith, President of the Stock Exchange_:

    DEAR SIR—I beg to hand you herewith a memorial in relation to
    the new issue of Georgia bonds, signed by a number of the
    largest and most important firms and corporations in this city,
    most of whom are connected by membership with the Stock
    Exchange, and all of whom, like myself, are victims of the State
    of Georgia’s repudiation.

    I understand that the subject of admitting this new issue of
    these bonds is to come up for consideration at the next regular
    meeting of your committee. Will you do me the favor of
    presenting this petition at said meeting? Hoping this matter
    will receive your favorable consideration and influence, I have
    the honor to remain,

                                  Yours very respectfully,

                                       HENRY CLEWS.


      _To the Governing Committee of the New York Stock Exchange_:

    We, the undersigned, holders of repudiated bonds of the State of
    Georgia, have learned that an application has been made for
    listing upon your Exchange new issues of bonds of that State.

    We respectfully urge upon you that so long as the name of
    Georgia remains dishonored by repudiation, you should stamp upon
    such application your absolute disapproval, and thus maintain
    the well known and uncompromising hostility which the New York
    Stock Exchange has always shown against bad faith and dishonest
    practice.

        August 24, 1886.

        RICHARD IRVIN & CO.,
        MORTON, BLISS & CO.,
        JAS. B. JOHNSTON,
        S. W. MILBANK,
        HENRY CLEWS & CO.,
        HALLGARTEN & CO.,
        FULTON BANK OF BROOKLYN, By J. A. NEXSEN, Cashier,
        WALTER S. JOHNSTON, Receiver Maine National Bank,
        MORRIS K. JESUP,
        JAMES R. JESUP,
        DREXEL, MORGAN & CO.,
        FOSTER & THOMSON,
        NATIONAL BROADWAY BANK, By F. A. PALMER, Prest.,
        L. VON HOFFMAN & CO.,
        RUSSELL SAGE,
        C. F. TIMPSON & CO.,
        HERMAN R. LE ROY,
        SAMUEL RAYNOR & CO.,
        THE N. Y. WAREHOUSE & SECURITY CO., By S. C. KNAPP,
           Secretary,
        COMMERCIAL WAREHOUSE CO., J. F. NAVARRO, Prest.

The petition of these gentlemen was granted, and true to its honorable
record, the Governing Committee of the Stock Exchange refused to have
anything to do with the bonds of the repudiating State of Georgia.


------------------------------------------------------------------------




                            CHAPTER XXVIII.

          ANDREW JOHNSON’S VAGARIES.


“SWINGING AROUND THE CIRCLE.”—HOW MR. JOHNSON CAME TO VISIT NEW YORK ON
    HIS REMARKABLE TOUR.—THE GRAND RECEPTION AT DELMONICO’S.—THE
    PRESIDENT LOSES HIS TEMPER AT ALBANY AND BECOMES AN OBJECT OF PUBLIC
    RIDICULE.—HIS PROCLAMATION OF “MY POLICY” IRONICALLY
    RECEIVED.—RETURNS TO WASHINGTON DISGRACED.—THE MASSACRE OF NEW
    ORLEANS.—THE IMPEACHMENT OF THE PRESIDENT.


As I have attributed the ill luck of myself and others in certain
business ventures in Southern securities to President Andrew Johnson, it
will be necessary to describe some of the vagaries of that gentleman
which had such a ruinous effect upon the investments of Northern men in
the South.

In common with several other Wall Street men, I had an idea that the
President might be favorably affected by the social influence of the
North, if that were brought to bear upon him in the right way. So when
we heard that he had been invited to attend the laying of the
corner-stone in the erection of a monument to the memory of Stephen A.
Douglas, at Chicago, I got up a paper signed by several Wall Street men
and other prominent citizens, urging the President to accept said
invitation and also invited him to stop at New York, on his way to the
West.

The invitation was graciously accepted, and preparations were made at
once to give him a suitable reception. It was hoped that this
demonstration of our good will would have the effect of smoothing down
the asperities of the President, and that it might remove any harsh
feelings that he entertained towards the members of Congress who
represented the Eastern and Western sections, and hence prove a means of
inducing him to advise the people of the South, over whom he had
considerable influence, to lay aside their sentiments of hostility and
attend to their business interests in a manner that should redound to
the mutual benefit of the two great sections of the country. This was in
1866.

The President left Washington about the end of August, accompanied by
General Grant, Admiral Farragut, Secretary Wells, Postmaster Randall,
and a few others of less note.

When the party arrived in New York it was joined by Secretary of State
Seward.

The preparations for the President’s reception were on a magnificent
scale for that time, and the people turned out _en masse_ eagerly to do
honor to the Executive of the nation. There was a grand procession which
conducted him to the City Hall, where he was received by the officials
of the City and State, and the procession afterwards escorted him to
Delmonico’s, at Fourteenth Street and Fifth avenue, where a dinner was
served in the most sumptuous style, with every mark of honor and respect
befitting the distinguished guest and his numerous friends.

There was an address of welcome pertinent to the occasion, and the
President responded in a very happy style. This was said to have been
one of his best efforts in oratory, in which he was, at times,
exceedingly forcible and persuasive.

He was always pithy and powerful, and there has perhaps never been a
President who produced stronger, more brilliant, and more argumentative
state papers than Andrew Johnson.

The audience at Delmonico’s was thoroughly delighted with him, the
dinner came off in a way that left nothing to be desired, and everything
seemed to indicate that the presidential visit would be a potent
influence in creating a new era of harmony between the two hostile
divisions of the country.

Everything was lovely until the presidential party arrived at Albany,
when it became manifest that the President had set out with the full
intention of giving the journey the aspect of a political canvass, and
of taking occasion to abuse his enemies in the strongest terms, and to
vindicate his policy of reconstruction in opposition to that of
Congress.

The crowd which met him on his arrival at Albany was immense, and on the
whole was disposed to accord the President a kind and courteous welcome.

The President was called upon to make a speech, in which he made violent
attacks upon his supposed enemies, or those who opposed his policy,
thereby sinking beneath the dignity which he was expected to maintain as
President of the United States, to the level of a mere political
demagogue. His utterances in that motley assembly, of course, were soon
met by sharp opposition. There were many, however, who did not treat the
fiery demonstration of the President seriously, and several of the crowd
indulged in the pastime of firing off a few good-natured jokes at the
tailor of Tennessee, who, by a mysterious fate, had been raised to such
a dizzy eminence. These jests were taken seriously by the President,
whose hot Southern blood became so aroused that he forgot the dignity of
his office and station and condescended to bandy words, and exchange
terms of ribaldry with people in the crowd. He then became a butt for
savage ridicule. A small black flag was exhibited which seemed to have
the same effect upon him as a red rag has upon a Texan steer.

The President became furious, and losing entire control of himself,
pointed towards a man in the crowd saying, “Who is that man who dares to
hoist that black flag. Let him come up here and I will tell him what I
think of him.”

This descent of personal dignity on the part of the President was
received by the audience with a feeling of ineffable disgust. He had
stooped beneath the level of the average electioneering stump speaker.
He was greeted with jeers and hooting, and the meeting was turned into a
roaring farce, in which the President played harlequin, to the great
delight of the ignorant element in the crowd, and the terrible
mortification of those who had conducted him thither.

His friends were greatly incensed at his conduct. My business friends
and I were heartily sorry that we had anything to do with this unruly
Executive, who had evidently lost his head through the sudden
acquisition of power.

The President’s journey was continued to Chicago by way of Cleveland,
where he made similar outbursts to those displayed at Albany. By the
time he had reached Chicago he had become a public object of ridicule.
He spoke so vociferously about “my policy” that the very boys in the
streets began to utter these words ironically and jeeringly.

The tour of the President was designated “Swinging around the circle,”
and when he returned to Washington he had become an object of national
contempt, and the majority of the people had entirely lost confidence in
him.

One thing about this time that intensified the popular feeling of
hostility against him was the attitude he assumed concerning the
massacre of New Orleans, which occurred about a month before he started
on his political tour.

The Convention which had formed the free constitution of the State of
Louisiana in 1864 had been ordered to reassemble by its President. The
Confederate sympathizers, who had been greatly encouraged by the acts of
the President to keep alive their old feelings of hostility to the
North, resolved that the Republican Convention should not be permitted
to meet. The ground they urged for this proposed action was that the
Convention proposed to recommend the imposition of Negro suffrage upon
the State. There was a riot and a terrible massacre, in which over a
hundred lives were lost, and several hundred persons were wounded. The
municipal authorities of New Orleans gave aid and comfort to the
rioters.

The Congressional Committee that investigated the circumstances
connected with the riot reported that the President knew that riot and
bloodshed were apprehended. He knew what military orders were in force,
and yet without the confirmation of the Secretary of War, or the General
of the Army, upon whose responsibility these military orders had been
issued, he gave orders by telegraph, which, if enforced, as they would
be, would have compelled our soldiers to aid the rebels against the men
in New Orleans who had remained loyal during the war, and sought to aid
and support, by official sanction, the persons who designed to suppress,
by arrest and criminal process under color of the law, the meeting of
the Convention; and all this although the Convention was called with the
sanction of the Governor and by one of the judges of the Supreme Court
of Louisiana claiming to act as President of the Convention. The effect
of the action of the President was to encourage the heart, to strengthen
the hand, and to hold up the arms of those who intended to prevent the
Convention from assembling.

The President’s opposition to the Reconstruction Bill probably rendered
him more unpopular than any other executive act during his
administration. The bill was passed by large majorities in both Houses
of Congress.

The President’s repudiation scheme was another very unpopular
recommendation, for which he was very strongly reproved by the action of
Congress. He stated in his message of December, 1868: “That the holders
of our securities have already received upon their bonds a larger amount
than their original investments, measured by the gold standard. Upon
this statement of facts, it would seem but just and equitable that the
six per cent. interest now paid by the Government should be applied to
the reduction of the principal, in semi-annual instalments, which in
sixteen years and eight months would liquidate the entire national
debt.”

This clause of the President’s message was condemned by an almost
unanimous vote of both Houses.

The great event in President Johnson’s career, however, was his
impeachment trial, which lasted from March 5 until May 26, 1868. He was
arraigned at the bar of the Senate, which was presided over by the Chief
Justice of the United States, the Hon. Salmon P. Chase.

The counsel of the President were Attorney-General Henry Stanberry, who
resigned his position to defend the President, ex-Judge Benjamin R.
Curtis, William S. Groesbeck, who acted as substitute for Judge “Jerry”
Black, and Hon. Wm. M. Evarts. General Benjamin F. Butler made the
opening argument against the President, accusing him of high crimes and
misdemeanors. Hon. Wm. Lawrence, of Ohio, posted him on the law of
impeachment. The chief charge in the articles of impeachment was the
removal of Mr. Stanton from the office of Secretary of War, in alleged
violation of the Tenure-of-office Act. According to this act Stanton had
a right to hold office during the term of the President by whom he was
appointed, and a month longer. He was appointed by President Lincoln.

The question to be decided then was whether Johnson was serving out
Lincoln’s unexpired term, or whether he was President _de facto_. Judge
Curtis took the latter ground, and argued, therefore, that Stanton’s
term had expired.

At the conclusion of the trial, the Senate was addressed against the
President by General John A. Logan and Mr. Boutwell. Thaddeus Stevens
attempted to read a speech, but was too weak. He handed his manuscript
to General Butler, who read it to the Senate, but it fell comparatively
flat. The Hon. Thomas Williams, of Pennsylvania, read a speech in favor
of impeachment, which was well received. The case on behalf of the
Senate was summed up by Hon. John A. Bingham, who arrayed all the
charges against the President in a very strong and unfavorable light.
His concluding sentences were, “I ask you, Senators, how long men would
deliberate upon the question whether a private citizen arraigned at the
bar of one of your private tribunals of justice, for criminal violation
of law, should be permitted to interpose a plea in justification of his
criminal act that his only purpose was to interpret the Constitution and
laws for himself; that he violated the law in the exercise of his
prerogative to test it hereafter, at such day as might suit his own
convenience, in the courts of justice? Surely, Senators, it is as
competent for the private citizen to interpose such justification in
answer to his crime as it is for the President of the United States to
interpose it, and for the simple reason that the Constitution is no
respecter of persons, and vests neither in the President nor in the
private citizen judicial power. For the Senate to sustain any such plea
would, in my judgment, be a gross violation of the already violated
constitution and laws of a free people.”

The speech of “Our own Evarts” was the _chef d’œuvre_ of his life, and
probably did much to help the President’s narrow escape. As it was, he
was only saved from impeachment by one vote, namely, that of Mr. Ross,
of Kansas.


------------------------------------------------------------------------




                             CHAPTER XXIX.

              THE DIX CONVENTION.


HOW THE WAR DEMOCRAT, GENERAL DIX, WAS ELECTED GOVERNOR BY THE
    REPUBLICAN PARTY.—THE CANDIDATES OF SENATOR CONKLING REJECTED.—HOW
    DIX WAS SPRUNG ON THE CONVENTION, TO THE CONSTERNATION OF THE
    CAUCUS.—JUDGE ROBERTSON’S DISAPPOINTMENT.—EXCITING SCENES IN THE
    CONVENTION.—GENERAL DIX DECLINES THE NOMINATION, BUT RECONSIDERS AND
    ACCEPTS ON THE ADVICE OF HIS WIFE AND GENERAL GRANT.—HOW DIX’S
    ELECTION ENSURED GRANT’S SECOND TERM AS PRESIDENT.


Among the political events of the last quarter of a century in which I
took an active part, in common with some other Wall Street men, I think
the Utica Convention, at which General Dix was nominated for Governor of
this State, is entitled to special notice, particularly on account of
its effect upon national politics.

I was a delegate to that Convention. Just as I was stepping from the
train to the platform at Utica I was met by a gentleman who introduced
himself to me as the Private Secretary of Senator Conkling. He said he
came to convey an invitation to me from the Senator to be his guest
during my stay in that city. He escorted me to the carriage in waiting,
and I was taken to the palatial mansion of the Senator. I was the only
resident guest during my stay—an honor which I highly appreciated.

Several gentlemen were invited that evening to dinner, amongst whom were
Hon. Chester A. Arthur, A. B. Cornell, Wm. Orton and General Sharpe.

At the conclusion of a sumptuous repast the subject matter relating to
the Convention was introduced by Senator Conkling. The Senator turned to
me and said: “Mr. Clews, why would not George Opdyke be the best man for
Governor?” Mr. Opdyke and Senator Conkling had always been on excellent
terms, and a few weeks previously this aspirant for Gubernatorial honors
had been a guest at the house of the Senator, and General Grant had been
there at the same time. It was apparent, therefore, that Mr. Opdyke had
gained special recognition from the Senator as his candidate for
Governor, and that the choice had been sanctioned by General Grant. So
the visit of these two distinguished guests seemed to indicate that the
matter had been virtually, harmoniously and finally arranged, simply
awaiting the official approval of the Convention. Hence, the point of
the Senator’s inquiry directed to myself.

I replied: “Senator, I have a very high regard for Mr. Opdyke, as a man
of great ability, as well as a brother banker, but as we have, all of
us, a greater interest in what is to be done at this Convention, with a
view of re-electing General Grant, we must, in my judgment, sacrifice
all other interests thereto. Looking at the matter from that point of
view, I am bound to say, therefore, that George Opdyke is not our best
man. As you remember, he was Mayor of the city of New York at the time
of the great riots of 1863, which was the most critical period of the
country’s existence, and it was generally understood that in his
official capacity he showed the white feather. While I admit that the
excitement at the time was calculated to intimidate some of the
strongest hearts, still, Mr. Opdyke, as Chief Magistrate of the city,
was supposed to be equal to the emergency, and to meet it with firmness,
irrespective of personal danger. He was expected to be equal to the task
of ordinary self sacrifice in such a position, and he did not come up to
popular expectation.

“And you will recollect, Senator,” I continued, “that your own
brother-in-law, that able, worthy and popular man, Hon. Horatio Seymour,
was so far carried away by his predilections then, that he addressed the
crowd of peace-breakers as ‘friends.’ I confess that when a man like him
was so pronounced on that side it was a difficult matter for a Mayor to
have backbone enough to withstand the pressure. But public opinion is
not in the habit of making such fine distinctions to excuse want of
courage.

“If this is not an ample reason,” I said, “I can give you another, which
should be sufficient to determine that Mr. Opdyke is not our best man at
this time. He is young enough, however, and may be available at a future
period, when the asperities associated with these troublous times have
been fully smoothed down. During the war Mr. Opdyke had the misfortune
to be a special partner in a clothing manufacturing firm which had
received a contract from the Government to make clothing for the poor
fellows who were fighting our battles for the salvation of the country.
The clothing made by this firm was rejected on account of the
inferiority of the material, and this is said to have been the first
application of the term ‘shoddy’ to army clothing in this country.”

Mr. Conkling seemed to be amazed at my statement, and admitted that his
protegé would not do. He felt considerably embarrassed in regard to his
position with reference to Mr. Opdyke. He said, “Mr. Opdyke is here and
expects the nomination. Some one ought to tell him to withdraw.”

Thereupon Mr. A. B. Cornell volunteered to undertake this delicate duty.
He promptly performed it, and afterwards reported that the work had been
accomplished. He said that Mr. Opdyke at once consented to comply with
the modest request, but was so mad about it that he had left the city by
the first train for home, being unwilling to remain for the convention.

Prior to his departure, however, he had advised the Hon. W. H.
Robertson, who was the next prominent candidate, of his withdrawal, and
of the support of his constituency so far as his name could control it.

Mr. Robertson, who had been prominent in the preliminary canvass, was
gratified at this turn of affairs, and encouraged by his new accession
of strength. He was quick to embrace the opportunity now left open, as
there were no other candidates whom he feared. So the whole of that
night he worked arduously and faithfully for the object in view.

When I left the Conkling mansion next morning, after breakfast, I
mingled freely with the delegates, and found, from the efforts made the
previous night, that the nomination of Judge Robertson was a foregone
conclusion, and the candidate himself was sure of it. The Robertson boom
had become suddenly popular. In fact, it was in the air.

I was invited to General Arthur’s parlors, where the caucus had its
headquarters. It was customary with General Arthur, in those days, to
take parlors for that purpose at State Conventions. I found the rooms
filled with distinguished members of the party, and it was assumed by
all that Robertson was the candidate for Governor; it was also proposed
that we should march in a body to his hotel, to congratulate him, and to
assure him of the fact that we were all for him. I declined to be of the
number on that mission, to the great chagrin of some of my friends. When
asked for my reasons, I said that I had no feeling of personal hostility
towards Mr. Robertson, but as the New York _Times_ had not been pleased
with his conduct while State Senator, and had severely criticized him
thereafter, I felt satisfied that under no circumstances could we rely
upon the _Times_ to support our ticket if he were at the head of it; and
as that was the only paper in New York that we had to fight our battles
then, it was all important that we should nominate a ticket that would
not be antagonistic to it, in order that we might have its endorsement
and full co-operation.

The rest of the gentlemen went to pay their respects to Judge Robertson,
as pre-arranged, and during their absence I went to the telegraph office
and sent the following message to General John A. Dix, to his residence
at 3 West Twenty-first street, New York:

    You are favored by many of the delegates for Governor. If
    nominated will you accept? For the sake of the country, answer
    in the affirmative.

                                                      “HENRY CLEWS.”

To this I received the following:

    “I have telegraphed your dispatch to West Hampton, where my
    father now is.

    “Aug. 21 1872.

                                                      “JOHN W. DIX.”

A short time afterwards the Convention met, and the name of Robertson
was presented. The management had been so ably conducted since the
departure of Mr. Opdyke, that there seemed to be an overwhelming hurrah
in favor of Robertson, though it was evident that many of the delegates
did not know why they cheered, except by force of imitation. The
Convention at first, as has been the case on many similar
occasions—except that there never was any occasion precisely similar to
this one—did not seem to know its own mind, and was apparently well in
hand by the management. Several most laudatory speeches were made in
favor of Robertson, which placed him on the very pinnacle of popularity
with the Convention, as manifested by the cheering and wild hurrahs with
which the speeches were received. The management was thoroughly
convinced that the popular tide had begun to flow in favor of their
candidate, beyond the possibility of ebbing until it carried him to
port, and there was probably no man in that enthusiastic audience more
fully convinced of the fact than Robertson himself.

Several other nominations were made, but that of Robertson overshadowed
them all.

When the gavel was about to descend on the choice of the people, as
expressed through their intelligent representatives by every sign of
enthusiastic approval, the audience being almost exhausted with this
high pressure of excitement, and when it was just prepared to relapse
into a more thoughtful and deliberate mood, I sprung General Dix on the
Convention. The mere mention of the name of that veteran seemed to
inspire the vast assemblage with new life. The announcement acted like
magic, and appeared to throw all the previous work of the Convention
into utter oblivion.

After Mr. Bruce and the Hon. E. Delafield Smith had spoken, I said: “On
behalf of the bankers and business men of New York, regardless of party,
the nomination of John A. Dix would do more for the Republican party in
the national contest than any other that could be named. No other man
would receive equal confidence of the great monied interests of the
metropolis.”

The scene that followed the remarks of these gentlemen and myself is
indescribable. The whole audience arose to their feet and cheered
vehemently. If the house had been struck with lightning the caucus
managers could not have been more surprised, and Judge Robertson must
have begun to doubt his own identity.

Concerning the scene in the Convention at this juncture, the New York
_Herald_ the next morning had the following:

    “The enthusiasm excited by the representatives of Henry Clews
    carried the Convention, and it only wanted to put the question
    to the delegates to result in a triumph for the Dix interest.
    There was great confusion in the hall at this moment. Delegates
    attempted to make themselves heard from all parts of the hall.
    There were heard the first notes of the coming avalanche of
    victory for the Dix ticket. The stentorian voice of a delegate
    from St. Lawrence, mighty almost as the cataract of Niagara, was
    heard above the din, proclaiming that the St. Lawrence
    delegation endorsed the nomination of Dix. Further enthusiasm
    was thus excited. Then followed Kings, Jefferson, Cayuga and
    others, lost in the cheering that was incessantly kept up. The
    whole of the delegation seemed under one impulse to fall into
    line under the flag raised by Dix as the standard-bearer of the
    party. Then came a demand that no ballot should be taken,
    formally or informally, but that the nomination of General Dix
    be made by acclamation. The Hon. William A. Wheeler, the
    chairman, said such a motion was not in order, as there were
    other candidates before the Convention. This difficulty, like
    every other, was soon swept away in the tornado of excitement
    consequent upon the sudden and unexpected course of affairs, so
    lately garbled and mixed up, had taken; and the clear course
    that the name of one man, held back to the lucky moment, had
    arrived, to give it a talismanic power, opened to the previous
    bewildered senses of the delegates when the Bald-Eagle of
    Westchester, the proposer of Judge Robertson, arose and
    announced the withdrawal of his nominee’s name. A thunder of
    applause followed this announcement, which was echoed and
    re-echoed, when the several other proposers withdrew in quick
    succession the names of their candidates. Then came again the
    call to put the name of General Dix by acclamation to the
    Convention. The vote was put and was unanimously carried, with
    the greatest excitement ever before witnessed at a Convention.”

The New York _Times_ said editorially:

    “The Convention of this State has placed at the head of its
    ticket two of the strongest names it could possibly have
    selected. In General Dix it has nominated a Democrat who is free
    from all the reproaches which the last twelve years have brought
    upon the Democratic party—a man whose character is without a
    stain, whose strenuous efforts to assist the Union during the
    rebellion ought never to be forgotten, who has been one of our
    most indefatigable assistants in the work of reform, and whose
    integrity and abilities alike entitle him to the respect of the
    public. No one can doubt that if we have General Dix as Governor
    of this State the affairs of the community will be managed with
    discretion, dignity and a high sense of honor. We purposely
    refrained from recommending candidates to the Convention, but
    now that all is over, we need not disguise our opinion that
    General Dix was the very best man that could have been chosen.
    Honest Democrats will gladly support him, Republicans have every
    reason to arrange themselves by his side, for he has identified
    himself with every great work in which they have been
    interested. He has always done his duty, no matter what position
    he has occupied, and we shall be proud to assist in electing him
    as Governor of this State. If we could not trust such a man as
    General Dix, it would be very hard to carry on the work of
    popular government at all.”

At the close of the proceedings I sent the following despatch to General
Dix:

    “I took the responsibility of putting your name forward as a
    candidate for Governor, and now rejoice in apprising you of your
    nomination by the Convention by acclamation.

                                                      “HENRY CLEWS.”

On my return to New York, to my utter dismay, I found the following
telegram awaiting me:

                                       “WEST HAMPTON, Aug. 22, 1872.

    “HENRY CLEWS:

    “I have been compelled to decline.

                                                      “JOHN A. DIX.”

That afternoon I went down to Long Branch to see General Grant, and
spent the evening with him. I showed him the despatch from General Dix,
declining the nomination, and expressed the opinion that it was all
important that he should be prevailed upon to reconsider his first
resolve, and permit his name to head our ticket. “You know, General,” I
said, “Dix is a war Democrat. He will act as a bridge to bring over to
our ranks all the war Democrats. It was chiefly for that reason that I
sprung him on the Convention.”

General Grant realized the position at once, and fully agreed with me.

I said: “General, you must write a letter to General Dix, urging him to
accept the nomination.” He wrote to General Dix in a day or two. The
veteran was greatly moved by a letter from a renowned brother in arms,
but still had some difficulty in making up his mind, lest he might lay
himself open to the charge of inconsistency. And here comes in the
predominating influence of lovely woman, even cruelly deprived as she is
of the ballot. General Dix held his final answer in abeyance until he
should consult his wife.

                     GENERAL GRANT TO GENERAL DIX.

Following is the letter which General Grant wrote after my interview
with him:

                                 “LONG BRANCH, N. J., Aug. 24, 1872.

    “MY DEAR GENERAL:

    “I congratulate you upon the unanimity and enthusiasm of the
    Utica Convention on the occasion of your nomination for the
    honorable and responsible position of Governor of the great
    State of New York. Especially do I congratulate the citizens of
    that State, almost irrespective of party, upon your nomination.
    I believe you will receive the active support of the great
    majority of the best people of the State, and the secret
    sympathy of thousands who may be so bound up by party ties and
    pledges as to force them to support your opponent.

    “But to doubt your election would be to impugn the intelligence
    and patriotism of a people by whose enlightened discrimination
    such good men as Tompkins, Clinton, Marcy, Fish, King and Morgan
    have been lifted to the Chief Magistracy of the Empire State.
    With your election reforms in the State will naturally follow,
    which all acknowledge have been much needed for years.

    “No one acquainted with the political history of New York for
    the past eight years will claim that all the abuses of
    legislation are due to Democratic rule, but members, or at least
    pretended members, of both political parties share the
    responsibility of them.

    “When I read the proceedings of the Convention of the 21st
    inst., and of the unanimity of feeling in favor of you and your
    associates on the State ticket, I felt that victory had been
    already achieved and reform inaugurated in the State of New
    York.

    “Again, I congratulate you, not upon the prospect of being
    Governor, but upon having it within your reach to render such
    services to your State.

    “It is a happy day when conventions seek candidates, not
    candidates nominations. This dream has been realized in the
    action of the Convention of the 21st inst. at Utica, New York.

    “I have the honor to be, General, your most obedient servant,

                                                       U. S. GRANT.”

    “GEN. JOHN A. DIX, N. Y.”

                          GENERAL DIX’S REPLY.

                                  “LEAFIELD, WEST HAMPTON, N. Y.,

                                       August 28, 1872.

    “MY DEAR GENERAL:

    “I am very thankful to you for your kind letter of
    congratulation on my nomination for the office of Governor of
    this State. You are aware, no doubt, that I declined it before
    the Convention was held. I am deeply sensible of the honor
    conferred on me, especially by the manner in which it was
    tendered; but my objections to the acceptance of the nomination
    are so strong, that I would not think of it a moment, were it
    not for the deep concern I feel in the result of the election,
    and the great public interests at stake.

    “I expect Mrs. Dix to arrive from Europe on the 2nd or 3rd
    proximo, and as soon as I am able to confer with her, I shall
    reply to the letter of the President of the Convention, advising
    me of my nomination.

    “I am, dear General, very respectfully and sincerely yours,

                                                       JOHN A. DIX.”

    “HIS EXCELLENCY, U. S. GRANT.”

It is evident from this correspondence that General Grant’s letter,
which I take the credit of having inspired, reinforced by the latent,
loving power and good judgment of Mrs. Dix, assisted in the wise
decision of the war Democrat to accept the Republican office which was
judiciously thrust upon him.

The election of Dix made the second calling and election of Grant sure.
The Republican party took General Dix into its fold, and the effect was,
as I had anticipated, to bring thousands of others similarly situated,
to vote, at the Presidential election, for General Grant.

The Dix nomination was the worst black eye that Mr. Greeley received
during that campaign, and the Sage of Chappaqua acknowledged on his
death bed that that event, together with the Grant mass meetings at the
Cooper Institute, described in another chapter, sealed his political
doom.


------------------------------------------------------------------------




                              CHAPTER XXX.

 CONSEQUENCES OF THE UTICA (DIX’S) CONVENTION.


A CHAPTER OF SECRET HISTORY.—CONKLING GETS THE CREDIT FOR DIX’S
    NOMINATION AND HIS “SILENCE GIVES CONSENT” TO THE HONOR.—ROBERTSON
    REGARDS HIM AS A MARPLOT.—THE SENATOR INNOCENTLY CONDEMNED.—THE
    MISUNDERSTANDING WHICH DEFEATED GRANT FOR THE THIRD TERM, AND
    ELECTED GARFIELD.—HOW THE NOBLE “306” WERE DISCOMFITED.-“ANYTHING TO
    BEAT GRANT.”—THE STALWARTS AND THE HALF BREEDS.-“ME TOO.”—THE
    EXCITEMENT WHICH AROUSED GUITEAU’S MURDEROUS SPIRIT TO KILL
    GARFIELD.


The political events succeeding the Utica Convention and the nomination
of General Dix for Governor contain some inside history of more than
ordinary importance.

Had I not sprung General Dix on that Convention at the peculiar moment,
as described in the last chapter, Judge Robertson would have carried the
day with flying colors. It was a sudden and crushing blow to the
prospects of himself and his political friends, and it dissipated some
of the brightest hopes and brilliant schemes that had ever originated in
the fertile brain of Senator Conkling. As a consequence of the unique
turn that affairs took on that day, the Senator was placed in a false
position in relation to some of his best friends. Several of the latter
were put in an attitude whereby they misinterpreted the actions of
Senator Conkling at that Convention, and unjustly accused him of
betraying friends that he had promised to support. This was the result
of a misconception on their part, that the Senator was the prime mover
of the _coup d’etat_ that surprised the Convention in the nomination of
General Dix.

The credit was awarded to Conkling, without any hesitation or inquiry,
and he was either too proud, or too indifferent to public opinion to
explain. If he had explained his position candidly the chances are that
his explanation would have been taken in a Pickwickian or political
sense. In fact, he was in a position where he could hardly escape the
responsibility of Dix’s nomination, and everybody was ready to believe
that the movement in favor of Dix was too good a thing to be engineered
by a man of less calibre.

It would have been useless, therefore, for anybody else to explain, as
the person attempting to do so would only have been laughed to scorn.

Judge Robertson, himself the greatest sufferer by the curious turn
affairs had taken, was the first to believe that the nomination of Dix
was one of Conkling’s masterstrokes of political policy. He never
thought of looking to any other source for its emanation. He believed in
his soul it was the work of Conkling, and he thinks so to this day.

I happened to have been better informed, however; but my explanation
would have hardly passed muster at that time, and I would have been
charged with egotism if I had attempted to explain. I think an
explanation is now in order, however, and may point a moral as well as
help to adorn a tale.

History is said to be philosophy teaching by example, and one great
historian has said that no one event in itself is any more important
than another, except from what it teaches posterity by its example. So,
for the benefit of posterity, I now state the facts on this historical
principle.

I am willing to make affidavit on the revised edition of the good book
that prior to the Utica Convention the name of General Dix was not even
lisped by Senator Conkling within my hearing, nor was Dix ever thought
of even remotely by the Senator as a possible candidate.

I am almost certain that the Senator had taken no action that could
possibly conflict with the interests of Judge Robertson prior to the
mention of the name of Dix at the Convention. In fact, with the
exceptions previously stated, I am quite certain that the name of Dix
was a genuine surprise to the entire Convention, managers and all.

Judge Robertson thought differently, however. He believed that Conkling
was the cause of his defeat, and to this misapprehension is due the
enmity that sprang up between these two men, and worked with various
results to the defeat of the political aims of both ever since.

As I was Senator Conkling’s guest, this seemed to create a conviction in
the mind of Judge Robertson, without any inquiry into the matter, that I
had acted at the instigation of Conkling in bringing Dix to the front;
whereas the conception of Dix as the best candidate originated solely
with myself, nor did I ever suggest the idea to Conkling until I
addressed the Convention, in favor of General Dix.

Believing as he did, that the Senator had played the marplot to such
perfection at Utica, Robertson was naturally on the watch for the first
opportunity that would enable him to get even with the friend whom he
suspected of having so basely betrayed him, and with having blocked his
way to political preferment.

This opportunity came at the Chicago Convention, when the Utica
statesman was managing matters very successfully to nominate General
Grant for a third term.

It is curious that the very circumstance which was most conducive to
Grant’s success for the second term was the remote cause of his defeat
for the third. Senator Conkling had no idea of the deep-seated enmity
that lodged in the breast of Robertson. He had done nothing, knowingly,
to merit it, and had been calculating on the co-operation of Robertson,
as usual. He was not aware of the smouldering fire of vengeance that lay
latent in the bosom of his friend. He supposed that Robertson and his
co-mates in politics were with him as in days of yore in the support of
General Grant. He imagined that he had gone to Chicago with a full hand,
but instead of that he was short of some of his best cards, and his
enemies had them stocked in a way that finally brought him to grief.

Conkling only discovered his dilemma after the Convention met, when he
found to his dismay that Robertson had bolted the Grant ticket.

Robertson had first made an alliance with the Blaine party, but finding
an insufficiency of power among that party to carry his point against
the solid phalanx of the Grant movement, he joined forces with John
Sherman’s supporters, who were under the management of James A.
Garfield.

The able strategist from Utica, at the head of his 306 chosen followers,
so disconcerted the Sherman contingent that it also failed to carry the
necessary number of guns.

As day after day passed without any change, it seemed as if the Conkling
forces had adopted the motto of Napoleon’s old guard, “The Guard dies,
but does not surrender.”

At length Robertson and his lieutenants collected the shattered ranks of
Blaine and Sherman, and with Garfield at their head, like Ney attacking
the English centre at Waterloo, hurled them with desperation on the
solid square of Conkling, which still remained unbroken.

The united forces, however, with the war cry, “Anything to beat Grant!”
carried the day, Garfield was nominated and Conkling retired in good
order, but greatly discomfited.

Robertson had taken up this cry at the Convention in the same spirit
that was displayed by another man about whom a good story was told
during that campaign. He had got that shibboleth on the brain, “Anything
to beat Grant!” As the story goes, a prediction had been made by some
religious enthusiast that the world was coming to an end early in
November of that year. A preacher was reminding his congregation, one
Sunday, of the prediction, and the possibility of its fulfilment—at
least that it was well to be prepared for such an event. At the
conclusion of his exhortation, a man in the congregation arose to his
feet, and in a solemnly pathetic voice said, “Thank God.” At the end of
the service the minister’s curiosity was excited to converse with the
man who had so fervently thanked heaven for what most people regarded as
a universal calamity. He saw the man, and asked why he had made such a
remarkable ejaculation at the prospect of such a terrible consummation.
“Anything to beat Grant,” was the reckless and self-sacrificing
response.

It was in this spirit that the Robertson party made the fight at
Chicago, and in this spirit that they triumphed. It was anything to beat
Senator Conkling, however, so far as Judge Robertson was concerned, who
on other grounds would probably have preferred Grant. Thus he avenged
upon the wrong man his defeat at the Utica Convention, and I was
permitted to escape scathless, though innocently responsible for
blasting his Gubernatorial aspirations.

This was not the end of Judge Robertson’s enmity to Senator Conkling,
however. When the new Government came into power, Garfield, in making up
his cabinet, selected Blaine as a member of that special body. This
created a bad feeling between Blaine and Conkling, as it seemed to the
latter like a continuation of the conspiracy between Robertson and
Blaine, hatched at the Chicago Convention. Thus the seeds of a strong
and bitter antagonism were sown between these two leading spirits in the
Republican party, each aspiring to be at least the power behind the
throne.

After Garfield’s inauguration Blaine was made Secretary of State. Great
credit for the Presidential success was not only due to Mr. Blaine, but
in a large degree to Judge Robertson also, as without his assistance
Garfield could not have been nominated. So it was necessary to take care
of Judge Robertson too. This was done by making him Collector of the
Port of New York. These appointments were severe political blows, which,
in the nature of circumstances, fell with full force upon the devoted
head of Senator Conkling.

These events led to the sudden resignation of Senator Conkling and
Senator Platt, “Me Too,” and a very serious division in the ranks of the
party, under the respective names and banners of the Stalwarts and the
Half-Breeds.

The excitement growing out of the political battle between these
factions aroused the intemperate zeal and insane delusions of Guiteau to
kill the President. Thus the thread of cause and effect, when followed
up in this way, is entangled in the deepest mystery.


------------------------------------------------------------------------




                             CHAPTER XXXI.

             GRANT’S SECOND TERM.


THE BEST MAN FOR THE POSITION AND MOST DESERVING OF THE HONOR.—HOW THE
    “BOOM” WAS WORKED UP IN FAVOR OF GRANT.—THE GREAT FINANCIERS AND
    SPECULATORS ALL COME TO THE FRONT IN THE INTEREST OF THE NATION’S
    PROSPERITY AND OF THE MAN WHO HAD SAVED THE COUNTRY.—THE GREAT MASS
    MEETING AT COOPER UNION.—WHY A. T. STEWART REFUSED TO PRESIDE.—THE
    RESULTS OF THE MASS MEETING AND HOW THEY WERE APPRECIATED BY THE
    FRIENDS OF THE CANDIDATE, LEADING REPRESENTATIVES OF THE BUSINESS
    COMMUNITY AND THE PUBLIC PRESS GENERALLY, IRRESPECTIVE OF PARTY.


I wish to relate briefly the part which I took in the re-election of
General Grant, whose defeat, when he was spoken of as a candidate for
the second term, was foreshadowed among a large number of politicians of
every stripe. There were serious divisions in the ranks of his former
friends and adherents, and an organized effort was made to destroy his
prospects a long time in advance of the meeting of the Philadelphia
Convention.

All the political machinery of his enemies, and of disappointed office
seekers and their friends, was put in force, and all the tactics and
prejudices employed that were put into operation with greater success
four years later.

I felt assured that the nomination of any other man might result in the
defeat of the party, and that it was absolutely necessary to its
strength, maintenance and autonomy that General Grant should again be
our choice. He had been tried for one term and found to be a very
satisfactory executive. There was no important risk involved in trying
him for a second term while the experiment with another man in the then
sensitive, unsettled and tentative condition of reconstruction, might
have been injurious to the best political and industrial interests of
the country; and the experiment would have been especially risky if the
nominee should have been a Democrat.

The people of the South were not then in a proper frame of mind to be
trusted with any power implying the mere possibility of obtaining a
controlling influence in the affairs of the Government. I perceived it
was important that the Republicans should make a nomination that had a
fair prospect of being successful, and I felt satisfied that the result
would be extremely doubtful if we should nominate any other man.

Besides, no other man was more deserving of the national compliment,
considering that he had done so much to terminate the struggle for
national existence, and had been the chief force in suppressing the
Rebellion. His genius and courage had been chiefly instrumental in
preserving to the country the blessing of a Republican form of
Government. For this boon no people could ever be too profuse in the
manifestations of their gratitude.

This was the patriotic feeling deep in the hearts of the people at
large, but there was a secret movement engineered by “sore-head”
politicians, behind whom were even more dangerous enemies, to thwart
patriotic purposes. Some of these conspirators had been brooding over
latent schemes of anarchy for a long period, and had been attempting to
put them in organic shape before half the first term of General Grant
had expired. They were hard at work training public opinion, by every
means in their power, to prevent Grant’s renomination.

This hostile element was sedulously hatching scandals and ventilating
them in subsidized newspapers, and through various other disreputable
channels.

This opposition increased in violence and intensity, and as the time
approached when the country was to choose its next President, the
renomination of General Grant became a matter of serious doubt, even to
some of his most enthusiastic supporters. It had become a foregone
conclusion that the Democrats would draw largely from the Republican
ranks, and the anxiety on this point was intensified by the hostility of
the _Tribune_, and the prospect of Horace Greeley’s candidacy. It was
absolutely necessary, therefore, that an energetic effort should be
made, and the requisite steps taken to ensure General Grant’s success at
the Convention.

I entered into this feeling with a great deal of personal enthusiasm.
What was my motive? some one reading this may ask.

Because I believed the sacredness of contracts, the stability of wealth,
the success of business enterprise, and the prosperity of the whole
country depended on the election of Grant for President.

If the reader wants to get at the selfish motive, as all readers do, I
shall be perfectly candid with him in that respect also. Of course I
knew that Wall Street business would boom in the wake of this general
prosperity. That was the selfish motive, from which no man is free. Of
course, I expected to share in Wall Street’s consequent prosperity.

I did not want office, as several of the highest were offered me which I
respectfully declined; and no office in the gift of the people would
have compensated me financially; and moreover, my highest ambition has
been satisfied in my own line of business.

I went to work then in the interest of Grant for the second term. I
employed numerous canvassers at my own expense, to find out the minds of
the representative business men on the subject, and to talk the matter
up with those interested in Republican success. These men reported to me
daily, and in a short time I had sounded the minds of that part of the
business community who had the greatest stake in the country, and whose
influence is always most felt when any important achievement is to be
compassed. I sent out a petition, and obtained the names of a splendid
array of merchants and business men of all shades of opinion and
politics in favor of Grant. Following is the heading of the petition:

    “A PUBLIC MEETING.

    “To the merchants, bankers, manufacturers and other business men
    in favor of the re-election of General Grant:

    “The undersigned, desiring publicly to express their earnest
    confidence in the sagacity, fidelity, energy and unfaltering
    patriotism, so signally displayed by Ulysses S. Grant in
    securing the restoration of peace at home, upholding national
    rights abroad, and in maintaining throughout the world the honor
    of the American name, do hereby invite their fellow citizens to
    assemble in mass meeting at the Cooper Institute, on Wednesday
    evening, the 17th of April, 1872.”

This call was chiefly the result of the personal canvass which I had
instituted a few weeks previously. I selected the names of the persons
to be called on from day to day, and kept these men working the matter
up, until I had secured almost all the reputable business firms in the
city of New York. The following, whose original signatures I have still
in my possession, were prominent in the list:


    WILLIAM E. DODGE,
    JOHN C. GREEN,
    HENRY F. VAIL,
    GEORGE T. ADEE,
    REV. SAMUEL OSGOOD,
    WILLIAM H. FOGG,
    BENJAMIN B. SHERMAN,
    ROBERT L. STEWART,
    WILLIAM HENRY ANTHON,
    E. D. MORGAN,
    JAMES BUELL,
    H. B. CLAFLIN,
    W. R. VERMILYE,
    WM. M. VERMILYE,
    CHARLES L. FROST,
    NATHANIEL HAYDEN,
    JESSE HOYT,
    WILLIAM BARTON PEAKE,
    EMIL SAUER,
    JACOB OTTO,
    JOSEPH STUART,
    J. STUART,
    THOS. GARNER ANTHONY,
    FREDERICK S. WINSTON,
    MORRIS FRANKLIN,
    WM. C. BRYANT,
    R. H. McCURDY,
    JOSEPH SELIGMAN,
    THEODORE ROOSEVELT,
    WILLIAM ORTON,
    CHARLES P. KIRKLAND,
    PETER COOPER,
    HUGH J. HASTINGS,
    SAMUEL B. RUGGLES,
    CORTLANDT PALMER,
    JONATHAN EDWARDS,
    CHARLES KNEELAND,
    S. R. COMSTOCK,
    PITT COOK,
    THOMAS J. OWEN,
    OTIS D. SWAN,
    GEORGE OPDYKE,
    HARPER & BROS.,
    JOHN C. HAMILTON,
    GEO. W. T. LORD,
    SAMUEL T. SKIDMORE,
    JONATHAN STURGES,
    WM. H. VANDERBILT,
    SHEPARD KNAPP,
    WM. H. ASPINWALL,
    J. S. ROCKWELL.


It is sad to reflect that these are all now numbered with the mighty
dead.

These names will serve to show the great number of prominent people
gradually departing from us every few years.

The name of the number of those yet alive who signed that petition is
legion. In fact those who did not sign it were those whose names were
not worth having. To put it mildly, I secured through their own
signatures, by this method, all whose names were desirable. Our forces
having been mustered in this way, the next thing was to disconcert the
enemy, and inspire our own party by showing our available strength, and
the power and enthusiasm behind the movement. This we proceeded to do by
calling a mass meeting at the Cooper Institute for April 17, 1872.

The meeting was an immense success, in numbers, brains and
respectability. The hall was crowded and the outside meeting was several
times larger.

Mr. A. T. Stewart had been invited to preside. He had been a warm friend
of General Grant, but had then become lukewarm and indifferent, owing to
the fact that he had failed to obtain a Custom House promotion for one
of his wife’s near relations. I had endeavored for several days to
soften Stewart’s heart and get him to consent to be chairman of the
meeting, but he was incorrigible. Finally, I succeeded in extorting a
promise from him that if he did not vote for General Grant he would not
vote against him, but beyond this it was impossible to mollify him. He
was a paragon of obduracy when he had once resolved upon any course.
Even the recollection that he, though an alien born, had been offered
the second highest position of trust in the nation, Secretary of the
Treasury, which he could not accept on account of being in business,
failed to draw out his feelings of gratitude sufficiently to forget the
fancied slight of refusing his wife’s relative promotion.

Failing to secure Mr. Stewart, I invited Mr. William E. Dodge to
preside. He graciously accepted the invitation and made a very good
chairman indeed.

The array of Vice-Presidents was said to excel anything that had ever
appeared in a similar list of the proceedings of any meeting in this
city.

I had invited Fred. Douglas and P. B. S. Pinchback, the eminent colored
orators, to the meeting, but they could not attend, as they were at a
New Orleans convention of their own people. Mr. Rainey, a colored
gentleman, spoke most eloquently and with telling effect. This was the
first time since the war that a colored orator had addressed a meeting
of whites on politics in New York, or probably in the North. Prior to
this the colored vote for Grant had been in doubt, as Horace Greeley,
whose name was a word to conjure with among these people, had recently
been swinging around the circle down South, with a view of capturing
alike the vote of the colored people, who loved him, and that of the
Democrats, who hated him. By a curious fatality he failed to capture
either. As Blaine has truly said of him: “No other candidate could have
presented such an antithesis of strength and weakness.”

There had been no meeting for a long time previous to this that had been
the cause of such an enthusiastic awakening in the party and among
politicians generally over the whole country, as this great
demonstration of the people at the Cooper Union. It crushed the
aspirations of the so-called Independents and smothered the lingering
hopes of the Democratic party.

In order to show the influence of this mass meeting upon the destiny of
political parties in the Presidential election of 1872, it will be
necessary to take a retrospect of the impression it made on parties most
deeply interested in the result, and to make known their private
opinions on the subject. Inside history of this nature is always
instructive, and time has clothed with the attribute of public property,
what at one time was a very precious political secret.

Among the striking incidents of the night of that meeting I distinctly
recollect one that was truly prophetic, in regard to Senator Henry
Wilson, of Massachusetts. A number of the speakers and other prominent
men took supper with me at the Union League Club after the meeting, and
in proposing the health of Senator Wilson, who had spoken so eloquently,
I nominated him for the Vice-Presidency, and sure enough he was
afterwards elected to that position.

I shall take the liberty in this place of introducing to the reader a
few letters hitherto unpublished, which throw considerable light on the
value of the political work done by myself and friends at that time, and
how it was appreciated by those most deeply interested in its outcome.

The following from the White House shows how anxiously the current of
events was being watched from that great centre:

                                “EXECUTIVE MANSION,                }
                                 WASHINGTON, D. C., April 17, 1872 }

    MY DEAR CLEWS:

    I have received your several interesting letters in regard to
    the great meeting in New York, and have shown them to the
    President, who read them with deep interest. I have not
    written any suggestions, because I know you, being on the
    ground, could judge so much better of the situation, and the
    temper of the New York people. You have done a great work, and
    this evening’s success will, I have no doubt, be the reward of
    your efforts. We shall look anxiously for the reports. What
    you say is curious about the use of Dix’s name and others. Our
    people are at work in Congress getting up telegrams signed by
    the Republican members of all the State delegations endorsing
    the administration of General Grant. I wish we had thought of
    these sooner, but still we can get them all in time, I hope. I
    have just come from the House, where I was looking after this
    matter. Wishing you every success,

                                  I remain yours very sincerely,

                                       HORACE PORTER,

                                            (Sec’y to President
    Grant.)

After the meeting the President’s Secretary writes as follows:

                                                EXECUTIVE MANSION, }
                                                WASHINGTON, D. C., }
                                                April 19, 1872.    }

    MY DEAR CLEWS:

    I have only a moment before the mail closes to say how earnestly
    all congratulate you upon the great success of the meeting.

    It was glorious and genuine. We read the proceedings in full in
    the _Times_ last night. It has created a marked effect in
    Congress and elsewhere. Nearly every Republican in the House
    would have signed the congratulatory telegrams, but the movement
    was started so late in the day that the paper was not presented
    to any one.

                                  Yours very truly,

                                       HORACE PORTER.

The following, from the Hon. Roscoe Conkling, is a very flattering
reminiscence, which I highly appreciate:

                                     UNITED STATES SENATE CHAMBER, }
                                     WASHINGTON, April 19, 1872.   }

    MY DEAR SIR:

    As a New Yorker and a Republican, I want to thank you for the
    great service you have rendered our country and our cause in
    conceiving and carrying forward the great meeting of night
    before last.

    The effect of it will be wholesome and widefelt; it was most
    timely, and its whole management was a success. Our friends all,
    I think, know and appreciate the large debt due you in the
    premises.

    Noting your suggestions as to the future, I lay them to heart.

                                  Yours sincerely,

         ROSCOE CONKLING.

    HENRY CLEWS, Esq.

The New York _Herald’s_ special from Washington next day after the
meeting said:

    “The President, in conversation with Senators who called upon
    him this morning, expressed himself as much pleased with the
    demonstration in New York last night, which he regards only as
    evidence of the popularity of the Republican party. He has been
    assured, from reliable sources, that the leading Democratic
    merchants and bankers in different parts of the country are
    anxious that the Republican party may completely triumph at the
    coming Presidential election, as the surest way of maintaining
    our credit, and resisting anything like a financial crisis,
    which they regard as certain if their own party should succeed.”

Following are the address and resolutions expressed through the
representatives of a grateful people in favor of the hero who had saved
the country:

    _Grant Meeting at Cooper Institute, March 17, 1872.—Address and
    Resolutions._

                                ADDRESS.

    Hon. E. Delafield Smith, on behalf of the Committee of
    Arrangements, read the following address, remarking that it was
    prepared by one of the most eminent and substantial of our
    business men:

    The administration of public affairs under the government of
    President Grant has been eminently wise, conservative and
    patriotic; our foreign relations have been conducted with a
    scrupulous respect for the rights of other nations, a jealous
    regard for the honor of our own; the noble aspiration with which
    General Grant emphasized his acceptance of his great office,
    “Let us have peace,” has been happily realized; the Union has
    been completely re-established on such principles of justice and
    equity as to insure its perpetuity; the Constitution, with all
    its amendments, has been adhered to with rigid fidelity;
    domestic tranquility has been restored; a spirit of humanity has
    been infused into our Indian policy; the revenues of the country
    have been faithfully collected and honestly disbursed, so that,
    while the burdens of taxation have been materially lightened,
    the public debt has been largely reduced, and the national
    credit appreciably strengthened; all branches of industry have
    been stimulated to healthy activity; and throughout the length
    and breadth of the land security, prosperity and happiness
    reward the perils and sacrifices by which the rebellion was
    suppressed and the Union preserved.

    It is an act of poetic justice that the soldier whose victories
    in war, and the statesman whose triumphs of peace have made the
    last decade the most glorious in the annals of American history,
    should receive an earnest of the gratitude of his countrymen by
    his re-election to the Presidency.

    It is an auspicious circumstance that the people are evidently
    awakening to a higher sense of the duties and responsibilities
    of public officials. There is a general disposition to hold men
    entrusted with place and power to a strict accountability for
    their acts, and to demand that honesty and capability shall be
    the inflexible conditions of appointment to office. The
    recommendations of the president in favor of the principles
    enunciated in the report of the Civil Service Commission, were
    timely and apposite, and deserve universal endorsement.

    Numerous investigations have been set on foot during the present
    session of Congress, having for their object the discovery of
    corruption in the public service. Disaffected Republicans and
    partisan Democrats have made common cause in the endeavor to
    elicit evidence tending to show acts of wrong doing, and to
    implicate the President in knowledge or toleration of such acts.
    As in the days of Daniel, “they sought to find occasion against
    him.” But, like the enemies of Daniel, “_they could find none
    occasion nor fault, forasmuch as he was faithful, neither was
    there any error or fault found with him_.”

    The more incisive the scrutiny, the more palpable the
    demonstration of his purity. The cost of pursuing these
    investigations has exceeded the aggregate loss incurred by the
    Government through the dishonesty of its subordinates since the
    administration came into power.

    A record so clear and honorable challenges the admiration, and
    compels the approval of citizens whose only aim is to secure a
    stable and beneficent Government—to preserve inviolate the faith
    of the nation—to give security to capital, adequate reward to
    labor, and equal rights to all.

    With the grievances of disappointed office seekers, the masses
    who thrive by their own toil, cannot be expected to find time or
    patience to sympathize. Whether this Senator has had more or
    that Senator less than his share of patronage, are insignificant
    questions compared with the grave issues involved in a
    Presidential canvass. It is the constitutional prerogative of
    the President to make appointments to office. That he has not
    exercised these functions unwisely, the success of his
    administration abundantly proves.

    Believing that General Grant’s civic career fitly supplements
    his military greatness, that he has brought to the discharge of
    his duties to the State the same energy, foresight and judgment
    which marked his achievements in the field, and made his
    campaigns from Donelson to Appomatox for ever illustrious; and
    that he possesses and deserves the confidence of the American
    people, we pledge to him our united and hearty support as a
    candidate for re-election.


                              RESOLUTIONS.

Hon. E. Delafield Smith, Chairman of the Committee on Resolutions,
presented the following:

    _First._ That the merchants and mechanics, the bankers and
    business men of New York, represented in this meeting and in the
    call under which it is assembled, are satisfied with the wisdom,
    ability, moderation and fidelity with which the national
    government is administered, and in common with the bulk of our
    brethren throughout the Union favor the continuance of its
    distinguished head in the office which he holds with usefulness
    and honor.

    _Second._ That the practical result of the coalition movement,
    if successful, would be to restore the Democratic party to
    power.

    _Third._ That such a restoration, after the late glorious
    triumph over rebellion, would read in history like the record of
    a Tory resurrection at the close of our revolutionary war.

    _Fourth._ That Republicans elected to office mainly by those who
    assailed the Union at the South and at the North embarrassed its
    defenders, would inevitably become serviceable to the powers
    that sustain them, like those northern presidents who were
    chosen by the South and did its bidding better than its own
    statesmen.

    _Fifth._ That the patriotism that made Grant President of the
    Republic he saved, is akin to that which placed Washington at
    the head of the nation he created. The trust was accepted by
    each at a manifest sacrifice of interest and inclination, with
    modest misgiving as to civic experience and qualification. But
    having been well and wisely administered, the confidence implied
    in a re-election is an appropriate reward for faithful services,
    and accords with the broadest views of public policy.

    _Sixth._ That against hostile criticisms and unfounded
    imputations, against alluring promises and prismatic
    theories,—we array the practical reforms constantly inaugurated
    and the substantial results already achieved by the present
    administration. The chronic vices of existing systems, unfairly
    paraded to its injury, have been placed in a course of
    amelioration or removal. The reduction of the national debt has
    elicited the admiration of the world. Our diplomacy has made
    peace the ally of national honor. And our President has been in
    deed as in name a kind and “great father” to the Indian tribes
    still lingering within our borders.

    _Seventh._ That while honorable opposition is entitled to
    respect, every effort to blacken, for political purposes, the
    character of President Grant, is a crime against truth which
    vindicates him, and an insult to the American people who honor
    and exalt him. Pure in private as irreproachable in public life,
    with strong convictions yet deferential to the popular will,
    patient under attack, more ready to listen than to speak, with
    no display and no ostentation—those who know him best bear
    testimony to the sense, the sagacity, and the power of analysis
    by which his utterances are characterized and impressed.

    _Eighth._ That in the judgment of this meeting a majority of the
    people of the country expect, desire, and decree the
    renomination and re-election of Ulysses S. Grant.

                   SPEECH OF HON. E. DELAFIELD SMITH.

    Mr. E. Delafield Smith said:—Fellow Citizens:—It is manifest to
    us all that President Grant will be renominated at the
    Convention in Philadelphia. It is equally clear that such is the
    wish of the American people. This is due to a confidence reposed
    in him by the “plain people” of the country, which no
    misrepresentation seems able to impair. His opponents assert
    that the public declarations in his favor are influenced by the
    office holders. But this cannot well be, for the office
    _holders_ are always far outnumbered by the office _seekers_.
    With regard to executive patronage, it is as true now as when
    Talleyrand first said it, that every office conferred makes one
    ingrate and forty-nine enemies. The truth is, possession of the
    offices is a source, not of strength, but of actual weakness to
    any political party. In spite of this, General Grant is so
    strong and popular that a coalition is frantically sought as the
    only and forlorn hope of defeating him. It is thought that the
    Democratic masses can be carried over bodily to the few
    Republican seceders. But the moment the Democratic organization
    is relaxed, it will lose its hold upon thousands of its own
    members, and they may and will prefer in voting for a Republican
    to make the choice themselves, and they will rally in large
    numbers to the hero of our patriotic armies. The coalition
    meeting, lately held in this city, recalls the old arrangement
    as to colored troops, where the officers were white men, but the
    rank and file negroes. So here, the platform was covered with
    Republicans, but the audience was made up of Democrats. In thus
    acting with their old opponents our disaffected friends boast of
    their independence, and impute servility to us. But they are
    wrong. That man is most independent who is at once loyal to his
    country, true to his party, and faithful to his friends! With
    these brief observations, I move the adoption of the address and
    resolutions.

My only apology for inserting the above address and resolutions is, that
I believe they constitute a valuable epitome of a very important
chapter, yet to be more fully written, of the political history of the
United States.

A greater criterion of the success of the meeting, however, was the
editorial opinion of the _Evening Post_ next day, which had been for a
long time previously very bitter in its attacks upon General Grant. It
said:

    “The meeting held last evening at the Cooper Institute was, we
    believe, without precedent in our political history. It was
    expressly called as a gathering of that branch of the Republican
    party which desires the nomination and re-election of President
    Grant. Yet, when it came together, the officers and speakers
    assumed that it was a mass meeting of the Republicans of New
    York. This is to say, according to the organizers and promoters
    of this gathering, the one test of Republicanism now is the
    political support of one man’s aspirations, and that before any
    nomination has been made by that party. This is a singular
    position to receive the approval, at least, by their
    acquiescence, of such men as some scores of those whose names
    are prominent in the report of the meeting, and who, as we know,
    would prefer some other candidate than General Grant, if they
    could hope to control the Philadelphia nomination.

    “The power of this meeting was wholly in its organization. The
    list of officers chosen by it is, on the whole, the best, most
    reputable, and most influential commanded by any partisan
    meeting within our recollection. There are a few names on it
    which disgrace their fellows; there are many which carry no
    weight, but an unusually large proportion of the very long list
    are eminent and representative names in this city. The audience
    assembled was in many respects in keeping with the officers. It
    consisted mainly of reputable, thoughtful voters.”

The good work was continued until November with the result that is now
historical.

The New York _Sun_ said: “We believe that Henry Clews did more, in a
pecuniary way, to promote the success of Grant, than any Republican
millionaire of the Union League Club.”

Another mass meeting was held late in the fall. Referring to it, and
other events of that period, the President’s Secretary writes a few days
prior to the election as follows:

                                    WASHINGTON, D. C., Nov. 2, 1872.

    MY DEAR CLEWS:

    We are all greatly obliged for the documents and information
    which you have sent us during the campaign. The President says
    the list of vice-presidents of the last Cooper Institute meeting
    is the most remarkable list of prominent names he has ever seen
    upon one paper. It will of itself do great good.

    Our news is charming from all quarters, and all our hopes will,
    without doubt, be fully realized on Tuesday next.

    If the defeat of the enemy is overwhelming, it will be
    sufficient reward for all our labors.

                                  Your very truly,

                                       HORACE PORTER.

To show still further the interest which the leading merchants, bankers
and business men of this city took in the movement to re-elect General
Grant at that time, the following circular furnishes an excellent and
historical record. It constitutes, in a small compass and compact form,
a valuable chapter of financial history:


                                CIRCULAR

    _Of the Business Men of New York on the Financial Condition of
    the National Debt of the United States. Further Reduction
    October 1, 10,327,000 Dollars._

    The undersigned, merchants, bankers and business men of New
    York, respectfully submit the following statements for the
    information of all parties interested therein:

    The Republican candidate for President of the United States is
    Gen. Ulysses S. Grant, who was unanimously named for re-election
    at Philadelphia, in May last.

    At the commencement of Gen. Grant’s first term of office, March
    4, 1869, the national debt was $2,525,000,000. On the first day
    of September, of the present year, there had been paid and
    cancelled of the principal of this debt, $348,000,000, leaving a
    balance of principal remaining unpaid at that date, in
    accordance with the official statement of the Secretary of the
    Treasury, the sum of $2,177,000,000.

    Of this amount, $1,177,000,000 are represented in a funded debt,
    bearing interest in gold, while $400,000,000 remain unfunded in
    Treasury circulation.

    Up to the close of the last session of Congress, the annual
    reduction of taxes, as measured by the rates of 1869, had been
    as follows:


               Internal revenue tax          $82,000,000

               Income tax, (repealed,)        30,000,000

               Duties on imposts,             58,000,000

                                                     ———

               Making a total reduction     $170,000,000
                 of


    The reduction of the yearly interest on the public debt exceeds
    the sum of $23,200,000, of which $21,743,000 are saved by the
    purchase and cancellation of the six per cent. public
    securities.

    A careful consideration of these results of a prudent and
    faithful administration of the national Treasury, induces the
    undersigned to express the confident belief, that the general
    welfare of the country, the interests of its commerce and trade,
    and the consequent stability of its public securities, would be
    best promoted by the re-election of Gen. Grant to the office of
    President of the United States.

    New York, Oct. 4, 1872.

        PHELPS, DODGE & CO.,
        GEORGE OPDYKE & CO.,
        A. A. LOW & BROTHERS,
        JOHN A. STEWART,
        VERMILYE & CO.,
        JAY COOKE & CO.,
        JOHN STEWARD,
        HARPER & BROTHERS,
        JOHN TAYLOR JOHNSTON,
        FREDERICK S. WINSTON,
        PEAKE, OPDYCKE & CO.,
        MORRIS FRANKLIN,
        SCHULTZ, SOUTHWICK & CO.,
        J. S. ROCKWELL & CO.,
        ROBERT H. McCURDY,
        WILLIAM M. VERMILYE,
        R. W. HOWES,
        WILLIAM CULLEN BRYANT,
        C. L. TIFFANY,
        SPOFFORD BROS. & CO.,
        JOHN C. GREEN,
        H. B. CLAFLIN & CO.,
        MOSES TAYLOR,
        WM. H. ASPINWALL,
        ROBERT LENOX KENNEDY,
        S. B. CHITTENDEN & CO.,
        JAMES G. KING’S SONS,
        HENRY E. PIERREPONT,
        EMIL SAUER,
        BOOTH & EDGAR,
        WILLIAM ORTON,
        ISAAC H. BAILEY,
        SHEPHERD KNAPP,
        WILLIAMS & GUION,
        EDWARDS PIERREPONT,
        RUSSELL SAGE,
        PETER COOPER,
        ANTHONY, HALL & CO.,
        GARNER & CO.,
        J. S. T. STRANAHAN,
        E. D. MORGAN & CO.,
        DREXEL, MORGAN & CO.,
        AUGUSTINE SMITH,
        WM. H. VANDERBILT,
        MORTON, BLISS & CO.,
        JONATHAN STURGES,
        J. & W. SELIGMAN & CO.,
        J. & J. STUART & CO.,
        JOHN A. PARKER,
        BENJAMIN B. SHERMAN,
        JOHN D. JONES,
        J. D. VERMILYE,
        SAMUEL T. SKIDMORE,
        HENRY F. VAIL,
        LLOYD ASPINWALL,
        JACOB A. OTTO,
        GEORGE W. T. LORD,
        SAMUEL McLEAN & CO.,
        HENRY CLEWS & CO.


------------------------------------------------------------------------




                             CHAPTER XXXII.

 THE TWEED RING, AND THE COMMITTEE OF SEVENTY.


THE RING MAKES ITSELF USEFUL IN SPECULATIVE DEALS.—HOW TWEED AND HIS
    “HEELERS” MANIPULATED THE MONEY MARKET.—THE RING CONSPIRES TO
    ORGANIZE A PANIC FOR POLITICAL PURPOSES.—THE PLOT TO GAIN A
    DEMOCRATIC VICTORY DEFEATED AND A PANIC AVERTED THROUGH PRESIDENT
    GRANT AND SECRETARY BOUTWELL, WHO WERE APPRISED OF THE DANGER BY
    WALL STREET MEN.—HOW THE COMMITTEE OF “SEVENTY” ORIGINATED.—THE
    TAXPAYERS TERRORIZED BY BOSS TWEED AND HIS MINIONS.—HOW “SLIPPERY
    DICK” GOT HIMSELF WHITEWASHED.—OFFERING THE OFFICE OF CITY
    CHAMBERLAIN AS A BRIBE TO COMPROMISE MATTERS.—HOW THE HON. SAMUEL
    JONES TILDEN, AS COUNSEL TO THE COMMITTEE, OBTAINED HIS GREAT START
    IN LIFE.


The Tweed Ring had considerable experience in and out of Wall Street for
several years during the municipal reign of the famous Boss. I have made
some reference to their attempts to manipulate the market through tight
money, in my biographical sketch of that Wall Street celebrity Henry N.
Smith.

The Ring was often highly subservient in assisting certain operators in
speculative deals in stocks, one notable instance being in Hannibal &
St. Jo. shares, which resulted in a terrible loss to Boss Tweed & Co.
This stock became quite neglected for a long period afterwards, and so
remained until the famous “corner” was engineered many years after by
John R. Duff, of Boston, through his New York broker, Wm. J. Hutchinson,
and by which poor Duff was almost, if not entirely, ruined. It is only
justice to Mr. Duff, in this connection, to state that he was not to
blame, as an exhaustive investigation by the Governing Committee of the
Stock Exchange showed that his trouble chiefly arose through flagrant
dishonesty and betrayal of trust on the part of his agent, in whom he
reposed too much confidence.

Boss Tweed and his special retainers sometimes made Wall Street
instrumental in engineering national and State political movements.
About the time of an election, if their opponents happened to be in
power, the Ring would produce a stringency in the money market, by
calling in simultaneously all the city money, which was usually on
temporary loans in the Street.

This the Ring managers would accomplish through some of the banks which
were the depositories of the city funds, and were under their control.

By this means they worked up a feeling of antagonism against the
Republicans who were in office, by throwing the blame on them, and thus
rendering them odious in the eyes of those who had lost money in
speculation. The blame was not unnaturally fastened on the party in
power, and most men, when they lose money, are credulous enough to
believe anything that seems to account for the manner in which the loss
has been sustained. It seems to have a soothing effect upon their minds,
and furnishes them with a tangible object upon which they may wreak
their vengeance and feel satisfied. There is nothing so irritating to
the disappointed speculator as the harassing doubt of where to fix the
blame.

The Tweed Ring supplied this long-felt want, and filled the aching void
in the heart of the man who happened to get on the wrong side of the
market. When speculators frequently had their margins “wiped out,” and
were almost beggared of everything except their votes, they found that
consolation which Wall Street refused them, in the sympathetic hearts of
Tweed’s “heelers,” who pointed to the poor office-holders of the
Republican party, representing them as the sole possessors of Pandora’s
box, which contained all evils that flesh is heir to.

So these financial disasters were brought about by the Tweed party for
the purpose of getting their friends into office, which always paid
tribute to the Boss when he was instrumental in elevating a person to a
fat position. He, himself, did not want any better office than receiver
general of this tribute.

In those days a Presidential election was largely influenced by the way
Pennsylvania went, so that it had grown into a political maxim, “As goes
the Keystone State so goes the Union.”

In the Spring of 1872, the year in which General Grant was the
Republican candidate for the second term, when it was decided that
Horace Greeley should be the Democratic candidate, great efforts were
made to produce a panic in Wall Street. It was arranged by the Tweed
party that the panic should take place simultaneously with the State
election in Pennsylvania, so as to illustrate the evil results of
Republican rule, and turn the influence in favor of Mr. Greeley’s
election.

I received intimation of this politico-speculative conspiracy, and
communicated my information to Senator Conkling, who was stopping at the
Fifth Avenue Hotel at the time. I told him that the Democrats were
working up a panic to help to defeat General Grant. He said it was the
first he had heard of it, but it was so like a move that Tweed and his
party would make, that he felt there was just cause for alarm about it,
and he requested me to go and see Governor Morgan, and also George
Opdyke, on the subject. I found that the Governor was at a church
meeting, and I left my card telling him to call upon me at the rooms of
the Republican National Committee, as I wanted to see him upon important
business. I left word for Mr. Opdyke to call also.

The Governor soon presented himself at the Committee rooms, and I
divulged to him my information and suspicions. He did not exhibit so
much interest as I imagined the importance of the case demanded, and he
appeared to doubt the correctness of the report of the political
intentions of the Tweed Ring, or rather he seemed to imagine that the
Ring was hardly capable of a move that involved such subtlety and depth
of design. Therein he greatly underestimated the power, resources and
statecraft of Peter “Brains” Sweeney. The Governor was of a phlegmatic
temperament, and it was difficult to convince him of anything that was
not very clearly demonstrable. I told him that my information was of
such a positive and reliable nature that I knew I was right, and that if
there should be a panic in Wall Street I had serious apprehensions that
it would prove disastrous to the Republicans in the national campaign.

Governor Morgan appointed a meeting for the next day to discuss the
matter more fully and obtain further light upon the subject. I took with
me to see the Governor, whom I had now convinced of the reality of the
political plot, Mr. George Opdyke and Mr. H. B. Claflin.

In the meantime the Governor had seen Travers, who, being an inveterate
bear on the situation, had an inkling of what was in progress to break
the market. The Governor had satisfied himself that my representations
were correct, and that trouble was really brewing. He then entered with
earnestness into the question of the best policy to be adopted to
obstruct the schemes, and frustrate the purposes of the Democratic
party.

I then suggested, that as the matter did not admit of delay, it was
highly essential that some one, or more, of us should go to Washington
to see General Grant. The Governor said he could not go. I could not go,
and neither could Mr. Claflin. So Mr. Opdyke, who was very ready in such
matters, consented to bear the important message in person, provided we
all agreed to back him up by writing a strong letter to the President,
setting forth the facts in relation to the emergency. This we did, and
Mr. Opdyke left at once for Washington. This was on Friday evening, and
he transacted his business with more than ordinary despatch, and
returned on Sunday morning. He sent for me, and told me that he had
explained the matter to the President, who felt exceedingly grateful for
the warning which he and our letters had conveyed, and that he had
forthwith consulted with the Secretary of the Treasury, and it was
resolved to order the purchase, on Monday, of ten millions of bonds, and
the sale of ten millions of gold, for the purpose of averting, in
advance, any financial disturbance that might arise through the project
of the Tweed Ring to create an artificial stringency in the money
market.

Then I saw that these men who were engaged in the conspiracy to create a
panic, and benefit themselves both politically and financially by its
results, were a deeply designing lot, and that under the law, gold could
be bid up, the highest bidders obtaining it, having the option of either
paying by depositing their money in payment for it in the National
depositories, which were the Fourth National Bank and the Bank of
Commerce, or else depositing it in the Sub-Treasury. If deposited in the
latter it would be locked up, and the effect intended by the Treasury,
to make money easy, would be neutralized, in so far as the influence of
the money as a circulating medium was concerned.

In order, therefore, to provide for that probable contingency, my firm
subscribed for the whole ten millions of gold, the names being the
clerks of my office. We were awarded eight millions, and we paid the
money into the Bank of Commerce, and the Fourth National Bank, through
which it was brought into circulation.

Thus ten millions of greenbacks and also ten millions of gold came fresh
from the Sub-Treasury into circulation immediately, promptly
anticipating and defeating the machinations of the Ring.

The Tweed Ring being “all broke up” on this deal, the effect was magical
on the market. The plans of the conspirators had been entirely upset,
and the Pennsylvania election took place a few days afterward with an
overwhelming majority for the Republicans.

Had the panic, which was projected by the Ring, taken place, the result
might have been otherwise, and the re-election of Grant thus
jeopardized.

After this triumph over Tweed and his gang, I set my wits to work to
plan their overthrow. I saw that their power was entirely money power,
obtained by official position through official theft. I was satisfied
that these patriots who had put their hands up to the elbows in the City
Treasury of New York were bent upon buying, stealing or otherwise
obtaining their way to the National Treasury at Washington.

They had hoped to do there on a large scale what they had accomplished
on a smaller scale in the city of New York, where they were becoming
restive under their limited resources.

It was with the view of suppressing the dangerous aspirations of this
band of political marauders that I originated the well known Vigilance
Committee of Seventy, and at the first meeting to organize this
committee I nominated sixty-five of its members.

The committee was thus backed at the start by so many prominent citizens
as to make it at once a power in the community.

Then for the first time in many years the citizens of New York were
emboldened to become outspoken on the subject of political plunder and
tyranny, and against the officials who had ruled the city with a rod of
iron.

For a long time previous to this there had been grave suspicions that
robbery on a large scale was being perpetrated, but no one dared to give
utterance to the fact except with bated breath and in half smothered
whispers. No one, with the possible exception of a few who were not
taxpayers, had the temerity to open his mouth to say a word against the
desperate men who controlled the destinies of the city, through fear
that on the event of any remark reaching the ears of the Boss or his
minions, the property of the person thus offending should be marked up
to an artificial value and his taxes accordingly increased. This was one
of the most effective methods pursued by the Ring to choke off
unfriendly criticism by the rich men of the city. In this way the power
of some of the most influential citizens became paralyzed, being held in
complete subjection under the terrorism of this subtle system of
blackmailing.

The power the Ring possessed of covering up the rascality of its members
and bamboozling the public is hardly conceivable at this day except by
those who had experience of it at the time. As an instance of this I may
state that some time prior to the appointment of the Committee of
Seventy certain accusations were ventilated against Richard Connolly,
the City Comptroller. He put on a bold front, and insisted upon an
investigation of his department by a committee of leading and prominent
citizens. He named his committee, who were Moses Taylor, Marshall
Roberts and John Jacob Astor. These were men against whom no person
could have any objection. They were wealthy and independent citizens,
and it might have been difficult at the time to have selected any other
three who commanded greater confidence in the community. The
investigation, through the unblushing effrontery and audaciousness of
Connolly and his “pals,” resulted in an acquittal of Mr. Connolly, which
gave him a new lease of political life, and rendered it more dangerous
than ever for any one to utter a word of hostile criticism against his
methods of managing the city finances.

Results showed, when the Ring was exposed, that Connolly had made the
very best use of this investigation in appropriating additional sums out
of the City Treasury.

The Ring was now supreme in city affairs, and the city was under a reign
of terror. This state of things existed until the summer of 1872, when
the Committee of Seventy got into harness, after which the despotic
thieves that had ruled the roost so long, were driven from power one
after another in rapid succession, and scattered to the four corners of
the globe.

The task of ousting this brazen band of plunderers, root and branch, was
attended with considerable difficulty, as their resources were so
numerous and powerful. When they were no longer able to exercise their
arbitrary power they stooped to every form of cajolery and bribery in
order to adhere to the remnant of their official authority. As an
illustration of this, I may state that at the beginning of my efforts in
connection with the Committee of Seventy I was waited upon by a member
of the Ring and asked if I would not accept the position of City
Chamberlain. I said: “That is a matter, of course, which I could not
decide upon at once, as there is no vacancy at present. It will be time
enough for me to consider the matter when a vacancy occurs, and then
when the position is offered to me.”

This answer carried with it an intimation, which I had intended, with a
view of drawing out some of the internal methods of procedure in such
cases, that I would probably accept the position and help to smooth over
impending revelations. I thought that the end which the Committee had in
view justified this means of mildly extorting an important secret in
methods of Ring management, that was calculated to aid us in the work of
municipal reform.

Next day I was again waited upon by one of Tweed’s most trusty friends,
who graciously informed me that the City Chamberlain had resigned, and
that there was a vacancy which I could fill to the entire satisfaction
of the then appointing power. I desired him to convey my feelings of
deep gratitude to the powers that were then on the point of being
dethroned, and to say that I very respectfully declined the flattering
offer. I said that I had thought earnestly over the matter since the
previous day, and as I was a member of the Committee of Seventy, which
was a reforming organization, I felt that I could not conscientiously
accept the position.

It was necessary that the office should be filled immediately, and it
was next offered to Mr. F. A. Palmer, President of the Broadway Bank,
which had been one of the Ring’s depositories of the city funds.

Soon after this the majority of the city officials had resigned and
taken their flight to parts unknown. They were scattered broadcast over
the world. Some had gone to Europe, some to Cuba, and others to that
favorite and paradisaical colony of defaulters, the New Dominion,
leaving the Committee of Seventy, as a reform and revolutionary body, in
complete control of the city.

Tweed remained, but was not quite so audacious in putting his pet
interrogative, “What are you going to do about it?” He seemed to be
convinced that the Committee of Seventy meant business. Mayor Oakey Hall
also remained, and facetiously protested that as far as he was concerned
everything was “O. K.”

The Hon. Samuel J. Tilden began to loom into prominence about this time.
Through the influence of William F. Havemeyer, he was chosen one of the
three legal advisers of the committee. Abraham B. Lawrence and Wm. H.
Peckham were the other two. Mr. Tilden was quick to seize this
opportunity of sudden prominence to bring himself to the front and pose
as a great reformer. Had it not been for the Committee of Seventy, I
believe it is very doubtful whether this great reformer would ever have
been known as such, and it is also exceedingly problematical whether he
would have ever got the chance of being counted out, or, attempting
through the magic of his occult cyphers, to count anybody else out of
the Presidency of the United States.


[Illustration:

  SAMUEL JONES TILDEN.
]


------------------------------------------------------------------------




                            CHAPTER XXXIII.

            HON. SAMUEL J. TILDEN.


HOW TILDEN BEGAN TO MAKE HIS FORTUNE IN CONNECTION WITH WILLIAM H.
    HAVEMEYER.—TILDEN’S GREAT FORTE IN POLITICS.—HE IMPROVES HIS
    OPPORTUNITY WITH THE DISCERNMENT OF GENIUS.—HOW TILDEN BECAME ONE OF
    THE COUNSEL OF THE “COMMITTEE OF SEVENTY.”—HIS POLITICAL ELEVATION
    AND FAME DATING FROM THIS LUCKY EVENT.—THE SAGE OF GREYSTONE A TRULY
    GREAT MAN.—ATTAINS MARVELOUS SUCCESS BY HIS OWN INDUSTRY AND BRAIN
    POWER.—HE NOT ONLY DESERVED SUCCESS AND RESPECT, BUT COMMANDED
    THEM.—HOW HIS LARGE GENEROSITY WAS MANIFESTED IN HIS LAST WILL AND
    TESTAMENT.—THE ATTEMPT TO BREAK THAT PRECIOUS PUBLIC DOCUMENT.


Mr. Wm. H. Havemeyer had long been associated with Mr. Tilden in
railroad wrecking and the reorganization of broken concerns of this
character. Through this process both these gentlemen became wealthy.
When, therefore, Mr. Havemeyer extended the right hand of fellowship to
his confidential companion in money making affairs, and invited him to
officiate as one of the counsel of three for the Committee of Seventy,
Mr. Tilden was sharp enough to appreciate the opportunity, which he
seized with avidity.

He was quick to discern the tide in the affairs of men which, when taken
at the flood, leads on to fortune. He did not wait until the tide began
to ebb, but, like an able seaman, set his sail at the propitious moment
to catch the prosperous breeze as well as the tide. Thus, through a
lucky chance and other men’s exertions, Mr. Tilden was raised high on
the very crest of the tidal wave of reform, almost before he knew it.

In the first instance, this happy accident of being one of the trinity
of legal advisers to our committee, for which he was well paid, did not
lead immediately so much to fortune as to fame, but it formed an
important portion of the pedestal upon which the several millions which
he so munificently bequeathed to educational purposes were subsequently
raised. To fame he was then comparatively unknown. The Committee of
Seventy enabled him to obtain the start which was chiefly instrumental
in elevating him to a position of renown in national politics.

Tilden’s great forte in politics, as in financial affairs and railroad
matters, was to set a cash value on everything, and measure it
accordingly. If he opened his “barrel” the contents were not distributed
indiscriminately, but on the principle directed by the most expert
judgment of where the money would do the most good—according to Mr.
Tilden’s ideas of good. What they were I don’t attempt to explain, but,
like the popular novelist, charitably leave them to the inference of the
reader, or to that expert Moses who so ably deciphered occult telegrams
from Florida and Louisiana when there was such a close contest for the
office of National Executive.

Without departing from the main issue of my subject, however, I may say
that the position which Mr. Tilden was enabled to assume as counsellor
to our committee made it possible for him to rise from the, not to say
dignified, although money-making, attitude of railroad wrecker to that
of Governor of the Empire State of the Union, thus paving the way for
him to become almost a successful candidate for the highest position in
the gift of the Great Republic.

Such a sudden transition from comparative obscurity was enough to turn
any ordinary head.

Seeing the unexpected course that both our local and national history
have taken, it is impossible to say what might have been the course of
this man’s destiny, and the fate of this new Daniel come to judgment in
canal ring masters, had it not been that his friend Havemeyer discovered
him at an opportune moment, and rescued him from manifest oblivion in
the nick of time.

It must be said, on behalf of Mr. Tilden, however, that he improved the
occasion with the discernment of genius, and in the fullest degree, and
to the highest extent, thoroughly justified Havemeyer’s choice.

The soundness of that proverbial philosophy which holds that lightning
never strikes twice in the same place seems to have been fully
appreciated by Mr. Havemeyer, although this was a little ahead of the
time that John Tyndall and other scientists of the modern school of
discovery had demonstrated some of the recent wonders of electricity.

Tilden struck while the iron was hot, and though he failed to reach the
highest pinnacle of his soaring ambition, he demonstrated the wonderful
possibilities which lie in the path of obscure men who are blest with
friends who look out for their welfare, and who have the precaution to
turn the wheel of fortune in the right direction.

Whether it was the result of fate, genius, or wise direction, or a
combination of all these attributes, I don’t pretend to decide, but I
have noted the simple facts from my own observation and experience,
associated with the rise and financial progress of the Hon. Samuel J.
Tilden, leaving others deeper in scientific and philosophic matters to
supply the details and hidden mysteries of the causes of his marvellous
prosperity.

The Committee of Seventy, when entering upon its labors, passed a
resolution authorizing the appointment of a subcommittee by the chair to
select and retain three lawyers to represent it in the matters of
litigation that might arise in connection with the investigation. Mr.
Havemeyer, being a member of the sub-committee, through his influence
Samuel J. Tilden was one of the three appointed.

To give the reader an idea of the power and prestige of the Committee of
Seventy at that time it is only necessary to state that it was
instrumental in making Mr. Abraham Lawrence one of the Judges of the
Supreme Court, and Mr. W. H. Peckham, the third counsel, could have
obtained almost any judgeship he had desired, with perfect facility.

These cases are on official record, and are living examples to show that
I am not exaggerating. Judge Lawrence still adorns the bench, with an
excellent record behind him, and Mr. Peckham has been a prominent figure
in many of the most important suits that have become historic in the
State and City of New York.

Mr. Tilden saw the power which this committee, used as an instrument of
recommendation, wielded, and he set his astute mind to avail himself of
the reformatory advantages which it afforded. The committee was a reform
body, and he saw his opportunity, as one of its counsel, to become a
reformer also. He builded almost better than he knew, if I may be
permitted to quote Scripture in this case, and he did not build on a
sandy foundation either. He planted himself on the solid rock of reform
principles, independent of politics or previous condition. It must be
said, to his credit, that he used the material at his disposal with
great tact and good judgment, and made an excellent reformer.

Whatever may have been said about him by political opponents, the late
Sage of Greystone must be judged in this sinful world by the positions
to which he honorably attained. He became a prominent and most estimable
citizen of our great Republic, and had it not been for his age, and
certain physical infirmities, the existence of which was a matter of
dispute, he would have made a very good President, judging from his
record as a Governor.

I have not intended to say anything especially disparaging or
ill-natured about Mr. Tilden through any hostile feeling towards him, of
which I never had any. My intention has been simply to show how easily a
man can rise if he has the ability required to take passage on the tide
of prosperity exactly at its flow, the magic point of embarkation which
William Shakespeare has suggested.

So what I have stated about Mr. Tilden is in the main rather to his
credit than otherwise.

For a man who attained such an elevated position of success by his own
industry and brain power I have the highest respect and the deepest
sympathy, knowing myself a good deal about the toil attendant upon
climbing above the heads of the great majority of the “masses” with a
strong contingent of the envious “classes” always using their best
efforts to pull a man down who attempts to aspire above a certain level.
In fact, Mr. Tilden not only deserved success and respect, but he
commanded them. Such a man should always be accorded most graciously his
well-earned deserts.

I can, therefore, conscientiously subscribe myself one of the great
admirers of his successful career on the whole, bearing always in mind
that human nature is not perfect, and that there are few, if any, who
have not had some murky clouds cast over their fair fame.

Although on strict moral principles we should never do evil that good
may come, yet the manner in which Tilden disposed of the greater portion
of his fortune will, even in the eyes of straight-laced moralists, go
far to cover a multitude of sins in the acquisition of his wealth. There
are probably few, if any, churches in the land that would have refused a
portion of the bequest, no matter how familiar their members or their
clergy might have been with Mr. Tilden’s railroad methods.

In this imperfect sketch of the turning point of prosperity in Mr.
Tilden’s career, I have desired to show how little it requires to change
the entire current of a man’s apparent destiny. A man who attains such
eminent success has his Creator to thank for endowing him in the first
instance with the capacity to take advantage of the chances thrown in
his way, and his own smartness for turning them to the best account.

I have taken Mr. Tilden up and devoted to his extraordinary career a few
pages, from personal reminiscences, in this book, owing to the fact that
he was identified with a number of railroads in the way which I have
indicated above. His position in this respect naturally classifies him
with some of our most prominent Wall Street speculators, investors and
operators, and he thus naturally falls within the scope of the main
subject of this book.

Mr. Tilden, in his will, ordered that if the will should be contested by
any of the beneficiaries each and all of the contesting parties should
be disinherited.

In spite of this prohibition, George H. and Samuel J. Tilden, sons of
Henry A. Tilden, and nephews of the testator, contested the validity of
the instrument, not on the ground of incapacity or undue influence, but
upon construction.

Henry L. Clinton and Aaron Vanderpoel were the lawyers for the
contestants.

It is curious that the will of a man so deeply learned in the law as Mr.
Tilden was, should be questioned as to whether it was a legal document
or not. But such was the ground of the contest. The point was this: The
residuary clause empowers the trustees to apply to the Legislature for
an act to incorporate a body to be called the Tilden Trust. This body,
when incorporated, was to become the legatee. This method of procedure,
according to the opinion of learned counsel in the law, bequeathed to
the trustee under the will the power to name the public legatee of the
testator. It seems that a testator has no power to do this, according to
the recent decisions of the Courts of last resort in this country,
which, it would seem, Mr. Tilden had not read. Nobody but the testator
himself has power to name the legatee. It appears he had the decision of
the English Court in his mind, which allows of this method of
bequeathing property. Following is the residuary clause in full, bearing
upon this point: “I request my said executors and trustees to obtain, as
speedily as possible, from the Legislature an act of incorporation of an
institution to be known as the Tilden Trust, with capacity to establish
and maintain a free library and reading-room in the city of New York,
and to promote such scientific and educational objects as my said
executors and trustees may more particularly designate. Such corporation
shall have not less than five trustees, with power to fill vacancies in
their number, and in case said institution shall be incorporated in a
form and manner satisfactory to my said executors and trustees during
the lifetime of the survivor of the two lives in being, upon which the
trust of my general estate herein created is limited, to wit, the lives
of Ruby S. Tilden and Susie Whittlesey, I hereby authorize my said
executors and trustees to organize the said corporation, designate the
first trustees thereof, and to convey to or apply to the use of the same
the rest, residue and remainder of all my real and personal estate not
specifically disposed of by this instrument, or so much thereof as they
may deem expedient, but subject, nevertheless, to the special trusts
herein directed to be constituted for particular persons, and to the
obligations to make and keep good the said special trusts, provided that
the said corporation shall be authorized by law to assume such
obligation. But in case such institution shall not be so incorporated
during the lifetime of the survivors of the said Ruby S. Tilden and
Susie Whittlesey, or if for any cause or reason my said executors shall
deem it expedient to convey said rest, residue and remainder, or any
part thereof, or to apply the same, or any part thereof, to the said
institution, I authorize my said executors and trustees to apply the
rest, residue and remainder of my properly, real and personal, after
making good the said special trusts herein directed to be constituted,
or such portion thereof as they may not deem it expedient to apply to
its use to such charitable, educational and scientific purposes, as in
the judgment of my said executors and trustees will render the said
rest, residue and remainder of my property most widely and substantially
beneficial to the interests of mankind.”


[Illustration:

  _C Van Derbilt_
]


------------------------------------------------------------------------




                             CHAPTER XXXIV.

                COMMODORE VANDERBILT.
            —HOW HIS MAMMOTH FORTUNE WAS ACCUMULATED.


FERRYMAN.—STEAMBOAT OWNER.—RUNS A GREAT COMMERCIAL FLEET.—THE FIRST AND
    GREATEST OF RAILROAD KINGS.—THE HARLEM “CORNER.”—REORGANIZATION OF
    N. Y. CENTRAL.—HOW HE MILKED HIS CO-SPECULATORS.—HIS FORTUNE.—ITS
    VAST INCREASE BY WM. H.


The most conspicuous man connected with Wall Street in my early days of
speculation was “Commodore” Vanderbilt. Without going minutely into the
early exploits of the man, it will be sufficient, for the purposes of
this narrative, that I trace his start in life in connection with a
row-boat of which he was Captain, plying between Staten Island,
Governor’s Island, and New York, in which he himself did the rowing.
This enterprise, in course of time, grew into one with boats propelled
by steam, instead of manual labor. During his progress as ferryman he
became proprietor of a hotel at New Brunswick, New Jersey. This side
issue did not prove very lucrative, perhaps, because the Commodore, with
all his versatile ability, did not possess the special talents required
to keep a hotel. The hotel still exists, and is situated near the
railroad station, and is now, as it was then, merely a railroad tavern.
The first vivid recollection of the Commodore in Wall Street “dickering”
was in connection with the Nicaragua Transit Company, the capital of
which was over $4,000,000. He became President of the Company, and soon
afterward the head and front of the whole enterprise. The Directors and
stockholders, and in fact every one else connected with the Company,
were soon crushed into nonentities. When their complete subjection was
obtained, the Commodore loomed up into gigantic dimensions, and, as he
expanded, the Nicaragua Company became small by degrees and beautifully
less in inverse proportion. Eventually the greatly depressed
stockholders, like the worm when trodden under foot, turned and showed
resentment. The case came into Court and was the subject of ordinary
investigation, but I never heard of the Company recovering anything. I
presume their claims were relegated to the profit and loss account in
perpetuity.

After this, the Commodore started a line of steamers in opposition to
the fleet of Pacific Mail, and kept his boats running until he was
bought off. About this time an event happened which has preserved for
posterity a good story, highly characteristic of the Commodore. His
son-in-law, James M. Cross, had conceived the idea of embarking in the
wholesale leather business in the “Swamp.” He had been talked into it by
an experienced man who was to be his partner. A store was secured, and
everything put under way for the start, with the exception of the
capital, which Mr. Cross had agreed to contribute against the experience
of his partner. The amount was to be $50,000. Mr. Cross, knowing that
the Commodore had at this time become rich and prosperous, felt
satisfied that it was only necessary to make application to his
enterprising father-in-law for the amount required. Thereupon, with the
confidence begotten of implicit trust, he approached the Commodore for
this temporary accommodation, giving him a full description of the
nature of the business. After listening attentively to the statement of
his esteemed son-in-law, the Commodore said in reply: “Now, James, if I
let you have this $50,000 to put in the leather business, how much do
you think you will be able to make for your share out of the profits?”
Mr. Cross thought the best position to take with a rigid business man
like his father-in-law was to be prudently conservative in his
expectations, and to keep all his Colonel Seller prospects in the
background. After a few moments reflection he replied: “I believe I am
almost certain to make $5,000 a year.” The Commodore promptly responded:
“James, as I can do better than that myself in handling $50,000, I will
give you $5,000 a year hereafter, and you may consider yourself in my
employ at that salary.” There was no way for James to wriggle out of it,
and he accepted the situation with apparent good grace, whatever his
internal emotions may have been at the time. The Commodore forthwith
dispatched Mr. Cross to San Francisco to manage his steamboat business
there. He soon discovered, however, that James was hardly aggressive
enough for the go-ahead fellows on the gold coast, and he was recalled.
After looking around some time for a man possessing the necessary
requirements to be placed in successful competition with the adventurous
spirits of the Pacific Slope, his search was rewarded by an introduction
to Commodore C. K. Garrison, then in command of a Mississippi steamboat.
Garrison had established his reputation for being the best euchre player
on the river, and for much besides which that term implies. He was brave
and fearless—in fact, in some respects, a Jim Bludso of real life, with
the self-sacrificing qualities of that hero largely discounted, or
perhaps entirely left out. It required men of mettle in those days to
run a steamboat on the Father of Waters, when the greater portion of the
passengers belonged to the gambling fraternity, and were all experts
with the bowie knife and the ready revolver.

The Commodore had an interview with Garrison, which resulted in an
engagement, and he was sent to San Francisco as the Commodore’s agent.
It was soon found that he was the man for the Wild West, and he was not
slow to appreciate his own value and importance to the increasing
fortunes of his employer. He struck very often for higher wages, and was
always able to command his price. He rose, from one advance to another,
until his salary at that day had reached the marvellous figure of
$60,000 a year. Numerous stories of Garrison’s fabulous prosperity on
the Pacific Coast reached this city and the ears of the Commodore, and
his fame began to penetrate farther than the name of the latter had ever
been heard. These accounts had their effect on a mind so naturally
envious as that of the Commodore. He began to realize the humiliating
fact that, instead of Garrison being in his employ, the former captain
of the Mississippi steamboat had him in tow, and was everywhere regarded
as the Boss, while Vanderbilt was simply supposed to be his Eastern
agent. This brought matters to the point where patience ceased to be a
virtue, and the connection was severed. Soon after this the Commodore
sold out to the Pacific Mail Company, which again became a monopoly, and
as the fight had been a losing one to him, he was obliged to find other
waters for his boats.

Since his advent with a common row boat on the waters of our own
handsome bay, thence through the gradations of ferry boats and
steamboats, nothing but unremitting success had attended his ventures,
until his unequal struggle in competition with Pacific Mail. He appeared
to have met his Trafalgar when he encountered that fleet. His
dissociation with Garrison seemed for a time to forebode disaster. He
gathered himself up temporarily again, but never took to the waters so
kindly afterwards. He began to feel that his financial destiny was
verging towards a firmer foundation. His last boat was the famous
steamship Vanderbilt, which was recognized at the time as one of the
finest ships to be found on any sea. He made a present of her to the
Government during our great National struggle, or according to another
account, he lent her, and the Government kept her. The Commodore at one
time had a fleet of sixty ships.

The Commodore became convinced that the growing prospects of railroads
pointed to greater facilities for transportation in the future, and also
a more profitable investment than those watery regions which had
hitherto appeared to be his natural element. He promptly resolved to
turn his back on the domain of Neptune, and to devote his great energies
to enterprises on land. He saw there was comparatively little room for
development in water traffic, while in the railroad business the field
was practically unlimited.

He then commenced to buy up Harlem Railroad stock, so as to obtain
control of that road, and in the operation got up the celebrated Harlem
“corner.” Application had been made to the Legislature for some
advantages in connection with the road, which were refused for reasons
best known to leading members of that body. In the meantime Harlem stock
had been knocked down to a very low figure. The Commodore remained in
ambush, and was secretly purchasing it. He then went to the Legislature
to get his bill passed. Most of the members of the Legislature thought
they had got the “deadwood” on the Commodore, and enlisted a large
number of their friends in the enterprise. They attempted “to work the
Commodore for all he was worth,” and for a time appeared anxious to pass
the measure required. On the strength of this anticipated action on the
part of the Legislature the stock advanced, when the members sold
“short” and failed to legislate. The stock naturally went down, and
Vanderbilt bought it up. The collapse anticipated by the Legislature did
not take place, and, instead of that, the Commodore got a “corner” in
the stock, and the members of the Legislature were the parties mulcted.
They had, therefore, all to go to the Commodore’s office, and settle up
with him on his own terms, and he made arrangements to get his measure
in favor of the road through the Legislature as part of the bargain.
This transaction is more fully described in another chapter.

His next great enterprise was in connection with the New York Central.
Having successfully euchred the legislators in the matter of Harlem, he
was encouraged to play a still higher game. As soon as he obtained
control of this property, it seemed as if it had been touched by a magic
wand, or that famous stone of Midas, contact with which turned
everything into gold. Prior to this event the road had been dragged
along under the management of Dean Richmond, Samuel Sloan and Henry
Keep, without any signs of prosperity; but when Vanderbilt took hold of
it there was a sudden change to visible progress and prosperity. It
never looked behind afterwards, and both enterprises have enjoyed signal
and increasing success ever since, thus illustrating the marvellous
capacity of the Commodore for the organization and management of large
enterprises. The hydraulic operations of the Commodore with the stock of
this property would alone furnish material for a very interesting
chapter. Sending it up on one occasion at a bound, between Saturday and
Monday, 20 per cent., was a new move in manipulation which caused some
of the boldest operators on the Stock Exchange to stand aghast. He kept
working the stock up and down, in some such way as Mr. S. V. White now
keeps toying with Lackawanna, until he “milked” the street sometimes
very dry. He kept the tempting prize of a coming dividend glittering
before the eyes of the dazzled imaginations of his friends who were
dealing in the stock, but the “milking” process was so ably managed
that, when the famous 80 per cent. dividend was actually declared, they
had become so poor that they were unable to carry any of the stock, so
as to avail themselves of the profits. There was but one man that I know
of who reaped any benefit from it, and that was an old friend of the
Commodore, who still lives, and who had met with signal reverses in some
of the Erie deals at the time Mr. Gould so ably managed that concern.
This man had been wiped out in Erie, and his depressed condition awoke a
sympathetic cord momentarily in the heart of the Commodore. He gave his
friend the tip the day before the dividend was declared, and he found
another friend who bought enough of stock to realize $700,000, which was
divided between them. This is the solitary exception within my knowledge
where the Commodore failed to bag the entire game without “saying turkey
once” to any person connected with the deal.

The life of the Commodore affords singular scope for reflection on the
immense possibility of a great business capacity to amass a huge fortune
in a few years, especially in this country. The Commodore and his son
William H., in a little more than half a century, accumulated the
largest private fortune in the world, excepting the aggregate wealth of
all the Rothschilds combined, which has been the result of the most
expert financiering in all the capitals of Europe through several
generations, with all the resources of the greatest monarchs on the
earth to back their various enterprises. With all these advantages in
favor of the Rothschilds, the Vanderbilt fortune amounts to two-thirds
of the sum total of theirs. The result is certainly astounding when
submitted to a test of the highest standard of comparison that can be
found anywhere on this globe. But, wonderful as the success of the
Commodore was in its rapid gradations, from the possession of a rowboat
on our bay to that of a fleet of sixty-six steamboats that brought
mercantile argosies from all parts of the world, and in later years his
great railroad acquisitions, yet the success of his son is more
marvellous still.

In seventy years the Commodore arose from nothing financially to be the
proud possessor of $90,000,000. Wm. H. obtained $75,000,000 of that and
nearly trebled it in a tenth part of the time. He made three times as
much in seven years as his father made in seventy, or he made as much on
an average every two and one-half years as his father had done during
the three score and ten of his active business and speculative career.
If any person having the necessary amount of temerity had ever ventured
to make such a prediction as this in the presence of the old Commodore,
what a natural burn idiot he would have been regarded by that grand old
man. If the spirits of the departed ever visited the glimpses of the
moon in these days, what a profound sense of humiliation that of old
Vanderbilt must feel, as it makes its nightly rounds through those
spacious marble corridors in Fifth avenue, or, perched on the dome of
the Grand Central Depot, it contemplates the mighty development and
expansion of its earthly designs, now extended far beyond the limits of
what its highest ambition had dared to foreshadow.

Some people may argue that it required greater ability to acquire these
first $90,000,000 than the present sum total of the wealth of the
Vanderbilts. Those who argue thus, however, have no precedent to suggest
their position. An instance of such prosperity on so large a scale in so
short a time has never occurred in the history of financiering. The
accumulations in all the wealthy families that I know of have been
comparatively slow, and the history of the family of European
millionaires shows a similar principle of gradation, except, indeed,
that the gradation in the majority of instances has gone backwards. Very
few wealthy men, with the exception of the Rothschilds, the Astors and a
few others, have had any children capable of increasing their wealth,
except where it was almost impossible to do otherwise under the law of
primogeniture. In this country, therefore, where the law of distribution
has full scope, Wm. H. Vanderbilt, who had to that time been regarded as
a man of very moderate capacity, proved himself to be the ablest
financier of which there is any record either in ancient or modern
history.

Jay Gould, with all the resources of science at his disposal, and all
the talent that money could command, with newspapers, politicians,
lawyers, judges, and courts at his will, with as good a start,
financially dating from 1878, as Wm. H. Vanderbilt had, has been left
far behind in the race for wealth, and for the highest prize ever gained
by one man in any nation. It has been truly said that a fool can make
money, but it takes a wise man to keep it. Wm. H. Vanderbilt’s financial
wisdom, as well as his ability, was signally displayed in keeping this
great fortune intact, besides adding fully three times as much more to
it; and it proves that his father made no mistake in selecting him to
hand his name and fortune down to posterity. This immense pile of
“filthy lucre,” however, in spite of all the credit that is justly due
to its late manager, has had one serious drawback from a public
standpoint. In fact, the very announcement of this mammoth fortune in
the newspapers, at the time of Mr. Wm. H. Vanderbilt’s death, had a most
demoralizing effect upon a large number of the wealthy portion of the
community, who began to feel that they were nonentities in comparison.
In making this statement I absolve the Vanderbilt family from any blame.
Every man in this great Republic has the privilege of walking in the
footsteps of the two great Vanderbilts if he only has the ability; but
it would not be wisdom for a large number of men to attempt it. They
would be pretty certain to “get left.”

The story of the distribution of the Vanderbilt wealth, however, has
brought discontent to many a home where happiness reigned before. It
could hardly be otherwise, constituted as human nature is, and
especially human nature in our highly strung commercial society, where
the spirit of ambition is always strenuously aiming at higher flights.
People who heretofore had considered themselves rich, and socially
important, with a million or so to draw upon, felt that they were mere
ciphers in the scale of wealth; they seemed to themselves to be
financially blighted, and miserably poor in contrast with the colossal
magnitude of the Vanderbilt possessions as exhibited in the Surrogate’s
Court. The plain, cold, prosy figures brought out there read like a
romance, or the story of Sinbad the Sailor and the Valley of Diamonds.
But it was all stern reality. This is why the feelings which suffer from
this contrast are so deeply pathetic. It is a reality, and a stern
reality, that can hardly be imitated or duplicated by any other two men
in this generation. The thing is possible, but just about as probable as
it was for every private soldier of Napoleon the Great, who each had a
Marshal’s baton in his knapsack, to become a Marshal. “Every
blacksmith,” says the Rev. Robert Collyer, “might become a preacher, but
it would be a great public calamity if it should happen to that extent.”
The bare outlines of the Vanderbilt wills, which have made such a deep
impression on the community at large, will be found in another part of
this book. I think they will afford very interesting reading for
generations yet unborn.


[Illustration:

  _W H Vanderbilt_
]


------------------------------------------------------------------------




                             CHAPTER XXXV.

            WILLIAM H. VANDERBILT.


A BUILDER INSTEAD OF A DESTROYER OF PUBLIC VALUES.—HIS RESPECT FOR
    PUBLIC OPINION ON THE SUBJECT OF MONOPOLIES.—HIS FIRST EXPERIENCE IN
    RAILROAD MANAGEMENT.—HOW HE IMPROVED THE HARLEM RAILROAD
    PROPERTY.—HIS GREAT EXECUTIVE POWER MANIFESTED IN EVERY STAGE OF
    ADVANCE UNTIL HE BECOMES PRESIDENT OF THE VANDERBILT CONSOLIDATED
    SYSTEM.—AN INDEFATIGABLE WORKER.—HIS HABIT OF SCRUTINIZING EVERY
    DETAIL.—HIS PRUDENT ACTION IN THE GREAT STRIKE OF 1877, AND ITS GOOD
    RESULTS.—SETTLED ALL MISUNDERSTANDINGS BY PEACE AND
    ARBITRATION.—MAKES PRINCELY PRESENTS TO HIS SISTERS.—THE SINGULAR
    GRATITUDE OF A BROTHER-IN-LAW.—HOW HE COMPROMISES BY A GIFT OF A
    MILLION WITH YOUNG CORNEEL.—GLADSTONE’S IDEA OF THE VANDERBILT
    FORTUNE.—INTERVIEW OF CHAUNCEY M. DEPEW WITH THE G. O. M. ON THE
    SUBJECT.—THE GREAT VANDERBILT MANSION AND THE CELEBRATED BALL.—THE
    IMMENSE PICTURE GALLERY.—MR. VANDERBILT VISITS SOME OF THE FAMOUS
    ARTISTS.—HIS LOVE OF FAST HORSES.—A PATRON OF PUBLIC
    INSTITUTIONS.—HIS GIFT TO THE WAITER STUDENTS.—WHILE SENSITIVE TO
    PUBLIC OPINION, HAS NO FEAR OF THREATS OR BLACKMAILERS.-“THE PUBLIC
    BE DAMNED.”—EXPLANATION OF THE RASH EXPRESSION.—THE PURCHASE OF
    “NICKEL PLATE.”—HIS DECLINING HEALTH AND LAST DAYS.—HIS WILL AND
    WISE METHOD OF DISTRIBUTING 200 MILLIONS.—EFFECTS OF THIS COLOSSAL
    FORTUNE ON PUBLIC SENTIMENT.


In treating of the family in the order of descent, I shall now make a
brief survey of the life of William H. Vanderbilt, especially in its
relation to Wall Street affairs and the management of his great railroad
system, the two being closely connected. William H. Vanderbilt was not
much of a speculator in the Wall Street sense of the term. He was more
of an investor than a speculator, and his investments had always a
healthy effect upon the market. Unlike Woerishoffer and others of that
ilk, he built up instead of pulling down values, but was at the same
time careful to avoid the error of inflation. He paid due deference to
public opinion also, in striving to allay its alarm in regard to the
dangerous overgrowth of monopolies. A grand illustration of this was
seen in the sale of the large block of New York Central. His first
experience in railroad matters was in connection with the Staten Island
Railroad, thirteen miles in length. The road had been mismanaged and was
deeply in debt, and became bankrupt. As he and his father had
considerable interest in the road William H. was appointed receiver. It
seems this was done secretly at the suggestion of the Commodore, who
wanted to discover by this experiment if his son had any capacity for
railroad management. The receivership of the Staten Island road was
crowned with signal success. In two years the entire indebtedness of the
road was paid, and the stock, which had been worthless, rose to 175.
William H. Vanderbilt was then elected President of the road. It was at
this time, it is said, that the Commodore began to correct his judgment
regarding the “executive ability of William H.,” and the latter relaxed
no effort to please his exacting father in everything, taking all his
abuse without complaint or anger. After the Commodore secured control of
the Harlem road, which was his first great railroad venture, he made
William H. Vice-President. As a co-worker with his father the latter
further demonstrated his capacity for railroad management, and Harlem
stock, which had been down to nearly nothing, in a few years became one
of the most valuable railroad properties in the country. So, it is a
fact, although not generally known, that William H. Vanderbilt had
proved himself to be a competent railroad manager before his eminent
father had fairly begun that line of business. It was almost entirely
owing to his individual exertions and sound judgment that, in a few
years, the Harlem road was double-tracked, and such other improvements
made as sent the stock from 8 or 9 to above par. The Commodore was so
highly pleased and agreeably surprised with his son’s management of the
Harlem road that he made him Vice-President of the Hudson River Railroad
also, and at a later date associated him in the same capacity with the
management of the important consolidation of New York Central & Hudson
River. The great executive power of William H. was manifested in every
successive movement which his father directed, and unparalleled
prosperity was the result in every instance. After William H. was fully
installed in the Vice-Presidency of the consolidated system of the
Vanderbilt railroads he became an indefatigable worker, taxing his
physical and mental powers to their utmost capacity, and it was
doubtless this habit of hard work, persisted in for many years, that
resulted in so sudden and comparatively premature death for a member of
a family famous for its longevity throughout several generations. He
insisted on making himself familiar with the smallest details of every
department, and examined everything personally. He carefully scrutinized
every bill, check and voucher connected with the financial department of
the immense railroad system, and inspected every engine belonging to the
numerous trains of the roads. In addition to this general supervision of
everything that pertained to the railroads, he was in the habit of going
over a large amount of correspondence which the majority of other men
not possessing the hundredth part of his wealth hand over to their
clerks, and he answered a great number of letters with his own hand
which financiers of comparatively moderate means are in the habit of
dictating to their stenographers. When his father died, at the age of
82, in January, 1887, William H. Vanderbilt, then 56 years of age, found
himself the happy possessor of a fortune variously estimated at from 75
to 90 million dollars. The remainder of the Commodore’s bequests
amounted to 15 millions.

After the death of his father the executive powers of Wm. H. Vanderbilt,
in the management of the vast railroad interests bequeathed to him, were
called into active play. The great strike of 1877 among the railroad
employes threatened to paralyze business all over the country, and came
pretty near causing a social revolution. In this emergency a cool head
and prudent judgment were valuable attributes to a railroad manager. Mr.
Vanderbilt proved that he possessed both in more than an ordinary
degree. Just prior to encountering the knotty problem of the strike he
had been highly instrumental in bringing about suspension of hostilities
in the freight war, and the course which he advised led to an
arrangement that produced harmony among the trunk lines for a
considerable period. As a consequence of the rate war the railroad
companies were obliged to cut down the wages of their employes, and this
was the chief element in causing the strike. There were 12,000 men in
the employ of the New York Central and Harlem. Their wages had been
reduced ten per cent. and they had threatened to annihilate the Grand
Central Depot. Instead of making application to have the militia called
out, as had been done in Pennsylvania, Mr. Vanderbilt—although a man
possessed of far more than ordinary courage—with keen foresight proposed
a kindly compromise with his employes. He telegraphed from Saratoga to
his head officials an order to distribute $100,000 among his striking
employes and promising them a restoration of the ten per cent. reduction
as soon as business improved to a point justifying such an advance. This
prompt and prudent action had the desired effect, and the consequence
was that while there was a small insurrection in Pittsburgh, and bloody
war to the knife, at great cost to Allegheny County, calmness reigned in
the prominent railroad circles of New York, and the taxpayers escaped
the burden that might otherwise have been put upon their shoulders, and
the demoralizing effects of violence and bloodshed were prevented. Over
11,500 of the 12,000 men returned to work, thus showing their gratitude
to Mr. Vanderbilt and faith in his promise, which was afterwards duly
fulfilled. The policy of Wm. H., in the management of his great railroad
system, unlike that of his father, was entirely pacific in its
character. He was disposed to settle all misunderstandings by reason and
arbitration, and had no inclination for fighting and conquest, after the
manner of the Commodore. Although a very close calculator in business
matters, a habit to which he adhered even to the precision of striking
out superfluous items which should not have been charged in his lunch
bill, Mr. Vanderbilt was in many respects generous to a fault. He
compromised the suit with his brother, “Young Corneel,” allowing him the
interest on $1,000,000, whereas his father had only left him the
interest on $200,000, with a forfeiture clause in the event of “Corneel”
contesting the will. Wm. H. also made a present of $500,000 in United
States bonds to each of his sisters, out of his own private fortune. A
good story is related in connection with the distribution of this
handsome gift. Mr. Vanderbilt, it is said, went around one evening in
his carriage, taking the bonds with him and dispensing them to the
fortunate recipients from his own hands. One of his brothers-in-law
having observed by the evening papers that the bond market had declined
a point or two on that day, said, “William, these bonds fall $150 short
of the $500,000, according to the closing prices of this day’s market.”
“All right,” replied Mr. Vanderbilt, with assumed gravity, “I will give
you a check for the balance,” and he wrote and signed it on the spot. It
is related that another brother-in-law followed him to the door, and
said, “If there is to be anything more in this line I hope we shall not
be forgotten.” It is said that these remarkable instances of
ingratitude, instead of irritating him, as they would have in the case
of an ordinary individual, only served to arouse his risible faculties
and that he regarded the exhibitions of human weakness as a good joke.

One of the greatest works of Mr. Vanderbilt’s life was the building of
the beautiful palace on Fifth avenue, between Fifty-first and
Fifty-second streets, which he adorned extensively with paintings
selected from the great masterpieces of the most renowned artists of the
world.

One reason assigned for his disinclination to speculate was that he
regarded the property left by his father in the light of a sacred trust,
and while he considered it a filial duty to look after its increase and
accumulation, he was careful not to do anything that might risk its
dissipation.

Mr. Chauncey Depew, who succeeded to the presidency of the New York
Central & Hudson River Railroad Company, was upon one occasion, while
visiting in London, a guest at a dinner given to the Hon. Wm. E.
Gladstone, then Premier of England, and was honored by a seat on the
left of Mr. Gladstone, with whom he discussed the differences between
American and English railroad and financial management. In the course of
conversation Mr. Gladstone said, “I understand you have a man in your
country who is worth £20,000,000 or $100,000,000, and it is all in
property which he can convert at will into cash. The Government ought to
seize his property and take it away from him, as it is too dangerous a
power for any one man to have. Supposing he should convert his property
into money and lock it up, it would make a panic in America which would
extend to this country and every other part of the world, and be a great
injury to a large number of innocent people.” Mr. Depew admitted that
the gentleman referred to—who was Mr. Vanderbilt—had fully the amount of
money named and more, and in his usual suave and conclusive way,
replied, “But you have, Mr. Gladstone, a man in England who has equally
as large a fortune.”

Mr. Gladstone said, “I suppose you mean the Duke of Westminster. The
Duke of Westminster’s property is not as large as that. I know all about
his property and have kept pace with it for many years past. The Duke’s
property is worth about £10,000,000 or $50,000,000, but it is not in
securities which can be turned into ready cash and thereby absorb the
current money of the country, so that he can make any dangerous use of
it, for it is merely an hereditary right, the enjoyment of it that he
possesses. It is inalienable, and it is so with all great fortunes in
this country, and thus, I think, we are better protected here in England
than you are in America.” “Ah, but like you in England, we in America do
not consider a fortune dangerous,” was the ready response.

The best proof of Wm. H. Vanderbilt’s great ability as a financier is
the marvellous increase in the value of the estate which he inherited
from his father during the seven years which he had the use and control
of it, and in which he did more than treble the value at which it was
estimated on the death of the Commodore.

The weakest financial operation on his part, known to the public, was
the purchase of the Nickel Plate Road, as regards the time of the
transaction, in which he was rather premature. It is now positively
known that if he had waited about a month longer the road would have
gone into bankruptcy and have fallen into his lap on his own terms. In
that case the West Shore would have followed suit.

In such an event I believe Mr. Vanderbilt would have been saved an
immense amount of money, remorse and mental strain, which, no doubt,
aggravated the malady which was the cause of his sudden death. He
realized his error when it was too late, and it was a source of great
mental anxiety to him in his latter days. He was very sensitive, and
nothing afforded him more gratification than a clean and successful
transaction, which drew forth public approval, and in the purchase of
Nickel Plate he was caught napping. It was a mistake for which the
Commodore, had he been alive, could never have forgiven him.

The syndicate that built the road had solely for their object to land it
upon either Gould or Vanderbilt, and it was upon its last legs at the
time it made the transfer to Mr. Vanderbilt. The syndicate laid a trap
for him. It had been coquetting with Mr. Gould in reference to the
purchase, and had made it to appear, through the press and other
channels of plausible rumors, that he had an eye upon the road. Mr.
Gould had occasion to go West about this time and the syndicate invited
him to make his homeward trip over the road, taking particular pains
that all these rumors and reports should reach the ears of Mr.
Vanderbilt, who was impressed with the idea that Mr. Gould’s trip was
one of inspection, with the intention of buying the road if he did not
anticipate him. This was just what the syndicate desired, and the
successful consummation of their financial plot.

The purchase was made solely in the interest of Lake Shore, as it was a
parallel road, and the road was afterwards turned over to the Lake Shore
Company.

The conception of the scheme was to build the road at a nominal price
and sell it to Mr. Vanderbilt as high as possible, and this was duly
accomplished. I am quite satisfied that if this road had not been sold
at this particular time it would then have gone into the hands of a
receiver, while a number of the syndicate, who had built the road, would
have failed, and a general crash would have ensued. This Mr.
Vanderbilt’s purchase averted for the time, and served to prolong the
period of its coming until May, 1884.

For a few years prior to his death Mr. Vanderbilt was in a weak
condition. This cause of mental annoyance came upon him at a time when
he was not robust enough to bear it and had not sufficient strength to
throw it off. He had been seized with a slight paralytic stroke, the
only visible effect of which was a twitching of the lower lip. Shortly
after this he lost the entire sight of one eye, about a year before his
death. This was not generally known to the public, however, and it was
the principal cause of his giving up his favorite pastime of driving,
which was one of his greatest pleasures and the chief source of mental
diversion from the heavy weight of his worldly cares and
responsibilities.

The day after Mr. Vanderbilt’s death I sent the following circular to my
customers:

    “As Mr. Wm. H. Vanderbilt was a very important factor in Wall
    Street business, I feel it incumbent upon me to issue a letter
    to my friends and clients on the subject of his decease,
    especially as the loss to the Street is a most important one,
    and certainly will be felt for some time to come. Mr. Vanderbilt
    undoubtedly, at the time of his death, was the largest holder of
    American securities in the world, and had innumerable followers,
    who were also vast holders of similar properties as those he
    controlled, who acted more or less in concert with him, and who
    were at his beck and call. When he told them to buy or sell they
    would do so. These parties have now lost a valuable friend and
    counsellor, and a leader in whom they believed implicitly. In
    such quarters, for some time to come at least, more or less of a
    dazed condition will prevail, precisely, the same as would exist
    in an army in the event of the general in command having been
    killed. Mr. Vanderbilt was a bolder and larger operator than his
    father ever dared to be, as he spread out over more interests.
    The market has lost an able leader, who was usually a builder-up
    of the interests of the entire country, and unlike many other
    large operators, who, at times, are on that side, but quite as
    frequently on the wrecking side. It will be a long while before
    so conspicuous and valiant a leader as Mr. Wm. H. Vanderbilt
    will be forthcoming, and the market will, for a protracted
    period, have cause to mourn its great loss. It is, indeed,
    fortunate that Mr. Vanderbilt lived long enough to see the
    completion of the consolidation of the West Shore and New York
    Central roads; since both roads are under the able direction of
    Mr. Depew, they are now secure from future harm; but the same
    cannot be said of the South Pennsylvania enterprise, as
    negotiations remain in connection therewith unfinished, which
    will suffer by Mr. Vanderbilt’s death, and it will be found
    difficult, I fear, for any other man to knit the discordant
    elements together that at present exist in that quarter. There
    is enough in this for some ground of apprehension, and this
    matter may, therefore, disturb the harmony of the great trunk
    lines, as this speck of trouble may yet prove a cancer in the
    body of the stock market. As it is capable of infusing its
    poison elsewhere, beyond where it is at present located, it is
    certain that there will be required skillful surgery to prevent
    inoculation therefrom.

    “The stock market started off to-day as if held by concerted
    action, and the appearances indicating that such attitude might
    prevail to bridge over the Vanderbilt shock. While prices had a
    moderate break, it was scarcely adequate as a fitting tribute of
    respect to Mr. Vanderbilt’s memory, as the great General of the
    Army of Finance of this country. It was unmistakable, however,
    that the large selling was mostly of long stock, coming from
    numerous frightened holders who were shaken out, and it was very
    evident that the bears were more conspicuous as buyers than as
    sellers, to cover their short sales made during the previous
    several days. I do not think that the market had, considering
    the power it has lost in the death of Mr. Vanderbilt, as much of
    a break as should have occurred; still, it must be remembered,
    that the dealings have been so enormous during the past month,
    which represent the immense number of operators now interested
    in the market, that it has taken from it a character which
    previously existed as a one man market, and therefore it is
    owing to this fact that the removal of any one man, or a half
    dozen of them, by death or otherwise, could not bring about, at
    the present time, any very wide and lasting disaster to Wall
    Street. This market, as I have repeatedly stated, can fairly be
    now considered the market for the world, and beyond the
    permanent reach of any one man doing it any lasting harm. As Mr.
    Vanderbilt invented pegging stocks, and stood his ground when
    taken better than any one that will survive him in that plan of
    strategic movement, he will, in that particular alone, be
    sorrowfully missed. I am of the opinion, now that Mr. Vanderbilt
    is no more, that Mr. Gould’s plan of leaving the Street will
    undergo a modification, at least by his remaining for some time
    longer at the helm. This will prove, in such an event, an
    important factor in the future, especially as the bulls of the
    Street have for at least a year past recognized Mr. Gould in the
    light of a benefactor. To them he has proved a brave and able
    leader, and the field is now clear for him to become
    commander-in-chief of all the forces, without any one to dispute
    his right thereto. This should be enough to fire his ambition
    and keep him in our midst, and probably will.”

    Among the popular and erroneous impressions entertained
    regarding Wm. H. Vanderbilt, the one that he was no judge of
    pictures seemed to have taken deep root in the public mind,
    except among the few who knew him intimately, and the celebrated
    artists whom he visited and from whom he purchased many of the
    works of art which adorn his great gallery in Fifth avenue, now
    in charge of his youngest son, George. That Mr. Vanderbilt had
    an intimate knowledge and correct appreciation of true art has
    been amply proved by the highest authority. I am well aware that
    some years ago this statement would have been ridiculed by the
    majority of the newspapers; but Mr. Vanderbilt never bought a
    picture that he did not fully understand in his own simple,
    unaffected method of judgment. He may not have been capable of
    the highest flights of fancy, necessary to follow the poetic
    imagination of the artist to its extreme height, but he was
    equal to the task of grasping all the material essentials from a
    common-sense point of view.

    So far from making any pretence of being a lover of art, he was
    in the habit of saying, when a handsome painting was shown him,
    “It may be very fine, but until I can appreciate its beauty I
    shall not buy it.”

    Apropos of his modesty and judgment, in regard to the fidelity
    to nature of a picture, a circumstance is related of his visit
    to Boucheron, a French picture dealer, where he wanted to see a
    painting by Troyon, with the object of buying it. A yoke of oxen
    turning from the plough to leave the field is the subject.
    Experts in art had taken exception to the manner in which the
    cattle left the field. When Mr. Vanderbilt’s opinion was asked,
    he said, “I don’t know as much about the quality of the picture
    as I do about the truth of the actions of the cattle. I have
    seen them act like that hundreds of times.” The artists present
    submitted to his judgment, as he knew more about the oxen than
    they did. When in France he visited the celebrated Rosa Bonheur,
    at Fontainebleau, who was about his own age, and gave her an
    order for two pictures, which she painted to his entire
    satisfaction. He had his portrait painted by the celebrated
    Meissonier, to whom he paid nearly $200,000 for seven pictures.
    He purchased in Germany this artist’s masterpiece, “The
    Information—General Desaix and the Captured Peasant,” for
    $40,000, giving Meissonier, who had not seen it for many years,
    a great surprise, and filling the heart of the enthusiastic
    artist with unbounded gratitude for rescuing the picture from
    Germany and bringing it to America.

    Mr. Vanderbilt’s taste for music, especially operatic music, was
    refined, and he had a keen sense of the humorous.

    Neither Mr. Vanderbilt nor any of his family ever displayed any
    anxiety to hobnob with those people who are known as the leaders
    of society, although possessed of more wealth than the greatest
    of them. The celebrated fancy dress ball, given by Mrs. Wm. K.
    Vanderbilt, at the suggestion of Lady Mandeville, in March,
    1883, seemed to have the effect of levelling up among the social
    ranks of upper-tendom, and placing the Vanderbilts at the top of
    the heap, in what is recognized as good society in New York. So
    far as cost, richness of costume and newspaper celebrity were
    concerned, that ball had, perhaps, no equal in history. It may
    not have been quite so expensive as the feast of Alexander the
    Great at Babylon, some of the entertainments of Cleopatra to
    Augustus and Mark Antony, or a few of the magnificent banquets
    of Louis XIV., but when viewed from every essential standpoint,
    and taking into account our advanced civilization, I have no
    hesitation in saying that the Vanderbilt ball was superior to
    any of those grand historic displays of festivity and amusement
    referred to, and more especially as the pleasure was not cloyed
    with any excesses like those prevalent with the ancient nobility
    of the old world and frequently exhibited among the modern “salt
    of the earth” in the mother country. The ball had the effect of
    drawing the Astors and the Vanderbilts into social union. The
    _entente cordiale_ was brought about in this way, as the story
    goes:

    Several weeks before the ball Miss Carrie Astor, daughter of
    Mrs. William Astor, organized a fancy dress quadrille, to be
    danced at the ball. Mrs. Vanderbilt, it seems, heard of this and
    said, in the hearing of some friends, that she was sorry Miss
    Astor was putting herself to so much trouble, as she could not
    invite her to the ball, for the reason that Mrs. Astor had never
    called on her. This was carried to Mrs. Astor, who immediately
    unbent her stateliness, called on Mrs. Vanderbilt, and in a very
    ladylike manner made the _amende honorable_ for her former
    neglect. So the Astors were cordially invited to the ball, where
    Miss Astor presented a superb appearance with her well trained
    quadrille.

    All Mr. Vanderbilt’s other attachments vanished in presence of
    his love for his horses. When any company, of which he formed a
    part, began to talk horse his tongue was immediately loosened
    and he became eloquent. Although generally a man of few words
    and diffident as a talker, he could throw the eloquence of
    Chauncey M. Depew in the shade when the subject was horse. He
    not alone admired the speed of his horses; he seemed possessed
    of the fondness of an Arabian for them, and, like old John
    Harper of Kentucky, would probably have slept with them only
    through fear of the newspapers criticising his eccentricity. It
    was he who introduced the custom of fast driving teams, first
    with Small Hopes, purchased by his father, and Lady Mac,
    purchased by himself. With this team, in a top road wagon, he
    made the then remarkable time of 2.23¼.

    A host of rivals immediately sprang up, of whom Mr. Frank Work
    was the most formidable. Mr. Vanderbilt procured faster teams,
    and with Aldine and Early Rose, under the spur of competition,
    reduced the time to 2.16½. Mr. Work, however, was a daring and
    persistent rival, and soon beat this record, although only by a
    fraction of a minute, which in trotting or racing counts just
    the same as if it were an hour. Mr. Vanderbilt then purchased
    the famous Maud S. in Kentucky for $21,000, and with her and
    Aldine made the mile in Fleetwood Park in June, 1883, in 2.15½.

    He afterwards reduced this time to 2.08¾, leaving Mr. Work and
    all other rivals hopelessly in the distance. Eventually he sold
    Maud S. to Mr. Robert Bonner for the comparatively small amount
    of $40,000, on condition that she should never be trotted for
    money. Other men would have given $100,000 for her without this
    condition.

    On the 12th of August, this year, Murphy, the famous jockey,
    drove Maud S. in single harness, at Tarrytown, a mile in 2.10½,
    and declared he did not push her. He said he was confident he
    could make her do the mile in 2.06 or 2.07 if Mr. Bonner would
    permit him, thus smashing all trotting records.

    It has been said by experts in driving that Mr. Vanderbilt was
    the best double-team driver in America, either amateur or
    professional.

    Mr. Vanderbilt’s bequests were liberal and numerous. He added
    $300,000 to the million which his father gave, through the wife
    of the Commodore and Dr. Deems, to the Nashville University. He
    gave half a million to the College of Physicians and Surgeons,
    and his sister, Mrs. Sloane, added a quarter of a million to
    this generous donation. It cost him over $100,000 to remove
    Cleopatra’s Needle from Egypt to Central Park. He offered to
    cancel the $150,000 check which he gave to General Grant to
    relieve him from the Ward-Fish embarrassment, and his munificent
    gift to the waiter students in the White Mountains will long be
    remembered.

    Although Mr. Vanderbilt was very courageous, as was proved by
    the fact that no matter how many threatening letters he may have
    received—and their name was legion—from cranks, socialists and
    others, he never made any change in his programme or his routine
    of business for the day, and never absented himself from the
    place where he was expected at any particular hour on account of
    such letters. Yet he was peculiarly sensitive to public opinion,
    and sought in various ways to correct its hasty judgment in
    regard to himself and his enormous wealth.

    It was this sensitive feeling, together with his profound
    respect for popular opinion against monopolies, which induced
    him to sell a controlling interest, 300,000 shares out of
    400,000, at from 120 to 130, ten points below the market price,
    of New York Central stock in 1879 to a syndicate, the chief
    members of which were Drexel, Morgan & Co., Morton, Bliss & Co.,
    August Belmont & Co., Winslow, Lanier & Co., L. Von Hoffman &
    Co, Cyrus W. Field, Edwin D. Morgan, Russell Sage, Jay Gould and
    J. S. Morgan & Co. of London. The amount paid for the stock was
    $35,000,000. As the syndicate largely represented the Wabash
    system, the stock of that property, as well as New York Central,
    had an important advance.

    The reasons assigned for this stupendous and unprecedented stock
    transaction are briefly condensed by Mr. Chauncey M. Depew as
    follows: “Mr. Vanderbilt, because of assaults made upon him in
    the Legislature and in the newspapers, came to the conclusion
    that it was a mistake for one individual to own a controlling
    interest in a great corporation like the New York Central, and
    also a mistake to have so many eggs in one basket, and he
    thought it would be better for himself and better for the
    company if the ownership were distributed as widely as possible.
    The syndicate afterwards sold it, and the stock became one of
    the most widely-distributed of the dividend-paying American
    securities. There are now about 14,000 stockholders. At the time
    he sold there were only 3,000.”

    That hasty expression, “The public be damned,” which Mr.
    Vanderbilt used in an interview with a reporter for a Chicago
    newspaper, has received wide circulation, various comment and
    hostile criticism. Although the expression is literally correct,
    the public at first, and many of them to this day, received a
    wrong impression in regard to the spirit in which it was
    applied. It was represented as if Mr. Vanderbilt was a
    tyrannical monopolist, who defied public opinion. A true and
    simple relation of the interview is a sufficient answer to this.
    The subject was the fast mail train to Chicago. Mr. Vanderbilt
    was thinking of taking this train off, because it did not pay,
    and did not appear to him therefore to be a necessity, and he
    did not propose to run trains as a philanthropist. As part of
    the interview which relates to this point has become so widely
    historic, I think it will bear reproduction here, literally:

    “Why are you going to stop this fast mail train?” asked the
    reporter.

    “Because it doesn’t pay,” replied Mr. Vanderbilt; “I can’t run a
    train as far as this permanently at a loss.”

    “But the public find it very convenient and useful. You ought to
    accommodate them,” rejoined the reporter.

    “The public,” said Mr. Vanderbilt. “How do you know, or how can
    I know that they want it? If they want it why don’t they
    patronize it and make it pay? That’s the only test I have as to
    whether a thing is wanted or not. Does it pay? If it doesn’t pay
    I suppose it isn’t wanted.”

    “Are you working,” persisted the reporter, “for the public or
    for your stockholders?”

    “The public be damned!” exclaimed Mr. Vanderbilt, “I am working
    for my stockholders. If the public want the train why don’t they
    support it.”

    This, I think, was a very proper answer from a business
    standpoint, and the expression, when placed in its real
    connection in the interview, does not imply any slur upon the
    public. It simply intimates that he was urging a thing on the
    public which it did not want and practically refused. The
    “cuss” word might have been left out, but the crushing reply
    to the reporter would not have been so emphatic, and that
    obtrusive representative of public opinion might have gone
    away unsquelched. As it was, however, he and his editor
    exhibited considerable ingenuity in making the best
    misrepresentation possible out of the words of Mr. Vanderbilt,
    thus giving them a thousand times wider circulation than the
    journal in which they were first printed, and affording that
    paper a big advertisement. This is the correct account of that
    world-renowned expression, “The public be damned!”

    The mausoleum at New Dorp, Staten Island, is another outcome of
    the genius of Wm. H. Vanderbilt. Mr. Richard M. Hunt was the
    architect. Pursuant to the instructions of Mr. Vanderbilt, it
    was built without any fancy work, but at the same time on such a
    grand and substantial scale that it is said there is nothing
    among the tombs of either European or Oriental royalty to excel
    it, in solidity of structure and grandeur of design. It is forty
    feet in height, sixty in breadth and about 150 in depth. It is
    situated on an eminence commanding the largest prospect of the
    bay, and one of the finest views all around in the State of New
    York. The tomb and the twenty-one acres of land, upon the
    highest part of which it stands, cost nearly half a million
    dollars, and when the grounds are finished, in the style
    intended, beautiful roads and walks made, flower gardens planted
    with the requisite adornments, the entire expense of the
    mausoleum and its surroundings will not fall far short of a
    million dollars.

    The precautions taken by the family against resurrectionists is
    one of the best that has ever been adopted. There is a guard at
    the tomb night and day. Each of these must put on record his
    vigilance every fifteen minutes by winding up a clock, which is
    sent to the office at the Grand Central Depot every morning.

    In May, 1883, Mr. Vanderbilt, finding that his railroad duties
    were too heavy for him, resigned the presidencies of his roads
    and took a trip to Europe. James H. Rutter was elected President
    of the Central, and on his death was succeeded by Chauncey M.
    Depew, the present President, who so ably fills that office.
    About a year before his death Mr. Vanderbilt gave unmistakable
    notice of his approaching dissolution when he stopped driving
    his fast teams, and went out riding with some other person to
    drive for him. He must have keenly felt his growing weakness
    when he was obliged to resign the reins which he so fondly
    desired to hold, and which he had handled with such inimitable
    skill.

    The death of Mr. Vanderbilt was a great surprise, especially to
    Wall Street, as very few brokers were aware even of his failing
    health. On the 8th day of December, 1885, he arose early,
    apparently no worse in health than he had been for a year
    previous. He went to the studio of J. Q. A. Ward and gave that
    artist a sitting for the bronze bust ordered by the Trustees of
    the College of Physicians and Surgeons. Mr. Depew called upon
    him at one o’clock, but finding that Mr. Robert Garrett,
    President of the Baltimore & Ohio Railroad Company, had also
    called to see Mr. Vanderbilt, Mr. Depew waived his opportunity
    in favor of Mr. Garrett. Mr. Garrett was conversing on his
    project of getting into New York by way of Staten Island and a
    bridge over the Arthur Kill. They were in the study. Mr.
    Vanderbilt sat in his large arm chair and Mr. Garrett sat on a
    sofa opposite to him. It seems that Mr. Vanderbilt was in
    perfect harmony with the plans of Mr. Garrett. While he was
    replying to the remarks of Mr. Garrett the latter observed that
    his voice began to falter and there was a curious twitching of
    the muscles about his mouth. Soon he ceased to speak and had a
    spasm. In a moment he leaned forward and would have fallen on
    his face on the floor, but Mr. Garrett caught him in his arms,
    laid him gently on the rug and put a pillow under his head. This
    was only the work of a few moments, but before it was
    accomplished the greatest millionaire in America had ceased to
    breathe. When Dr. McLean, the family physician, arrived he said
    a blood vessel had burst in the head, and so death, according to
    the frequently expressed wish of Mr. Vanderbilt, was
    instantaneous.

    On the announcement of Mr. Vanderbilt’s death, (which was after
    Board hours), a panic was predicted in the stock market. A pool
    was formed of the most wealthy leading operators, with a capital
    of $12,000,000, to resist such a calamity. It was not required,
    however. There was a reaction of a few points in the morning
    following, which was recovered before the close of the market.
    The stocks of Mr. Vanderbilt’s properties, as well as the
    properties themselves, had been so well distributed that such a
    disaster could hardly have occurred without a strong outside
    combination to help it, and the prevalent desire there was to
    assist speculation in the very opposite direction. The remains
    of Mr. Vanderbilt were conveyed to New Dorp and deposited in the
    tomb without any ostentation.

    In the chapter on the young Vanderbilts a brief account of the
    disposition of the mammoth fortune of $200,000,000 is given.


------------------------------------------------------------------------




                             CHAPTER XXXVI.

               “YOUNG CORNEEL.”


THE ECCENTRICITIES OF CORNELIUS JEREMIAH VANDERBILT, AND HIS MARVELLOUS
    POWER FOR BORROWING MONEY.—HE EXERCISES WONDERFUL INFLUENCE OVER
    GREELEY AND COLFAX.—A DINNER AT THE CLUB WITH YOUNG “CORNEEL” AND
    THE “FAMOUS SMILER.”—“CORNEEL TRIES TO MAKE HIMSELF SOLID WITH JAY
    COOKE.—THE COMMODORE REFUSES TO PAY GREELEY.-“WHO THE DEVIL ASKED
    YOU?” RETORTED GREELEY.-“CORNEEL’S” MARRIAGE TO A CHARMING AND
    DEVOTED WOMAN.—HOW SHE SOFTENED THE OBDURATE HEART OF HER
    FATHER-IN-LAW.


Cornelius J. Vanderbilt, the brother of Wm. H., popularly known by the
name of “Young Corneel,” is entitled to a place in this book, as he was
prominent among the many financial friends I have had, in his own
peculiar line.

“Corneel” was eccentric, and was possessed of some astonishing
peculiarities that made him a genius in his way. He led a charmed and
adventurous life in his own circles.

He had a wonderful facility for getting into scrapes, and “banked” on
the Commodore to extricate him therefrom, which the latter did on many
occasions. The mere fact, however, that he had such a father, was in
itself sufficient, very often, to get him out of his troubles, without
any effort on the part of the Commodore in that direction. “Corneel,”
however, worked this “racket” for all it was worth, and in time it
became almost exhausted. Still, he went on making new acquaintances
without limit, and to many of them the name of the Commodore was a
sufficient guarantee of security for sundry loans, that were promised to
be paid on the fulfilment of certain expectations which only existed in
the borrower’s imagination.

But it was not very safe for “Corneel” to rely upon his father, or to
bank upon his credit in any case. If he had depended solely on the
paternal security, he would often have found, when in his worst straits,
that he had leaned upon a willow cane for support. “Corneel” had a
peculiar fascination in his ability to catch the ear of prominent men,
who would listen attentively to his tale of woe, and some of them were
so thoroughly under the spell of his persuasive powers that they would
“fork” out the required amount without hesitation, to relieve his
pressing necessities.

It is sad to relate that the money thus sometimes piteously solicited,
and really required to pay a board bill or room rent, was often thrown
away in the first gambling den that the borrower happened to be passing,
while the landlady and the washerwoman would be obliged to extend their
bills of credit indefinitely.

Amongst the special friends upon whom he was in the habit of exercising
his alluring magnetism were the Hon. Schuyler Colfax and Horace Greeley.
Over both of these eminent gentlemen he seemed to have perfect control.
So hopelessly were they under the charm of his occult power that they
seldom said “no” to any request that he made, especially when he wanted
to borrow money. No sorcerer ever had his helpless victims more
completely at his mercy, nor had greater power by the touch of his
mysterious wand, than “Corneel” had over these and certain other men,
when he would entertain them with a list of imaginary wrongs which he
had suffered at the hands of his father and brother. In their ears this
story never seemed to become stale, though it was the same old story
every time, with hardly any attempt at variation. To them and others,
over whom he exercised this unaccountable influence, the thing did not
seem to become monotonous like other twice-told tales, related by
ordinary people.

To the man of average intellect and common business capacity “Corneel”
was a shocking “bore” and a victim of morbid melancholia, but these men
of genius were won by the impression which he had made upon them, and
thoroughly imbued with the deepest sympathy for the wrongs which his
strange hallucinations conjured up. Unlike most men who borrow money
from friends and don’t pay, instead of exhausting his credit by this
business delinquency, he made it the basis for increasing it, and it
generally seemed to be a potent means of enabling him to borrow more.
Hence his obligations to Mr. Greeley were persistently cumulative until
they exceeded $50,000.

I have been told by a person familiarly acquainted with him that years
after Greeley’s death he would sometimes sit in deep meditation, with
the tears welling up in his eyes, especially when in a great financial
strait, and sighingly say: “When Mr. Greeley died I lost the best friend
in the world.” Be it said to his credit, however, in spite of all his
shortcomings, he exhibited his honesty by paying every cent of the debt,
with interest, to Mr. Greeley’s daughters. He also paid the greater part
of all the other debts which he had contracted under similar
circumstances, after making a settlement with Wm. H. and receiving a
much larger amount than he had been left by the will of his father, who
bequeathed him merely a decent competence for his rank and station in
life, without any surplus for the policy shops and faro banks.

One of the qualities possessed by “Corneel” in a remarkable degree, and
which enabled him to be so successful a borrower, was his extreme
earnestness. He bent his whole energies to the work in hand, and his
requests usually met with ready response. If he had put the same energy
and intense enthusiasm into legitimate speculation, he would have been
as successful as his father or Jay Gould. He must have been an intuitive
judge of character, for he showed that he generally knew his man in
advance of making application for sundry little loans. In that respect
he was not unlike the famous huntsman who was a dead shot every time.

My first acquaintance with “Corneel” was through one of his special
friends, the Hon. Schuyler Colfax, whom he brought to my office for the
purpose of having himself introduced by Mr. Colfax. He informed me that
he had just then returned from Hartford, Conn., where he had taken his
friend, Mr. Colfax, for a week’s visit at his house. It can be readily
imagined, therefore, that at this time Mr. Colfax had but little control
over his own bank account and for a long time afterwards.

I invited both these gentlemen to dinner at the Club that afternoon.
Although Mr. Colfax was an extraordinarily good talker, he was left far
in the distance and almost silenced by “Corneel.” Most of what the
latter said, however, had very little in it of a tangible character, and
was almost entirely made up of unstinted praise of his friend Colfax. If
ever there was a man talked up to the skies, or if the thing were
possible, Colfax must have been literally in that elevated position
during our dinner.

There was no let-up to the unqualified adulation, yet I must say that
there was none of the uninterrupted stream of fulsome flattery fell to
the ground. Schuyler took it all in as he did his viands, and as if it
were legitimately his due, a proof positive that “Young Corneel” was not
mistaken in his man; and a further demonstration of his natural sagacity
in striking the man upon whom he could successfully exercise his
peculiar charms of persuasion.

When he got tired talking about Mr. Colfax, the object of his next theme
was Mr. Greeley, on whom he was profusely prolific.

I met Mr. Greeley frequently afterwards, and told him what a good friend
he had in young Cornelius Vanderbilt. “Yes,” he said, with a knowing
smile, “I think he is a good friend of mine. I have heard of his
frequently saying nice things about me. It is a great pity, however,” he
added significantly, “that he is so frequently short of funds. If he had
more money he would be a very good fellow.”

It was generally in the way above referred that he would steal a march
on Mr. Greeley and impose on his good nature. He would say nice things
about him to some one who would quote him to Mr. Greeley, and thus pave
the way for an additional loan. In a few days afterward “Corneel” would
call on his tried and trusty friend, and never fail to obtain the needed
relief, or a large portion of it.

“Corneel” had great tact in utilizing his various advantages for
borrowing, and was imbued with a thorough devotion to his object, worthy
of a better cause. The day following his first visit to my office, he
called again and told me that his friend Colfax had left by the early
train for Washington and had urged him to go along, but as he had some
matters to attend to he had postponed his departure until the night
train.

He said to me, “By-the-bye, you know Jay Cooke very well.”

I said, “Yes.”

Then he replied, “I have some matters to look after in connection with
the Treasury Department, and I think he could be of some service to me.
Will you be good enough to oblige me with a letter of introduction to
him? I may not need it,” he added with a business air of _sang froid_,
“but I should like to have it in case of need.”

I wrote him a brief and non-committal introduction, somewhat as follows:

    “This will introduce to you Mr. Cornelius Vanderbilt, Jr., son
    of the Commodore. I take the liberty of making you acquainted
    with him through this medium, at his own request.

                                  “Truly yours, HENRY CLEWS.”

There was certainly nothing on the face of this document, except the
Commodore’s name, to justify any person in utilizing it as a bill of
credit.

Yet the financial genius of “Young Corneel” was equal to the task of an
indirect negotiation of this character, and after the lapse of a few
days his drafts from Jay Cooke began to pour into my office like April
showers. None of them was very large, but when put together they
aggregated a pretty fair amount, and were so cumulative in their
character that, had I not wired Mr. Cooke to stop the supplies, it is
difficult to say what figure the sum total would have reached.

The last time I saw “Young Corneel” was at Long Branch, where he took a
drive with me one fine warm afternoon. He spoke feelingly about his
wasted life, and concerning the many good friends who had come so often
to his rescue, and had got him out of his numerous holes, into which,
through misfortune, he had been thrown. He said all there was of life
for him was to live long enough to pay up old scores. He had fully
determined to do this, and then, he thought, a prolongation of existence
would have no further charms for him. It must be said to his credit that
he accomplished this work, and then laying himself sadly down, died by
his own hand.

Let us, therefore, throw the mantle of charity over that tragic scene in
the Glenham Hotel, and hope that his soul may elsewhere have found the
rest which in its poor, afflicted body it vainly sought for here.

That portion of the Commodore’s will in which he makes provision for
Cornelius J. is thoroughly characteristic of the old man, in its
iron-clad provisions. It says: “I direct that $200,000 be set apart, the
interest thereof to be applied to the maintenance and support of my son,
Cornelius J. Vanderbilt, during his natural life. And I authorize said
trustees, in their discretion, instead of themselves making the
application of said interest money to his support, to pay over from time
to time, to my said son, for his support, such portions as they may deem
advisable, or the whole of the interest of said bonds. But no part of
the interest is to be paid to any assignee of my said son, or to any
creditor who may seek by legal proceedings to obtain the same; and in
case my said son should make any transfer or assignment of is beneficial
interest in said bonds or the interest thereof, or encumber the same, or
attempt so to do, the said interest of said bonds shall thereupon cease
to be applicable to his use, and shall thenceforth, during the residue
of his natural life, belong to my residuary legatee. Upon the decease of
my said son, Cornelius J., I give and bequeath the last mentioned
$200,000 of bonds to my residuary legatee.”

Though a portion of this provision is rather whimsical, yet it was ably
designed to force “Corneel” to desist from his besetting sin, the gaming
table.

If the trustees were permitted to pay him the whole of the interest at
whatever period they should choose, it seems harsh that the beneficiary
should forfeit it entirely, if he should seek to relieve present and
pressing necessities, by borrowing on his future income. It showed that
the Commodore, even at the hour of his death, thought that “Corneel” was
not fit to be treated otherwise than as a child, and that it was
necessary he should be kept under the guardianship of his brother.

This circumstance hurt “Corneel’s” feelings greatly, as he imagined
himself a bigger man, mentally, than Wm. H. This opinion, however, no
other man could conscientiously endorse, except it might have been
Greeley or Colfax.

“Corneel,” though always exclaiming against the old man’s
hard-heartedness, had an intense admiration for his father’s abilities,
and he was as sensitive as a sunflower when any other person would say a
word to disparage the Commodore. While railing constantly at the
parsimony of his father, he was as devoted a hero-worshipper of the
Commodore as Thomas Carlyle ever was of the greatest of his heroes, and
he never grew tired talking of his achievements, with the history of
which he was thoroughly familiar. He had even a more intense hatred
against Gould than his father had, and solemnly believed that Gould and
Fisk had, during the manipulation of the Erie “corner,” conspired to
assassinate the Commodore.

Of course this was one of his many hallucinations, and there was not the
least ground for it, but he had got it indelibly on the brain, and he
would not tolerate contradiction in that notion any more than in any
other opinion which he had got fixed in his morbid mind. He once went
into an epileptic fit in the presence of a friend of mine who attempted
to reason with him on the improbability of such a man as Gould
contemplating murder.

He never forgave his father for having him arrested and incarcerated in
Bloomingdale Lunatic Asylum. He had run off to California the time of
the gold fever, and shipped as a sailor. He was then in his eighteenth
year. When he returned, which was pretty soon, as he had no ability to
enter into the terrible mental and physical struggle for wealth on the
gold coast, his father had him arrested. It was soon discovered that he
was no lunatic, however eccentric he might be, and he was released, but
he took the matter dreadfully to heart, and it had a melancholy and
demoralizing effect upon all his future life. He was petulant, and still
complaining, and often acted like a crazy man in that the more any of
his intimate friends tried to please him he seemed the more
dissatisfied; yet it was impossible to get along with him without
humoring him, and it was almost next to impossible to humor him. In this
way he could work on the minds of the strongest of his friends, so as
almost to put them into a fit as bad as one of his own.

Dr. Swazy’s patience was often put to a very severe test in his attempt
to please this eccentric invalid.

“Corneel” was a miser everywhere except at the gaming table, and would
cling to a cent with greater tenacity than ordinary people display in
holding on to a ten-dollar bill. But among the gamblers either a
ten-dollar bill or a hundred-dollar bill was less valuable in his eyes
than a cent in the common transactions of every day life. “Faro” and
“keno” had terrific power over him. He has often been known to have had
an epileptic fit at the gaming-table, get a doze afterwards which seemed
like the sleep of death, so cadaverous did he look on those occasions,
and then awake up and go on with the play, whose fascination he appeared
utterly powerless to resist.

When it came to the ears of the Commodore that Greeley was lending his
son hundreds and sometimes thousands of dollars at a time, he visited
the office of the _Tribune_. He rushed without ceremony into the
sanctum, where Greeley was busy at his high desk, grinding out a tirade
against some political or social abuse, and thus addressed the Sage of
Chappaqua: “Greeley, I hear yer lendin’ ‘Corneel’ money.” “Yes,” said
Greeley, eyeing the monarch of steamboat men through his glasses, with
an air of philosophic contempt mixed with commiseration; “I have let him
have some.” “I give you fair warning,” replied the Commodore, “that you
need not look to me; I won’t pay you.” “Who the devil asked you?”
retorted Greeley. “Have I?”

This closed the interview. The Commodore retraced his steps down the
rickety stairs into Spruce street, and Greeley continued to grind out
his illegible chirography for the profane printers. There is no record,
I believe, that the subject was ever reverted to between them. Soon
after the death of Greeley the Commodore sent a check for $10,000 each
to his two daughters.

The Commodore was well satisfied with the marriage of young “Corneel” to
Miss Williams, of Hartford, Connecticut, and he had hoped that his son
would begin then to lead a new life, but he was doomed to
disappointment.

There is a good story told about an interview between the Commodore and
Mr. Williams prior to the marriage.

Mr. Williams called upon the Commodore at his office in Fourth street,
near Broadway, and informed him that his son, Cornelius Jeremiah, had
asked his daughter in marriage, and she was willing if the Commodore had
no objection to the union.

“Has your daughter plenty of silk dresses?” asked the Commodore,
sententiously.

“Well,” replied Mr. Williams, showing some sensitiveness at what he at
first considered assumption of superiority and purse-pride on the part
of the Commodore, “my daughter, as I told you, is not wealthy. She has a
few dresses like other young ladies in her station, but her wardrobe is
not very extensive nor costly.”

“Has your daughter plenty of jewelry?” continued the Commodore, without
appearing to take much notice of Mr. Williams’ explanation.

“No, sir,” replied Mr. Williams, becoming slightly nettled, and showing
a laudable pride in opposition to what he considered a slur on account
of his moderate means, “I have attempted to explain to you that I am in
comparatively humble circumstances, and my daughter cannot afford
jewelry.”

“The reason I ask you,” pursued the Commodore, “is, that if she did
possess these articles of value, my son would take them and either pawn
or sell them, and throw away the proceeds at the gaming table. So I
forewarn you and your daughter that I can’t take any responsibility in
this matter.”

The nuptials were duly consummated, however, in spite of the Commodore’s
constructive remonstrance.

After the marriage “Corneel” asked his father for some money to build a
house. “No, Corneel,” he said emphatically, “you have got to show that
you can be trusted before I trust you.”

His wife made application to her father-in-law with better success,
however. He gave her a check for $10,000. In a few months afterward she
paid another visit to the Commodore, who received her cordially, but
expected she had come for another loan, and he was attempting to work up
his courage to the point of refusal; for, strong and almost invincibly
obdurate as he was in the general affairs of life, in the presence of
the fair sex, like Samson when he got his hair cut, he was weak and like
another man.

“Well,” said the Commodore, addressing his daughter-in-law with a kindly
smile, “what can I do for you now?”

“Well, papa,” she replied in her exceedingly candid and agreeable
manner, “we did not need all the money, so I brought you back $1,500.”

The Commodore could hardly believe his ears and eyes, and thought for a
moment that he must be under some mysterious delusion, superinduced by
the spiritual seances which he then was in the habit of attending. But
when the cash was put in his hand he found it was a material reality.
This sealed a warm friendship between him and his worthy and economical
daughter-in-law, which was only severed by her premature death about ten
years before that of her unfortunate husband.

The sympathy that some people manifested for “Young Corneel” was, like
his own maladies, of the most morbid or delusive character. He had $200
a week from his father all the time that he was whining to the public
about his pinching poverty and denouncing the old man’s niggardliness.
This would have been ample, with fair economy, not only for all the
necessaries of life, but, under judicious management, would have
afforded the recipient many of its luxuries.

With his irresistible propensity for gambling, he would not have been
any better off physically, but worse, with the entire income from his
father’s 75 or 100 millions. The only difference that should have arisen
was that he would have been instrumental in carrying out in part the
socialistic and communistic idea of a wider distribution of private
property, amassed by thrift, privation and industry, among the drones,
lazy “loafers” and criminals of society.

The Commodore’s judgment, therefore, in limiting his prodigal son to
$200 a week, was not only comprehensive, but beneficent in its results
both to his son and to society at large.


[Illustration:

  _C. Vanderbilt._
]


------------------------------------------------------------------------




                            CHAPTER XXXVII.

   THE YOUNG VANDERBILTS AND THEIR FORTUNES.


REMARKABLE FOR PHYSICAL AND INTELLECTUAL ABILITY.—THE MIXTURE OF RACES
    AND THE LAW OF SELECTION.—THE WONDERFUL WILL AND THE WISE
    DISTRIBUTION OF TWO HUNDRED MILLIONS.—TASTES, HABITS AND SOCIAL
    PROCLIVITIES OF THE YOUNG VANDERBILTS.—THE MARRIED RELATIONS OF SOME
    OF THEM.—BEING HAPPILY ASSORTED THEY MAKE GOOD HUSBANDS.—THEIR
    PROPERTY REGARDED AS A GREAT TRUST.—THEIR RAILROAD SYSTEM AND ITS
    GREAT ARMY OF EMPLOYES.—THE YOUNG MEN CAUTIOUS ABOUT SPECULATING,
    AND CONSERVATIVE IN THEIR EXPENSES GENERALLY.


The young Vanderbilts who have succeeded to the estate of their father,
William H., are all remarkable for both intellectual and physical power,
as well as a high degree of refinement, showing how fast human evolution
under favorable circumstances progresses in this country. In other
countries it takes many generations to develop such men as the present
Vanderbilts. In this country three generations in this instance have
produced some of the best samples of nature’s nobility, which is
superior in every respect to the proud and vain-glorious production
which emanates from the succession of “a hundred earls” in England, or
even a greater number of barons, princes and kings on the Continent of
Europe. It would be difficult to produce better types of men in the
short period named than Cornelius, William K., Frederick and George
Vanderbilt, in personal appearance, breeding and culture.

The mixture and amalgamation of races from all parts of the world have
doubtless had a great deal to do with such favorable results in the
reproduction of our species in the United States. In the old country
close intermarriages seem to have a deteriorating effect on the race,
with probably the one apparent exception, namely, the house of
Rothschild, and a little longer time may tell that the rule of
deterioration holds good in this case also.

The four sons of William H. Vanderbilt have had the greatest start in
life of any family in all the records of history, ancient and modern,
with the single exception, probably, of the five Rothschild brothers,
the sons of old Anselm, and they had not near so much money to begin
with, but had the advantage of the Vanderbilts in their locations and in
their methods of combination. These methods, as I have observed
elsewhere, could only be attained through the Hebrew religion. By the
provisions of the remarkable will, which revealed such enormous wealth
as to make almost every other millionaire feel comparatively poor, the
greater portion of 200 million dollars was divided among the eight
children of the testator. Millions were distributed in this case as
other millionaires have been in the habit of dealing with thousands. The
ordinary human mind fails to grasp the idea of such a vast amount of
wealth. If converted into gold it would have weighed 500 tons, and it
would have taken 500 strong horses to draw it from the Grand Central
Depot to the Sub-Treasury in Wall Street. If it had been all in gold or
silver dollars, or even in greenbacks, it would have taken Vanderbilt
himself, working eight hours a day, over thirty years to count it. If
the first of the Vanderbilts had been a contemporary of old Adam,
according to the Mosaic account, and had then started as president of a
railroad through Palestine, with a salary of $30,000 a year, saving all
this money and living on perquisites, the situation being continued in
the male line to the present day, the sum total of all the family
savings thus accumulated would not amount to the fortune left by Wm. H.
Vanderbilt, unless this original $30,000 had been placed at compound
interest, and that in a bank from which young Napoleons of finance had
been strictly excluded.

[Illustration:

  _W K Vanderbilt_
]

The will itself affords one of the best tests on record of the sound
judgment and equitable mind of the testator. He was under filial
obligations to a certain extent to revere the memory and respect the
opinions of the father through whom he had acquired the means of
accumulating this wonderful fortune.

The Commodore had modified ideas of primogeniture, not exactly in the
English sense of the term, but he had an intense desire to perpetuate
his name and wealth, and would doubtless have advised William H., and
perhaps he did, to bequeath nearly all his possessions to one of his
sons, leaving the rest of the family a bare independence.

Wm. H., in accordance with his sensitive disposition, upright mind, and
a due respect for the feelings, opinions and even the prejudices of
others, resolved to make what public opinion would be likely to consider
an approximately fair division of his immense estate. In this attempt, I
think he succeeded pretty well, considering all the circumstances and
difficulties with which he had to grapple. A synopsis of the will
itself, however, herewith inserted, will enable the public to be the
best judge of the equity of the case.

In the first place Mr. Vanderbilt devised to his wife the palatial
residence, which cost two millions, situated between 51st and 52d
streets on Fifth avenue, the stables on Madison avenue, the paintings
and statuary, and an annuity of $200,000 per annum. He also empowered
her to dispose of, by will, in any way she might desire, $500,000 out of
the sum set apart to produce her annuity of $200,000.

He bequeathed to each of his four daughters, Mrs. Elliott F. Shepard,
Mrs. William Sloane, Mrs. Hamilton McK. Twombly and Mrs. William Seward
Webb, an elegant house on Fifth avenue in the vicinity of his own
mansion. He then devised 40 million dollars’ worth of securities, 25
millions of which were in United States bonds, to be divided by the
trustees equally among his eight children, five millions each. Next he
bequeathed 40 millions more in securities, ten millions of which were in
United States bonds, and the balance in securities of his own railroads,
to his eight children, share and share alike.

He gave to his son Cornelius two million dollars in addition to all
other bequests made to him.

George W., his youngest son, is to receive at the death of his mother
all that she possessed during her natural life, and if he should die
without issue his inheritance shall go to Wm. H., the son of Cornelius,
but in the event of this contingency not occurring, the grandson, Wm.
H., is to receive a million on attaining the age of 30.

Then followed a host of small legacies to relatives, friends and
employes. He left $2,000 a year to each of his uncle Jacob’s three
children.

He gave $200,000 to the Vanderbilt University of Nashville, Tenn.,
founded by his father; and he left about a million in the aggregate to
twelve charitable and religious institutions.

The twenty-second clause of the will is the most important, especially
to his two eldest sons. It reads as follows:

“All the rest, residue and remainder of all the property and estate,
real, personal and mixed, of every description and wheresoever situated,
of which I may be seized or possessed, or to which I may be entitled at
the time of my decease, I give, devise and bequeath unto my two sons,
Cornelius Vanderbilt and William K. Vanderbilt, in equal shares, and to
their heirs and assigns, to their use forever.”

Mrs. Vanderbilt was appointed executrix and her four sons executors of
the will. The witnesses were Judge Charles A. Rapallo, Samuel F. Barger,
C. C. Clarke and I. P. Chambers.

This remainder, left to his two sons named in the clause cited, amounted
to about 50 million dollars each, in addition to their other bequests,
thus leaving each of them nearly as wealthy as their grandfather was
when he died. Cornelius is said to be worth over 80 million dollars.

Cornelius is the oldest son. He is a year or two over forty. He received
a good education, and had an excellent business training in his father’s
offices at the Grand Central Depot. He has always been remarkable for
strict attention to business, and for his thorough familiarity with
everything connected with his own department, as well as having a good
general knowledge of all the departments of the great railroad system.
When his father retired from active work, and the presidency of the
roads, Cornelius succeeded him as Chairman of the Board of Directors in
New York Central and Michigan Central.

Wm. K. took a similar position in Lake Shore, and was also elected
President of New York, Chicago & St. Louis, generally called the Nickel
Plate road.

Cornelius was married about fourteen years ago to Miss Alice Gwinn, a
handsome young lady of Cincinnati, and has four children. He resides in
an elegant house, at the corner of Fifty-seventh street and Fifth
Avenue, and has a handsome summer residence, “The Breakers,” at Newport.

He is connected, as an active worker, with various charitable and
religious institutions, and is very favorably known and highly respected
in the best social circles. He is gaining a great reputation through
various donations to laudable objects. Among these may be mentioned the
Club House in the vicinity of the Grand Central Depot, for the
accommodation of employes of the various railroads connected with the
Vanderbilt system. Also his magnificent gift to the Metropolitan Museum
of Art, the celebrated picture of Rosa Bonheur, “The Horse Fair,” which
is valued at $60,000. In this he surpassed the most liberal efforts of
Mr. George I. Seney, in one of his grand specialties, namely,
contributions to Art.

William Kissam Vanderbilt, the second son of Wm. H., also received a
fair education, and graduated in business in the Transportation
Department of his father’s great railroad system, where he exhibited
marked ability in mastering all the essentials, and in doing his work
with rapidity and accuracy. He is considered the most handsome and the
most imposing in appearance of any of the family, although, as I have
intimated at the beginning of this chapter, they are all above the
average in regard to the manly and gentlemanly virtues, owing to what
Darwin would have designated the “natural law of selection.” Wm. K. has
a grand mansion, on the corner of Fifty-second street and Fifth Avenue,
and a country residence at Islip, Long Island, where he usually summers.
He is about thirty-eight years of age. He is married to Miss Alva Smith,
the daughter of a wealthy merchant of Savannah. She is a leading lady in
society, considerably above the average in good looks, and possessed of
rare conversational powers, with an ample fund of wit and humor. They
have three children.

Frederick W. Vanderbilt, the third son of the late millionaire, seemed
to have had a greater desire for study than the two former, hence after
going through the ordinary course for boys at home, he went to Yale,
where he graduated in the Sheffield Scientific School. Thus equipped he
went into his father’s office, and made himself thoroughly acquainted
with the general routine of the whole business, in every department.

He married Mrs. Torrance, formerly the wife of his cousin. Young
Vanderbilt fell in love with her and married her in a year afterward.
She is an exceedingly attractive woman, and the union is a very happy
one. Mr. Vanderbilt gave Frederick the house at Fortieth street and
Fifth Avenue, in which he himself had resided prior to his removal to
the Fifth Avenue palace. This house was built by the old Commodore for
his son W. H. It was considered to be the finest residence in the city
at the time of its completion.


[Illustration:

  _F. W. Vanderbilt._
]


George W. Vanderbilt, the youngest of the four sons, is now about 25
years of age. He is not so robust as the others, but enjoys pretty good
health. He manifested a decided tendency at an early age for study and
reading.

He is said to be extensively read in literature for his age, and has
written some essays on various subjects, which give considerable promise
of success with perseverance in that line. He is a lover of the
fine-arts, knows the history of all the pictures in the great gallery
which his father collected, and like that revered parent, whose constant
companion he was during the last few years of his life, he is very fond
of the opera. His grandfather, the Commodore, left him a million
dollars, to which his father added another million on his twenty-first
birthday.

George W. has recently made a handsome present to the Bond street free
public library, donating thereto $40,000 to build a branch of that
institution at 251 West Thirteenth street. He bids fair to be a liberal
patron of letters, and no doubt his gifts in this way will be prudently
directed and made with good judgment. The man who can appreciate
learning, as George Vanderbilt has proved he can, will never be likely
to leave the terms of an endowment to a public library, for instance,
which he intended for the benefit of the whole community, so loose that
a clique of trustees can restrict all its privileges to a limited number
of ladies and gentlemen of leisure, by narrowing the hours of keeping
the institution open, as has been done with those two fine libraries
intended by the donors for the people at large, namely, the Astor and
the Lenox.

New York is comparatively poor in its libraries, even on the supposition
that these public trusts should not be tampered with, and their original
object defeated; but when the best of them are diverted from the purpose
originally intended by the philanthropists who presented them to the
public, a great wrong is inflicted on the citizens of New York.

There has been a great deal said and written during the past few years
about the Vanderbilt system of railroads being a great monopoly. I am
not in favor of monopolies. On the contrary, I have, in this book, as
well as through other mediums of reaching the public, and in interviews
published all over the country, denounced monopolies in very strong
terms. I regard the Vanderbilt properly, however, in the light of a
great trust, the four young men above referred to, with Chauncey M.
Depew, the President of New York Central, being the trustees, and I
question very much if that eminent team of honest and able reformers,
Henry George and the Rev. Dr. Edward McGlynn, with other minor lights of
the Anti-Poverty Society, could administer that trust with greater
benefit to the public, nor could they employ a greater army of
well-paid, easy-worked, and well-fed men by any State or National
supervision or management, or by breaking up the great corporation into
probably a hundred or more small companies.

The Vanderbilt system employs 200,000 people at better wages than they
can obtain elsewhere, any place in the world. It pays over $150 an hour
for taxes. The State is paid $1 for every $2.70 received by the
stockholders.

Nor can I think it possible that the paternal system of Government
proposed by the Socialists, with all the modern discoveries and
appliances of dynamite to aid them, could accomplish as much in a
century for the well-being and advantage of the people of this State and
of the whole country as the Vanderbilt system of railroads has done in
half that time. I see no reason, therefore, to regard the present
Vanderbilt regime as a grinding monopoly.

Until the Georgeites, the McGlynnites, and the Socialists demonstrate
that their untried systems will confer greater happiness on humanity
than honest enterprise in the best circumstances, under our present
social system, with all its defects, has developed, I shall be tardy in
subscribing my adhesion to the new order of things.

I don’t wish to be understood for a moment as implying that I am averse
to free thought, the highest development of humanity, mentally and
physically, and the most advanced evolution in the same direction. I aim
at keeping abreast of all these within the free exercise of my own
judgment, and it is thus that I can heartily applaud Dr. McGlynn for his
polite but firm refusal to visit the Eternal City for the purpose of
being corrected or regulated in regard to free thought and free speech,
as viewed from the American standpoint, by a foreign potentate, who
assumes the guardianship and governorship of all human affairs, both
from a spiritual and secular point of view.

The days of Hildebrand (Pope Gregory VII.) are gone for ever, and Leo
XIII. should have sense enough to know it. McGlynn will never stand,
like Henry IV., shivering in his shirt at the door of the Vatican,
awaiting his sentence of penance to Canossa. Bismarck, however, came
pretty near repeating this little historical episode not long since, but
the great Chancellor of the German Empire, unlike McGlynn, did not have
the advantage of an American education, and the independence which it
confers. He may, therefore, to some extent be excused. I think, however,
that McGlynn will stick, and I admire his firmness. No church, no matter
how powerful its foreign allies may be, can suppress free speech in the
home of the brave and the land of the free.

So, in their battle for freedom of speech, I admire the pluck of the
George-McGlynn party, but as regards their social theories, I shall
remain in a waiting mood until I see them more fully demonstrated.

To return from this little digression, however, I wish to express the
hope that the young Vanderbilts will manage their vast estate so as to
inure to the public benefit in such a way that the most fastidious
Socialist will be unable to take exception to the benign results.

The young Vanderbilts have at intervals speculated in Wall Street, but
conservatively, with the exception of William K., who, in the past, has
made numerous and spasmodic turns, chiefly on the advice of older
operators, which have not always redounded to his interest. As a rule
these young men are shrewd and cautious financiers, and I think it is
safe to say that none of them will run the risk of losing his handsome
fortune in speculation.


[Illustration:

  From Harper’s Magazine. Copyright, 1873, by Harper & Brothers.

  SOLOMON ROTHSCHILD,
  Head of the old House at Vienna.

  CHARLES ROTHSCHILD,
  Head of the old House at Naples.

  ANSELM MAYER ROTHSCHILD,
  Head of the House at Frankfort, 1812-35.
]


------------------------------------------------------------------------




                            CHAPTER XXXVIII.

               THE ROTHSCHILDS.

THE BEGINNING OF THE FINANCIAL CAREER OF THE GREAT HOUSE OF
    ROTHSCHILD.—THE HESSIAN BLOOD MONEY WAS THE GREAT FOUNDATION OF
    THEIR FORTUNE.—HOW THE FIRM OF THE FIVE ORIGINAL BROTHERS WAS
    CONSTITUTED.—NATHAN THE GREATEST SPECULATOR OF THE FAMILY.—HIS
    CAREER IN GREAT BRITAIN, AND HOW HE MISREPRESENTED THE RESULT OF THE
    “BATTLE OF WATERLOO” FOR SPECULATIVE PURPOSES.—CREATING A PANIC ON
    THE LONDON STOCK EXCHANGE—HIS TERROR OF BEING ASSASSINATED.—HIS
    DEATH CAUSES A PANIC ON THE LONDON EXCHANGE AND THE BOURSES.


As the Rothschilds have indirectly made an immense amount of money in
Wall Street from time to time, a sketch of the famous house and its
methods of doing business will be of interest in this volume. The house
is represented in America by Mr. August Belmont, than whom there is no
banker more widely known and more highly regarded all the world over. It
is due to the wise and conservative management of Mr. Belmont that the
famous Rothschilds have reaped millions of profits from American
sources. The original name of Rothschild was Bauer. The family adopted
the name Rothschild (Red Shield) from the sign which the founder of the
house kept over his dingy little shop in Frankfort-on-the-Main, in the
odoriferous quarter called the Judengasse (Jews’ street). In this little
shop Mayer Anselm Rothschild, the founder of the house, discounted
bills, changed money, examined the quality of coins, bought cheap and
sold dear. “How do you get so rich, Mr. Rothschild?” said a friend of
his to old Anselm one day, as he leaned over his dusky little counter.
The original head of the great house said: “I buys ‘sheep’ and sells
‘deer.’” His knowledge of the quality of coins was marvellous. He could
detect a light coin the moment he took it in his hand, and there was no
imitation diamond or gem could escape his eye. He had the instinct of
genius in detecting everything in the form of money or jewelry that was
not genuine. He was a walking directory so far as the financial standing
of every commercial man in Frankfort and in several other important
cities in Germany was concerned. At the age of seventeen young
Rothschild took rank with the best, oldest and ablest financiers of
Frankfort. His father, who died when Mayer Anselm was thirteen years of
age, had intended to make him a Rabbi, but the coin had such attraction
for him, that it quickly drew him from the Talmud, and he established
himself in his father’s narrow quarters as a financier.

It is not generally known that Rothschild’s first great start in
financial life was given to him by the use of the twenty million dollars
which was paid to the Landgrave of Hesse, Frederic II., by George III.
of England, for 17,000 Hessians to help to whip George Washington and
retain the American Colonies. This blood money was the original basis of
the vast fortune of the Rothschilds. It was deposited with Mayer Anselm
by William IX., the successor of Frederic, whose example was followed by
other great ones of the earth, and in a few years the agents of the
kings and princes of Europe were flocking to Frankfort to negotiate
loans with Rothschild on behalf of their mighty patrons.

There is a very interesting story related, giving the reason why the
Landgrave passed by all the great bankers of Frankfort and entrusted
this large amount, together with a similar amount afterwards, to
Rothschild. The latter had occasion to visit Prince William at his
palace in Cassel, and found him playing a game of chess with Baron
Estorff. Rothschild prudently kept quiet and did not interrupt the game,
but stepped lightly up and stood behind the prince’s chair, where he
could watch every move. The Prince was getting the worst of the game,
and was becoming a little excited. Turning around, he said: “Rothschild,
do you understand chess?” “Sufficiently well, your Serene Highness,”
replied Rothschild, “to induce me, were the game mine, to castle on the
king’s side.” The Prince took the hint, and won the game. Then turning
to Rothschild, he said: “You are a wise man. He who can extricate a
chess player from such a difficulty as I was in, must have a very clear
head for business.”

The Prince afterwards told the Baron that Rothschild was as good a chess
player as Frederic the Great, and that a man of such capacity must be
able to take good care of money. The forty millions which were obtained
on deposit remained with the house of Rothschild for nine years, and
when Napoleon invaded Germany in the interim, the money, together with
other valuables, was hidden in wine casks in Rothschild’s cellar, but
the Conqueror never thought of tapping the casks. After peace was
proclaimed, and William, who had been obliged to seek safety in flight,
returned home, old Rothschild was dead, but his son Anselm handed over
to the Prince every dollar of the forty millions, and tendered him in
addition two per cent. interest for the entire time of the deposit. The
Prince made him a present of the interest.

The elder Rothschild had five sons, namely: Anselm, who succeeded his
father in Frankfort; Solomon, of Vienna; Nathan Mayer, of London;
Charles, of Naples; and James, of Paris. According to their father’s
will, the five sons were to constitute but one firm, in which they were
to enjoy equal profits, and never divide the fortune. The business was
to be managed at Frankfort as headquarters, to which great money centre
all the profits from the other moneyed capitals were to be raked in. The
intention of the old man was to make these five money kings dominate
Europe by the power of their wealth, so that the ordinary kings would
become their subjects, and in many instances the hopes of the great old
chess player have been realized. All the annual settlements were made at
Frankfort, and the brothers met there at least once a year for a general
conference. This system continues, and though the original five brothers
have all passed over to the majority, the last of them, James, having
died in Paris in 1868, at the ripe age of 76, yet the representatives of
the house in the large cities of Europe sustain the principles of union,
harmony and consolidation laid down by old Anselm Mayer Rothschild.
Although this union has been the great source of the Rothschilds’
success, it would be hopeless, however, for any other parent outside the
Hebrew race to imitate the injunction of old Rothschild. The idea of an
equal division of the profits could not be entertained for a moment by
an American. The socialistic family tie that enjoined such an
arrangement could only be rendered binding through the power of the
Hebrew religion. Just imagine how an American would feel if by some
lucky turn of fortune, like that of Nathan Rothschild in London, after
the battle of Waterloo, he should make six millions in a day, and be
requested to divide it with his four brothers! He would sooner spend a
million of it to try and break the old man’s will, and employ several of
the best sophistical lawyers he could find to prove that his father was
demented.

It is supposed that the elder Rothschild died worth 15 or 20 millions,
but this is in a great measure merely conjecture, as nobody outside the
family ever knew what their real wealth was, this fact having always
been kept an inviolate family secret. It must be said, to the credit of
the old man, that in his latter days, instead of becoming stingy, as
many do, he was quite liberal, and, according to the scriptural
injunction, distributed his alms in secret, without even permitting his
sons to know anything about the matter. He contributed largely to
various charities in the same way. It is said he would go through the
poverty-stricken districts of the city after night, giving money to the
needy, from whom he would retreat before giving them time to thank him
for his beneficence. He had a notion that those who gave without
receiving thanks were greater favorites with the Divine Being, who rules
the destinies of man.


[Illustration:

  From Harper’s Magazine. Copyright, 1873, by Harper & Brothers.
  NATHAN MAYER ROTHSCHILD.
  (The Financial Hero of Waterloo.)
]


The greatest speculator of the five brothers was Nathan Mayer
Rothschild, the third son of the great old man. He made the grand hit of
his life after the battle of Waterloo. He kept watching the movements of
the opposing armies on the Continent, and followed Wellington very
closely as he approached the famous field. It seems that the Iron Duke
was not at all pleased with Nathan’s attention to him, as he took him
for either a spy or an assassin, and was on the point of having him
arrested several times. But Nathan kept his purpose steadily in view, in
spite of the fact that bullets were whizzing around his ears in showers.
He sat on his horse on the hill of Hougomont with perfect composure in
the teeming rain the whole afternoon, looking upon that terrible
struggle that was to decide the destiny of nations, until Blucher
arrived and the French were put to route.

As soon as Nathan saw this he put spurs to his steed and made all
possible haste to Brussels, where a carriage with swift horses was in
waiting to carry him to Ostend. At day light next morning he arrived on
the Belgian coast, where he found it exceedingly difficult to obtain a
boat, the sea being very rough. At length he obtained a boatman as
courageous as himself, who undertook the task for 2,500 francs, and
landed him at Dover in the evening. He lost no time, but with relays of
the swiftest horses pushed forward to London, and was on the Exchange
next morning ready for business, long before the opening of the market.
That was the morning of the 20th, only a day and two nights after the
battle that decided the fate of nations. Nathan had performed a great
feat. He acted his role well. Like the great hero whose political
history had just closed, Nathan was “grand, gloomy and peculiar,” in the
financial sense of the phrase. He was an embodiment of the latest
information from the Continent. In defiance of winds and waves he had,
at the risk of his life, outstripped the swiftest couriers and the best
special correspondents of that day. The great operators flocked around
him asking, “What is the news?” Nathan sighed heavily and seemed
reluctant to tell. Eventually, this important piece of information was
extorted from him, in strict confidence: “Blucher, at the head of his
vast army of veterans, was defeated by Napoleon at Ligny, on the 16th
and 17th (of June), and there can be no hope for Wellington with his
comparatively small and undisciplined force.” This statement was
substantially true, and it forcibly reminds one of Tennyson’s poetic
remarks:

                 “A lie which is all a lie
                    May be met and fought with outright,
                  But a lie which is half a truth,
                    Is a harder matter to fight.”

True, Blucher had been repulsed at Ligny. The Duke had an awkward squad,
with the exception of the English, the Irish, and the Scotch Greys, to
marshal in fighting order, but he “got there all the same.” Nathan’s
secret point soon oozed out, and in less than an hour after the opening
there was a perfect panic on the London Stock Exchange. Nathan had his
brokers at work, first selling “short,” and then, when the market
reached bed rock, buying on the long side. He bought everything that he
could raise, borrow or beg the money for—consols, notes and bills. When
the news of Wellington’s victory arrived, forty-eight hours after Nathan
had begun to manipulate the market, and when he was “long” of everything
that he had money or credit to purchase, securities went up with a boom.
Nathan realized six million dollars, and it is said that a large number
of the great operators flocked around him to congratulate him. It was
lucky for Nathan that the scene of his operations was in London instead
of Wall Street, otherwise Judge Lynch might have had something to say
before the settlements had been made.

The career of Nathan Rothschild in England was remarkable, and his
success from the very start phenomenal. He began his speculations and
money-lending operations in Manchester with $500, being the limited
amount which he was permitted to draw from the family treasury on taking
his departure from Frankfort to seek his fortune in Great Britain. In
five years he had augmented the $500 to a million. He then removed to
London. There he married a daughter of Levi Cohen, one of the wealthiest
Hebrews of the great metropolis, well known by the pseudonym of
Pound-Adoring Cohen. His father-in-law was afraid that Nathan would soon
ruin himself, so reckless did he seem in his speculations, estimated by
the conservative standard of old Cohen.

Nathan was very fortunate in his speculative ventures in the public
funds, and managed to get himself introduced so as to do considerable
business for the Government in its transactions on the Continent. His
first introduction to the Government was through the Duke of Wellington,
who during his peninsular campaigns had made drafts that the Treasury of
Great Britain was dilatory in meeting. Nathan purchased these drafts at
a large discount. He afterwards renewed them to the Government, and they
were eventually redeemed at par. This was the means of bringing him into
confidential relations with the ministry of Great Britain, and he was
entirely trusted as their chief agent in all their financial matters on
the Continent. This gave him immense advantage in speculating, and
enabled him to give his brothers in the other great capitals of Europe a
large amount of valuable and inside information, which put them in a
position to speculate with success in the funds of their respective
Governments. Nathan had made arrangements to get the very latest
information from Frankfort, then the centre of European financiering, by
well trained carrier pigeons. He had also several boats of his own by
which to send personal messages across the channel in cases where these
were requisite, and a boat always in readiness at a moment’s notice in
case his presence should be indispensable at the great money centre, and
the central counting and clearing house of the family.

Nathan Rothschild was a strange and inconsistent compound of liberality,
avariciousness, and penuriousness. He entertained his guests in a
princely style, and often princes were mingled with those guests, but he
was miserably mean with his clerks and employees generally. Unlike A. T.
Stewart, who followed the very opposite rule, and had his place filled
with bankrupt dry goods men as employees, the Rothschilds would never
engage anybody who had been unfortunate in business. They had a
superstitious feeling that misfortune is contagious, and they carefully
avoided coming in contact with any of its victims. Nathan was even more
precise than Wm. H. Vanderbilt in calculating the pennies in his lunch
bill; but while Vanderbilt did this as a mere whim to illustrate his
business precision and correctness, Rothschild really loved the pennies
with ardent devotion. But Baron Nathan, even when he had accumulated
$70,000,000 or $80,000,000, was not happy. He was tortured by the fear
of enemies, who, he believed, intended to murder him. Like Vanderbilt,
he received many threatening letters; but unlike the New York
millionaire, who paid no attention to threats, but walked and drove out
defiantly, Rothschild was still in mortal terror, and believed that the
threats were intended to be executed. Nathan made one of his biggest
piles out of the Almaden quicksilver mines in Spain. The Spanish
Government wanted a loan, which he granted, receiving the mines as
security for several years. He got up a “corner” in quicksilver, and
raised the price 100 per cent. He realized almost $6,000,000 out of this
transaction. It was as good for him as the Waterloo deal, only the
returns did not come in so quickly. Nathan died in Frankfort, at the age
of 59, in 1836. His last words were, “He is trying to kill me. Quick,
quick, give me the gold.” His death created a panic on the London Stock
Exchange, and the Continental Bourses were greatly embarrassed by the
event. The news was conveyed by a carrier pigeon, which was shot by a
boy near Brighton. The message was briefly, _Il est mort_-“He is dead.”
The interests of the house of Rothschild are now scattered over the
globe, and it is probable that the aggregate wealth of all the branches
of the firm, including the possessions of the various members of their
families, exceeds $1,000,000,000.


[Illustration:

  _W R Travers_
]


------------------------------------------------------------------------




                             CHAPTER XXXIX.

                   TRAVERS.


THE UNIQUE CHARACTER OF TRAVERS—HIS VERSATILE ATTAINMENTS—ALTHOUGH OF A
    GENIAL AND HUMOROUS DISPOSITION, HE HAS ALWAYS BEEN A BEAR—HOW HE
    WAS THE MEANS OF PRESERVING THE COMMERCIAL SUPREMACY OF NEW YORK—HE
    SQUASHES THE ENGLISH BRAVADO, AND SAVES THE ORATORICAL HONOR OF OUR
    COUNTRY—HAS THE OYSTER BRAINS?—IT MUST HAVE BRAINS. FOR IT KNOWS
    ENOUGH TO SH-SH-SHUT UP—THE DOG AND THE RAT—I D-D-DON’T WANT TO BUY
    THE D-D-DOG; I WILL BUY THE R-R-RAT—TRAVERS ON THE ROYAL STAND AT
    THE DERBY—HOW HE WAS EUCHRED BY THE POOL-SELLER—MY PROXY IN A SPEECH
    AT THE UNION CLUB.—IF YOU ARE A S-S-SELF-MADE MAN, WH-WH-Y THE
    D-DEVIL DIDN’T YOU PUT MORE H-HAIR ON THE TOP OF YOUR HEAD? OTHER
    WITTICISMS, &C.


Wm. R. Travers is one of the most notable men of Wall Street in our
time.

His success in speculation has usually been on the bear side, which is
rather singular, as he is a man of such a genial disposition, with a
kind nature, an inexhaustible supply of sparkling wit, and always
brimful of humor.

He is also fond of athletic sports of every description, and, in fact,
is a kind of universal genius, so various and versatile are his
attainments. Owing to his immense variety of qualities, tastes and
pursuits, he has one of the most remarkable records in Wall Street; and
the most singular thing about him, probably, is, that while having all
the attributes usually inherent in a bull, he has always been a bear in
his transactions.

This genial, benevolent and high spirited man has never been known to
believe that there was any value in any property.

If he ever by chance happened to make any money on the bull side of the
market, it must have made him feel very uncomfortable—in fact,
conscientiously miserable—as he could not realize that by any
possibility it belonged to him.

It is due to Mr. Travers, however, that New York has been so highly
classified in the catalogue of cities, in fact, as occupying the highest
position in public estimation, and that it has attained full credit for
being the largest in wealth and population of any city in the Union.
This fact, now generally admitted, seemed to have been suspended in
doubt until Mr. Travers came from Baltimore to reside in our midst.

It will be remembered by many Wall Street men that prior to the advent
of Mr. Travers the rivalry among several of the seaboard cities on the
Atlantic coast was very keen. Boston, Philadelphia and Baltimore were
each in turn disposed to claim pre-eminence. Thanks to this Wall Street
magnate, the matter is now no longer in dispute. It was finally decided
in this way:

One day after Mr. Travers became one of ourselves, an old friend from
Baltimore met him in Wall Street. As it had been a long time since they
saw each other, they had a considerable number of topics to talk over.
They had been familiar friends in the Monumental City, and were not
therefore restrained by the usual social formalities.

“I notice, Travers,” said the Baltimorean, “that you stutter a great
deal more than when you were in Baltimore.”

“W-h-y, y-e-s,” replied Mr. Travers, darting a look of surprise at his
friend; “of course I do. This is a d-d-damned sight b-b-bigger city.”

That settled it. Since this famous interview, and this scientific
explanation given by Mr. Travers to his old friend, no skeptic has had
sufficient temerity to entertain any doubt regarding the financial and
commercial supremacy of New York; its leading position as the great
emporium of the Continent has never since been questioned; and there are
few cities outside of Ohio that can claim such power in politics.

It is due to Mr. Travers, also, that this country still retains the palm
for oratory and volubility in speech, and has successfully resisted the
intrusive and pretentious claims of Great Britain in regard to that
great and somewhat limited accomplishment.

The destiny of this nation in that respect hung in the balance at one
time.

A sort of go-as-you-please oratorical contest was being arranged to
decide the question of championship between Great Britain and ourselves,
and a vaunting and loquacious Britisher had appeared in our midst to
dispute the claim of the national cup in oratory as Rowell had done for
the belt in pedestrianism.

This English bravado had letters of introduction from Lord Randolph
Churchill, Sir Charles Dilke, Lord Salisbury, Mr. Gladstone, and other
British declaimers to Mr. Travers and other American gentlemen. It was
in the yachting season, and the voluble champion was invited to
accompany a party, of which Mr. Travers was the leading spirit, down the
bay in Mr. Travers’ yacht. The orator had talked everybody within
earshot of his voice almost deaf. When the party arrived at the dinner
table it was hoped that he would cease for a short time; but when every
other topic seemed exhausted, as well as the patience of his listeners,
he started off with renewed fluency on the subject of oysters, which
constituted the dish then at table.

“It is now a debatable point among scientists,” he began, “as to whether
or not the oyster has brains.” Travers, who up to this time had endured
the infliction of his loquacious guest, with the calmness of Job, said,
“I think the oyster must have b-b-brains because it knows enough when to
sh-sh-shut up.”

By this satiric stroke the English orator was dumbfounded and almost
paralyzed; his fluent tongue ceased to wag with its usual volubility,
and when requested to name his time for the international contest, he
begged to be excused until cured of his cold. He took the next steamer
for Liverpool, and has not been heard of since. Mr. Travers’ incisive
remark about the mental attributes of the oyster thoroughly squashed
him, and saved the oratorical honor of our country.

Mr. Travers started in life in the grocery business in Baltimore, but
disaster overtaking him there, he came to New York, and soon thereafter
formed a co-partnership with Leonard W. Jerome, the firm being Travers &
Jerome. Mr. Travers met with fair prosperity from the start, and soon
accumulated wealth. The worst set-back probably that he ever received
during his residence in this city was on one occasion on his way home
after the business day was over. Being attracted by the display in the
window of a bird fancier and dog dealer, from curiosity he was tempted
to enter the place. One of the conspicuous objects that met his eye was
a very large sized parrot. Mr. Travers inquired of the proprietor of the
establishment who was in attendance “i-i-if th-th-th-that p-p-parrot
c-c-could t-t-talk?”

Its owner quickly replied, “If it couldn’t talk better than you, I’d cut
its damned head off.”

Mr. Travers for a long time afterwards made up his mind some time or
other to get even with this dealer in animals and birds, and succeeded
most effectually. His coachman made a complaint to him that the stable
was overrun with rats. Mr. Travers said, “Well, you m-m-must hunt for a
r-r-rat dog.” The coachman made it known that Mr. Travers wanted a dog,
and all those engaged dealing in dogs overran Mr. Travers’ house as
ferociously as the rats had overrun the stable, to get him to buy a dog.
Among the rest who responded was this identical man who kept the store
where the parrot was. Mr. Travers recognized him at once, and told him,
“I-i-if he w-w-would b-b-b-be d-d-down at the s-s-stable in the
m-morning with t-th-the d-d-dog, he would g-g-give him a tr-tr-trial,
and if he p-pr-proved to b-b-be a g-g-good r-rat c-c-catcher, would
b-b-buy him.”

Mr. Travers sent for his coachman and told him to catch three or four
rats and put them in the bin, and he would be down in the morning to try
the dog. So, good and early next morning Mr. Travers was on hand at the
stable, and also the dog man and his terrier. Three rats having already
been put into the bin, Mr. Travers ordered the dog put inside, as the
man said he was ready for the fray, and the rats were so ferocious, and
showed such determined fight, that they kept the dog at bay, and he took
to the corner of the bin for protection. By and by the owner pushed him
right on the rats, and after a pretty fierce tussle he did secure one of
them and shook him until dead. This success encouraged a tussle with
another, which, after a long fight, shared the same fate. The third rat,
however, was determined to resist the dog, and did so nobly and
fiercely, making a prolonged fight, which resulted in a draw, and it was
hard to tell which was the worst hurt, the dog or the rat.

The owner of the dog then turned to Mr. Travers and said: “Now you see
what a fine dog that is, won’t you buy him?” Mr. Travers replied: “I
d-d-don’t w-w-want t-t-to b-b-buy the d-d-dog, b-b-but I’ll b-b-b-buy
the r-rat.”

Mr. Travers, when he first saw the owner of this dog, remembered him in
connection with the parrot. Since the rat fight, however, this same man
has never ceased to remember Mr. Travers, so that honors remain easy
between them. Mr. Travers has never been known to be at a loss for wit
to meet an emergency, and it is recognized that it flows as freely from
his lips and in as perfectly natural a way, as ordinary conversation
does from most people.

Early in the Spring of last year, on the advice of his physician, Mr.
Travers took his maiden trip to Europe, and would not have gone but for
the urgency of the case, always regarding that this country was big
enough for him without leaving its shores. When he reached England,
however, he found, when his arrival was announced through the medium of
the papers, that he was as well known amongst the nobility, sporting
world and other distinguished people there as he was in his own country,
owing to his connection with the turf and athletic sports, together with
his widely published witticisms which had preceded him. He consequently
was overpowered by attention and hospitality, and participated to as
full an extent as his health would permit. He attended the Derby, and
took an interest in a pool which resulted in his favor. As soon as he
ascertained his good fortune, he went to bag his money, but found that
the pool man had decamped with the funds. This was a sad disappointment.
He could scarcely believe his eyes or the various statements which went
to corroborate this man’s disappearance, but it was evident that he was
_non est_, as he was nowhere to be found about the stand or on the
field. Travers made complaint to a policeman, who appeared perfectly
indifferent to the charge. Mr. Travers said: “W-w-we d-don’t d-d-do
th-th-that way in m-my c-c-c-country. I b-b-belong to America.” The
policeman turned impertinently and said: “You had better go back to your
own country, if that’s the case.” This was an indignity to which Mr.
Travers did not feel inclined to submit, and he at once exhibited his
badge, which admitted him to the royal stand. The policeman recognized
it with affright, and almost fell on his knees in making profuse
apologies and offers of service, showing the cringing spirit which
prevails in England to royalty and nobility, by the people who occupy
the position as servants to these high-born personages. Mr. Travers
overlooked this official rudeness, and submitted to his loss as
cheerfully as possible under the circumstances.

I met Mr. Travers on board the Newport boat immediately on his return,
and he told me this story. I replied, “that I was surprised that a man
of that character should have acted so villainously, as I had always
supposed that such men were influenced by the recognized principle the
world over, of honor among thieves.” Mr. Travers instantly replied: “No
one could have t-t-told him that I was a th-th-thief.”

I remember another instance, which was during the war period. I had
written a series of letters on national financial matters, which were
then before the country for discussion, and they were published in the
New York _Times_. Mr. Travers was met on his way down town by a Wall
Street friend on the morning that one of these letters appeared in the
paper, who asked Mr. Travers if he had seen Mr. Clews’ last letter. Mr.
Travers said, “I h-h-hope so.”

Shortly after this I was a guest at a dinner party at the Union Club,
and was late in presenting myself. When I reached the entertainment
(which was a sort of mutual admiration gathering), the speeches had
commenced, and I no sooner had taken my seat than Mr. Lawrence Jerome
proposed my health. While it was being drank, Mr. Travers, who sat
immediately opposite, came over and whispered in my ear, “Clews, you
d-d-don’t w-want t-to speak so soon after c-c-oming in here, d-d-do
you?” “No, I do not,” I replied. “I’ll t-t-tell th-th-them so, will I?”
“Yes, I wish you would,” I said. He went back to his place and said,
“Gentlemen, I have talked with Mr. Clews, and he d-d-desires me t-to ask
you t-to excuse him f-from making a speech on th-th-this occasion and
i-if you w-will d-d-do so, he w-will w-write you a l-letter.”

To show the rapid fluctuations that take place in Wall Street, and how
even the best judges of the market are often mistaken in their
prognostications, I will note an instance in connection with Mr.
Travers. On his return from Europe, which was early in July, 1885, when
the market on this side was weak, cables prior to his departure
evidently indicated to him that much lower figures were in order. Just
prior to the arrival of the steamer, in conversing with an associate
member of the Exchange, he said, “B-b-barnes, I’ll make a l-l-little
b-b-bet with you; I’ll b-b-bet you L-l-lackawanna will b-b-be under
six-ty when we r-reach New Y-York.” Barnes was not willing to make the
bet, however, but on their arrival, which was two days after, nothing
surprised Mr. Travers so much as to find Lackawanna 110 instead of the
figure 60 or less which he had predicted, especially as its advance did
not cease thereafter until it sold at 130.

It has been justly said, that if a man will wear a good looking hat, and
good, well polished boots, the head and feet being the parts which first
catch the eye of an observer, it matters very little what kind of
material the coat, vest and trousers may be made of, if they are whole
and kept clean. Though they may be threadbare the man will appear to be
fairly dressed, and will look much younger than if he were careless
regarding the covering of his extremities. If the latter are fairly
adorned he can pass muster.

Knowing this fact, I had always been in the habit of posing before the
public as a youth. In this I was materially assisted by having no hair
on the top of my head, in the place where other people’s hair usually
grows. I had been this way for twenty years, just presenting about the
same appearance as when I was born, and it has always been a matter of
remark how youthful I looked.

I have often been asked what I did to keep myself looking so young. My
truthful answer always has been that, “Virtue is its own reward.” This
theory invariably passed as sound in my case until it was knocked into a
cocked hat by Travers. One unlucky day he removed the mask, and changed
the current of public opinion against me on the much cherished subject
of my perpetual bloom of youth.

It occurred in this way. Frank Leslie’s _Illustrated Weekly_ had
published a number of pictures of the active business men of New York,
who were known in the community as self-made men, and mine was among
them.

A few days after the appearance of my picture in this paper, I happened,
one afternoon, on my way uptown, to drop into the Union Club, and as
usual, went into the main room. It was full of members, largely composed
of a scattering of Wall Street bankers and brokers.

Travers was present, and when he is on hand on such occasions, it always
means laughter for the multitude at some one’s expense. In this instance
it happened to be at mine.

As I entered the room, Travers said, in an audible voice: “Hallo, boys!
here comes Clews, the self-made man.” Then, addressing himself to me, he
said: “I s-s-say, Cl-Cl-Clews, as you are a s-s-self-made man, wh-wh-why
the d-d-devil didn’t you p-put more h-h-hair on the top of your head?”

This story having gone the rounds, as it soon did, drew attention to my
summer-appareled head, which before that time had enabled me to pass
myself off as a youngster just striking out at the commencement of life.
That stroke of Travers’ wit, however, has been the cause of consigning
me ever since to the ranks of the old “fogies.” Now, everybody is
convinced that my hair, now _non est_, had already come and gone, and
that my head represents the work of ages.

This is another vivid instance illustrating the saying that “many a
truth is spoken in jest.”

When Travers thus removed my mask of adolescence, it made me feel
unhappy for some time, as it really transformed my entire identity, and
deprived me of that luxury so dear to all the fair sex, and to many of
my own, of sailing under false colors in reference to my age.

Still, as Travers is such a righteous, good fellow, I have had to
forgive him, notwithstanding the gravity of the offense in having hurt
the most tender part of my sensitive nature. So we can make up and
become friends again, as I value the renewal of his friendship even at
the cost of such a great personal sacrifice as the deprivation of my
supposed youthfulness.

On the principle that misery loves company, and as Mr. Travers had
brought misery to my lot by drawing public attention to my bare head, I
found consolation, shortly afterwards, in a huge joke that the same
facetious individual perpetrated upon another member of the Club, who
happened to be one of New York’s most celebrated lawyers. This
gentleman, it is well known, has been connected with some of the largest
and most remunerative railroad cases in our courts for many years, and
being considered a great authority in that branch of legal lore, he was
accustomed to exact his own terms from his wealthy clients, which meant,
in most instances, a very fat fee. This gentleman was standing on the
side of the street opposite the Club one afternoon, while Travers was
surrounded by a cluster of club men on the other side. “Look across the
way, boys,” observed Travers, “th-th-there’s B-B-Barlow with his hands
in his own p-p-pockets at last.”

On another occasion, when Travers, who resides at Newport in the summer,
and is the possessor of a small-sized yacht there, which he obtained
some years ago in lieu of a debt, was taking a refreshing sail on his
yacht in the bay one morning, it happened that a squadron of yachts
appeared in his vicinity, and there was going to be a race. Travers
having been made acquainted with the fact, invited a party of friends to
go to see the race. As soon as it became known to the yachtsmen that the
renowned Travers had appeared on the deck of his yacht, a committee was
assigned to convey to him the respects of the members of the squadron.
When they came alongside his craft he invited them on board, and saw at
a glance that they nearly all happened to be bankers and brokers.
Casting his eyes across the glittering water, he beheld a number of
beautiful white-winged yachts in the distance, and finding, by inquiry,
that they all belonged to Wall Street well known brokers, he appeared
thereby to be thrown momentarily into a deep reverie, and, without
turning his gaze from the handsome squadron, finally asked his
distinguished visitors, “wh-wh-where are the cu-cu-customers’ yachts?”

Comment would be entirely superfluous.

A. T. Stewart, the world renowned retail dry goods merchant, was
elected, on one occasion, to preside at a meeting of citizens during the
war period, Travers being amongst the number present. When Mr. Stewart
took his gold pencil case from his pocket and rapped with its head on
the table for the meeting to come to order, Travers called out, in an
audible tone, “C-cash!” which brought down the house, and no one laughed
more heartily than Mr. Stewart, although it was a severe thrust at
himself.

As it is sometimes said of a stranger who comes from a foreign country,
Travers came to New York well recommended, bringing letters of
introduction with him from the first families of Baltimore, and
credentials which at once established his status and reputation. So it
was not necessary for him to remain long on probation in New York.
Coming here was not a new birth to him, although, in some measure, he
may be said to have risen, Phœnix-like, from the ashes of his former
self, as business misfortunes had overtaken him in Baltimore.

Travers had not only to start in a new place and in a new business when
he came here, but he had to begin the ascent of his prosperous career at
the very bottom of the financial ladder. Owing to his incomparable
geniality he met with hosts of friends from the very start, and he
prospered from the word “go.”

Travers formed several partnerships at various times. After making
considerable money in the one above alluded to with Mr. Jerome, the
partnership was dissolved, and Travers then continued business alone as
a Wall Street operator, and as I have formerly stated, usually acted on
the bear side of the market, which was remarkable for a person of such a
buoyant and hopeful disposition.

In his business operations Mr. Travers has always shown great sagacity,
mingled with caution, and his prestige as a leader became so great that
he soon attracted a numerous following of operators, who, with their
eminent leader, formed a set widely known in speculative circles all
over this country as the “Twenty-third Street Party.” Of this party, Mr.
Addison Cammack, the celebrated bear, was a prominent member, and a
great admirer of Mr. Travers.

Mr. Travers was well-born and received a good education, with an
excellent training for a business career. He married a daughter of the
Hon. Reverdy Johnson, who was United States Minister to England during
the administration of Andrew Johnson, and who was one of the most
prominent members of the Bar.

Mr. Travers has always been famous for his attachment to out-door sports
and amusements, and on the principle that water finds its level, so did
Mr. Travers in the sporting world. He soon became President of the
Jerome Jockey Club, President of the Racquet Club, President of the
Athletic Club, and was thoroughly identified as a leader in the large
majority of manly and out-door sports, in which the youth of New York
city and its suburbs were interested.

It is due both to Mr. Travers and his quondam partner, the renowned
Leonard W. Jerome, to state that the efforts of these two men have been
chiefly instrumental in elevating the social and moral tone of the
race-course in this part of the country, and raising it to a standard of
respectability, to which before their reformatory efforts it was
partially a stranger. It was, in a great measure, through their
exertions that the race-track became a fashionable resort, in the North,
for ladies, as it had been in the South for many years, especially in
Kentucky. The ladies of the present day can now talk horse at Jerome
Park, Sheepshead Bay and Long Branch with a volubility that twenty years
ago would have shocked their mothers, and would still cause their
grandmothers to have epileptic fits. So the ladies of the present
generation are greatly indebted to these two gentlemen for having
removed the social stigma from the turf, in this section, thus enabling
the fair sex to enjoy, in common with the lords of creation, and without
compunction and loss of dignity, one of the greatest pleasures in the
whole range of out-door recreations.

The breed of horses has been improved to an extent that leaves the
famous Arabian steed of yore, that outstripped the flight of the
ostrich, far in the distance. This development in speed has been brought
to its highest pitch in Harry Bassett, and Wm. H. Vanderbilt’s fondly
cherished Maud S., now the property of Mr. Robert Bonner. For this
immense evolution in speed and staying powers the patrons of the turf
are largely indebted to Jerome and Travers.

One of Travers’ best _bon mots_ was inspired by the sight of the Siamese
Twins. After carefully examining the mysterious ligature that had bound
them together from birth, he looked up blankly at them and said,
“B-b-br-brothers, I presume.”

Among Travers’ contemporaries, Mr. Charles L. Frost was very well known
a few years ago. His specialty was purchasing the junior securities of
foreclosed railroads which were supposed to be wiped out, so far as any
visible element of value was concerned.

Then, at a time when it was quite inconvenient for the reorganized
companies, he would pounce down upon them with some sort of vexatious
litigation, and would often levy on the bank balances of these
corporations as a part of his proceedings and peculiar methods of
management. He was enabled to take such action as they were foreign
corporations. In this way he made it exceedingly difficult for these
corporations to defend the various suits in law engineered by him, and
rendered their existence exceedingly uncomfortable by placing their
money in a tight place and cutting off the interest.

These peculiar methods of financiering identified Mr. Frost in a measure
with Wall Street men, as a character whom most of the bankers and
brokers who had any dealings with him have had good reason to remember
feelingly. Frost had bushy, white curly hair, a beardless, full face,
and a very red nose, which could only be acquired at considerable
expense or as the result of chronic dyspepsia. There is no evidence,
however, that he was a victim of this natural malady, so his
highly-colored proboscis must be accounted for in some other way.

Mr. Travers met this gentleman one morning by accident in a Fourth
Avenue railroad car going down town. Although formerly acquainted, they
had not met in years, and time, as indicated by his white locks, was
beginning to tell upon Mr. Frost.

This attracted the attention of Mr. Travers, who cordially shook hands
with the old gentleman, and after making a rapid survey of his person,
said, “Wh-why, Mr. Frost, wh-wh-what beautiful white hair you have; what
a su-su-superb blue n-n-necktie you wear; what a m-m-mag-magnificent red
nose you have got. If I had s-s-seen you as I do now in w-w-war times, I
should have taken you for a p-p-perfect p-p-patriot, red white and
blue.”

                         THE DEATH OF TRAVERS.

The foregoing reminiscences of Travers were written and stereotyped
while the great wit and financier was still alive. I have, therefore,
not deemed it necessary to recast the matter, but consider it sufficient
to add a few of the salient points in Mr. Travers’ character and career,
with more _bons mots_ which the death of this popular man brought out.
He died in Bermuda, March 19, 1887. He had gone there in the previous
November, where he had a residence of his own, in the hope that the
climate might restore him to health, but the malady, diabetes, had got
too far ahead, and, in spite of the best medical skill, carried him over
to the majority. His wit, like that of Tom Hood, did not forsake him
even in his last hours.

While on his death-bed at Bermuda a friend called to see him, and said,
“What a nice place Bermuda is for rest and change.” Travers replied:
“Y-y-yes, th-the waiters g-g-get th-th-the ch-change and th-the
h-h-hotel k-k-keepers th-the r-r-rest.”

Among Travers’ famous hits the following is one of the best: Jim Fisk’s
zenith of glory and grandeur was in the vicinity of its height when he
secured the control of the Boston & Providence line of steamboats. He
constituted himself Commodore, and was always on the deck as they
departed each day, dressed in a Commodore’s attire, and was evidently
very much elated in being supreme in command in connection with these
magnificent steamboats. Jay Gould was, financially, equally interested
with him in the venture, and Commodore Fisk, in his usual splurgy
manner, had a large likeness of both Gould and himself hung up at the
head of the stairs leading to the large saloon cabin on each of these
steamboats. Travers and others, who at that time were leading magnates
of the street, were invited to inspect one of these large boats that had
been newly fitted up, gilded, and put in magnificent shape, with a band
of music on board, etc. Fisk met Travers as he went on board, and
volunteered to escort him over the boat to show him its magnificence and
superb appointments. As they went up the stairs and came to the first
landing, he pointed out the likenesses of Fisk and Gould that were hung
there, and asked Travers if he didn’t think they were good. Travers
replied: “I th-think th-th-they are v-v-very good, b-b-b-but t-to m-make
th-th-them c-c-complete, th-there sh-sh-should b-b-be a p-p-picture of
our S-S-S-Saviour in th-th-the m-middle.”

The last time I saw Mr. Travers down town he called at my office. After
he ran his eye over the stock quotations, I said: “The market is pretty
stiff, Travers.” He said: “Y-yes, it is th-the st-st-stiffness of
d-d-death;” and, sure enough, in the course of two or three days
afterwards, a big smash took place.

Mr. Travers once said to a friend: “C-come and see me in S-September. If
y-you wish I will give you a p-point that will m-make m-money. He wished
to do the man a favor in return for a kindly office. Late in the month
mentioned the friend dropped into Travers’ office.

“C-come for that p-point?” asked Mr. Travers.

“Certainly,” replied the friend.

“Well, y-you are the luckiest d-dog I know. I p-played that p-point two
weeks ago myself and lost a pile of money. Y-you st-stick to m-me l-long
enough and c-close enough, and I’ll l-land y-you in the p-poorhouse,
sure.”

When “Plunger” Walton was in the height of his prosperity on the turf he
met Travers at Saratoga.

“I have been anxious to see you for some time,” said Walton. “I think we
can do business together,” he added. “I’ve got good judgment on horses
and horse racing, and you have the same on stocks and stock speculation.
I’ve made $350,000 on horse races in the last two years. Now, you give
me points on stocks, and I’ll give you points on races. Is it a go?”

“Y-you’ve made three h-hundred and f-fifty th-thousand dollars on
h-horse racing?” Travers repeated.

“Yes.”

“And you want m-me to g-give you p-points on st-stocks?”

“In exchange for my points on horses. Yes.”

“Well, I’ll give you a f-first rate p-point. If you’ve made that much in
two y-years, st-stick to your b-b-business. It is a f-first-rate
p-point.”

One day, many years ago, Mr. Travers was standing on the curb of New
street, opposite the Exchange, buying some stock from a gentleman whose
aspect was unmistakably of the Hebrew stamp.

“Wh-wh-what is your name?” asked Travers.

“Jacobs,” responded the seller.

“B-b-but wh-what is your Christian name?” reiterated Travers.

The Hebrew was non-plussed, and the crowd was convulsed with laughter.

The first time Mr. Travers attempted to find Montague street, in
Brooklyn, he lost his way, although he was near the place. Meeting a man
he said:

“I desire to r-reach M-montague st-street. W-will you b-be kik-kind
enough to pup-point the way?”

“You-you are go-going the wrong w-way,” was the stammering answer. “That
is M-montague st-street there.”

“Are y-you mimick-mimicking me, making fun of me-me?” asked Mr. Travers
sharply.

“Nun-no, I assure you, sir,” the other replied. “I-I am ba-badly
af-flict-flicted with an imp-impediment in my speech.”

“Why do-don’t y-you g-get cured?” asked Travers, solemnly. “G-go to
Doctor —, and y-you’ll get c-cured. D-don’t y-you see how well I talk?
H-he cu-cured me.”

The fortune left by Mr. Travers has been estimated at $3,000,000. He
left three sons, William B. Travers, John Travers, and Reverdy Travers,
and five daughters, four of whom are married. His only sister is Mrs.
Prince, mother of the late John D. Prince, of Prince & Whitely.

Mr. Travers assisted a large number of young men to go into business,
and helped to give the start in life to several of the most successful
men in Wall Street.

He was charitable, and his secret beneficences are said to have been
numerous. He enjoyed the wealth he had made in a way that should make
the majority of millionaires blush with shame at their parsimony. He was
a _bon vivant_ of the first water. He maintained five domestic
establishments on a first-class and luxurious scale, not like a
Caligula, merely for his personal gratification or the pride of
ostentation, but rather for the development of those social traits of
character in which he had few equals, and no superior. The great social
pride of his life was to make his friends feel happy. He had one of the
best cellars in New York. His table at any of his residences was not
only bountiful, but exhibited a menu equal to that at Delmonico’s. His
favorite wine was Madeira, of which he was a perfect judge. He was very
moderate, however, both in eating and drink, but would have the best of
everything despite the cost.

He was a kind and indulgent father, but was pleased to see his boys
manifest ample pluck like himself. Apropos of this characteristic, one
of his boys came home one day with a big blackened eye.

“W-w-w-where d-d-did you g-g-g-get th-th-that?” inquired the father,
anxiously.

“In a f-f-fight, sir,” replied the son, who has a similar impediment in
his speech.

“D-d-d-did y-y-you w-w-w-whip the other f-f-fellow?”

“Y-y-yes, sir.”

“Q-q-q-quite r-r-right. H-h-h-here’s a d-d-dollar f-f-for y-you. Always
w-w-whip the other f-f-fellow.”

Travers himself was courageous, tall, and sinewy, and in his younger
days a great athlete. He was 68 years of age at the time of his death.
He was a member of twenty-seven clubs, social, political, and athletic.
He was a Democrat in politics. As to his religious belief, I expect if
he had been questioned on that he would have given the same answer as
another eminent man who cut a great figure in this country: “The world
is my country; to do good is my religion.” Travers might have added: “I
also wish to be the means of creating and diffusing the greatest amount
of social happiness and enjoyment of which humanity is capable.”

I may conclude by saying of Travers, as an eminent author observed of
his namesake the divine William, the Bard of Avon, “We ne’er shall see
his like again.”


------------------------------------------------------------------------




                              CHAPTER XL.

           CHARLES F. WOERISHOFFER.


THE CAREER OF CHARLES F. WOERISHOFFER, AND THE RESULTANT EFFECT UPON
    SUCCEEDING GENERATIONS.—THE PECULIAR POWER OF THE GREAT LEADER OF
    THE BEAR ELEMENT IN WALL STREET.—HIS METHODS AS COMPARED WITH THOSE
    OTHER WRECKERS OF VALUES.—A BISMARCK IDEA OF AGGRESSIVENESS THE
    RULING ELEMENT OF HIS BUSINESS LIFE.—HIS GRAND ATTACK ON THE VILLARD
    PROPERTIES, AND THE CONSEQUENCE THEREOF.—HIS BENEFACTIONS TO
    FAITHFUL FRIENDS.


By the death of Charles F. Woerishoffer, Wall Street lost one of the
most prominent figures which has ever shown up here. Mr. Woerishoffer
died May 9, 1886. His career is one worthy of study by watchers of the
course of speculation in this or any other country. The results of his
life-work show what can be accomplished by any man who sets himself at
work upon an idea, and who devotes himself steadily and persistently to
a course of action for the development and perfection of the principle
which actuates his life. Mr. Woerishoffer possessed peculiar personal
qualities which are denied to most men and to all women. He had the
magnetic power of impressing people with confidence in the schemes which
he inaugurated; that is to say, he had the power of organization—the
same power has made other men great, and will continue to make men great
who possess it in all walks of life. Notable instances may be cited in
the cases of Bismarck, Gladstone, Napoleon, Grant, and—coming down to
Wall Street proper—Gould, Daniel Drew, old Jacob Little and the
Vanderbilts, especially the Commodore, in his superior power of
aggressiveness.

It has been said of Mr. Woerishoffer that he was fortunate. He was
indeed. He was fortunate in the possession of natural ability, and he
had the aptitude to take advantage of events, and associate
circumstances and the strength of purpose, and to direct, instead of
following, the operations with which he became connected. He was the
leader of the bear element of the Street—at least he was such during the
period which marks his successful operations here. There is no doubt
that the death of Mr. Woerishoffer was hastened because of the great
strain of mind growing out of his business transactions. There is one
point in this connection which has been overlooked by his biographers,
namely, that his boldness in the magnitude of his dealings was resultant
from a careless or non-calculative mind. I do not believe that Mr.
Woerishoffer ever undertook a speculation of any sort until he had
carefully calculated all the chances _pro_ and _con_, and his success,
remarkable as it was, was largely due to the combination of calculation
and the natural development of business conditions, of which he was a
close student.

Mr. Woerishoffer’s conception of business principles was iconoclastic to
an intense degree. As a broker, as a business man, as an operator in
stocks, he “believed in nothing;” that is to say, he was a believer in
the failures of men, and had no faith in the corporations and
enterprises which were organized for the purpose of the development of
the best interests of the country in which he lived. There is another
view, or another statement of this peculiar feature, of the character of
this man which may be given in description, and this is illustrative of
the careful study he made of everything passing along in the lines of
life with which he was connected. It is this: That Mr. Woerishoffer, by
his intimate study of the prospects and probabilities of the projected
plans of enterprising Americans, had come to the conclusion that the
majority of them must fail, and that the first flush of enterprise would
be changed to a darker shade as time progressed. That is to say, he saw
and knew a great deal of the organization of the railroad schemes which
have marked the growth of our rapid development in a business way, and
he judged that the inflated ideas of the projectors must meet with a
check as developments were made, and that the earning capacity of the
roads would not equal expectations. Hence he sold the stocks, and sold
them right and left from the start, and with his followers reaped the
profits. Woerishoffer never indulged in the _finesse_ of Gould or Henry
N. Smith. He had the German ideas of open fight, and he attacked
everything indiscriminately, losing money sometimes, but making money at
other times, and by his open dash and persistency carried his point.

There is no doubt that the successful career of a man of this sort has a
deleterious effect upon those who follow him in succeeding generations.
It does not matter how successful the development of the business
industries of this country may be hereafter, there will always be found
men who will speculate upon the ruination rather than the success of the
best interests of the country merely because Charles F. Woerishoffer
lived and made a fortune by his disbelief and his disregard of the
growth of the institutions of the country which gave him a home.

Woerishoffer was a wonderful example of the sudden rise and steady and
rapid progress of a man of strong and tenacious purpose, who adheres
with firmness to one line of action or business. He was born in Germany.
Woerishoffer’s Wall Street career was begun in the office of August
Rutten, afterwards of the firm of Rutten & Bond, in which Woerishoffer
subsequently became Cashier. He left this firm in 1867, and joined M. C.
Klingenfeldt. Mr. Budge, of the firm of Budge, Schutze & Co., in 1868,
bought him a seat in the Stock Exchange. Some time after he entered the
Board he became acquainted with Mr. Plaat, of the well-known banking
firm of L. Von Hoffman & Co. Mr. Woerishoffer was entrusted with the
execution of large orders, especially in gold and Government bonds. At
that time the trading in these securities was very large. Afterwards
Plaat became an operator himself, and Woerishoffer followed in his
footsteps as an apt pupil. Eventually he formed the firm of Woerishoffer
& Co., his first partners being Messrs. Schromberg and Schuyler, who
made fortunes and retired.

Woerishoffer was connected in enormous operations with some of the
magnates of the street; for instance, James R. Keene, Henry N. Smith, D.
P. Morgan, Henry Villard, Charles J. Osborn, S. V. White, Addison
Cammack, and last, though not least, Jay Gould. He was especially on
intimate terms with his great brother bear, Addison Cammack, both
speculatively and socially. Besides being a bold operator in the street,
Woerishoffer was associated with large railroad schemes, which gave him
the inside track in speculation. He was connected with the North River
Construction Company, the Northern Pacific, Ontario & Western, West
Shore, Denver & Rio Grande, Mexican National, several of the St. Louis
Companies, and Oregon Transcontinental. He was originally a rampant bull
on these properties until they began to get into trouble, and then he
became a furious and unrelenting bear. He smashed and hammered them down
right and left. He soon covered his losses, and began to make enormous
profits on the short side of the market. On the bonds and stock of the
Kansas Pacific, when it became merged in the Union Pacific, it is
supposed that Woerishoffer cleared over a million dollars.

Woerishoffer, it seems, was one of the first to propose the building of
the Denver & Rio Grande Railroad. On this enterprise he realized immense
profits for himself and his friends. The stock rose until it reached
110, and was “puffed” up for higher figures. The public was attracted by
the brilliant prospects of immense profits on the long side. Mr.
Woerishoffer and friends held large quantities of long stock, but sold
out, and afterwards put out a large line of shorts. The bear campaign
had Woerishoffer as leader, and, it is said, he succeeded in covering as
far down as 40, and some even lower. In 1878, when the market began its
great boom on account of the resumption of specie payment and the
general prosperity of the country, he organized a combination which
bought stocks largely and sold wheat short. On this deal he made large
profits, and began to develop into a pretty strong millionaire. He took
advantage of the shooting of President Garfield, in 1881, together with
his colleagues, Cammack and Smith, to organize a bear raid on a large
scale, which was probably one of the chief, although somewhat remote,
causes of bringing about the panic of 1884.

The great perspicacity which he had in the deals enumerated failed him
in 1885. He thought, as the wheat crop was small, that wheat would go up
and stocks would go down, but the very reverse occurred. The
disappointment and depression, very probably, resulting from this
brought on the aneurism of the heart, which killed the great bear
operator, and his death was a fortunate event for Wall Street.

One of the many things which gave Woerishoffer great reputation as a
speculator, both here and in Germany and England, was the bold stand he
took in the fight for the control of Kansas Pacific against Jay Gould,
Russell Sage, and other capitalists, railroad magnates and financiers in
1879. He represented the Frankfort investors, and had engaged to sell a
large quantity of Denver extension bonds at 80, to the Gould-Sage
syndicate. The syndicate, however, knowing that they had the controlling
influence, declared the contract for 80 off, and “came to the
conclusion, after examining the road-bed, that the bonds were not worth
more than 70,” and they would not take them at a higher figure.
Woerishoffer then made a grand flank movement on the little Napoleon of
finance and his able lieutenants. He seemed to be greatly put out that
they had broken their contract, but did not complain very bitterly. He
immediately cabled to the English and German bondholders, and soon
secured a majority of the bonds which the syndicate wanted, and
deposited them in the United States Trust Company. He then informed the
syndicate that they could not obtain a single bond under par to carry
out their great foreclosure scheme. It was this circumstance that caused
Frankfort speculators and investors to come so largely into the New York
stock market, and that also made English capital flow in freely,
speculators throwing off their former timidity. The amount involved in
the Gould-Sage syndicate deal was about $6,000,000 of bonds, thus
netting Woerishoffer considerably over a million. This deal at once gave
him an international reputation as a far-sighted speculator, and this
reputation was gained at the expense of Gould and Sage, owing to their
disregard of the contract which had been entered into.

Woerishoffer showed great sagacity as a speculator when Henry Villard
put forward his immense bubble scheme in Northern Pacific and the
Oregons. Although invited to go into the big deal with other millionaire
speculators who had taken the Villard bait so freely, Woerishoffer kept
prudently aloof, and looked on the players at the Villard checkerboard
with equanimity and at a safe distance. He was not then considered of
very much account by the men of ample means who so freely subscribed
$20,000,000 to the Villard bubble. At the moment when these subscribers
were so highly elated with the idea that the Villard fancies were going
far up into the hundreds and, perhaps, the thousands, like the bonanzas
during the California craze, Woerishoffer boldly sold the whole line
“short.” This was a similar stroke of daring to that which James R.
Keene had perpetrated on the bonanza kings in the height of their
greatest power and anticipations. The Villard syndicate determined to
squeeze Woerishoffer out entirely, and for this purpose a syndicate was
formed to buy 100,000 shares of stock. There were various millionaires
and prominent financiers included in the syndicate. These were the
financial powers with which Woerishoffer, small in comparison, had to
contend single-handed. The feat that Napoleon performed at Lodi, with
his five generals behind him, spiking the Austrian guns which were
defended by several regiments, was but a moderate effort in war compared
with that which Woerishoffer was called upon to achieve in speculation.
He took things very coolly, and with evident unconcern watched the
actions of the syndicate. The latter went to work vigorously, and soon
obtained 20,000 shares of the stock which they required. It still kept
climbing rapidly, and so elated was this speculative syndicate with the
success of its plans that it clamored for the additional 80,000 shares,
according to the resolution. The speculators thought they were now in
the fair way of crushing Woerishoffer, and with a hurrah obtained the
80,000 shares required, but Woerishoffer’s brokers were the men who sold
them to the big syndicate. It was not long afterwards that the syndicate
felt as if it had been struck by lightning. In a short time the Villard
fancies began to tumble. The syndicate was in a quandary, but nothing
could be done. It had tried to crush Woerishoffer. He owed it no mercy.
The inevitable laws of speculation had to take their course, and the
great little bear netted millions of dollars. These events occurred in
1883.

After the Villard disruption, Mr. Woerishoffer became conservative for
some time, and was a bull or a bear just as he saw the opportunity to
make money. When the West Shore settlement took place he watched the
course of events with a keen eye, and was one of the most prominent
figures in pushing the upward movement upon the strength of that
settlement. His profits on the bull side then were immense. After this
he became a chronic and most destructive bear. The reason he assigned
for his conversion and change of base was that the net earnings of the
railroads were decreasing, and did not justify an advance in prices. He
pushed his theory to an extreme, making little or no allowance for the
recuperative powers of the country, and the large bear contingent, which
he successfully led, seemed to be inspired with his opinions. These
opinions, pushed to the extreme, as they were, had a very demoralizing
effect upon the stock market, and constituted a potent factor in the
depreciation of all values, throwing a depressing influence on
speculation, from which it did not recover until many months after Mr.
Woerishoffer’s death. The great bear had wonderful skill in putting
other operators off the track of his operations by employing a large
number of brokers, and by changing his brokers and his base of action so
often that speculators were all at sea regarding what he was going to
do, and waiting in anxiety for the next move. It was considered
remarkable at the time that his death had not a greater influence on the
stock market than this result proved. If he had died a week sooner, his
death might have created a panic, for he was then short of 200,000
shares of stock. His short accounts had all been covered before the
announcement of his death on the Stock Exchange.

Woerishoffer was almost as famous for his generosity as James R. Keene.
It is said that he made presents to faithful brokers of over twenty
seats, of the value of $25,000 each, in the Stock Exchange. He made a
present of a $500 horse to the cabman who drove him daily to and from
his office. He was exceedingly generous with his employes. A short time
before his death, feeling that the strain from over-mental exertion was
beginning to tell on his constitution, he had resolved to visit Europe
for the purpose of recuperating, but, like most of our great operators,
he had stretched the mental cords too far before making this prudent
resolve, and he died at the early age of 43. How many valuable lives
would be prolonged if they would take needful rest in time! The death of
Woerishoffer should be a solemn warning to Wall Street men who are
anxious to heap up wealth too rapidly. His fortune has been variously
estimated at from $1,000,000 to $4,000,000. He left a widow and two
little daughters.

Woerishoffer had simply the genius for speculation which is
uncontrollable, irrespective of consequences to others. He had no
intention of hurting anybody, but his methods had the effect of bringing
others to ruin all the same. He merely followed the bent of his genius
by making money within the limits of the law, and did not care who
suffered through his operations. All speculation on the bear side
involves the same principle. If there is any difference among
speculators, it only consists in degree. Large transactions, like those
in which Woerishoffer was engaged, are more severely felt by those who
have the misfortune to get “squeezed;” but it all resolves itself into a
question of the survival of the fittest.

Woerishoffer’s success in this country seems strange to Americans, but
how much stranger it must have seemed to the people of his native town
of Henau Hesse-Nassau, where he was born in 1843, in comparative
poverty. John Jacob Astor was one of the first of a considerable number
of Germans to find this country a veritable new El Dorado, where
peasants’ sons, as if by magic, became far wealthier than many of the
nobility whom they had, as boys, gazed upon with awe. Who could have
foreseen such a career for the poor young German, who came to New York
in 1864? He was then in his twenty-first year. He had had some
experience in the brokerage business in Frankfort and Paris, but he came
here poor. Addison Cammack, who was to become his ally in many a
gigantic speculation, was then prominent in the South, where he had
favored the cause of the people of his State during the war, and had
made a fortune. D. P. Morgan, who was to be another of his speculative
associates, had already won a fortune by speculating in cotton in
London. Russell Sage counted his wealth by the millions. Jay Gould and
Henry N. Smith had gone through the feverish excitement of a Black
Friday, and either, in common parlance, could have “bought or sold” the
poor young German. Nevertheless, by strange turns in the wheel of
fortune, he acquired a financial prestige that enabled him to beard the
lion in his den, and snap his fingers at powerful combinations that
sought to ruin him. When Henry Villard demanded his resignation as a
director in the Oregon Transcontinental Company, on the ground that he
had been selling the Villard properties short, the “Baron” (as
Woerishoffer was often called) tendered it at once, and flung down the
gage of battle in the announcement that he would ruin the head of the
Villard system.

Chas. F. Woerishoffer was slightly built, had a light complexion, was
under the medium height, and, on the street, might have been taken for a
bank clerk. He showed his inborn love of gaming in many ways. He is said
to have broken a faro bank at Long Branch twice; he would play at
roulette and poker for large stakes. He was kind-hearted and charitable.
At Christmas his benefactions to clerks and messenger boys were notable.
In the height of a great speculation he sometimes showed extreme
nervousness, but during the memorable contest with the Villard party he
exhibited the greatest coolness and composure. He was a curious compound
of German phlegm and American nervousness. One of the fortunate events
in his career was his marriage, in 1875, with Miss Annie Uhl, the
step-daughter of Oswald Ottendorfer, the editor and proprietor of the
great German organ of New York, the _Staats Zeitung_, who brought him,
it was understood, a fortune of about three hundred thousand dollars.

The following circular to my customers, which I published May 13th,
1886, with special reference to the death of Woerishoffer, and its
consequences, I think is worthy of reproduction here:

“The future of the market is going to be a natural one, and will go up
and down from natural causes; when this is fully realized there will be
no lack of the public taking a hand in it. That element has been crowded
out of Wall Street for a long time past, largely due to the fact that
its judgment to predicate operations has been sat on by brute force. It
has been, therefore, made to feel that the market was not one where it
was safe to venture. This brute force power came from Woerishoffer, who
has for a long time past been the head and front as a leader on the bear
side, and was a gigantic wrecker of values. His method was to destroy
confidence and hammer the vitality out of every stock on the list which
showed symptoms of life, and his power was the more potential, as all
the room traders were converted to believe in him and were his
followers. His decease leaves, therefore, the entire bear fraternity
without any head, and consequently in a state of demoralization, and in
a condition not unlike a ship at sea without a rudder. Mr. Woerishoffer
was a genial, hospitable man, lovely in character at his own home, true
to his friends and generous to a fault, and will, therefore, be a great
loss as a gentleman; but so far as the prosperity of the country goes,
his death will be the country’s gain. To the fact that Mr.
Woerishoffer’s power and influence are no longer felt on the market is
almost entirely due the change of front of the situation, which is now
one of hopefulness. While he lived the public and half the members of
the Board were completely terrorized by the fear of him, and were kept
in check from being buyers, however much the position of affairs
warranted going on the long side. The bull side of the market has had
for a long time past to contend with the bold and ferocious attitude of
Mr. Woerishoffer. When the bulls felt justified in making a rally and
forcing the market to go their way, when it looked most encouraging, as
a result of their efforts, Mr. Woerishoffer would strike their specialty
a sledge hammer blow on the head; he would repeat that on every attempt
that was made, which finally resulted in discouragement. If ten thousand
shares were not ample for that purpose, he would quadruple the quantity;
in fact, he has often been known to have outstanding contracts on the
short side of the market amounting to 200,000 shares of stock at least.
As an operator he seemed to be so peculiarly constituted as to know no
fear, and would often turn apparent defeat to success by possessing that
trait of character. It will be a long time before another such
determined and desperate man will appear on the stage to take his place;
in the meantime, it will be plainer sailing in Wall Street, besides
safer for operators. Mr. Woerishoffer, as an operator, was full of
expedients. He put his whole soul into his operations, and not only
would he attack the stock market with voraciousness, but he would
manipulate every quarter where it would aid him; sometimes it would be
in the grain market, sometimes by shipping gold, and sometimes by the
manipulation of the London market. He had all the facilities for
operation at his fingers’ ends, in fact he commanded the situation to
such an extent as to make his power felt. Mr. Cammack, Mr.
Woerishoffer’s associate, while usually a bear, is a very different man
and not to be feared, for that gentleman usually sells stocks short only
on reliable information, and always to a limited extent. If he finds
that the market does not go down by the weight of sales, he soon
extricates himself at the first loss. In this method of doing business
lies his safety. In this way he will sell often 10, 20 or 30 thousand
shares of stock and make the turn, but will not, like his late friend
Woerishoffer, take a position and stand by it through thick and thin,
and browbeat the market indefinitely until it finally goes his way. At
the present time, therefore, the bulls have no great power to fear
whenever they have merit upon which to predicate their operations. The
future will be brighter for Wall Street speculators and investors than
it has been for a long period, and with the public who may be expected
to come again to the front, greatly increased activity should be the
result.”


------------------------------------------------------------------------




                              CHAPTER XLI.

             WOMEN AS SPECULATORS


WALL STREET NO PLACE FOR WOMEN.—THEY LACK THE MENTAL EQUIPMENT.—FALSE
    DEFENSES OF FEMININE FINANCIERS.—THE CLAFLIN SISTERS AND COMMODORE
    VANDERBILT.—FORTUNE AND REPUTATION ALIKE ENDANGERED.


As speculators, women hitherto have been utter failures. They do not
thrive in the atmosphere of Wall Street, for they do not seem to have
the mental qualities required to take in the varied points of the
situation upon which success in speculation depends. They are, by
nature, parasites as speculators, and, when thrown upon their own
resources, are comparatively helpless. Although they are able, through
craft and subtlety, to rule the male sex to a large extent, yet, when
obliged to go alone, they are like a ship at sea in a heavy gale without
compass, anchor or rudder. They have no ballast apart from men, and are
liable to perish when adversity arises. When some of our strong-minded
woman’s-righters read this—and I hope for this honor from them—I can
imagine certain of them launching epithets of scorn against my head, and
even charging me with dense ignorance regarding the history of the great
women of the world, and the wonderful achievements of some of them. They
will, no doubt, cite Joan of Arc against me; Queen Elizabeth, Catharine
of Russia, the unfortunate and beautiful Mary, Queen of Scots, _et al._
Women, in general, rarely summon beautiful women in their own cause, but
in this case they will probably do so; for it is a trick of the sex to
bring feminine beauty to play as a tramp card when man is the game.

The wife of John Stuart Mill, Mrs. Elizabeth Cady Stanton, Julia Ward
Howe, and a host of other great female reformers and revolutionists
will, without doubt, be quoted against my theory. Several of the
strong-minded novelists and their chief works will be cited to show how
unfounded is my charge. Ouida, George Elliot, and George Sand will
probably be arrayed in judgment against me. The one answer to all this
must be that such women are the exceptional cases, which prove the rule
and sustain my theory. Besides, these fair ones, with the exception of
Ouida, and, to some extent, Elizabeth Cady Stanton, and possibly, George
Sand, have never tried their hands at speculation. They have excelled in
their particular lines, but when all their secret history is known, it
will be found that men were the source of their inspiration. I am aware
that the opposite theory is held, through false gallantry; but the
chivalrous knights who credit the fair sex with more speculative brains
than they possess are in a petty minority, and will always remain so as
long as men have manhood enough to decide according to their judgment
instead of their emotions.

Fact is the best test on this question, and I will recite a few facts in
the history of some of the female speculators of Wall Street, quite
aware that I touch a very delicate subject. The namby-pambyism and the
pseudo “gallantry” now so prevalent, are generally opposed to any fair
statement in regard to woman’s real financial capacity, and, worse than
all, woman’s true interests and functions are greatly aspersed and
prejudiced by these false sentiments. When carried away, as she so often
is, by the insidious flatteries of man and the showy frivolities of
fashion, a woman is rendered temporarily blind to these important facts;
but, in the exceptional instances, where she reasons calmly and reflects
prudently, she pays the greatest respect to those of our sex who
dispense plain advice and blunt opinions. Dudes and designing flatterers
may revel for a time in their conquests, but the opinions of men of
judgment, honesty and virtue will eventually triumph with those of the
other sex who are most discerning.

Let me, then, illustrate my estimate of women as speculators by a few of
the more prominent examples I have known in Wall Street, who have
essayed to make a fortune after the manner of men. I shall take up the
present Lady Cooke and her sister, Mrs. Woodhull. Lady Cooke has now a
virtual “castle in Spain,” or rather in Portugal, besides one of the
most elegant mansions in London. My knowledge of the history of those
sisters and their financial relations and business connections with the
late Commodore Vanderbilt, go to illustrate the fact very clearly that
the cleverest women cannot be successful in Wall Street; and if this is
so, where will the ordinary female be found when she essays the role of
an operator?

The notorious firm of Woodhull, Claflin & Co., in their peculiar
combination, included Commodore Vanderbilt. I shall say something about
their methods of operation before touching upon the history and
biography of the two sisters, which is remarkable in the extreme. Very
soon after the Commodore had aided to set these two women up as brokers,
in Broad Street, the firm was known all over the land. The present
titled Lady Cooke was then plain Tennie C. Claflin, and she was plain in
every sense of the word, excepting in face, which certainly was quite
pretty. She had, however, less personal magnetism than her celebrated
sister, Victoria C. Woodhull, but doubtless made more impression on a
well-known journalist of this city and upon the Commodore than any one
else, until she met Sir — Cooke. Tennie was rather phlegmatic in
temperament, and could therefore exercise but little influence over the
ordinary man, but she was cool and calculating, and had evidently more
brain than she seemed to possess. She could wear a winning smile, but it
was manifestly put on for the occasion.

I recollect her calling at my office one afternoon. After the usual
interchange of civilities, she told me she wished to deposit a check for
$7,000. The check was signed by the wealthiest man in Wall Street, and
was promptly accepted by my cashier, and duly credited. A few days after
this event, Miss Tennie drove up to my office in a cab. She wore a look
of enthusiasm and pleasant surprise. In her countenance one could read
at a glance that she had a heavy thought to divulge. So she said she had
a “point.” I don’t care for “points” as a rule, but I was bound by all
the laws of chivalry and business courtesy to give the lady a respectful
hearing, and I did. The point had emanated from a very high source, and
for that reason, also, was entitled to respectful consideration. The
charming Tennie wanted to buy 1,000 shares of New York Central. Though
always on the alert for business, I was not then at all anxious to
execute the lady’s order. I received Miss Claflin with all due respect,
and without giving her any intimation that I perceived, by my peculiar
inspiration, “the gentleman in the fence,” I tapped my little bell, to
which my office messenger responded. “Tell the cashier,” I said, “to
make out Miss Tennie Claflin’s account.” This was simply the work of a
few minutes, and Miss Tennie was instantly furnished with a check,
including interest for the time of deposit. Miss Claflin bowed herself
out, and I heaved a sigh of relief, and thought that everything was over
so far as that check was concerned. But I was slightly mistaken.

Tennie went to the Fourth National Bank immediately, and presented the
check. She returned to my office in a few minutes afterwards. P. C.
Calhoun was then President of the Fourth National. When Tennie returned,
she said, “Mr. Clews, the bank wishes to have me identified.” I called a
boy and told him to accompany Miss Claflin to the bank, and identify her
as being entitled to the amount of the check. This sealed her credit for
that amount at the bank, owing to which I obtained the rather doubtful
distinction of having been made the medium of largely aiding to
establish the firm of Woodhull & Claflin in Broad street. Myself and the
Fourth National Bank were said to have been the “sponsors” for this
consummation. As soon as I ascertained how my name was being connected
with those ladies, I had a private interview with the President of the
Fourth National, which prevented Tennie from using my name to a great
extent thereafter. I have never attempted to take any credit to myself
for this affair, but there is one thing evident, and that is, that I did
not get euchred in the matter. The Commodore was then regarded as the
power behind the throne, or behind the fair sex. If the sisters had any
scheme in the background (and I have reason to believe they had,) I did
not get caught in it.

Far be it from my purpose to insinuate that these celebrated “sisters”
are a sample of all the women who intrude into speculative circles.
These facts, however, show by what sort of methods two of the most
notorious female speculators of these times gained their success. It
would be an aspersion on womanhood to suppose that many women would be
found willing to resort to like methods; but it is safe to say that, as
a rule, women can have little other hope of success than by using their
blandishments to win the attentions and the services of the other sex.
There are doubtless exceptions to this rule, as in the case of Mrs.
Green, whose unaided sagacity has placed her among the most successful
of our millionaire speculators. She is, however, made up of a powerful
masculine brain in an otherwise female constitution, and is one among a
million of her sex.

If women are fortunate enough to escape being fleeced when they enter
Wall Street, it can only be from extraordinary luck, or from the
protecting counsel of their brokers, or from compassionate indulgence
shown to them when swamped by their losses. My own experience shows that
when they lose their money—as they usually do—they are by no means
sparing in their pleas for consideration; and this fact shows that women
who aspire to this path to fortune are not usually endowed with the
self-respect, the modesty and the independence of masculine favors which
characterize all high-minded women. In truth, this is so well understood
among the habitués of Wall Street, that while a woman who frequents
brokers’ offices is not likely to find any lack of attentions, yet she
is sure to lose caste among those who bestow such gallantries. In a
word, Wall Street is not the place for a lady to find either fortune or
character.

The explanation given by Mrs. Victoria Woodhull —— is somewhat different
from the statement herein made by me in reference to the establishment
of the brokerage firm, run ostensibly by the famous sisters; and as this
celebrated lady shows in some of her recent utterances that she has done
so much for humanity, truth, and financial reform, her statement is
entitled to fair presentation. I shall, therefore, give it in full. It
is as follows:

“The first move my sister and I made in this direction was to establish
a banking and brokerage office in Broad street. This step we were
induced to take with the view of proving that woman, no less than man,
can qualify herself for the more onerous occupations of life. So
startling was this innovation that the whole city of New York was
aroused, and when we entered the precincts of Wall and Broad streets
they were blocked with crowds of people until the novelty wore away. But
to-day women can establish themselves in any business, enter any avenue
of life that they are qualified through education to fill, either
political, financial, scientific, medical or mechanical, so great is the
advance. At that time, as some of the New York papers said, everything,
to the external view, was at the height of prosperity. But we exposed,
in our _Weekly_, one nefarious scheme after another when we realized
that companies were floated to work mines that did not exist, or that,
if they did exist, had nothing in them, and to make railways to nowhere
in particular, and that banks and insurance societies flourished by
devouring their shareholders’ capital. The papers of 1872 said that in
one year we had exposed and destroyed nearly every fraudulent scheme
that was then in operation—railroad swindles and the banking houses
which were palming them off on the public. Life insurance companies were
reduced from forty to nineteen for the whole country; the Great Southern
bonds and the Mexican Claim bubbles collapsed. More than one tried to
buy our silence, and when their money was refused they turned and
charged us with levying blackmail, and, losing in their rage and fear
all sense of honor, said that we were immoral women or we would not have
commenced such an undertaking. Other papers took up the warfare. It
brought about a great revolution in financial matters, but it made us
many bitter enemies, for we were the first to put ourselves into the
breach.”

I shall make no attempt to contradict the bold statement of the lady,
but simply quote it for what it is worth, leaving the inference to the
reader, as the novelistic phrase goes, but I do hold that the very
result of the experiment to which she alludes is one of the strongest
and most cogent arguments in favor of my theory, that women are not
qualified by nature for the speculative and financial operations in
which so many men have made their mark. Even the few apparent exceptions
to the rule have been sad failures compared with the achievements of the
male sex in this department of human enterprise. “Jennie June,” the able
and accomplished wife of Mr. Croly, the well-known journalist, has
essayed the speculative role, but she has not been very successful. When
women such as these have failed what can the ordinary female expect?
Well, I think they had better abide by the advice of St. Paul in regard
to women speaking in the church. Let them say or do nothing in the
peculiar line for the pursuit of which they are evidently disqualified,
but if they want to know anything, “ask their husbands at home.” Those
who have not yet obtained husbands may ask their fathers, brothers or
lovers, and if they do so they will often be saved a world of trouble.

There has recently been a curious craze in the ranks of young ladies as
well as among married women for speculation, many of them thinking they
could make a fortune in a few days, weeks or months, and it is nearly
time that this speculative mania should be checked or stopped. Maidens
of uncertain age have probably been foremost in leading this movement,
and through their influence many estimable ladies have been induced to
bring financial trouble upon their husbands and families. Many of the
woman’s righters think that it would be a glorious thing to follow in
the footsteps of Victoria Woodhull ——, whom they imagine to have been a
success in that line of business; whereas she was a sad failure. Women
as brokers have singularly failed in every known instance of experience.
Victoria W. has been much more successful as an investor than a
speculator, and the best investment of her life was that of her last
marriage. There she made a decided hit. Perhaps, her Wall Street
experience may have assisted her, in a great measure, to accomplish this
feat. Compared with her two former marriages, however, her happy union
with the foreign banker is a decided success. It is probably only in the
matrimonial line that women can become successful speculators.

Now, I shall attempt to give some reasons, with all due respect to the
fair sex—and without trying to lower them in the estimation of men—why
those dear creatures, so necessary to our happiness in many other
respects, are not by nature, nor even by the best possible education,
qualified to become speculators. Women are too impulsive and
impressionable. Although they often arrive at correct conclusions in the
ordinary affairs of life with amazing rapidity, they don’t reason in the
way that is indispensable to a successful speculator. They jump to a
conclusion by a kind of instinct, or it may be a sort of inspiration, on
a single subject or part of a subject, but they are entirely unable to
take that broad view of the whole question and situation which the
speculator has to seize at a glance, in the way that Jacob Little, the
elder Vanderbilt, or Daniel Drew could have done, as I have described in
other chapters. Gould possesses many of these qualities, though he has
never been a speculator like the others, in the ordinary and true sense
of the term, but, as I have clearly shown in another place, made his
great fortune by putting two or more wrecked railroads together and
making others believe they were good, and selling out on them
afterwards, and not by legitimate speculation or investment.

Women who have hitherto engaged in speculation have not yet shown that
they are capable of generalizing the causes which affect the market as
these kings of finance have done, nor have they illustrated that they
are possessed of the ability to foresee financial events in the same
way. Some people may think that Mrs. Hettie Green may be an exception to
the rule, but, without attempting to detract from the abilities of this
eminent and wealthy lady, I hardly think she has the mental power of any
of the great operators whom I have named, and though it must be admitted
that she has done some fine work in manipulating Louisville & Nashville,
I am of the opinion that she would fall very far short of leading a bear
attack on the market like any of those for which the late Charles F.
Woerishoffer was famous, and in organizing a “blind pool” she would
stand no show against Gould, Major Selover, Addison Cammack or James R.
Keene.

Lady Claflin Cook, formerly Tennie C. Claflin, or “Tennessee,” as she
was baptized, though she had not the intellectual ability of her sister
Victoria, appeared to exercise more influence over Commodore Vanderbilt
on account of her greater capacity as a spiritualistic medium. In his
latter days, as is well known, the Commodore was an implicit believer in
Spiritualism, and considered it expedient to consult mediums in the same
way that the ancient Greeks and Romans went to their oracles, before
engaging in any great enterprise. It is not generally known that the
fallacy of Tennie’s mediumistic powers was exposed by the Christian
Brothers, and her usefulness to the Commodore considerably impaired
thereby in his estimation. This came about through the influence of Mrs.
Claflin, the mother of the celebrated sisters. Her superstition ran so
high that she imagined her daughters were possessed of evil spirits
through the power of Colonel Blood, Victoria’s second husband. The holy
men received due credit for exorcising the spirits, thus freeing the
sisters from this mysterious thraldom, and Victoria from Blood. Her
great prosperity and that of her sister began from this date, and at the
beginning of the celebrated case on the part of “young Corneel” to break
the Commodore’s will the sisters suddenly took a trip to England, lest
they might be called as witnesses. It was a lucky day for them, and
their speculative career is probably now closed. This is the kind of
speculation for which women are best fitted. The introduction to this
great “deal” came through Wall Street indirectly, but it does not prove
by any means that women can be successful operators in speculative
transactions and financial investments. It simply shows that they are
excellent in adventures where their emotional feelings are brought to
bear upon the weaker characteristics of men.

------------------------------------------------------------------------




                             CHAPTER XLII.

       WESTERN MILLIONAIRES IN NEW YORK.


EASTWARD THE STAR OF WEALTH AND THE TIDE OF BEAUTY TAKE THEIR
    COURSE.—INFLUENCE OF THE FAIR SEX ON THIS TENDENCY, AND WHY.—NEW
    YORK THE GREAT MAGNET OF THE COUNTRY.—SWINGING INTO THE TIDE OF
    FASHION.—COLLIS P. HUNTINGTON.—HIS CAREER FROM PENURY TO THE
    POSSESSOR OF THIRTY MILLIONS.—LELAND STANFORD.—FIRST A LAWYER IN
    ALBANY, AND AFTERWARD A SPECULATOR ON THE PACIFIC COAST.—HAS ROLLED
    UP NEARLY FORTY MILLIONS.—D. O. MILLS.—AN[**AN?] ASTUTE AND BOLD
    FINANCIER.—COURAGE AND CAUTION COMBINED.—HIS RAPID RISE IN
    CALIFORNIA.—HE MAKES A FORTUNE BY INVESTING IN LAKE SHORE
    STOCK.—PRINCES OF THE PACIFIC SLOPE.—MACKAY, FLOOD AND FAIR.—THEIR
    RISE AND PROGRESS.—WILLIAM SHARON.—A BRIEF ACCOUNT OF HIS GREAT
    SUCCESS.—WM. C. RALSTON AND HIS DARING SPECULATIONS.—BEGINS A POOR
    NEW YORK BOY, AND MAKES A FORTUNE IN CALIFORNIA.—JOHN P. JONES.—HIS
    EVENTFUL CAREER AND POLITICAL PROGRESS.-“LUCKY” BALDWIN.—HIS
    BUSINESS ABILITY AND ADVANCEMENT.—LUCKY SPECULATIONS.—AMASSES TEN OR
    FIFTEEN MILLIONS.—WILLIAM A. STEWART.—DISCOVERS THE EUREKA PLACER
    DIGGINS.—HIS SUCCESS AS A LAWYER AND IN MINING ENTERPRISES.—JAMES
    LICK.—ONE OF THE MOST ECCENTRIC OF THE CALIFORNIA MAGNATES.—REAL
    ESTATE SPECULATIONS.—HIS BEQUEST TO THE AUTHOR OF THE “STAR SPANGLED
    BANNER.”—JOHN W. SHAW, SPECULATOR AND LAWYER.


Not a few Western men of wealth have in recent years taken up their
abode in New York. This is partly, and doubtless largely, due to the
influence of ladies. The ladies of the West of course have heard of
Saratoga, the far-famed spa of America, and as the fortunes of their
husbands mount higher and higher into the millions, they become more and
more anxious to see this great summer resort of wealth and fashion.
Their influence prevails, and at the height of the gay season they may
be seen at the United States or the Grand Union. They are in practically
a new world. There is the rustle and perfume, the glitter and show, the
pomp and circumstance of the more advanced civilization of the East, and
the ladies, with innate keenness, are quick to perceive a marked
difference between this gorgeous panorama and the more prosaic
surroundings to which they have been accustomed. As people of wealth and
social position, they are naturally presented to some of the society
leaders of New York, whom they meet at Saratoga, and who extend an
invitation to visit them in their splendid mansions in the metropolis.
In New York the Western ladies go to the great emporiums of dry goods
and fancy articles of all sorts, to the famous jewelry stores, and other
retail establishments patronized by the wealthy. They form a taste for
all the elegancies of metropolitan life, and this is revealed in a
hundred little ways.

They have been accustomed, for instance, to wearing two buttoned gloves,
but now, in emulation of their New York sisters, they must have them up
nearly to the shoulder. Their dresses of Western make do not bear
comparison with the superb toilettes of New York ladies, and so they
seek out the most fashionable modistes in the city, and the change in
their appearance is as marked as it is favorable. The innate refinement
and love of elegance which is so striking a characteristic in most
American women is exemplified, perhaps, in no respect more strikingly
than in their taste in dress, and the Western ladies soon require the
finest French silks for their dresses. They must have the most expensive
real lace; their toilettes must be numerous, rich, and varied, and the
refinements of other articles of dress or ornament to which American
women have attained may well astonish and even awe the masculine mind.

In a word, people of wealth are apt to be drawn to New York because it
is the great magnet of the country, whose attractive power is well nigh
irresistible. What London is to Great Britain, what Paris is to the
Continent, what Rome was in its imperial day to the Empire, what proud
old Nineveh was to Assyria, the winged lion of the Orient; what Tyre was
to old Syria, whose commercial splendor aroused the eloquence of the
Hebrew prophet—New York is to the immense domain of the American
Republic, a natural stage, set with innumerable villages, towns, and
populous cities, with mighty rivers and vast stretches of table-lands
and prairies, and far-reaching harvest fields and forests, for the great
drama of civilization on this Continent. New York has now a population
of approximately 1,500,000. By the close of the present century it will
certainly reach 2,000,000, and the next century will see it increase to
perhaps ten times that number. The great metropolis attracts by its
restless activity, its feverish enterprise, and the opportunities which
it affords to men of ability, but in the connection which I am now
considering more particularly it attracts as an enormous lode-stone by
its imperial wealth, its Parisian, indeed almost Sybaritic luxury, and
its social splendor.

New York city has more wealth than thirteen of the States and
Territories combined. It is really the great social centre of the
Republic, and its position as such is becoming more and more assured. It
will yet outshine London and Paris. Go where we may throughout the
country, see what cities we may, there is always something lacking which
New York readily affords. There is emphatically no place like New York.
Here are some of the finest stores in the world, and mansions of which a
Doge of Venice or a Lorenzo de Medici might have been proud. Here are
the most beautiful ladies in the world, as well as the most refined and
cultivated; here are the finest theatres and art galleries, and the true
home of opera is in this country; here is the glitter of peerless
fashion, the ceaseless roll of splendid equipages, and the Bois de
Boulogne of America, the Central Park; here there is a constant round of
brilliant banquets, afternoon teas and receptions, the germans of the
elite, the grand balls, with their more formal pomp and splendid
circumstance; glowing pictures of beautiful women and brave men
threading the mazes of the dance; scenes of revelry by night in an
atmosphere loaded with the perfume of rare exotics, to the swell of
sensuous music. It does not take much of this new kind of life to make
enthusiastic New Yorkers of the wives of Western millionaires, and then
nothing remains but to purchase a brown stone mansion, and swing into
the tide of fashion with receptions, balls, and kettle-drums, elegant
equipages with coachmen in bright-buttoned livery, footmen in top boots,
maid-servants and man-servants, including a butler and all the other
adjuncts of fashionable life in the great metropolis. It is of interest
to glance at the career, by the way, of some of the more famous
financial powers of the West, who have either settled of recent years in
New York or who are frequently seen here.


[Illustration:

  _C P. Huntington_
]


                         COLLIS P. HUNTINGTON.

One of the financiers who may be seen daily entering the palatial Mills
Building in Broad street, New York, is a tall, well-built man, with a
full beard tinged with gray, a square, resolute jaw, and keen
bluish-gray eyes. Though now in his 66th year, his step is light and
quick, betokening good habits in his youth and due care of himself in
his later years. He is one of the best known of American financial
chieftains. It is Collis P. Huntington. He is a born leader of men. As a
boy of 15 he came to New York, with scarcely a penny. Now he is worth
thirty million dollars. He was born October 22d, 1821, at Harwinton, in
Litchfield county, Connecticut. He numbers among his ancestors Samuel
Huntington, one of the signers of the Declaration of Independence, who
was also President of the Continental Congress and Governor and Chief
Justice of Connecticut; and also Bishop F. D. Huntington and the artist
Daniel Huntington. C. P. Huntington’s father was a farmer and small
manufacturer, in his fourteenth year Huntington left school and asked
his father to give him his time on condition that he should support
himself. He came to New York in the following year, 1836, and bought a
small bill of goods, a neighbor of his father’s becoming his surety. At
that early age he showed the same shrewdness in business, the same
energy and resolution in carrying through his projects as he did in
later life. At twenty-three he settled at Oneonta, Otsego county, New
York, as a general merchant. In 1844 he married a Connecticut girl, who
proved a valuable helpmeet in days when it was never supposed he would
ever attain any particular financial distinction. In March, 1849, he
sailed for San Francisco, going by way of the Isthmus, and following a
consignment of goods which he had made in the previous year. He was now
in his 28th year, and a future full of marvellous success awaited him.
This was not immediately apparent, however. Business success is not
usually attained without long and persistent efforts, and in spite of
repeated discouragements. He found San Francisco at that time a resort
merely for the idle and the reckless. It did not prove at this
particular juncture a satisfactory field for his business; his funds ran
low, and he determined to go to Sacramento. He earned his passage money
thither on a schooner, by helping to load her for a dollar an hour. In
Sacramento he started in business, after a time, with a small tent as a
store, and a limited supply of general merchandise as his stock in
trade; he worked hard; he labored early and late. Here he met Mark
Hopkins, and they formed a business co-partnership, which proved so
successful that by 1856 the firm was known as one of the wealthiest on
the Pacific slope. California, however, was isolated. It was a long trip
over the plains by wagon trains to the nearest point of commercial
importance east of the Rocky Mountains, and the ocean voyage by way of
the Isthmus of Panama was long and slow. A railroad to the East was
imperatively needed, in order to develop the enormous resources of the
broad territory lying west of that natural barrier known as the Rocky
Mountains. But how to bring it about was the question. Few were daring
enough to seriously grapple with the problem. It was in the store of
Huntington & Hopkins that the project was first considered with a
resolute purpose to push it through. The Civil War, however, broke out
just then, and the first gun fired on Fort Sumter seemed like the knell
of this great project. Collis P. Huntington was undaunted. “I will,” he
says, “be one of the eight or ten, if Hopkins agrees, to bear the
expense of a careful and thorough survey.” The result was that seven
gentlemen agreed to defray the expense of such a survey. Two
subsequently ceased to give their aid. The remaining five organized the
Central Pacific Railroad Company. Mr. Huntington at once went to
Washington to secure Government aid in constructing the first
trans-continental railway. He was successful. When the Pacific Railroad
bill was passed he telegraphed to his partners with characteristic humor
and terseness: “We have drawn the elephant.” He at once came to New York
to form a syndicate to take the bonds. Many at such a time would have
gone to speculators begging for aid and pledging his bonds for railroad
material with which to commence the great line. He did nothing of the
kind. The French saying, “_Toujours de l’audace_,” seemed to be his
maxim. He was always bold. He coolly announced that he would not dispose
of his bonds except for cash, and, strange as it may have seemed, he
capped the climax by refusing to sell any at all unless $1,500,000 worth
were taken. He was again successful, but the purchaser required more
security. Thereupon Mr. Huntington made himself and his firm responsible
for the whole amount. It was thus on the pledge of the private fortunes
of Mr. Huntington and his partner that the first fifty miles of the road
were built. After a time, however, funds ran low; it seemed inevitable
that the number of laborers should be reduced. Certainly more means were
necessary. At that time the Government held the first mortgage on the
road, and no Government subsidy bonds were obtainable until a section of
fifty miles of the road had been completed. Huntington and Hopkins
stepped into the breach, and agreed to keep five hundred men at work for
a year at their private expense, and three other gentlemen agreed to
furnish three hundred men for the same length of time. This resolution
ended their troubles; the road was built through to a connection with
the Atlantic seaboard, and trans-continental transportation became a
fact and no longer a dream. Mr. Huntington came to New York again, and
here he now resides in a fine mansion on Park avenue. He is still a hard
worker, but after business hours he dismisses as far as possible the
cares of his financial functions. Among the railroad systems controlled
and operated by him and his associates, the executive conduct of which
is largely directed by himself, are the Central Pacific, the Chesapeake
& Ohio, the Trans-Mississippi roads, and the Southern Pacific, making a
total of nearly eight thousand miles of line. He is also heavily
interested in roads in Mexico and Central America and steamship lines
plying to the Chesapeake Bay, to Brazil, China and Japan and other parts
of the world. Directly or indirectly he has thirty thousand men under
him. In business he is an autocrat; his manner is quick and decisive; he
is direct in his speech, and expresses himself with force when he says
anything. He also knows when silence is golden. He is a good story
teller, and has a large fund of anecdotes; he has original wit, a store
of quaint, homely sayings, which are often singularly apt. Sitting in
his office chair, with a black skull cap, which he usually wears in
business hours, pushed back on his head, he has an open, jolly,
unassuming look, and the stranger would hardly take him for one of the
uncrowned financial kings of this country. He is one of the few men in
this country who have shown themselves more than a match for Jay Gould.


[Illustration:

  _Leland Stanford._
]


                            LELAND STANFORD.

Leland Stanford, one of California’s United States Senators, is worth
from thirty to forty million dollars. He was born in Albany county, New
York, March 9, 1824. He received an academical education and entered a
law office in Albany in 1846, and, after three years’ study, was
admitted to practice law in the Supreme Court of the State of New York.
He removed to Port Washington, in the northern part of Wisconsin, and
there engaged in the practice of his profession for four years. In 1852
fire destroyed his law library and other property, whereupon he went to
California and became associated in business with his three brothers,
who had preceded him in seeking fortune on the Pacific Slope. His first
business venture was in Michigan Bluffs, but in 1856 he removed to San
Francisco to engage in business enterprises on a large scale. His
business at one time, it seems, was in oil, and, later, in various
manufacturing and agricultural ventures. He was elected Governor of
California in 1861. He insisted upon being inaugurated as provided by
the State constitution, at the Capitol building, though the locality was
under water by reason of floods. He became President of the Central
Pacific Railroad and superintended its construction over the mountains,
building 530 miles of it in 293 days. He was elected as a Republican to
the United States Senate in 1884, and his term does not expire till
1891. He is still the President of the Central Pacific Railroad and of
several of its associated lines, while he is a director in others. He
owns a princely domain in California, known as Palo Alto ranch,
comprising six thousand acres, which he has devoted to the site of an
Industrial University for both sexes, as a memorial of his only son, who
died some years ago. He has richly endowed this great educational
institution, setting aside for it about ten million dollars. Here both
sexes will be fitted to fill a useful part in the battle of life; they
will be instructed in mechanical arts and agricultural as well as in
other branches of education, which will start the student fairly in
life. He found, as President of the Central Pacific Railroad Company,
that many bright young men of collegiate education were not specially
fitted for any particular work in the great school of life, and those
who are familiar with great cities know that thousands of men have
really wasted their years in obtaining a collegiate education which
never enabled them to earn more than barely enough to live upon. They
become, in many cases, ill-paid book-keepers, entry clerks, salesmen,
car conductors, postmen, and sometimes find themselves obliged to turn
their hands to hard manual labor, or else starve. Senator Stanford’s
beneficent plan, then, of giving the young such a practical education
that they can face the world with confidence and with a reasonable
certainty of remunerative employment, or with the requisite knowledge to
guide them in enterprises of their own, is worthy of the highest
commendation, and his example is likewise worthy of the emulation of
gentlemen with millions to spare in all parts of the country. If Samuel
J. Tilden had endowed a university of this kind he would have been a far
greater benefactor in many respects than he has undoubtedly shown
himself in his will. Governor Stanford’s great ranch, which is to become
a seat of learning, is situated about 32 miles from San Francisco, and
promises to be the educational Mecca of the Pacific Slope. His fortune,
notwithstanding this princely donation, is still enormous, amounting to
twenty-five or thirty million dollars.

                            DARIUS O. MILLS.

One of the most notable figures daily seen on Wall Street is a man about
five feet nine inches in height, with handsome, florid features and a
firm jaw, indicative of great decision of character. He is now about
fifty eight years of age, and is as industrious and energetic as when he
began his eventful career. It is Darius O. Mills. He is one of the most
astute and one of the boldest financiers in this country. He has the
courage of a Richelieu, joined to that famous statesman’s caution and
conservatism when the march of events requires it. Of the California
magnates he is one of the most notable. In New York he has taken the
highest rank, socially and financially, of them all. As I have
intimated, he is bold, and yet, on occasion, he wisely acts upon the
maxim that discretion is the better part of valor. He was born in a
small town on the Hudson River, in this State. Before the California
gold excitement broke out he and his brother were in the hotel business.
He has always been dependent on his own exertions; he has fought his way
to opulence, such as a prince might envy, by his own keen intelligence
and undaunted enterprise. He began in humble circumstances. To-day he is
worth twenty millions. He is a permanent resident in the metropolis, and
is regarded as one of New York’s best and most influential citizens.


[Illustration:

  _D. O. Mills_
]


He laid the foundation of his vast wealth in California. On the breaking
out of the gold fever he and his brother left their native town for the
fields of adventure, where men of shrewd foresight and determined
courage achieved a success stranger than the wonders of a Persian tale.
The brothers did not trust to luck. They chartered a sailing vessel,
loaded it with commodities likely to be in demand among the miners, and
then sailed for the Golden Gate _via_ Cape Horn. After a narrow escape
from shipwreck they arrived at San Francisco and at once opening a
store, they sold their merchandise to the eager miners at fabulous
prices. D. O. Mills rapidly accumulated wealth, and when Wm. C. Ralston
organized the Bank of California, he became its President. During the
time that Mr. Mills gave his attention to the Bank of California it was
the most successful institution of a similar character in this country,
but when he decided to remove to New York his connection with the great
bank was severed. Disaster came under Ralston’s administration. Mr.
Mills had continued to be a stockholder, and when a financial hurricane
struck the bank, he was quick to go to the rescue. He contributed
largely to provide for the bank’s losses and to reorganize it with new
capital, which placed it again among the foremost financial institutions
of the United States. The credit of this Herculean achievement was due
more to him perhaps than to any other man. His social position is
deservedly high. His son married the daughter of a member of the
historic Livingston family, one of the oldest and most illustrious in
this country. His daughter married the successor to the editorial chair
of Greeley, Whitelaw Reid, whose able management of the _Tribune_ has
established a world-wide fame for that gentleman. These marriages of his
children strengthened his already strong position socially, which he
soon won despite the fact that he was a newcomer. Mr. Mills is
distinguished for a princely liberality. He believes in distributing his
property generously while living. He has built, therefore, one of the
finest residences in this city for his son; he bought for his daughter,
Mrs. Reid, at a cost of four hundred thousand dollars, the Villard
palace on Madison Avenue. His other acts of generosity are numberless.
He himself lives in fine style. He paid the highest price ever paid per
foot for a residence in New York when he bought from D. P. Morgan, for
one hundred and seventy-five thousand dollars, that gentleman’s
residence directly opposite St. Patrick’s Cathedral on Fifth Avenue.
This mansion occupies two lots on a Columbia College leasehold. After
purchasing it Mr. Mills gave a _carte blanche_ order to a noted
decorator of New York, and during a trip to California the work of
decoration was done. On his return he at once took possession of a
mansion of which a Shah of Persia might be proud. He was delighted with
all that had been wondrously wrought by the beautifying touch of
splendid art; with the richly carved wood work, the gorgeously
picturesque ceilings, the inlaid walls and floors, and the _tout
ensemble_ of Oriental magnificence. His contentment was complete, but a
surprise awaited him. It was the decorator’s bill for four hundred and
fifty thousand dollars. This, it is said, slightly disturbed his
serenity. It caused him to look with a critic’s eye on the splendid
decorations which constituted a study in the fine arts at such high
rates of tuition. As with the eagle eye of a connoisseur, he perceived
that the bill was altogether too high. He succeeded in getting, however,
only a slight reduction. Moral: Don’t give carte blanche orders to
decorators any more than you would hire a cab without first making a
bargain.

Mr. Mills came to New York to take up his residence some years ago, with
a fortune of many millions of dollars. He is particularly worthy of a
place in this book, as from the time of making his home here he has been
prominently identified with Wall Street. Soon after taking up his
residence here he became acquainted with William H. Vanderbilt, at whose
suggestion he invested very heavily in Lake Shore. He made by this
operation no less than $2,700,000. This large sum he devoted to the
construction of a palatial building on Broad Street, which bears his
name, and is probably the finest and most complete structure for office
purposes in the world. It has a frontage of 175 feet on Broad street, 30
feet on Wall Street, and 150 feet on Exchange place, and is nine stories
high. Thirteen buildings were torn down to secure its site. It was begun
in May, 1880, and was practically finished in one year, the men working
night and day. It is built largely of Philadelphia brick, with
Belleville brown stone trimmings. It is otherwise ornamented with terra
cotta, and Corinthian and Renaissance capitols, and red Kentucky marble
pillars. On the first three floors the wainscoting is of Italian marble,
and there is marble tiling throughout the building; the woodwork on the
first two floors is mahogany, and on the upper floors it is reeded and
panelled cherry. There are 400 offices, and the tenant population is
1,200. For weeks at a time the total daily average number of persons
carried on six elevators has been no less than fifteen thousand. The
working force necessary to look after this magnificent structure numbers
60 person. The net annual rental is about $200,000, the highest
individual rent paid being $20,000.

Mr. Mills’ exceptional skill as a financier has won him a high
reputation in New York, and his counsel on vexed and abstruse questions
has often been quoted by powerful corporations. He is a director in
several railroads, including the Erie, and it is understood is
interested in mining enterprises. In the battle of life he has achieved
signal success. His career is a fitting lesson to future generations.


[Illustration:

  _Chas Crocker_
]


                            CHARLES CROCKER.

Charles Crocker is now about 65 years of age, and lives in New York
city. He was born in Ohio in humble circumstances, and early in life
followed for a time the occupation of blacksmith. He used to get up at
four o’clock in the morning and work hard all day. It was a hard life,
and he engaged, after a time, in other occupations, gradually, in the
meantime, by thrift and industry, amassing a sufficient sum to enable
him to go to California, in the height of the mining fever, and
establish a general store in Sacramento. He met with considerable
success in trade, and when the project was formed to build the Central
Pacific Railroad, he lent his aid to the enterprise, and has ever since
been identified with that corporation. He is now its Secretary and
Vice-President, and is also interested in associate roads.

                             MARK HOPKINS.

Mark Hopkins died some years ago, worth fifteen million dollars. He was
from Massachusetts, and went to California on the breaking out of the
mining furore, and settled in Sacramento, where he soon engaged in the
hardware business with C. P. Huntington, with whom he also embarked in
the ambitious enterprise of building the Central Pacific Railroad. He
won a large fortune in his railroad operations. His widow has a
magnificent estate at South Great Barrington, in Massachusetts.

We come now to the famous mining princes of the Pacific Slope. The
discovery of gold in California, and of the rich deposits of the
precious metal elsewhere on the Pacific Slope, led not merely to the
accumulation of vast individual fortunes; it sent the currents of new
life humming through the veins, so to speak, of the entire country; it
stimulated trade; it awakened new life; it gave a tremendous impulse to
a thousand industrial enterprises; it sent the Republic forth as a
conquering hero of commerce, leveling all obstacles and laughing at
difficulties; tunneling mountains, building railroads whose very rails
seem to catch a golden gleam from the rich traffic; spanning great
rivers with majestic bridges, building ships and steamers; setting vast
manufactories to awake the solitude of primeval forests with the thunder
of machinery, the ringing of hammers and the thousand voices of labor;
building villages, towns and cities with such marvelous rapidity as to
suggest the touch of the magical wand of genii. With the treasure taken
from her bosom nature herself was subdued; an electric thrill stirred
the older centres of population as it led the new sections, and the
Republic has ever since, regardless of those periodical reactions known
as panics, kept its onward march in fulfillment of that far-sighted
prophecy that the star of empire takes its way to the West, and that on
the broad stage of the American Continent the Anglo-Saxon race will win
far greater triumphs than it has ever achieved in its amazing career
since it sprang from the barbarism of the Northern wilds of Europe to
take its proud station as the dominant family on this globe. The rich
gold mines, and later the great silver mines, have given this country a
feverish dream of speculation, in which gigantic fortunes have been
amassed. The richest deposit of silver in Nevada, if not in the world,
was the Comstock lode on the east side of Mount Davidson, in Storey
county, and partly under the towns of Virginia and Gold Hill. At one
time its ores contained one-third in value of gold and two-thirds of
silver. The lode has been traced on the surface some twenty-seven
thousand feet, and has actually been explored about twenty thousand
feet, within which space most of the larger mines are located. The lode
has been opened to the depth of about twenty-two hundred feet. The
various mines on this lode have given a total return, it is estimated,
of some three hundred millions of dollars.


[Illustration:

  _J W. Mackay_
]


One of the most famous of the bonanza magnates is John W. Mackay. His
rise to financial power reads like a romance, and yet his astounding
success was by no means attained as by turning over a hand. He believed
in the richness of the bonanza field; he and a number of associates
purchased the controlling interest in the corporations which owned it.
Then began the grand hunt for the ore body. Others had tried to find it,
but had given it up in despair. The idea that the property was worth
working was laughed to scorn. The men who believed in it persisted in
spite of all discouragements, which were many; they spent about half a
million in prospecting. They made in 1875, after long and trying
efforts, the famous strike which astounded the business world, and
stirred up a speculative fever which did not die out for years. This
plain, quiet, unpretending financier was born in the humblest
circumstances in Dublin, Nov. 28, 1835, and is consequently in his 52nd
year. He came to this country very early in life, and as a boy worked
for Wm. H. Webb, the once famous shipbuilder of New York. In 1852 he
went with a party to California, sailing in one of the ships of his
former employer. It has been said that previous to this he kept a liquor
saloon in Louisville. Like so many others, however, he caught the gold
fever, and on arriving in California he immediately engaged in placer
mining in Sierra county of that State. He met with the usual
vicissitudes of fortune, but at last a fair degree of success rewarded
his untiring efforts, and he thereupon went to Virginia City, Nevada,
and started a tunnel in what was called the Union ground, north of the
Ophir mine. The speculation was disastrous. He lost all he possessed,
but he was not conquered. He secured work as a timber man in the Mexican
mine, and he engaged also as a miner, swinging the pick and shovel, and
little dreaming that this would be told as an interesting circumstance
in a career which was to be successful beyond his wildest hopes. He
labored industriously; he saved his money, and he watched his
opportunities, which very few people do. He got his first important
start in connection with the Kentuck mine in Gold Hill, but he had
frequent fluctuations of fortune until finally, in 1863, he formed a
mining co-partnership with J. M. Walker, a brother of a former Governor
of Virginia, and subsequently the firm was strengthened by the addition
of Messrs. Flood, O’Brien, and Fair. The firm struck their first great
success in 1865-67 during their control of the Hale & Norcross mine.
Later came the celebrated California and Consolidated Virginia mines,
the wonders of the mining world. He was married in 1867 to the daughter
of Daniel Hungerford. Hungerford, by the way, was a Canadian, who came
to New York many years ago and lived in West Broadway, where he followed
the occupation of a barber. When the Mexican war broke out he enlisted,
and at the close of that war he returned to his family and his previous
occupation. When the famous Colonel Walker raised a force in New York
for the invasion of Nicaragua, Hungerford, who seems to have been of an
adventurous spirit, enlisted, and barely escaped the fate of Walker and
those of his force who were captured and shot by the Nicaragua
authorities. He escaped by fleet running, and again returned to his
family and tonsorial profession, dying soon after his return. His
daughter married a physician, with whom she went to Nevada. He died and
left her in reduced circumstances. With the open-handed generosity
characteristic of the financiers of the Pacific Slope, a number of
wealthy gentlemen, learning of the circumstances, started a
subscription, to which Mr. Mackay made a large contribution. She called
to thank him, and the acquaintance thus begun ripened into mutual
attachment, whose happy consummation was their marriage a few years
later. Mrs. Mackay, during the last few years, has resided for the most
part in Paris and London, where she has lived on a scale of magnificence
which has dazzled and astounded foreigners. Mr. Mackay himself has
apparently little inclination for social triumphs; he is well liked
wherever he is known for his quick, genial manners, but seems to avoid
publicity. He alternates, for the most part, between New York and San
Francisco. In New York his office is at the Nevada Bank, in which he is
a large stockholder, owning, in fact, half of the stock. In recent years
he has become largely interested in a cable line to Europe, started in
opposition to other well-known lines. His fortune is estimated at twenty
millions. Mr. Mackay’s step-daughter was married a few years ago to the
Prince of Colonna, who belongs to one of the most ancient and wealthy
families of the nobility of Italy.


[Illustration:

  JAMES C. FLOOD.
]


James C. Flood was once a poor boy of New York city, now he is worth
more millions than can exactly be told. He went to San Francisco in
1849, poor and friendless, and in company with the late W. S. O’Brien,
opened a liquor saloon, where he sold whiskey at 12½ cents a glass. He
drew the liquor from casks piled one upon another. In those early days
of the future queen of the Pacific Slope there were no gorgeous saloons
with tesselated marble floors, a dazzling stretch of costly mirrors, and
a gallery of rare pictures. Such resorts as Flood’s, in the slang of the
day, were termed “gin mills,” and in the man who drew whiskey from the
casks rather than tendering a heavy cut glass decanter, it would have
been difficult for the most fanciful to have recognized the future
famous man of millions. He made money and went into mining stocks. The
first great mining speculation in which Flood, with his partner,
O’Brien, embarked was in 1862, in Kentuck and the stocks of other mines
on the Comstock lode. Then they went heavily into Hale & Norcross, one
of the old time favorites. They were generally successful in these
operations, but a crowning and dazzling triumph awaited them. In
February of 1874 there were whispers that the Consolidated Virginia,
which had caused a furore some ten years previous, but had fallen off
materially, and the newer mine, the California, would soon develop rich
bodies of ore. Flood and his partners, who owned these mines, became
certain of this prospective bonanza in the following winter, and early
in 1875 came the announcement of the discovery of the fabulous ore
bodies which made the name of the Comstock lode known round the world,
and lifted the owners of the celebrated mines at once into wealth so
enormous as to make the extravagances of the Arabian Nights seem tame.
The establishment of the Nevada Bank was the idea of Mr. Flood, who is
said to possess a natural aptitude for finance. He became president of
the bank and a large stockholder in it. He is a man of compact robust
build, five feet nine inches in height, with quiet, courteous manners,
and of an energetic, self-reliant and industrious disposition. He has
had a remarkable rise, but has shown himself equal to the surprising
good fortune which has attended his strange career.


[Illustration:

  JAMES G. FAIR.
]


It is of interest to recall the fact that the original Comstock
syndicate, most of whom derived such enormous wealth from the Comstock
lode, was composed of Messrs. Mackay, Flood, O’Brien, Fair and Walker.
Soon after these gentlemen became associated in their great enterprises,
Walker sold out his share of one-fifth to Mackay, for a very small
consideration, and this consequently gave that gentleman an interest of
two-fifths, against the one-fifth share held by each of the three others
in the firm, a fact which accounts for Mackay’s greater wealth. Walker,
one of the original parties in interest, afterward not only lost in
mining and other speculations the amount which Mackay had paid him for
his share, but all his other means, and was, in fact, completely
beggared, and died in an asylum for paupers. He had experienced dramatic
vicissitudes of fortune. He ought to have been worth fully twenty
millions of dollars. He died without a penny.

                             W. S. O’BRIEN.

W. S. O’Brien was associated with Mackay, Flood and Fair in developing
mines on the Comstock, and died in 1878, enormously wealthy. He was born
in New York, went to San Francisco in the early days of the gold
excitement, and at first kept a liquor saloon with Flood. He gradually
engaged in mining speculations, and ultimately met with such success
that he died famous as one of the bonanza kings. It is an interesting
circumstance that four Irishmen secured the lion’s share of the bonanza
millions, and they were all born poor. The harp of Tara’s halls never
was struck to so strange a roundelay as this.

                             JAMES G. FAIR.

James G. Fair is another of the bonanza kings who has had an interesting
career. He was born Dec. 3d, 1831, near Belfast, Ireland. He came to
this country with his parents in 1843 and settled in Illinois. He
received a thorough business education in Chicago, and at the same time
devoted considerable attention to scientific studies. On the breaking
out of the gold fever in 1849 he removed to California, settling at
Long’s Bar, Feather River, in that State. He mined on the Bar for some
time without much success, and then turned his attention to quartz
mining. Placer mining in those days was conducted in too primitive a
fashion to suit a man of his mechanical ingenuity. Placer, by the way,
is a term of Spanish origin, signifying a gravelly place where gold is
found, especially by the side of a river or in the bed of a mountain
torrent. In quartz mining, on the other hand, the metal is obtained by
smelting after crushing the rock of which it forms a part. Mr. Fair
engaged in quartz mining in Calaveras county, California, and later
became superintendent of various quartz mines in other parts of the
State. In 1855 he became superintendent of the Ophir, and four years
later of the Hale & Norcross. In 1860 he removed to Nevada and became
actively engaged in developing mines. In 1867 he formed a partnership
with John W. Mackay, James C. Flood and Wm. S. O’Brien. The firm, at Mr.
Fair’s suggestion, obtained control of the California and Sides mine,
the White & Murphy, the Central Nos. 1 and 2, and the tract known as the
Kinney ground, and it was in this rich field that the famous California
and Consolidated Virginia mines were developed, the yield of which,
under Mr. Fair’s superintendence, is estimated at about two hundred
million dollars. He began speculative buying of real estate in San
Francisco in 1858, and is now said to own seventy acres of land in
different parts of that city, constituting in itself an enormous
fortune. He was elected to the United States Senate as a Democrat to
succeed the Hon. William Sharon, and took his seat in 1881, his term
expiring March 3d, 1887. In person Mr. Fair is of about the medium
height, of compact, solid build, has handsome features, and is a man who
would be likely to attract attention anywhere. His fortune is estimated
at from ten to twenty millions.

                            WILLIAM SHARON.

William Sharon was one of the remarkable men developed by the mining
excitement in this country, one of the sagacious, self-reliant men who
inevitably come to the front wherever they are found. He showed his
mettle when the Bank of California was forced to suspend, and when a
commercial pall hung over San Francisco. In the midst of the frenzied
excitement he was one of the few who kept cool and never lost their
courage. The wild excitement on the Stock Exchange of San Francisco was
stopped at his suggestion that the sessions be indefinitely postponed.
Then he called a meeting of the Bank of California directors and made a
stirring appeal to them to stand by the bank in the hour of its
misfortune, and rescue the business interests of the coast from the
paralysis by which they were likely to be seized if they did not take a
resolute stand, put their shoulders to the wheel and acquit themselves
like men. He proposed that each subscribe liberally to put the bank
again in operation, and set the example by a very large
subscription—said to have been five million dollars. Others also
subscribed liberally, and to the astonishment and joy of the city the
bank again threw open its doors for business. He had some years prior to
this become connected in business with the lamented Ralston.

William Sharon was born in Ohio, and early in life began the practice of
law in Illinois. He went to San Francisco, and immediately engaged in
the real estate business, and ultimately became a very large operator in
lands, but failed, and in 1863 went to Nevada to take the agency of the
Bank of California in Gold Hill and Virginia City. The bank had large
loans out on mining property, and as the production of many of the mines
had seriously declined, Ralston grew uneasy, and was greatly relieved
when Sharon offered to become personally responsible for these loans on
condition that the bank advance him a considerable sum to be used in
contemplated mining developments, and allow him two years in which to
meet the loans. The terms were accepted. Sharon ran new drifts here and
there, and in four months, to Ralston’s amazement, paid all the loans,
and placed on deposit three-quarters of a million to his own account.
This feat drew general attention to him; he was consulted in large
operations; he became a director in the great bank. He never forgot
Ralston’s kindness to him. He assumed entire charge of the personal
affairs of Ralston after his death, and settled on Mrs. Ralston nearly
half a million of dollars. He finally entered politics, and represented
California in the United States Senate. He was a conspicuous example of
business acumen and surprising energy, as well as of becoming gratitude
to the knightly Ralston, of whom he always said: “He was my benefactor.”

                            WM. C. RALSTON.

Wm. C. Ralston was one of the most notable, as he was one of the most
remarkable, of all the financial giants of the Pacific Slope. He
ascended the gilded summits of financial renown, and he fell into a
shadowy valley of stern retribution and utter ruin. No man could be more
popular, none could exhibit greater daring in his business enterprises.
He was a New York boy, but drifted to the West, and became a clerk on a
Mississippi steamboat, finally became Captain, and having amassed some
money, he leaped into speculative waters, like another Leander, to swim
the Hellespont of California finance. He became associated with
Commodore Garrison and two others in the banking business in San
Francisco about 1853. Finally he organized the Bank of California, and
became first its Cashier and then its President. His rise was
marvellous. At one time he was supposed to be worth $20,000,000 or more.
He had a country seat at Belmont, in San Mateo county, that a king might
have been proud to own, and here he entertained in royal fashion. Every
celebrity that visited California was received with regal hospitality by
this monetary prince of the golden State. But as the allied armies
arrayed against Napoleon were often put to rout from being too much
spread out, so this financial Titan, combining the genius and courage of
many in one, was finally overthrown by adverse fortune, because his
enterprises were too much spread out. He had too many projects on hand
at one time. He lost heavily in mining and real estate speculations; he
lost in manufacturing enterprises. Fate struck him suddenly as with the
hammer of Thor. In one fearful storm of trouble all his misfortune
descended upon him at once. All the waves and billows of adversity broke
over him. He had no chance to recover himself. Birnam seemed all at once
to come to his financial Dunsinane. An investigation of the affairs of
the Bank of California was made by the directors of that institution.
Their suspicions had been aroused that Ralston’s administration of its
affairs was open to grave criticism. He attended the meeting of the
directors, and was coldly requested to withdraw during the discussion.
He who had been absolute in the great bank saw that his power was gone;
he stood on the brink of a moral Niagara. He left the Directors to make
the inevitable discovery that he had over-issued the stock of the bank
some $6,000,000, and crazed with grief and despair, found a suicide’s
death in the waters of the bay. He had over-issued the stock hoping and
believing that success in some one of his numerous and gigantic
enterprises would enable him to provide for it, but disaster stealing on
him suddenly, like a thief in the night, frustrated any plan of
restitution, and he paid for his fault with his life. He was a man about
five feet seven inches in height, with a rather florid complexion, a
full light brown beard and kindly brown eyes. He was once the idol of
California, and his one great fault is almost swallowed up in the memory
of his princely generosity, his hearty geniality, and his many other
engaging traits.

                             JOHN P. JONES.

John P. Jones has had an eventful career. He has made and lost millions.
He was worth at one time five or six millions. He lost very heavily in
railroad enterprises in Southern California. He had been engaged in
mining and had won a big heap of treasure, probably as much wealth as
any one needs, or more, but with the restless ambition of one who would
travel still higher up the glittering heights of financial fame he
sought to emulate Huntington, Stanford and others and become a railroad
magnate. It was a case of vaulting ambition o’erleaping itself and
falling on the other side. He lost almost his entire fortune, but he has
now regained his feet again and is once more wealthy. He profited by the
revival of interest in mines and mining stocks in 1886, and secured,
moreover, a considerable interest in the Alaska mine, in which D. O.
Mills was interested. He bought stocks of once famous mines at low
prices, and when the advance on the revival of public interest in mining
shares took place he was a large gainer. John W. Mackay has within the
last few years shown a disposition to lend him assistance in his
endeavors to recover his former footing. John P. Jones is one of a
number of Englishmen who have won financial celebrity in this country.
He was born in Herefordshire, England, in 1830, and came to this country
with his parents when only a year old, settling in Ohio. For a few years
he attended school in Cleveland. In the early days of the gold
excitement in California he emigrated to that State and engaged in
farming and mining. He acquired a taste for politics. He represented his
county in both houses of the State Assembly. In 1867 he went to Gold
Hill, Nevada, and has ever since been engaged to a greater or less
extent in developing the mineral resources of that State. In his earlier
days he worked hard as a miner in one of the counties of California. He
worked in placers and tunnels; he had many ups and down. He was daring
and ambitious, and sometimes seemingly reckless. He spent a million
dollars trying to develop some mines in Mono, California, and then gave
up the attempt. At one time he controlled the Ophir, Savage and Crown
Point mines on the Comstock lode; he owned large establishments for the
manufacture of ice in Georgia, Louisiana and Texas and elsewhere; he
made large purchases of land in California; he engaged in a multitude of
ambitious enterprises. He had too many irons in the fire. Misfortune did
not daunt him. Like the old hunter of tradition, his motto was, “Pick
the flint and try it again.” He may yet become a financial power again.
He has a certain readiness as a speaker; he is of large frame and not
unpleasing aspect, and his taste for public debate and the excitements
of the political arena have led him into contests for public honors
which have been successful. He was elected as a Republican to the United
States Senate in 1872, and has twice been elected, so that his term will
not expire until 1891.

R. J. Baldwin has become widely known by the sobriquet of “lucky.” He is
59 years old and was born in Ohio. His father moved to Indiana and had a
farm adjoining that of Schuyler Colfax. There he worked till he reached
his twentieth year. He married in the following year and went to a small
place in Indiana and kept a country store; he soon built canal boats to
ply between Chicago and St. Louis. He went to Racine, Wisconsin, in
1850, and engaged in the grocery business with considerable success. He
was keen at a bargain and always had an eye out for the main chance. His
so-called “luck” was in reality business skill. He went to California in
1853, after purchasing a number of horses and wagons and an ample supply
of merchandise. He found a good market for his goods in Salt Lake,
making nearly four thousand dollars on the venture, and further on he
sold his wagons and harness and made up a pack train over the mountains,
and, arriving in San Francisco, sold his teams at good prices. His trip
had been a complete success. He now went into the hotel business, and,
after selling out twice to good advantage, he formed a partnership to
engage in the brick trade, which, proving very successful mainly through
his skill in drumming up business, he decided to go into it alone. He
himself knew nothing about brick making, but he studied up the subject
and eventually became an expert. He obtained remunerative contracts with
the Government; he boarded his men and made for a time about fifteen
hundred dollars a month. He finally sold out and went into the livery
business. He made money and invested considerable in real estate. He
sold out and went to Virginia City, Nevada, at the breaking out of the
mining excitement there. At that point he started a lumber yard. He
speculated in mines and met at times with great success, but once he was
so badly worsted in this great game that he was compelled to mortgage
all of his property; but the tide turned soon and became a flood of
gold. He speculated in such mines as the Crown Point, Belcher,
Consolidated Virginia, California and Ophir. He acquired at one time the
controlling interest in the Ophir. He has speculated heavily in San
Francisco real estate, and with marked success. He erected a building
there that cost, with all its appurtenances, over three million dollars.
Part of it is used as a theatre. He bought sixty thousand acres of land
in Los Angeles county, and had practically a town of his own. He spent
about half a million dollars improving this tract, more particularly his
Santa Anita ranch of over fifteen thousand acres. His sagacity and
industry, rather than mere “luck,” have won him his fortune of ten or
fifteen million dollars.

                          WILLIAM H. STEWART.

William H. Stewart, another successful man of the Far West, who has
twice represented Nevada in the United States Senate, was a New York
boy, born in Wayne county in 1827. A good many New York boys have
succeeded in the West. He went to California early in 1850. In the fall
of that year, while prospecting, he discovered the Eureka placer
diggings; he built saw mills, worked claims because disgusted with
mining, went to Nevada City in the spring of 1852, and in December of
that year was appointed District Attorney, was elected to that office in
the following year, and in 1854 was appointed Attorney General,
thereupon taking up his residence in San Francisco, where, by the way,
he married a daughter of ex-Governor Foote, of Mississippi. Later he
returned to Nevada City and established a very lucrative law practice,
and remained in that county till the spring of 1860, when the furore
over the Comstock mines induced him to go to Virginia City, Nevada. He
thoroughly understood mining law, and soon had a large practice. The
large sums which his legal talents brought him were invested in mines,
and he became one of the leading operators on the Comstock lode. He
invested half a million dollars in San Francisco real estate. He
rendered important services to mining interests while in the United
States Senate, in preventing the passage of a bill providing for the
sale of all the mineral lands of the country at public auction, a
measure which it was supposed would concentrate much of the mining
property of the United States into the hands of the wealthy.

                              JAMES LICK.

James Lick, born in Pennsylvania in 1796, was one of the strange
characters of California. He went there in 1847, after having been a
manufacturer of pianos in this country and different parts of South
America. He took $30,000 to San Francisco, which he invested in real
estate, foreseeing that it was to become the great city of the Pacific
Slope. He bought lots by the mile. His profits were enormous. He became
one of the great millionaires of California. He set aside $2,000,000 in
1874, to be held by seven trustees, and to be devoted to certain public
and charitable purposes. In 1875 he desired to make some changes in his
schedule of gifts, and when the trustees expressed some doubts as to
their legal right to give assent, at his request they resigned. The next
year he died, and then followed a litigation by his son and other heirs,
which was finally so adjusted as to leave a large sum to be devoted to
various public and charitable projects. He left $60,000 to be devoted to
a statue of Francis Scott Key, the author of the “Star Spangled Banner.”
He was very eccentric, due, it is said, to an early disappointment in
love. He sought the hand of a miller’s daughter, but was dismissed by
the father, because young Lick did not own a mill. When he became
enormously wealthy, James Lick built a large mill, and adorned it with
mahogany and costly woods as a memorial of his youthful attachment. He
seemed to derive almost childish pleasure in contemplating this splendid
building, which would have so far outshone any that could ever have been
owned by the man who had once spurned him for his poverty. The poor
young men of one generation are often the millionaires of the next. One
of the great monuments to his memory is the great Lick Observatory.

                             JOHN W. SHAW.

John W. Shaw, who made considerable money in mines and mining stocks, is
one of the Western millionaires who reside in New York. He was a
superintendent of mines, and speculated on his information. He was at
one time prominently identified with the Eureka Consolidated mine. He is
supposed to be worth $4,000,000 to $5,000,000, and is now President of
the Hocking Valley Road. Messrs. Keene, Lent, Dewey, Harpending,
Verdenal and other more or less successful men well known in California,
live here. One of the distinguished lawyers of the West who have come
here to establish a practice is ex-Governor Hoadly, of Ohio. Austin
Corbin, though at one time a lawyer in Iowa, found his true field in New
York, and Alfred Sully, after amassing some means in the same State,
likewise found himself drawn to New York, and won unexpected success in
finance here.

------------------------------------------------------------------------




                             CHAPTER XLIII.

             RAILROAD INVESTMENTS.


VASTNESS OF OUR RAILROAD SYSTEM.—ITS COST.—FALL IN THE RATE OF
    INTEREST.—TENDENCY TO A FOUR PER CENT. RATE ON RAILROAD
    BONDS.—EFFECT OF THE CHANGE ON STOCKS.—PROSPECTIVE SPECULATION.—SOME
    SOCIAL INEQUITIES TO BE ADJUSTED THROUGH CHEAPER TRANSPORTATION.


There are, perhaps, few who distinctly realize the magnitude of the
amount of capital invested in the railroads of the United States. The
immense area over which our population is distributed necessitates a
much greater length of railroad, as compared with inhabitants, than
exists in any other nation. In 1884 we had, according to “Poor’s Manual
of Railroads,” no less than 125,380 miles of road within the United
States, which exceeds the entire mileage of Europe. This was required to
provide for the travel and transportation of about 54,000,000 of
population, while Great Britain, France, and Germany, with their
combined population of 120,000,000, had in the same year about 60,000
miles, and Russia, with some 85,000,000 of people, had only about 19,000
miles.

It can hardly be a matter for boasting that we have found it necessary
to provide such a disproportionate length of road to accommodate the
wants of trade and travel; for the more capital we have to invest in the
facilities for carriage the less we have for investment in the means for
production, and the more we have to pay for transportation service the
worse is our position for competing with other nations. This,
undoubtedly, is a much more important factor than is generally allowed
in the question of our ability to command a share in the world’s
international commerce proportioned to the extent of our population.

The cost of our railroads, as indicated by the capitalization statements
of the Companies in 1884, is represented by $3,669,116,000 in bonds and
$3,762,016,000 of stock. As shown in another chapter on “Railroad
Methods,” the actual cash outlay in construction and equipments is very
much less than these figures; but the roads aim to earn an investment
return on these enormously inflated amounts, and do so as far as they
may be able.

Elsewhere in this volume I have shown how the effort to earn dividends
upon hundreds of millions of fictitious railroad capital is imposing an
unjust tax on the people, retarding the growth of national commerce and
creating a distinct millionaire class not without danger to our
political future; and I wish here to refer to one fact from which we may
hope for some mitigation of this pernicious tendency.

Within recent years it has become very clear that a large permanent
reduction has been effected in the rate of interest on fixed capital.
Perhaps, the principal causes of this change has been (1) the high
credit of the Government, represented by a 3 per cent. rate of interest
on its loans; (2) diminution of the element of risk in our corporate
enterprises; (3) the more developed and consolidated condition of our
industry; and (4) the growth of the national earnings in a ratio
disproportionate to the new undertakings inviting capital. To such an
extent has the loanable resources of the country increased that, whereas
ten to fifteen years ago we found it necessary to borrow in other
countries a large portion of the money needed to build our railroads, we
are now almost entirely independent of European lenders, and are
beginning to invest in the construction of roads in Canada and Mexico.

Thus comes about the fact that, while the bulk of the new outstanding
railroad bonds bear interest at 6 to 7 per cent., with exceptions at 5
and 8 per cent., there is no difficulty in now negotiating the mortgages
of sound railroads at 4 per cent., and that may be safely regarded as
the future rate for all meritorious loans. It is not difficult to see to
what course of things this fact points. If new roads can be built on a 4
per cent. ratio of interest charges, then the new constructions on that
basis and the gradual replacing of maturing loans at the same rate will
very quickly establish a competition between roads thus situated and the
large mass of companies burdened with the old high rate of interest that
will bear very seriously on the latter. To a company with, say,
$40,000,000 of bonded debt, it is a matter of a difference of $800,000
per year in fixed charges whether it pays 6 per cent. interest or 4 per
cent. This difference will be so vital in cases of competition between
high rate roads and low-rate ones, that it will leave no choice, with a
very important proportion of our railroads, between facing financial
embarrassment and taking immediate steps for readjusting their debts to
the new and lower rate of interest. As an important proportion of the
original bonds issued 25 to 30 years ago at 6, 7, and 8 per cent. rate
by the older roads are now beginning to mature very rapidly, a large
extent of high-rate debt will from this time forward be transmuted into
4 per cent. bonds, which will add force to the tendency here indicated.

Some important results must follow from this new drift in railroad
investments. One of the effects would naturally be a diminution of the
current high rate of premium on the old bonds, which has become, so
adjusted as to yield, in most cases, a return of 4 to 4½ per cent. on
the market value. Holders of this class of bonds will perceive that the
companies cannot long sustain the burden of their present high rate of
fixed charges, and will soon come to discount in advance the inevitable
“scaling” of their bonds. When the railroads begin to feel the effects
of competition with the low-rate companies, they will not be slow to
adjust their finances to the new situation; neither will they be nice
about their methods of effecting such adjustments; and the rights of
creditors will be ruthlessly dealt with under the compulsion of
foreclosure; and when this compulsory stage is reached, it will not be
very long before a large proportion of the high-rate bonds is transmuted
into long 4 per cent. obligations.

This very important transition, upon a such large mass of investments,
is to be anticipated as one of the most conspicuous financial events of
the comparatively near future. One of its first effects may be expected
to appear in a certain tone of depression among investors, who will feel
themselves impoverished through the fall in the market value of their
bonds, and by the impending reduction of one-third in their income from
this class of securities. The bondholders—and, indeed, investors
generally—will be likely to reason that the reduction in the fixed
charges of the roads will leave so much more available for the
stockholders; and there would be this extent of warrant for such a
conclusion, that, as the stock of a company usually about equals the
amount of its bonds issues, any reduction in the rate of interest on the
latter would be just so much per cent. saved towards the dividend on
share capital. Under such circumstances, there would naturally be a
marked increase in the demand for railroad stocks, and a large advance
in their market value would in all probability result. To those who
contemplate investing in railroad shares, this is a consideration which,
it appears to me, should claim their consideration.

It would seem probable that, in the process of conversion here
foreshadowed, there are the elements of an era of unusual speculative
activity at a period not very remote. That speculative movement may be
expected to consummate and finally adjust the change. Naturally, such an
excitement would tend to produce a great inflation in the price of
stocks (as distinguished from bonds); the final stroke of adjustment,
however, would come ultimately through the construction of new competing
roads, which would take out of the net earnings of the roads as much as
had been saved by the reduction of interest on their debts, thus leaving
the dividend resources where they stood before the change. The final
issue of this transition, therefore, would be to give the public at
large about the entire benefit of what the railroads saved by the
amelioration of their debt charges.

The tendency I have here aimed to foreshadow is one that must largely
tend to the public advantage. In other words, the railroads, having
reduced by 30 to 40 per cent. their interest charges, will be in a
position to perform their services for correspondingly lower charges.
This will be an invaluable advantage to all our industries, and
especially to such as have to deal with bulky products, a considerable
portion of the costs of which consists of charges for transportation,
and the working class, who constitute the bulk of our consumers, will be
especially benefited.

In another chapter I have shown how the overcapitalization of our
railroads has caused a false and unjust distribution of wealth, and
burdened our industries with transportation charges which are a serious
obstacle to our national progress. The tendency above delineated shows
how seriously the natural laws governing the distribution of wealth
provide an ultimate remedy for such violations of these laws. The
railroad capitalists who have made their millions by providing railroads
at such an inflated cost are now faced with the certain prospect of a
loss of one-third of their income from their investments; and that
deduction will have to be distributed among the community at large in
the form of cheaper carriage.

This is but a repetition of what we find so many times in the history of
nations, that when any important class exacts, by some artificial
process, a vast amount of wealth that does not naturally and justly
belong to it, it ultimately finds the earning capacity of its
accumulations declining. This is one among the many reasons why a low
rate of interest is apt to prevail in countries where privileged or
aristocratic classes have absorbed an undue proportion of the national
wealth.

------------------------------------------------------------------------




                             CHAPTER XLIV.

             THE SILVER QUESTION.


ITS FUNDAMENTAL IMPORTANCE.—DANGERS OF NEGLECTING IT.—ATTEMPTS AT
    EVASION.—HOW IT MUST BE FINALLY MET.—SILVER PAPER CURRENCY SCHEMES,
    AND THEIR FUTILITY.


Of all current public questions, I know of none that so vitally affects
the future of our financial interests as this one—what shall be the
status of silver among the world’s currencies? At the present time,
about one-half of the world’s metallic money consists of silver, and the
other half of gold. It is clear that silver cannot maintain its
necessary function as money unless it is invested with stability of
exchangeable value. Such stability it cannot possess without the
intervention of a conventional arrangement which, with all the force of
a uniform law, makes a given weight of silver virtually exchangeable for
a given weight of gold. This principle once established, and silver
bullion being made convertible into silver coin at the mints of the
chief nations on demand, it follows that the bullion value of silver
must constantly conform closely to its value as coin, and the stability
of the value of silver coin would thus be insured.

The difficulty has been that, owing to petty jealousies and prejudices,
Governments have hesitated to act with the unanimity that is necessary
to an efficient conventional arrangement. Each one has preferred that
others should take the responsibility of free coinage; and the result
has been that unrestricted coinage has been adopted only by those
nations which happened to be most imperatively committed to the
necessity of protecting their silver circulation. Those nations were
comprised in the international combination known as “The Latin Union.”
That Union was found competent to take care of all the new supplies of
silver, so long as the principle of free coinage was maintained and the
value of the metal was kept uniform under its operation. In an evil
hour, however, certain German theorists persuaded Chancellor Bismarck to
commit Germany to the demonetization of silver. The large supply of the
metal thereby suddenly thrown into the mints of the Union nations
alarmed that combination, first, into a limitation of their coinage of
silver, and, finally, into a suspension of it. The coinage demand for
silver being thus cut off, the price of silver bullion was cut loose
from the relative legal valuation between silver coin and gold, and was
left to drift with the variations in the commercial demand, and to
decline in consequence of an excess of supply over demand. This is a
brief explanation of the causes of the present depreciation in the value
of silver.

I know of no way of repairing the value of that metal other than by
establishing an international union, similar in its objects and
conditions to the now virtually defunct Latin Union, but embracing a
wider range of Governments than that combination did; the co-operation
of the United States, England and Germany being especially important.
Here I may perhaps be permitted to republish a series of questions
propounded by the New York _Daily Commercial Bulletin_, in October last,
with my answers appended, as briefly expressing the conclusions I have
been led to form on this question:

                               QUESTIONS.

I. Would the stock of gold in the world afford a basis broad enough to
meet the banking and commercial operations of Europe and the United
States, without the co-ordinate use of a properly regulated silver legal
tender?

II. Would you favor an International Coinage Union, embracing the United
States and the leading European Governments, based upon a uniform
valuation of silver as compared with gold, and binding each member to
coin on demand all silver presented at its mints and to make such coin a
legal tender?

III. Supposing the ratio of valuation adopted by such a Union to be the
present most general one of 15½ to 1, do you see any reason why the
obligation of all nations in the Union to convert silver bullion into
legal tender coin at that rate should fail to restore silver to its
former value of about 60 pence per ounce?

IV. Would the suspension of the coinage of the Silver Dollar be
judicious, or necessary, or effectual, as a means of inducing European
Governments to join in an International Coinage compact?

V. Are there any important reasons connected with the finances of the
United States Government, with our currency system, or with the
prospective trade of this country, why the coinage of the Standard
Dollar should be suspended?

IV. Do you favor the immediate suspension of coinage of the Silver
Dollar?

                                REPLIES.

1. Possibly the existing stocks of gold in Europe and America might be
sufficient to serve the purposes of banking reserves and for
transmission in the international exchanges; but it is impracticable to
use such a valuable metal to the extent required for the purposes of
active circulation, and this creates a necessity for a silver legal
tender coin for the retail transactions of business. For this reason I
regard the use of silver, co-ordinately with gold, as an indispensable
element in the world’s currency.

2. I regard an international union as absolutely necessary for
maintaining the joint use of gold and silver, if the relative value
between those metals is to be steadily maintained. If a uniform value of
silver were adopted by members of such a union, and if the mint of each
nation were bound to coin all silver brought to it, and the coins were
made a legal tender, it appears to me that this would establish a
uniform value for silver bullion the world over, on a parity with the
legal valuation of silver coin; and this conventional value of bullion
would be preserved as long as the union should be continued. Even the
limited international arrangement known as the Latin Union sufficed to
keep silver at about 60 pence per ounce, until its members, taking
fright by the demonetization of silver by Germany, stopped the coinage
of silver; when, the conventional support being withdrawn and the
coinage demand suspended, bullion fell to its value as a mere commodity.
This shows how effective the union principle is, and what becomes of
silver without it.

3. If an international union were to fix the value of the two metals at
15½ weights of silver to 1 of gold, the rate now general in Europe, and
the members of the union were compelled to coin it on demand at that
rate, then the free convertibility of bullion into coin would
necessarily make the coin and the bullion of equal value, except the
slight difference that might arise from coinage charges; which is
tantamount to making silver worth about 60 pence an ounce, or its former
value.

4. In view of the differences of opinion in Europe on the standard
question and the strong prejudices in England in favor of the gold
standard, it appears to me more than doubtful whether any step will be
taken on this subject until those countries are made to carry the
burthen of the large surplus of silver that we are now coining. But with
25 to 30 millions of bullion of our silver going thither every year, the
effect would be so serious upon Asiatic trade and upon the immense
silver circulation of the Latin nations, that it seems certain they
would soon become willing to assume their share in restoring silver. At
any rate, it is a proper and necessary compulsion for us to apply.

5. The Government is very closely threatened with a suspension of gold
payments, if the coinage is continued. We have already seen a point at
which the Treasury had to negotiate with the banks for six millions of
gold to avert that catastrophe; and it is only a thin margin of a very
few millions that separates us from such a condition all the time. Of
course, if the Government suspended coin payments, gold would be apt to
go to an indefinite premium; with the consequence of a rush of
greenbacks into the Treasury for redemption and a depreciation of such
paper as is redeemable in silver to the purchasing power of that coin.
In my view, these dangers are much nearer than is generally supposed;
and it is a most unjustifiable policy that needlessly perpetuates this
state of things.

6. For the reasons assigned in my other answers to your inquiries, I
regard the suspension of the coinage of the the silver dollars as to the
last degree imperative. And the suspension should be both total and
unconditional. Either a partial or a temporary suspension would fail
equally to avert the home dangers with which we are threatened, and to
bring about that European action which is indispensable to a sound and
permanent settlement of the question.

So long as there was no efficient conventional arrangement for
maintaining the value of silver, no nation can safely continue its
coinage, because, in so doing, it was increasing its stock of currency,
the future value of which could not be depended upon, and which might
easily become a source of embarrassment and injustice between citizen
and citizen, between debtor and creditor. In our country, however, such
was the political influence of the silver-producing States that they
easily induced Congress to order the coinage of not less than
$24,000,000 per annum of standard silver dollars. The effect of this has
been, undoubtedly, to somewhat check the decline in silver bullion; but
at the expense of the artificial addition already of $230,000,000 of
badly depreciated legal tender to our circulating medium. Our whole
currency system has thus been vitiated; for our $680,000,000 of paper
money may be redeemed in silver; and we are thus exposed to the very
gravest dangers, in the event of anything causing an important drain of
gold to Europe. That the coin thus issued was not really needed for the
purposes of circulation is demonstrated by the fact that it has been
found impossible to get more than one-third of it into circulation. In
order to obviate this difficulty, various devices have been introduced
for keeping the coin in the Treasury and issuing against it paper
certificates of small denominations. The most ingenious of these
contrivances was the one proposed by Hon. A. J. Warner, of Ohio, and
pressed on the Government for its endorsement. In September last I took
occasion to publish certain objections to Mr. Warner’s scheme, which was
finally rejected by the Silver party; and, with that rejection, there is
probably an end to all proposals for creating a purely silver paper
currency. As a brief exposition of one phase of this controversy, it may
perhaps be permissible to reproduce here the views then expressed:

    Mr. Warner’s measure virtually concedes that the coinage of the
    silver dollar has already been carried to a point that threatens
    serious danger to the currency system of the country, and,
    consequently, to the just relations between the creditor and
    debtor classes. This confession from a representative of the
    Silver party does not come a day too soon; and it would be
    welcome, were it not accompanied with proposals that would
    aggravate the evils which need to be remedied. Let us briefly
    examine Mr. Warner’s plan.

    First, it discontinues the current monthly coinage of silver
    dollars required under the existing “Bland Act.” 2. It provides
    that, in lieu of this current coinage, holders of silver bullion
    may deposit any amount thereof in the United States Treasury. 3.
    It requires that, against such unrestricted deposits of bullion,
    the Government shall issue to the depositors “bullion
    certificates,” expressing an amount of money equal to the market
    value of the bullion at the time of its deposit. 4. These
    certificates are to act as a new form of currency. The
    Government could use them in liquidation of all its debts not
    made expressly payable in gold; and it would be required to
    accept them in payment of customs duties, taxes and public dues
    generally. The national banks would be required to accept them
    in payments between themselves. And, 5, the certificates are
    made redeemable in lawful money, (i. e., either gold, silver or
    U. S. notes), or at the option of the Treasury in silver bullion
    at its current value at the time of redemption. These are the
    more vital provisions of the scheme. Let us see what they
    involve.

    Against the whole plan there lies a very positive doubt of its
    constitutionality. The Constitution empowers Congress to
    authorize the coinage of gold and silver, and to make such coins
    a legal tender; but there is nothing in the powers thus
    conferred, nor in any powers conveyed by that instrument, that
    can be construed into a right of the Government to receive
    silver bullion on deposit. The Government can have no interest,
    duty or function in connection with bullion, except so far as it
    may be procured for the express purpose of coinage. It can have
    no more power to assume the custody of bullion for the
    accommodation of its producers than it has to store cotton, iron
    or wheat for the convenience of the dealers in those
    commodities. And when, in addition to assuming the grave
    responsibilities of custodian, the Government undertakes to
    issue receipts endowed with special privileges and attributes,
    calculated to incorporate those receipts as an important part of
    the currency system, it commits a breach of the true functions
    of government and of the true constitutional limitations of
    federal authority, which, it would seem, the Supreme Court
    should unqualifiedly prohibit.

    The provision made for the redemption of these proposed
    certificates would be to the last degree objectionable. They are
    payable in legal tender money, or, at the option of the
    Government, in an equivalent value of silver bullion at its
    current market price. If the Government chooses to redeem them
    in lawful money, it exposes itself to a new and important demand
    upon its legal tender notes or its gold: and as the amount of
    greenbacks owned by the Treasury now runs so low as to prohibit
    those notes being used for the purpose, it follows that the
    redemption of the certificates would have to be made from the
    Treasury stock of gold. Thus the operation of the scheme would
    be to exchange the Government gold for silver bullion. What
    could the silver men desire better? What could all other
    interests dread more? It would be a direct step towards
    incapacitating the Government for maintaining gold payments;
    and, as such, would go far towards dissipating that broad
    substratum of gold which is the sole means of preventing our
    entire paper currency from depreciating to a level with the
    bullion value of the silver dollar.

    It is thus clear that the Government would be ultimately driven
    to redeem the certificates in silver bullion. What does that
    imply? First, that the Treasury would have to stand the loss
    upon the deposits of bullion that might arise from a fall in its
    value. Take a case for illustration. A deposit is made of
    1,000,000 ounces of gold at the current price of $1.10 per
    ounce, the Treasury being required to issue against it
    $1,100,000 of certificates. Later, when the price of silver has
    fallen to say $1.05, the $1,100,000 of certificates is presented
    for redemption, and 1,047,619 ounces of silver have to be
    delivered, as the bullion equivalent at the current market
    value. The Government thus loses 47,619 ounces of silver by the
    transaction. Now, seeing what a handsome profit can be made by
    thus depositing bullion at a higher price and withdrawing it at
    a lower, are men so virtuous that we can depend on their not
    working this Treasury silver mine to the utmost possible
    advantage? With the hands of the Government thus tied, it would
    be at the mercy of unprincipled speculators and could not escape
    being mulcted to the extent of millions of dollars. The moment
    such a bill was signed by the President, speculative
    combinations would be formed with London bullion dealers; the
    European stocks would be secured, and, after advancing the
    price, would be sent to the United States Treasury. The next
    step would be to force down the price; and then the certificates
    would be presented to be redeemed by a much larger quantity of
    silver than had been deposited against them. And thus the game
    would go on continuously, the Government being the loser in
    every transaction. A finer scheme for the benefit of speculators
    could not have been conceived; but for legitimate interests, in
    many ways dependent on the value of silver, nothing could be
    more serious.

    There is nothing in Mr. Warner’s measure to prevent the United
    States Treasury from being saddled with as much of the European
    stocks of silver as speculators find it to their interest to
    send here, in addition to the product of our own mines; and for
    such deposits the Treasury would be compelled to pay whatever
    artificial price it suited the operators to determine. And what
    does such a transfer involve? First, that we should have to ship
    so much more gold to Europe, making the operation a virtual
    exchange of Europe’s silver for America’s gold; next, that the
    United States Government would thus be made to bear the sole
    weight and responsibility of carrying the WORLD’S surplus of
    silver; next, that, as a consequence, England, Germany, and
    other nations would become still more reluctant than they now
    are to negotiate for an international settlement of the silver
    question; next, that the Government would be so handicapped with
    its enormous load of silver as to place it at an utter
    disadvantage in such negotiations; next, that the Government
    would be exposed to immense losses in assuming such vast
    responsibilities; and, next, that the large issues of
    certificates to be made against this mass of bullion would be a
    forcible and artificial inflation of the currency, which could
    not fail to produce disaster to all the material interests of
    the country.

    Of course, such an arrangement would be all that the silver
    interests could desire. For them, indeed, it would be a far
    better protection than the Bland Act. But this advantage would
    be only temporary; for when the scheme broke down of its own
    weight, as sooner or later it must, the miners would be exposed
    to ruin from the consequent derangements.

    The only wholesome treatment of this question is to repeal the
    Silver Coinage Act. That done, we should add $25,000,000 to our
    yearly exports, instead of locking up so much of our national
    product as dead capital in the Treasury; while that increase of
    exports would give us a greater command of European gold and
    thereby strengthen our international position in this question.
    Europe, and especially England, would then be compelled to
    earnestly consider measures for placing the double standard upon
    a broad and lasting international basis; and as such a
    disposition began to manifest itself, the silver market would so
    far sympathize as to amply compensate producers for any losses
    they might suffer from a temporary fall in bullion.

                                                        HENRY CLEWS.

Bad as the situation is, in respect to this vast mass of the world’s
circulating medium, yet it is far from being a hopeless one. The more
serious it becomes, the nearer will be the remedy. The derangements to
commerce and to immense vested interests must ultimately become so
serious, that the nations which now obstruct the application of a remedy
will be compelled to submit to the necessities of an imperative danger,
and the end will probably be that a coinage union will be established
between the great nations, on a basis broad enough to give stability to
this form of money beyond all possibility of future disturbance.


------------------------------------------------------------------------




                              CHAPTER XLV.

              THE LABOR QUESTION.


HARMONY BETWEEN THE REPRESENTATIVES OF CAPITAL AND LABOR NECESSARY FOR
    BUSINESS PROSPERITY.—IF MANUFACTURERS SHOULD COMBINE TO REGULATE
    WAGES, THE ARRANGEMENT COULD ONLY BE TEMPORARY.—THE WORKINGMEN ARE
    TAKEN CARE OF BY THE NATURAL LAWS OF TRADE.—COMPETITION AMONG THE
    CAPITALISTS SUSTAINS THE RATE OF WAGES.—OPINION OF JOHN STUART MILL
    ON THIS SUBJECT.—COMPELLING A UNIFORM RATE OF PAY IS A GROSS
    INJUSTICE TO THE MOST SKILFUL WORKMEN.—THE TENDENCY OF THE TRADES
    UNIONS TO DEBAR THE WORKINGMAN FROM SOCIAL ELEVATION.—THE POWER OF
    THE UNIONS BROUGHT TO A TEST.—THE UNIVERSAL FAILURE OF THE
    STRIKES.—REVOLUTIONARY DEMANDS OF THE KNIGHTS OF LABOR.—GOULD AND
    THE STRIKES ON THE MISSOURI PACIFIC, &c., &c.


There is no influence to which business circles are more sensitive than
the disruption of harmony between capital and labor. Whatever affects
the productiveness of labor affects, more directly than any other cause,
the national prosperity and the welfare of all classes of society. The
value of the vast aggregate of corporate property represented on the
Stock Exchange is vitally dependent on the maintenance of such relations
between the employed and employing classes as contribute to the highest
welfare of both and to the largest possible national production; and,
therefore, whatever tends to imperil such relations becomes a source of
serious disturbance to the stock market, to financial interests at
large, and to the best interests of labor itself.

There appears to be an idea, in certain quarters, that the modern
concentration of capital into large masses has made it necessary for
workmen also to organize themselves into large bodies, sinking their
individual rights and liberties and selling their labor _en masse_. For
my part, I am unable to see the force of this reasoning, although I
cannot but respect the ability of some authorities by which it is
sanctioned. It seems to assume that large employers of labor have more
power to depress wages than smaller ones; and from this it is inferred
that it is necessary for workmen to combine to protect themselves
against this supposed increased exposure to aggression from capital. But
is either the premise or the conclusion sound? In order to concede the
assumption we must suppose that large employers can cease to be
competitors for labor; for in no other way can they depress wages. But
this can never happen; for capitalists will always produce to the
fullest extent compatible with an average rate of profit, and this
ensures the largest possible demand for labor and, therefore, the
highest possible rate of wages. If employers combined to force the rate
of wages down, as workmen do to force it up, they would undoubtedly be
able to compel a temporary reduction in the remuneration of labor.

But, of necessity, such an artificial depression of wages could only be
temporary; for what was thus taken by force from labor would make
manufacturing so unusually profitable that new capital would be
immediately attracted to it, and the consequent additional demand for
labor would necessitate an advance in wages, which the combined
manufacturers would be compelled to pay. As a matter of fact,
manufacturers do not combine to regulate wages, not only because of the
reasons just stated, but also because they know that no such combination
could be maintained in the face of the jealousies and conflicting
interests that always exist among them. If, then, it is true that
manufacturers are compelled by the necessities of competition to pay as
much for labor as it is for the time-being worth, and, if they do not
and cannot combine to depress wages, I am unable to see where arises the
necessity for the workmen to combine for the purpose of protecting
themselves against capital.

The workingmen are taken care of by the natural laws of trade far more
perfectly than they can be by any artificial arrangement; and trades
unions are simply an intrusion upon the domain of those laws, without
the power to supplement or perfect their operation, and with a certainty
of obstructing and perverting their tendency, with the inevitable result
of mischief to all parties. If the unions do occasionally get an advance
in wages, it would have come by the natural laws of competition among
the capitalists. It might be delayed for a time, but if you calculate
the loss of wages and suffering entailed by the strike, I think the
workmen would be safer in the end to wait for the natural advance. I am
clearly borne out in this view of the case of the capitalist by that
great political economist, philosopher and thinker, John Stuart Mill,
who was certainly no enthusiastic friend of the capitalist, and is an
acknowledged friend of labor as widely as his writings are known, which
is almost as extensive as civilization itself.

After laying down the principles of Socialism, Mill says:

    “Next, it must be observed that Socialists generally, and even
    the most enlightened of them, have a very imperfect and one
    sided notion of the operation of competition. They see half its
    effects, and overlook the other half; they regard it as an
    agency for grinding down every one’s remuneration—for obliging
    every one to accept less wages for his labor, or a less price
    for his commodities, which would be true only if every one had
    to dispose of his labor _or his commodities to some great
    monopolist, and the competition were all on one side_. They
    forget that competition is the cause of high prices and values
    as well as of low; that the buyers of labor and of commodities
    compete with one another as well as the sellers; and that if it
    is competition _which keeps the prices of labor and commodities
    as low as they are_, it is competition which prevents them from
    falling still lower. In truth, when competition is perfectly
    free on both sides, its tendency is not specially either to
    raise or to lower the price of articles, but to equalize it; to
    level inequalities of remuneration, and to reduce all to a
    general average, a result which, in so far as realized (no doubt
    very imperfectly), is, on Socialistic principles, desirable. But
    if, disregarding for the time that part of the effects of
    competition which consists in keeping up prices, we fix our
    attention on its effect in keeping them down, and contemplate
    this effect in reference solely to the interest of the laboring
    classes, it would seem that if competition keeps down wages, and
    so gives a motive to the laboring classes to withdraw the labor
    market from the full influence of competition, if they can, it
    must on the other hand have credit for keeping down the prices
    of the articles on which wages are expended, to the great
    advantage of those who depend on wages. To meet this
    consideration Socialists, as we said in our quotation from M.
    Louis Blanc, are reduced to affirm that the low prices of
    commodities produced by competition are delusive, and lead in
    the end to higher prices than before, because when the richest
    competitor has got rid of all his rivals, he commands the market
    and can demand any price he pleases. Now, the commonest
    experience shows that this state of things, under really free
    competition, is wholly imaginary. The richest competitor neither
    does nor can get rid of all his rivals, and establish himself in
    the exclusive possession of the market; and it is not the fact
    that any important branch of industry or commerce formerly
    divided among many has become, or shows any tendency to become,
    the monopoly of a few.

    “The kind of policy described is sometimes possible where, as in
    the case of railways, the only competition possible is between
    two or three great companies, the operations being on too vast a
    scale to be within the reach of individual capitalists; and this
    is one of the reasons why businesses which require to be carried
    on by great joint-stock enterprises cannot be trusted to
    competition, but, when not reserved by the State to itself,
    ought to be carried on under conditions prescribed, and from
    time to time, varied by the State, for the purpose of insuring
    to the public a cheaper supply of its wants than would be
    afforded by private interest in the absence of sufficient
    competition. But in the ordinary branches of industry no one
    rich competitor has it in his power to drive out all the smaller
    ones. Some businesses show a tendency to pass out of the hands
    of many small producers and dealers into a smaller number of
    larger ones; but the cases in which this happens are those in
    which the possession of a larger capital permits the adoption of
    more powerful machinery, more efficient, by more expensive
    processes, or a better organized and more economical mode of
    carrying on business, and thus enables the large dealer
    legitimately and permanently to supply the commodity cheaper
    than can be done on the small scale; to the great advantage of
    the consumers, and therefore of the laboring classes, and
    diminishing, _pro tanto_, the waste of the resources of the
    community so much complained of by Socialists, the unnecessary
    multiplication of mere distributors, and of the various other
    classes whom Fourier calls the parasites of industry. When this
    change is effected, the larger capitalists, either individual or
    joint-stock, among which the business is divided, are seldom, if
    ever, in any considerable branch of commerce, so few as that
    competition shall not continue to act between them; so that the
    saving in cost, which enabled them to undersell the small
    dealers, continues afterwards, as at first, to be passed on, in
    lower prices, to their customers. The operation, therefore, of
    competition in keeping down the prices of commodities, including
    those on which wages are expended, is not illusive but real, and
    we may add, is a growing, not a declining fact.”

One principle of the unions is exceedingly unjust to the workingmen to
the last degree. It starts with the assumption that all workmen are
equal in their capacity as to the quality of service or work and the
quantity of production; and upon this false assumption is based the
injustice of compelling all members to bind themselves to a uniform rate
of pay. A greater injustice and a more flagrant inequity cannot be found
in the whole range of the world’s social institutions; nor is the wrong
the less culpable because the members voluntarily inflict it upon
themselves; for as “no man liveth unto himself” but has dependents for
whom he is bound to do the best in his power, so no man is free to throw
away to the less industrious or less competent what his superior
abilities and industry have earned for himself.

This levelling system is not only in defiance of the law of varied
endowment which the Creator has incorporated into the constitution of
humanity, but it tends to bind into one cast-iron man the entire working
community, debarring them from all chances of progress and consigning
them to a degrading condition of semi-slavery or serfdom. Time was when
the way was clear to any workingman in this country to the highest
positions of wealth, or of social standing or political influence. As a
matter of fact, a large proportion of our present successful merchants,
and not a few even of our millionaires, are men who have risen from the
ranks of labor. The first steps in their progress were won by the
superiority of their skill or faithfulness as workmen, which qualified
them to rise step by step to higher achievements. Then, the workman was
free to rise according to his abilities and his character; he was the
free ruler of his own destiny. Now, it seems the tendency of the trades
unions is to obliterate all such distinctions and virtually debar the
workman from the possibility of earning a rank among his fellowmen
proportioned to his merits; and on this plan the American workman would
be as completely cut off from the chances of social elevation, as was
the American slave twenty-five years ago. This would be a terrible
degradation, of which every man who enjoys the rights of American
citizenship should deem himself incapable and feel ashamed.

However much political leaders, and even some who rejoice in the
reputation of economists, may feel disposed to regard these combinations
as a social necessity of the time, and an institution that has come to
stay, I cannot resist the conviction that the trades-union movement has
already seen its culmination and is destined to a steady disintegration,
unless the system is greatly modified. The principle of combination is
useless unless it can be successfully employed to compel employers to
accept the terms of the employees. In fact, it has been almost the sole
object of the unions to employ it, through the agency of strikes, to
compel the acquiescence of capital. Up to a recent period, it has been
largely successful in this sense. So long as employers could at all
afford to comply with the demands of labor, they would make considerable
sacrifices to avoid the inconvenience and loss connected with the
interruption of their operations involved in a strike. At last, however,
the workingmen advanced their demands to a pitch so seriously
threatening to industry and so vitally dangerous to the material
interests of the country at large, that employers saw, with common
consent, that the time had come when a square issue must be made with
this modern invasion on their rights.

The spring of 1886 will always be memorable, for its having brought to a
fair test the power and principles of trades-unionism. Strikes were
suddenly initiated on a stupendous scale, upon the railroads, among the
western factories, and among the larger employers in the Middle States,
partly to enforce demands for higher wages, partly to shorten the time
of work to eight hours a day, and above all, to compel employers to
recognize the leaders of the unions in determining the conditions of
employment and to submit all disputes between the two parties to
arbitration. Employers, simultaneously, but without any concert of
action, met the challenge squarely. They refused to concede the demands
made; they in many instances declined to recognize the officers of the
unions; they proceeded promptly to fill the places of the strikers with
non-union men, and refused to make formal conditions with returning
strikers; they brought to bear upon the leaders of the strikes the laws
against conspiracy; and they took the “boycotters” before the courts.
The result of this treatment was an almost universal failure of the
strikers; the declaration by the courts that the compulsory methods of
the unions are illegal, and in the nature of conspiracies; the throwing
out of employment of tens of thousands of union employees, and the
exhaustion of the funds raised by the unions for enforcing their
coercive tactics.

The result of the contest was that, within one brief month, the power of
the unions was shown to be weakness itself; employers everywhere
discovered the intrinsic importance of the combinations they had so much
before dreaded, and very many respectable and reflecting members of the
unions felt themselves discredited in the eyes of the public, while
their faith in the efficiency of their system of supposed protection was
seriously shaken. After this, if I am not seriously mistaken, employers
will find that they have much less to fear from trades-unions than they
had once supposed. A defeat so fundamental as this, is likely to be
followed by the gradual dispersion of the formidable array of united
workmen. Such a result is no more than is to be reasonably expected from
an organization based upon no great truth and no sound principle, but
resting upon popular ignorance and misconception of the natural laws
governing society.

During the progress of the recent strikes, I had occasion to make
frequent allusions to the course of events, from which I may be
permitted to make the following quotations:

(The following appeared on the 3d of May.)

    “The Knights of Labor have undertaken to test, upon a large
    scale, the application of compulsion as a means of enforcing
    their demands. The point to be determined is, whether capital or
    labor shall, in future, determine the terms upon which the
    invested resources of the nation are to be employed.

    “To the employer it is a question whether his individual rights
    as to the control of his property shall be so far overborne as
    not only to deprive him of his freedom, but also expose him to
    interference seriously impairing the value of his capital. To
    the employees, it is a question whether, by the force of
    coercion, they can wrest, to their own profit, powers and
    control, which, in every civilized community, are secured as the
    most sacred and inalienable rights of the employer.

    “This issue is so absolutely revolutionary of the moral
    relations between labor and capital, that it has naturally
    produced a partial paralysis of business, especially among
    industries whose operations involve contracts extending into the
    future. There has been at no time any serious apprehensions that
    such an anarchical movement could succeed, so long as American
    citizens have a clear perception of their rights and their true
    interests; but it has been distinctly perceived that this war
    could not fail to create a divided, if not a hostile feeling,
    between the two great classes of society; that it must hold in
    check not only a large extent of ordinary business operations,
    but also the undertaking of those new enterprises which
    contribute to our national progress, and that the commercial
    markets must be subjected to serious embarrassments.

    “From the nature of the case, however, this labor disease must
    soon end one way or another; and there is not much difficulty in
    foreseeing what its termination will be. The demands of the
    Knights and their sympathizers, whether openly expressed or
    temporarily concealed, are so utterly revolutionary of the
    inalienable rights of the citizen, and so completely subversive
    of social order, that the whole community has come to a firm
    conclusion that those pretensions must be resisted to the last
    extremity of endurance and authority; and that the present is
    the best opportunity for meeting the issue firmly and upon its
    merits. The organizations have sacrificed the sympathy which
    lately was entertained for them, on account of inequities
    existing in certain employments; they stand discredited and
    distrusted before the community at large as impracticable,
    unjust and reckless; and, occupying this attitude before the
    public, their cause is gone and their organization doomed to
    failure. They have opened the flood gates to the immigration of
    foreign labor, which is already pouring in by tens of thousands;
    and they have set a premium on non-union labor, which will be
    more sought after than ever, and will not be slow to secure
    superior earnings by making arrangements with employers upon
    such terms and for such hours as may best suit their interests.
    Thus, one great advantage will incidentally come out of this
    crisis beneficial to the workingman, who, by standing aloof from
    the dead-level system of the unions, will be able to earn
    according to his capacity, and thereby maintain his chances for
    rising from the rank of the employee to that of the employer.
    This result cannot be long delayed, because not only is loss and
    suffering following close upon the heels of the strikers, but
    the imprudences of their leaders are breeding dissatisfaction
    among the rank and file of the organizations, which if much
    further protracted, will gravely threaten their cohesion. It is
    by no means certain that we may not see a further spread of
    strikes, and possibly with even worse forms of violence than we
    have yet witnessed; but, so long as a way to the end is seen,
    with a chance of that end demonstrating to the organizations
    that their aspirations to control capital are impossible dreams,
    the temporary evils will be borne with equanimity. The coolness
    with which the past phases of the strikes have been endured,
    shows that the steady judgment of our people may be trusted to
    keep them calm under any further disturbance that may arise.

    “Prior to the strike in the Missouri Pacific, Jay Gould was one
    of the most hated men in the people. He was anxious to have
    public respect and sympathy. He had made all the money he
    wanted, and was willing to spend part of it in gaining the
    respect and honor of the country. What his money could not do
    for him this strike on the Missouri Pacific has done. The
    sympathy and good-will which previously were with the strikers
    have been shifted from them to him. There is no doubt that the
    strikers selected the Missouri Pacific because it was a property
    with which Gould was known to be most largely identified, and
    because they thought that general execration would be poured out
    on him in any event. But, instead of injuring Mr. Gould, they
    have done him inestimable service.

    “The timely and forcible action of Mayor Harrison, of Chicago,
    will put dynamiters and rioters where they belong, and thus
    divide the sheep from the goats in a very short time. If
    officials would sink political bias, the country would soon be
    rid of law-breakers and disturbers of the peace. As this plan of
    treatment has now been adopted, it will be far reaching in its
    effect, and stop mob gatherings, riotous speech-making, and
    other such bad incentives, which recently have been so
    conspicuous in Chicago, Milwaukee, St. Louis, and elsewhere. The
    laboring classes, who are parties to the strike, will now have
    an opportunity to retire to their homes, where there will be
    more safety than in the streets, which will bring to them
    reflection. They will then soon become satisfied that they are
    the aggrieved parties, and the not unlikely result will be their
    turning upon their leaders, who have deceived them.

    “There have been numerous vacancies created by the strikers
    voluntarily resigning. There has been no difficulty in filling
    these vacancies by those who are equally capable, if not more
    so, from other countries flocking to our shores. The steam ferry
    between this country and Europe has demonstrated this by the
    steamer just arrived in six days and ten hours from European
    shores to our own. As the separation between the oppressed
    operatives of the Old World and America is thus reduced to
    hours, Europe will quickly send to us all the labor we need to
    meet all such emergencies.

    “The laboring man in this bounteous and hospitable country has
    no ground for complaint. His vote is potential, and he is
    elevated thereby to the position of man. Under the government of
    this nation, the effect is to elevate the standard of the human
    race and not to degrade it. In too many other nations it is the
    reverse. What, therefore, has the laborer to complain of in
    America? By exciting strikes and encouraging discontent he
    stands in the way of the elevation of his class and of mankind.

    “The tide of emigration to this country, now so large, makes
    peaceful strikes perfectly harmless in themselves, because the
    places of those who vacate good situations are easily filled by
    newcomers. When disturbances occur under the cloak of strikes it
    is a different matter, as law and order are then set at
    defiance. The recent outbreaks in Chicago, which resulted in the
    assassination of a number of valiant policemen through a few
    cowardly Polish Nihilists firing a bomb of dynamite in their
    midst, was the worst thing that could have been done for the
    cause of the present labor agitation, as it alienates all
    sympathy from them. It is much to the credit, however, of
    Americans and Irishmen that, during the recent uprisings, none
    of them have taken part in any violent measures whatsoever, nor
    have they shown any sympathy with such conduct.

    “If the labor troubles are to be regarded as only a transient
    interruption of the course of events, it is next to be asked,
    what may be anticipated when those obstructions disappear? We
    have still our magnificent country, with all the resources that
    have made it so prosperous and so progressive beyond the record
    of all nations. There is no abatement of our past ratio of
    increase of population; no limitation of the new sources of
    wealth awaiting development; no diminution of the means
    necessary to the utilization of the unbounded riches of the
    soil, the mine, and the forest. Our inventive genius has
    suffered no eclipse. In the practical application of what may be
    called the commercial sciences, we retain our lead of the world.
    As pioneers of new sources of wealth, we are producing greater
    results than all the combined new colonizing efforts which have
    recently excited the aspirations of European governments. To the
    over-crowded populations of the Old World the United States
    still presents attractions superior to those of any other
    country, as is demonstrated by the recent sudden revival of
    emigration from Great Britain and the continent to our shores.”


------------------------------------------------------------------------




                             CHAPTER XLVI.

            AN IMPORTANT SYNOPSIS.


A RESUME IN BRIEF OF THE LEADING EVENTS CONNECTED WITH WALL STREET
    AFFAIRS FOR SEVENTY-SEVEN YEARS.


_December, 1816._—The first savings banks in the United States went into
operation.

_July, 1820._—Great financial distress throughout America. The causes
were excessive importations and a deranged currency.

_August, 1833._—There was great commercial distress, caused by
contraction by the United States Bank. The bank defended its course on
the ground of the evident hostilities of the Administration, the public
deposits, amounting to $10,000,000, having been withdrawn by order of
the President.

_May, 1837._—In this year commercial distress prevailed throughout the
United States. On May 10th all the banks in New York city, by common
consent, suspended specie payments, banks throughout the country
following the example. In New York about 300 large failures took place.
In Boston 168 failures were reported. In New Orleans houses stopped
payment owing an aggregate of $27,000,000.

_May, 1838._—The banks of New York and New England resumed payment after
the suspension due to the panic of 1837. The Philadelphia banks resumed
in August, 1838, and in January, 1839, there was nominal resumption
throughout the country.

_July, 1840._—The bill organizing the United States Sub-Treasury became
a law. The act was repealed in 1841, but was re-enacted in 1846.

_October, 1842._—The first sub-marine telegraph cable, the invention of
Prof. Morse, was laid between Governors’ Island and the Battery, New
York, October 18th.

_January, 1844._—The first telegraph line in the United States was
erected. The telegraph was invented by Morse in 1837.

_August, 1851._—The depression of this year reached its height on the
13th. A bad credit system had been in vogue, trade with California had
not met expectations, imports had been large, exports of gold heavy,
cotton declined in Europe, the banks contracted, property was sacrificed
to raise ready money, mercantile credit was disturbed everywhere, and
distress was general in all the cities. In Wall Street large blocks of
stock were unloaded and the market was broken. Erie went from 90 to 68¾.
Later in the month money became easier, prices advanced, and the market
resumed its ordinary aspect.

_October, 1851._—Panic regarding the value of State money. The
Metropolitan Bank made war on the country banks to compel them to
deposit with it against their notes, which were extensively circulated
in the city. After receiving their bills the Metropolitan Bank demanded
their redemption in specie. This led to many suspensions. The bills were
well secured by State stocks, and the Metropolitan continued to receive
them. As brokers refused to take State moneys of any kind there was a
rush to the Metropolitan, and a panic prevailed. Ultimately the brokers
bought the bills at a discount and made large profits. Their purchases
gradually restored confidence, but not before four country banks had
failed.

_July, 1853._—A panic in the stock market in consequence of bank
contraction. The State Legislature enacted that the banks should publish
weekly, in the New York _Times_, statements of their condition. In
preparing for this statement the banks called in a large portion of
their loans, and ran after each other for specie. The panic was of short
duration.

_October, 1853._—Simeon Draper, a railroad banker, failed.—Stocks were
depressed on the 19th, in consequence of bank contraction. There were
several failures.

_January, 1854._.—California defaulted in its interest on the 1st, and
there was much alarm in financial circles in consequence.

_February, 1854._—Heavy failures in California.

_May, 1854._—The New York, Newfoundland & London Telegraph Company was
organized, and was the first company to attempt Atlantic cable
telegraphy.

_July, 1854._—Robert Schuyler, President of the New York & New Haven
Railroad Company, fraudulently issued nearly $2,000,000 stock of the
company. About the same time fraudulent entries, made by Secretary Kyle,
were discovered in the stock ledger of the Harlem Company, amounting to
about $470,000. Frauds were also discovered in the affairs of the Parker
Vein and the Vermont Central railway companies. In consequence there was
a rapid decline in the stock market, and many suspensions occurred in
New York, Boston and Philadelphia.

_September, 1854._—A severe twist in Erie stock on the 13th.

_October, 1854._—Frauds on the Ocean, American Exchange and National
banks were discovered.

_December, 1854._—There was a severe run on the savings banks of the
city of New York on the 9th.

_September, 1855._—A financial panic in San Francisco and many failures
of prominent bankers.

_September, 1856._—Charles B. Huntington committed forgeries amounting
to $15,000,000 or $20,000,000. The forgeries were used as collateral
security for raising money, and for a time were taken up before
maturity.

_April, 1857._—Freight-train men on the Baltimore & Ohio struck. Trains
were molested and many fights occurred. The military were called out and
a desperate fight ensued, in which many were killed and wounded.

_August, 1857._—The financial panic of this year began on the failure of
the Ohio Trust Company, with liabilities about $7,000,000. Banks either
failed or suspended specie payments everywhere. The New York banks
resumed in December. Business was generally prostrated until the
following spring, when improvement became perceptible.

_July, 1860._—Congress authorized a war loan of $250,000,000. The
National debt was $64,640,838.11. It reached $2,756,431,571, its
greatest point, in 1885.

_August, 1860._—Treasury notes to the amount of $50,000,000 were
authorized by Congress.—The first well ever sunk for oil, and the first
petroleum ever obtained by boring. The well was at Titusville, Oil
Creek, Pa. It gave 1,000 barrels a day. This was the beginning of the
petroleum business.

_December, 1860._—The Southern banks suspended specie payment on the
12th.

_April, 1861._—The lowest price at which United States bonds sold during
the war was 75 for the 5s of 1874, quoted in this month.

_December, 1861._—The National Bank system was recommended by Secretary
Chase.—A premium for gold was quoted at the New York Stock Exchange for
the first time, on the 30th.

_April, 1862._—Gold was first quoted at a premium on the 12th, and by
October 1 it had advanced to 123.

_February, 1864._—Speculation in stocks was “rampant” and “wild.”

_March, 1864._—There was a panic in the coal stocks on the 10th.—The
month was noted for a rapid rise in gold.

_April, 1864._—A semi-panic in Wall Street on the 18th.

_June, 1864._—National currency to the amount of $300,000,000 was
authorized by Congress. The full amount was issued before the close of
1867.

_August, 1864._—Gold touched 261¾, its highest point.

_July, 1865._—The Stock Exchange made a rule inflicting a penalty on
members who attended Gallaher’s up-town night Exchange.

_August, 1865._—Edward B. Ketchum, a junior partner in a prominent
banking house in New York, forged gold certificates to the extent of
$1,500,000, and they were negotiated at the banks. In addition he
abstracted more than $3,000,000 from the vaults of the firm. The firm
failed.

_October, 1865._—Call loans were made as high a per cent. and a heavy
commission added. Tight money checked a rise in stocks. Money was wanted
in the West for the moving of crops. Relief came on the demand from the
West subsiding, and by temporary loans from the Sub-Treasury to the
banks.

_November, 1865._—Prairie du Chien common stock was cornered. On the 6th
29,000 shares were bought at about 40. The trap being sprung 200 and
more was demanded, and the shorts settled at rates ranging from 110 to
210. There were several failures. It opened on a Monday at 96; on
Tuesday it ranged between 160 and 225, and closed on Saturday at 110.

_December, 1865._—The new Stock Exchange building was opened for
business on the 9th.

_February, 1866._—Toward the close, on February 20th, everybody seemed
to want to borrow money, and no one was willing to lend. The market
verged on panic. People were afraid of the course of the Government in
selling upwards of $12,000,000 gold.

_April, 1866._—Michigan Southern was cornered. The price rose from 84 to
104. The pool closed out and the price dropped to 80 within 24 hours.
Other corners were made in the same month in Reading, Rock Island,
Hudson River, Cleveland & Pittsburg and Northwestern preferred. Money
was plentiful and speculation was rampant.

_May, 1866._—The marketing of Erie stock by Daniel Drew caused a drop in
its price from 74½ on May 18th to 60½ on May 31st. The movement had very
little effect on the remainder of the market.

_July, 1866._—A panic in stocks followed the failure of Overend, Gurney
& Co., London bankers.

_August, 1866._—London markets were first quoted by Atlantic cable in
New York.

_November, 1866._—There was heavy speculation in stocks, produce, dry
goods and real estate. Poor men became rich by a single turn of the
wheel. Unexpectedly the Treasury drew about $15,000,000 for its own
purposes, money became tight and the bears became very active. Prices
declined about 10 points, and outsiders lost upwards of $25,000,000.

_December, 1866._—Northwestern preferred and Cumberland Coal were
cornered.

_January, 1867._—Prices broke on the 18th with a rush. Cumberland Coal
declined 55 points, and the general list went off in sympathy. There
were several failures. Money was tied up by bear operators.—President
Yelverton, of the Bank of North America, on learning of the failure of
A. J. Meyer & Co., the firm having overdrawn its account $219,000, was
seized with apoplexy and died.

_May, 1867._—A pool in Erie was broken by the sale of a large block of
English stock.

_October, 1867._—Daniel Drew was turned out of Erie, and the stock
advanced 10 points.

_December, 1867._—Vanderbilt secured control of New York Central.

_January, 1868._—A corner in Rock Island was broken, owing to the
company throwing 49,000 shares on the market. The stock declined
heavily.

_February, 1868._—The contest between Drew, Vanderbilt and Frank Worth
was at its height.

_April, 1868._—There was a break in Atlantic Mail, with subsequent
complications.

_June, 1868._—An unsuccessful attempt to corner Pacific Mail was made.

_July, 1868._—Jay Gould became president of Erie.

_October, 1868._—Money became stringent, owing to the withdrawal of
funds from New York for the West. The associated banks lost $20,000,000
in deposits and $12,000,000 in legal tenders, with a reduction of only
$9,000,000 in loans. Special efforts were made to break the stock
market, but the bull leaders had provided themselves with time loans,
running to the end of the year, and were thus enabled to hold prices.

_November, 1868._—Erie was cornered, and a panic extending through the
whole list occurred. It was helped by the inability of a leading
operator, a director of St. Paul, to meet puts on that stock. The common
and preferred fell about 20 points. Erie made an extraordinary issue of
shares. Later on money became more plentiful, prices advanced and the
market became very strong.

_April, 1869._—A bill to consolidate the New York Central and the Hudson
River railroad companies passed the Legislature.

_May, 1869._—The New York Stock Exchange and the Open Board of Brokers
were amalgamated under one management. The new Exchange began business
with 1,030 members and $750,000 in its treasury.—The era of
consolidations. Active stocks advanced to prices never before reached.
New York Central sold at 192-5/8. A movement to depress prices at the
close of the month met with some success.—The last rails of the Union
Pacific and Central Pacific railroads were laid. Trains began running
across the continent on the 15th.

_June, 1869._—Many brokers failed, the result of a successful bear
attack on the market.

_July, 1869._—Heavy speculation in the Vanderbilt stocks. New York
Central advanced to 217-7/8. Money was stringent.

_September, 1869._—New York Central dropped 25 points on the 22d, and a
panicky feeling was developed.—Gold reached 165 on Friday, the
24th—Black Friday. Transactions ran up into hundreds of millions, and
business was conducted with so much confusion that bids running from 135
to 160 were made at one and the same time in different parts of the
room. Between 11 and 12 o’clock the shorts settled on a basis of
148@158, the market price being 5@15 higher. At noon it was officially
announced that the Government would sell gold next day and buy bonds,
and within 15 minutes the price had fallen to 135, and the great
speculation had collapsed.

_April, 1870._—The cliques who had bought stocks on the decline after
Black Friday, started an upward movement in the last week of the month.
The public came in and top figures were reached about May 10. The
cliques unloaded, turned bears, depressed prices until margins were
wiped out, bought in again at the decline and were ready for another
advance.

_May, 1870._—The process of “shearing the lambs” was repeated in this
month.

_June, 1870._—James Boyd, carrying 40,000 shares of stock and $5,000,000
gold, failed. The market showed signs of breaking, but was sustained by
the cliques.

_July, 1870._—Congress authorized an addition of $54,000,000 to the
national currency.

_January, 1871._—A prominent operator repudiated his orders to buy
Reading. Several brokers failed in consequence. The market was only
slightly depressed.

_April, 1871._—There was much speculative excitement in the stock
market.

_June, 1871._—Rock Island was cornered. The pool began buying at 114½
and advanced it to 130-7/8. On liquidation the stock declined to 110.
Many failures occurred and bad faith was charged.

_October, 1871._—The week beginning October 9, 1871, was one of the most
eventful in the history of the Stock Exchange. The banks had expanded
beyond precedent and were compelled to contract loans to raise money for
crop purposes. The payment by France to Germany in settlement of war
claims caused the Bank of England rate to advance from 3 to 5 per cent.,
and produced a feeling bordering on panic in London. The New York market
was very sensitive when news of the Chicago fire came. Prices broke 4@10
points. On Tuesday there was great excitement; sales were enormous and
fluctuations wide. On Wednesday there was a rally on the belief that the
Government would purchase 5-20s. The lowest prices, however, were made
on Thursday. On Friday there was more steadiness and prices were higher.
The bank statement was favorable and matters quieted down.

_December, 1871._—The Ocean National Bank, the Union Square and the
Eighth National Bank failed. Money was scarce, but stocks were firmly
held. Operators and brokers were loaded up with stocks and they
sustained prices, awaiting an opportunity to get out.

_March, 1872._—The Erie revolution occurred. The Board of Directors was
overthrown, and Jay Gould resigned the presidency. Gen. Dix became his
successor. The operation caused great activity in the stock market, and
money became tight.

_June, 1872._—Stock dividends on Lake Shore and Michigan Central were
declared.

_August, 1872._—Gold was cliqued.

_September, 1872._—Erie was cornered. The Gould-Smith clique was short
of it. The stock first became scarce on purchases by German brokers for
foreign account. Then Drew became a heavy purchaser. At the same time
the German brokers were long of gold, and with the double idea of
punishing them and compelling those carrying Erie to sell out the
Gould-Smith clique endeavored to lock up money. This plan was defeated
by the refusal of two banks to pay out legal tenders on certified
checks. Just then, too, the Government bought $5,000,000 bonds and sold
the same amount of gold. This completely broke the speculative
manipulation of money, and a panic was averted. During the height of the
panic there were no quotations for money. Among the failures of the week
were Northrup, Chick & Co., bankers, the Glenham Woolen Manufacturing
Co., Paton & Co., dry goods, George Bird, Grinnell & Co., stock brokers,
Hoyt, Sprague & Co. and A. & W. Sprague. The banks suspended their
weekly statements, and they were not resumed until late in November.

_November, 1872._—Jay Gould was arrested on criminal charges based on
his management of the Erie Railroad. He surrendered securities, the face
value of which was more than $9,000,000, in December.—Northwestern was
cornered. It opened Nov. 20 at 83¾ and closed at 95. On Thursday it sold
at 100, and at the close on Friday 200 was bid. On Saturday buying in
under the rule ran the price up to 230. The settlement was made on the
following Tuesday, when the price declined to par, the highest bid made
being 85. Jay Gould, Horace F. Clark and Augustus Schell conducted the
corner, while the cornered were Drew and Henry N. Smith. It was one of
the most profitable corners ever made in Wall Street.

_February, 1873._—There was a noted corner in Northwestern.

_April, 1873._—The preliminary panic of the year occurred in this month.
The stock market was uneasy. The failure of a firm of silk importers was
followed by that of Barker & Allen, the members of which were related to
Vanderbilt. Three other firms also failed. Confidence returned and quiet
prevailed until the 26th, when the Atlantic Bank failed. This brought
about another depression, which was followed by a quick rally.

_May, 1873._—Heavy break in Pacific Mail. The further retirement of
greenbacks was prohibited by Congress.

_August, 1873._—Fraud was discovered in the issue of certain bonds of
the New York Central & Hudson River Railroad.

_September, 1873._—The New York Warehouse & Security Company failed on
the 8th; Kenyon, Cox & Co., in which Daniel Drew was a special partner,
on the 13th; Jay Cooke & Co. on the 18th, and Fisk & Hatch on the 19th.
Innumerable brokers failed. There were runs on the Fourth National Bank
and the Union Trust Company. The secretary of the company was a
defaulter to the extent of $500,000, and its doors were closed. The Bank
of the Commonwealth failed. There was a panic in the stock market, and
the excitement ran so high that the Governing Committee closed the
Exchange at 11 o’clock on Saturday, the 20th. The Gold Exchange Bank was
unable to effect all the clearances, and dealers were unable to get
their balances. The result was the temporary suspension of some dozen
firms. The Gold Exchange Bank having been enjoined by the courts from
making the clearances, the Bank of New York undertook the job and failed
in it. Next a committee of 20 was appointed to do the work, but it
failed also, because Smith, Gould & Martin refused to render a statement
to it. The final settlements were made between members themselves.
Smith, Gould & Martin, with contracts amounting to $9,000,000, settled
on a basis of 135. Business was resumed on Sept. 30.

_December, 1873._—The Credit Mobilier was organized for the construction
of the Union Pacific Railroad. It was composed of stockholders of the
railway company, and had a capital of $3,750,000. Profits were large,
and the stock was quoted at 400. Certain Congressmen were given stock at
par on their personal notes, the object being to gain their favor in
case adverse legislation was proposed. Oakes Ames, of Massachusetts, was
expelled from the House for his connection with the bribery, and James
Brooks, of New York, for accepting bribes. Other Congressmen were
censured. A proposition to impeach Vice-President Colfax was reported
against by the Judiciary Committee.

_January, 1874._—The value of the pound sterling was fixed by Congress
at $4.86.65.

_February, 1874._—Two letters, purporting to come from the Wabash and
Western Union companies, were received by the Stock Exchange, announcing
an increase of stock by the directors. The market went off three points
before it was discovered that the letters were forgeries.

_April, 1874._—The President’s veto of the inflation bill unsettled
prices and caused depression. The bears raided the market, causing a
heavy decline, but a quick recovery followed.

_February, 1875._—Wabash went in the hands of a receiver.

_May, 1875._—A receiver for Erie was appointed.

_July, 1875._—Duncan, Sherman & Co. failed.

_August, 1875._—The Bank of California failed. Cashier Ralston committed
suicide.

_March, 1876._—Jay Gould made his famous attack on Western Union.

_April, 1876._—The National Bank of the State of New York failed.

_November, 1876._—Many savings banks failed.

_January, 1877._—Commodore Vanderbilt died on the 4th.

_February, 1877._—Jersey Central went into the hands of a receiver.

_July, 1877._—Great railway strikes; rioting and incendiarism in
Baltimore and Pittsburgh; losses $10,000,000. Over 100,000 laboring men
took part in the movement.

_January, 1878._—The Vanderbilt combination, including Michigan Central,
Lake Shore and Canada Southern, was made in this month.

_February, 1878._—The purchase of silver bullion by the Government to
the amount of $2,000,000 to $4,000,000 per month, and its coinage into
legal tender dollars, was ordered by Congress on the 28th.

_May, 1878._—Congress passed the Resumption Act.

_January, 1879._—Specie payments were resumed after the suspension which
took place soon after the opening of the war of the rebellion.

_April, 1879._—Gould and Field combined, and under their auspices the
St. Louis, Kansas City & Northern and Wabash Railways were consolidated.
Gould already had control of Union Pacific and Kansas Pacific, and
afterward secured control of Missouri Pacific and Denver & Rio Grande.

_June, 1879._—Western Union declared a scrip dividend of 17 per cent.

_August, 1879._—There was a serious tumble in prices in this month.

_October, 1879._—The stock market was very active in October and
November. The bull movement of the year was at its height and
transactions were so numerous that it was impossible to record them all.
The drop came in November.

_November, 1879._—William H. Vanderbilt sold 250,000 shares of New York
Central & Hudson River stock at 120 to a syndicate headed by J. S.
Morgan & Co., of London. Early in the following year the same syndicate
took 100,000 shares on the same terms.

_May, 1880._—Philadelphia & Reading Railway and Coal and Iron Company
failed. There was a flurry in the stock market in consequence.

_June, 1880._—A scrip dividend of 100 per cent. to the holders of Rock
Island stock on the purchase and consolidation of the Iowa Southern and
the Missouri Northern with Rock Island.—A leading German Wall Street
banking house, in view of the large exports of gold, offered a premium
of 1/2 of 1 per cent. for a call on $1,000,000 gold, the privilege to
extend for one year.

_November, 1880._—The Louisville & Nashville declared a 100 per cent.
stock dividend.—Western Union declined from 104-7/8, on November 22d, to
77½ on December 17th.—Jay Gould purchased most of the stock of the
Denver, South Park & Pacific Railroad, in the following month a large
block of Iron Mountain and a majority of the International & Great
Northern.

_December, 1880._—Seats in the New York Stock Exchange sold at $25,000.
A great number of new securities were listed. So numerous were the
combinations, consolidations and extensions of railways that in many
cases the analogy with former periods was lost, and comparisons as to
earnings were of little value. In 1886 seats in the Exchange sold at
$35,000. In December, 1870, when speculation was stagnant and the market
was clear of all outsiders, seats sold at $3,000.—B. G. Arnold & Co.,
the largest coffee importing house of New York, suspended. They were the
principals in a combination to corner Java coffee, and met disaster in
the attempt.

_January, 1881._—Western Union, American Union and Atlantic & Pacific
consolidated. The former company declared a stock dividend of 38¼ per
cent. The capital stock was made $80,000,000.

_February, 1881._—Call loans were made at 1 per cent. per day on the
25th.

_May, 1881._—The Gould southwestern railway system was consolidated.

_July, 1881._—President Garfield was shot by Guiteau. The stock market
broke on the news of the shooting, and a panic was only prevented by the
intervention of Sunday and the National holiday on Monday.—The Oregon
war debt was paid.

_August, 1881._—There was heavy speculation in wheat and corn in Chicago
and New York. Money became scarce, and call loans were made at interest
and commission.

_September, 1881._—The Hannibal & St. Joseph corner.

_January, 1882._—The trunk line railway war of rates was settled.—Gould
and Huntington purchased a controlling interest in the St. Louis & San
Francisco Railway and half the ownership of the Atlantic & Pacific
Railway.

_February, 1882._—The market showed some animation early in 1882, but it
soon collapsed and became very weak. Bottom was touched on the 23d, the
recovery being based on talk of a settlement of the then existing trunk
line rate war.—Richmond & Danville plunged from 219 to 130 and a
semi-panic ensued on the Stock Exchange.

_March, 1882._—To allay reports that he was in financial straits, Mr.
Gould, on the 13th, displayed his wealth. He took from a tin box
$23,000,000 Western Union, $12,000,000 Missouri Pacific, $6,000,000
Manhattan Elevated, $2,000,000 Wabash common, and $10,000,000 bonds of
Metropolitan, New York Elevated and Wabash preferred. He offered to show
$30,000,000 additional railway stocks, but his visitors had seen enough.

_October, 1882._—A syndicate headed by the late W. H. Vanderbilt
purchased 124,800 shares of the common and 140,500 shares of the
preferred stock of the New York, Chicago & St. Louis Railway at 13 and
37 respectively. This stock afterwards became the property of the Lake
Shore & Michigan Southern Railway.

_December, 1882._—The Municipal Bank of Shopin, Russia, failed with
liabilities of $60,000,000.—The railway war in the Northwest lasted from
September until December 15. On the announcement of the settlement the
market improved and the year closed with a better feeling all around.

_February, 1883._—Western Union absorbed Mutual Union by lease, the
rental being interest at 6 per cent. on $5,000,000 bonds and 6 per cent.
on $2,500,000 stock.

_March, 1883._—A block of Hannibal & St. Joseph stock was sold to
Chicago, Burlington & Quincy. At the same time Wabash was leased to Iron
Mountain.—From the 19th until the close of the month there was great
depression. Money on call loaned at 4@25 per cent. The public was
heavily loaded with stocks.

_May, 1883._—Jersey Central was leased to Reading.

_June, 1883._—The National Petroleum Exchange and the New York Mining
Stock Exchange consolidated.—McGeoch, Everingham & Co., of Chicago,
failed in consequence of an unsuccessful attempt to corner the lard
market. The firm lost $6,000,000.—The movement against the circulation
of trade dollars at par was begun in Philadelphia and extended
throughout the country.

_July, 1883._—Western Union Telegraph operators struck for increased
pay. The strike lasted a month and ended in failure.

_October, 1883._—A notable feature of 1883 was the gigantic losses made
in speculative operations. The failures of McGeoch, of Chicago, and
Ranger, of Liverpool, were notorious instances, but thousands of private
individuals were squeezed out by the pressure.—In the summer and fall of
this year there had been a shrinkage in prices of stocks, when, in
October, the Northern Pacific Company announced a proposed issue of
$20,000,000 new bonds. This precipitated a heavy decline in nearly the
whole list. The market became largely oversold, when a sharp twist was
made in a number of stocks, and prices advanced with great rapidity.
Northern Pacific preferred jumped from 56 to 78½ within a few days, and
Oregon & Transcontinental went from 34½ to 51. Then Vanderbilt came into
the market and put up Michigan Central from 77 to 96½, and the other
Vanderbilt stocks to a less extent. Great depression followed this
manipulation.

_December, 1883._—The mercantile failures in 1883 amounted to
$173,000,000, against $81,000,000 in 1881.—The triple alliance between
Union Pacific, Rock Island and St. Paul was made.—Villard resigned from
Oregon & Transcontinental and Oregon Railway & Navigation.

_January, 1884._—Firmness in the market on the announcement that a
syndicate had made a large loan to Oregon & Transcontinental on the
pledge of its stocks. A quick move against the shorts caused a sharp
advance.—Henry Villard resigned the presidency of the Northern Pacific
Railroad.—John J. Cisco & Co., New York bankers, failed.—The surplus
reserve of the New York National banks was wiped out.—James R. Keene,
operator in wheat, failed.

_March, 1884._—There was a squeeze in New York Central. It sold up to
122.—Delaware, Lackawanna & Western was cornered, and its price was run
up to 133-1/8 regular and 139½ cash. S. V. White managed the pool.
Another move in the same stock was made later in the year. The pool
closed out at an average of 102. Then the stock dropped to 86¾.

_May 6, 1884._—The Marine Bank failed May 6th, wrecked by Grant & Ward.
Grant & Ward suspended two days later.,

_May, 1884._—During the panic the New York banks issued Clearing House
certificates to the extent of $24,915,000, of which $7,000,000 went to
the Metropolitan Bank. Similar certificates, to the amount of
$26,565,000, were issued in the panic of 1873.—The height of the panic
was reached on the 14th. The storm had been brewing for nearly three
years, but it was in no sense a commercial panic. Stock Exchange values
had shrunk to an unparalleled degree, and the crash was precipitated by
the developments regarding Grant & Ward, John C. Eno, Fish, of the
Marine Bank, and a few others. The disturbance was over by July 1.—The
Metropolitan Bank failed. Eno’s frauds on the Second National Bank
discovered. George I. Seney failed. The Atlantic Bank failed.

_June, 1884._—The greatest depression following the May panic was
reached. Large overselling led to a sharp rally.—Charles Francis Adams,
Jr., became president of the Union Pacific.

_August, 1884._—The Wall Street Bank failed.

_November, 1884._—The Metropolitan Bank, on May 15th had $11,294,000 in
deposits; on October 1st $1,338,000, and in November it went into
liquidation and retired from business.

_December, 1884._—The Lackawanna pool of 1884 closed out its holdings on
the 12th, and there being no further support to the market prices
declined, and the year closed with much depression.—The largest corn
crop ever grown in the United States was that of 1884. It was estimated
at 1,800,000,000 bushels.

_January, 1885._—Henry N. Smith, a noted bear operator, failed, and
carried down with him the brokerage firm of William Heath & Co.

_November, 1885._—The trunk lines came to an agreement and advanced
rates. This gave confidence, and an upward movement was started. The
Vanderbilts and the Grangers were the features of the market.

_December, 1885._—Texas Pacific stock collapsed. A receiver was
appointed for the property on the suit of the Missouri Pacific, a large
holder of its floating debt.—William H. Vanderbilt died suddenly on the
8th. The fact was not known down town until after business hours, but it
had a very unsettling influence. The next morning the market opened 1@3
points lower, but the bulls had combined to support prices, and bought
freely. In many instances prices were higher at the close than on the
previous day.

_February, 1886._—The trans-continental pool was ruptured. The railroads
declined to continue to pay the subsidy demanded by Pacific Mail.

_March, 1886._—Western Union declared a scrip dividend of 1½ per cent.
for the quarter. The scrip was made convertible into stock, and carried
the same rate of interest as the stock.—The representatives of the coal
companies met at a dinner party and reached “an agreement among
gentlemen” that the anthracite coal production for the year should not
exceed 33,250,000 tons.—F. B. Gowen joined the Drexel-Morgan syndicate
for the reorganization of Reading. The announcement caused a rapid
advance in all coal stocks.—The great strike on the Gould system of
railroads, inaugurated on the 7th, failed.—Heavy engagements of gold for
shipment abroad were made.

_April, 1886._—Wabash, St. Louis & Pacific were sold in
foreclosure.—Labor strikes at their height. The Lake Shore switchmen
struck in Chicago, and the Third Avenue horse car drivers in New York.
The troubles had a depressing influence on the stock market.

_May, 1886._—Charles Woerishoffer, bear operator, died May 9.—Chicago
anarchists attacked the police with bombs, killing and wounding many.
Police used revolvers freely and many rioters fell. Anarchists were
sentenced to death.—The strike on the Southwestern system was officially
declared off on the 1st. The men were completely beaten after a contest
of six weeks.—Tasker Marvin, bull operator, failed. Marketing of long
stock caused decline. The depression was aided by existing labor
troubles.

_June, 1886._—Western Union passed its dividend.

_November, 1886._—The managers of the trunk lines reaffirmed the
presidents’ agreement of the previous year to maintain rates.—Richmond &
West Point Terminal became very active and strong on the purchase by the
company of the control of Richmond & Danville.—There were extraordinary
buoyancy and speculative activity in stocks. Low priced non-dividend
payers were largely dealt in. One specialty after another was “boomed,”
and in some instances large profits were made.

_December, 1886._—About $10,740,000 in gold was imported at New York
during the month.—Prices toppled over on the 15th. All kinds of cheap
stocks had been boomed by cliques, when, on money becoming tight, there
was a rush to realize. Sales reached the unprecedented figure of
1,095,159 shares. The most conspicuous stocks in the decline were
Philadelphia & Reading and New York & New England. No financial disaster
or failure of importance occurred. There was much uneasiness for several
days, but a better feeling soon set in, although speculation was checked
by the prevailing high rate for money.—The Inter-State Commerce bill was
introduced in Congress.

_January, 1887._—On a report that Hocking Valley had suffered by
irregularities of former directors, stock broke 1½ points. The
consumption of iron in the United States exceeded that of Great Britain
for the first time in 1886. The Inter-State Commerce Bill was passed by
the House Jan. 21, by a vote of 5 to 1. European war rumors caused
foreign selling and a break in the market of 2 to 5 points. There was a
complete recovery on the following day.

------------------------------------------------------------------------




                             CHAPTER XLVII.

     INTERNATIONAL SIGNIFICANCE OF THE BARTHOLDI
                             STATUE.


GREAT AS AN ACHIEVEMENT OF ART, BUT GREATER AS THE EMBODIMENT OF THE
    IDEA OF UNIVERSAL FREEDOM THE WORLD OVER.—IT IS A POETIC IDEA OF A
    UNIVERSAL REPUBLIC.—ENLIGHTENMENT OF THE WORLD MUST RESULT IN THE
    FREEDOM OF MAN.


The following was sent by me to the New York _World_, as briefly
embodying my views on Bartholdi’s great work, a few days prior to the
dedication of the Statue of Liberty:

“When, several years ago, the gigantic forearm, with the torch in its
hand, of the Statue of Liberty was exhibited in Madison square, the
people who gazed at it with idle curiosity had little idea that the
mammoth structure of which it was a part would so soon be completed, or
that it would be so great an achievement as it now stands. Thanks to the
New York _World_, which gave the impetus to the subscription fund
movement, which enabled the great sculptor to realize the greatest
artistic dream of his life within a reasonable period. Some people may
imagine that the time has been long, but many people who understood the
magnitude of the work, and observed the slowness of the subscriptions,
had no hope of seeing it finished in this generation prior to the time
the subscription for the pedestal was under way.

“Until the last few days, when this colossal goddess arose on Bedloe’s
Island in all her full, finished and magnificent proportions and
artistic splendor, like the ancient divinity emerging from the foam of
the sea, the people did not begin to realize the magnitude of
Bartholdi’s idea. In mere mechanical size the statue with its
appurtenances excel anything and everything of the same character in the
world. It is the biggest thing of its kind either ancient or modern, and
is, therefore, the most appropriate emblem to show forth the evolution
and the international and historic associations of the two greatest
Republics that the world has yet seen. The Colossus of Rhodes, the great
Sphinx and other colossal statues sink into insignificance when compared
with the latest production of Bartholdi’s brain.

“But great as the statue is as a work of art, the international idea
which it embodies is greater still. When taken in connection with that
earlier and comparatively insignificant effort of the same eminent
artist, the Statue of Lafayette in Union square, the Colossus of Liberty
suggests a whole century of history, replete with greater events than
the thousand years which preceded it. In these two statues the
interdependence of the two great nations is clearly portrayed, and their
destiny as the pioneers of universal Republicanism brought out in bold
relief. If Tennyson’s poetic dream of a universal Republic is ever to be
realized it will come through the idea which the chisel of Bartholdi has
immortalized, and which the _World_ has been chiefly instrumental in
providing with a local habitation and a name on Bedloe’s Island.
European monarchs are now trembling on their thrones, which are doomed
to crumble into ruins at no distant day, through the very idea which
‘The Statue of Liberty Enlightening the World’ is destined to propagate
from this day forward in its imposing position in our spacious harbor.
The Israelites of old were cured of their bodily maladies by gazing at a
serpent erected on a pole. In a similar way the politically afflicted
and oppressed of all nations, as soon as they emerge through the narrows
of our magnificent bay, either by day or night, will find a panacea for
all their ills in the sight of that wonderful statue, with all that its
name implies.

“And one word as to what is in that name which has been so severely
criticised. On account of it Americans have been charged with egotism,
but those who talk in this way seem to forget that Bartholdi himself, as
the representative of the French nation, is the author of the name. So,
as it comes from him in his representative capacity, we can receive it
with good grace, and without being amenable to any such charge as that
referred to. Taken, with all its broad, historical associations, I don’t
think the name is at all too pretentious. I have no hesitation in
predicting that, ere the present century draws to a close, results will
fully justify the assumption.

“The magnificent gift of the French people, and the years of toil and
study which Bartholdi has devoted, gratis, to his unprecedented labor of
love, cannot fail of the great and only reward which both have so
earnestly and magnanimously sought, namely—to enlighten the world.”


------------------------------------------------------------------------




                             CHAPTER XLVIII

     LARGE FORTUNES AND THEIR DISPOSITION.

HOW THE FORTUNES OF THE ASTORS WERE MADE.—GEORGE PEABODY AND HIS
    PHILANTHROPIC SCHEMES.—JOHNS HOPKINS AND HIS PECULIARITIES.—A. T.
    STEWART AND HIS ABORTIVE PLANS.—A SCULPTOR’S OPINION OF HIS
    HEAD.—ECCENTRICITIES OF STEPHEN GIRARD, AND HOW HE TREATED HIS POOR
    SISTER.—HIS PENURIOUS HABITS AND GREAT DONATIONS.—JAMES LENOX AND
    THE LIBRARY WHICH HE LEFT.—HOW PETER COOPER MADE HIS FORTUNE, AND
    HIS LIBERAL GIFTS TO THE CAUSE OF EDUCATION.—SAMUEL J. TILDEN’S
    MUNIFICENT BEQUESTS.—THE VANDERBILT CLINIC.—LICK, CORCORAN, STEVENS
    AND CATHARINE WOLF.


I shall take a short review in this chapter of some of the most
prominent wealthy men who have been the architects of their own
fortunes, and comment briefly on their methods of disposing of their
estates.

In the United States, John Jacob Astor was one of the first to arrest
public attention in the matter of large fortunes. Before his day there
were few, if any, millionaires on this side of the Atlantic. Now there
are thousands of these lucky individuals. It is true, George Washington,
the Father of our country, was very comfortably fixed, and supported
aristocratic style in his domestic life, but he probably never was worth
more, all told, than $200,000. It is singular that none of his
successors have ever been worth even this amount. It was believed at one
time that Grant had accumulated a large amount of money and value, and
was fast approaching the financial status of a millionaire, but this
popular delusion was suddenly dispelled when he and his family were
victimized by the first young Napoleon of finance, Ferdinand Ward.

The founder of the now wealthy house of Astor and of the Astor Library
died in 1848, at the age of 85. He left the greater bulk of his estate
to his son, William B. Astor. He bequeathed $400,000 to the Astor
Library, also a few legacies, amounting in all, the library inclusive,
to about $500,000. His wealth, at the time of his death, was estimated
at twenty millions, a very large fortune at that time.

William B. Astor, who died in 1875, left $250,000 to the library, and
the large balance of his estate to his sons and widow.

The Astors have been characteristic for their benefactions, in a quiet
way, to a large number of public objects. Their estate is remarkable for
the way it has been kept intact, and for its steady and considerably
rapid improvement, and they are popular as landlords.

The elder Astor who came to this country from Waldorf in Germany, near
Heidelberg, before he was 20 years of age, and who started in life
dealing in furs, had a grand scheme on foot at one time for monopolizing
the fur trade of the whole world, which he had calculated would then
have brought him a million dollars a year. He was diverted from this
purpose by the large profits which he found in real estate, by dealing
in which he made most of his money; and the family has steadily adhered
to this line of speculation and investment through two generations.

The native American who, perhaps, ranks above all others in the
munificence of his gifts, and the beneficence of his purpose was George
Peabody. He was a poor Massachusetts boy, who, by hard industry, arose
to be one of the largest millionaires of his day. He was also a
philanthropist in the highest sense of the term. His fortune at one time
probably exceeded ten millions. His well-known benefactions, during his
life, exceeded seven million dollars, and it is supposed that he gave
away vast amounts in charity of which no definite account was kept.

Shortly before his death, in 1869, he bequeathed two and a half millions
as a building fund for lodging houses for the poor of London, and
devised for a Southern Education Fund two million one hundred thousand.
In addition to these he left five millions to various relatives. J. S.
Morgan, who was Mr. Peabody’s partner in the banking business, became,
at his death, his successor, and is now supposed to be a richer man than
Mr. Peabody ever was.

Johns Hopkins, who died at Baltimore in 1873, at the age of 78, was one
of the most eccentric millionaires and philanthropists. Very few
expected that he would bequeath the great university and the hospital
which are called by his name. He was so wretchedly penurious that he
hardly afforded himself the means of subsistence. His benefactions to
these two institutions, however, exceed eight million dollars.

Alexander T. Stewart, the great dry goods merchant, who was reputed to
be one of the three wealthiest men in the United States, Commodore
Vanderbilt and John Jacob Astor being the other two, died in 1876. He
had no legitimate heirs, and his estate, estimated at one time between
twenty and thirty millions, was left to his wife, with the exception of
a million to Judge Hilton and $325,000 to his employes.

Mr. Stewart’s two great benefactions were failures, as he left nobody
able and willing to carry out his intentions in regard to their
arrangement.

They would probably have been failures in any event, as they seemed to
the majority of people to be in a large measure Utopian. One was Garden
City on Long Island, intended to be homes for industrious mechanics on a
higher and more comfortable scale than the majority of the dwelling of
these sons of physical and intellectual toil. A grand cathedral was
built there in memory of the merchant prince, and a beautiful crypt for
his mortal remains, which were stolen from St. Mark’s churchyard shortly
after the interment.

The mechanics and laborers were not attracted to Garden City, and it is
now making slow progress with tenants whose avocations are generally in
the higher walks of life.

The other great enterprise was a home for girls and women at moderate
expense. This was in the shape of a hotel on a large scale at Park
Avenue and Thirty-third street. The restrictions and the prices were
such that the home also failed to attract the class it was intended for.
The public gift, therefore, reverted to the Stewart estate, or rather
was taken forcible possession of by the trustees and transformed into
the Park Avenue Hotel. To carry out the rather indefinite terms of the
bequest would probably have involved the expenditure of a very large
amount of the Stewart estate, and, perhaps, the enterprise would even
then have been a failure. It is more than probable that if Mr. Stewart
had lived a few years longer, he himself would have been satisfied with
the impracticability of both his semi-philanthropic schemes.

There were great things expected in the shape of benefactions from Mr.
Stewart at the time of his death. He had done so little in that respect
while living that the public indulged the hope that he would make up for
his charitable shortcomings when he found that his worldly accumulations
could no longer be of any service or gratification to him, and that he
could not take any of them away with him.

Hence, it was a considerable disappointment to the public when the will
revealed the fact that nothing had been devised, out of the immense
hoard of nearly half a century’s savings, to charitable purposes.

On the day of his death I had an engagement with my dentist, Mr.
Dwinell, in Thirty-fourth street, and while I was seated in the chair
Mr. Wilson MacDonald, the well known sculptor, came in to pay a visit to
the dentist, with whom he was well acquainted. Having been introduced by
the sculptor, we immediately entered into conversation on the prominent
local topic of the day, the death of Mr. Stewart and the probable
distribution of his wealth.

Mr. MacDonald invited me to go to his studio to see a bust in clay of
Mr. Stewart that he had just about finished. He said, “I knew Mr.
Stewart’s aversion to having any portraits or photographs taken of
himself during his lifetime, so I provided for the emergency some time
ago by taking close observation of him at various intervals. During the
past two years I have frequently come in contact with him, going into
his store and getting a good look at him from various points of view, so
as to impress his likeness upon my mind. I have thus succeeded in
getting a pretty good bust of him in clay.”

Mr. MacDonald was very anxious that I should call and see this bust,
because, as I knew Mr. Stewart so well, he inferred that my judgment
would be worth something, and he expressed a desire that I should
criticise his work. I promised him I would call and see the bust as soon
as I could spare the time.

On leaving the dentist’s office I made another engagement to go back the
following week, and in the meantime I had been unable to call at the
studio of the artist, but the latter happened to be in the office of the
dentist when I called there again. The will of Mr. Stewart had been
published in the interim, and in it all reference to charities and
benevolent institutions had been carefully omitted.

Mr. MacDonald reminded me that I had not called to see the bust, and
added, “If you had called that time you would hardly recognize any
resemblance between what it is now and what it was then.” “How is that?”
I inquired. “Because,” he replied (facetiously), “as soon as I saw the
will published in the newspapers and none of that immense pile left to
the public, from whom it had been collected, I set to work and toned
down the bumps of benevolence, conscientiousness, sublimity, veneration
and ideality, making those of acquisitiveness, inhabitiveness,
amativeness and all the selfish and animal propensities prominent. I
naturally concluded, if phrenology is not a fraud, that Stewart’s will
was a manifestation of the non-existence of the higher and more humane
organs in his cranium. There certainly could be nothing there indicative
of any generous emotions.”

I think everybody who knew the great dry goods merchant will be inclined
to say that the judgment of the sculptor was neither rash nor
uncharitable.

                            STEPHEN GIRARD.

Stephen Girard was another of the great millionaires who arose from
penury, and whose eccentricity took a philanthropic turn. Mr. Girard was
a Frenchman, born near Bordeaux in 1750, who made his home in later
years in Philadelphia. He bequeathed over two million dollars to found
and endow Girard College in that city.

There is a good story told, which seems to be well authenticated, of the
manner in which Mr. Girard rewarded the ingratitude of a sister. When he
was a boy about ten he manifested very little disposition for hard work,
and his family treated him harshly. One morning a rumpus arose about his
idleness, and having said something that aroused the ire of his sister,
she clutched the broom and flew at him in a rage. He retreated,
receiving a few hard blows over the shoulders as he passed for the last
time over the threshold of his paternal home. He went to sea, his father
having been a seaman, and through various vicissitudes of fortune
eventually turned up as a millionaire in Philadelphia.

After young Girard had gone through the preliminary course as cabin boy,
trading between France, the West Indies and New York, he had saved up
some money and became part owner of a small trading vessel. This was in
1776, the year of the Declaration of Independence. His trading was
suspended by the war with Great Britain. He then speculated in the
renting of a number of stores in Philadelphia, and sub-let them at a
large profit. Afterward he purchased a controlling interest in the stock
of the old U. S. Bank in 1812, and became a private banker with a
capital of more than a million. Subsequently he loaned five millions to
the Government to help defray war expenses.

In the meantime fortune, however, had not favored his irate sister, who
had chastised him with the broom. She remained poor. She had heard of
her brother’s wealth, however, but did not have money enough to pay her
passage to this country. In this extremity she went to the captain of a
Philadelphia vessel in a French port and told him that she was a sister
of Stephen Girard, without money, and desired to go and see her brother,
who was well known to the captain. She received the best accommodation
that the vessel could afford. Having arrived in Philadelphia the gallant
captain escorted her to the house of her wealthy brother. Leaving her in
the hallway he went in to see Mr. Girard and told him that a lady
outside wished to see him. The benevolent captain was prepared to behold
a demonstration of joy, which he thought would be exhibited as soon as
the long lost brother and sister should recognize each other. He was not
kept long in suspense. Mr. Girard knew his sister instantly. “_C’est
vous._” “It is you,” he said. “Oui,” she replied. These were all the
words that passed. There was no rushing into each others arms, but on
the contrary, Mr. Girard plunged at the captain in a lively mood. “What
authority had you to bring that woman here?” he said. The captain was
dumbfounded and hardly knew what to answer. “Take her back again at your
own expense,” he added.

The captain did not stand a minute on the order of his going, and the
millionaire’s sister, without receiving one kind adieu, was conducted
from the palatial mansion of her brother to the vessel, and thence to
her pauper home in France.

This shows that the great philanthropist had a good memory and was
resentful of injuries, yet it also betrays a narrowness from some taint
of which the greatest minds are not entirely free. The Girard sister was
unable to comprehend the higher aspirations of her young brother and his
intelligent convictions, which had, no doubt, taken form at that early
period of his life, that a man can never become wealthy by hard manual
labor. He was wrong, however, in giving her the cold shoulder. She was
correct in one sense, from her point of view, although a narrow view,
and his large charity should have condoned an error arising from her
superficial conception of his early designs.

His narrow-mindedness, with all his genuine greatness, and his
eccentricity were exhibited in a remarkable degree in some of the
restrictions of his will regarding the college. Although he was
exceedingly generous in his gifts to religious denominations, without
distinction, as well as to charitable institutions generally, he was,
though illiterate, a free thinker of the school of Voltaire and
Rousseau. He, therefore, had inserted in his will a prohibitory clause
to the effect that no clergyman should be permitted to have anything to
do with Girard College, nor even be admitted as a visitor. The college
is for orphans between six and ten years of age, who are put to a trade
when they are sixteen, all expenses being defrayed until they are able
to earn a living. There are now over 500 beneficiaries. Girard died in
1831, at the ripe age of four score and one. He was worth nine million
dollars, of which but a very small pittance went to a few of his
relatives, the great bulk of the estate having been distributed among
charitable institutions. This great philanthropist was exceedingly close
in money matters with men generally, and it is said that he never had a
friend, except the friend in the pocket, which is by all odds the most
genuine.

The late James Lenox takes rank with the great philanthropists of the
age, in attempting to devote a large portion of his surplus wealth to
the good of humanity. When he died, in 1880, at the age of eighty, he
was supposed to be one of the five wealthiest men in New York. He spent
a million dollars to found and endow the Presbyterian Hospital at
Seventieth street and Madison avenue, and over a half million in
building the Lenox Library at Seventieth street and Fifth avenue.

The building and the library are both immense gifts, but admission to
the latter is so hampered by red tape, forms and ceremonies that it is
of little or no earthly use to the general public. As a piece of
architecture the building may, according to the ideas of the famous John
Buskin, help to educate the people, but in other respects they derive no
benefit from it. The library, which is built on ten city lots, contains
the choicest selection of books in the world, outside of the British
Museum, besides valuable manuscripts and works of art, and its
collection of American works is unsurpassed anywhere. That part of the
collection, consisting of Mr. Lenox’s own private library of 15,000
volumes, contains books of rare value, many of which could not be
duplicated. This is one reason why the general public are excluded.

In fact, there is a good deal to be said in favor of the fastidious care
that is taken of some libraries and picture galleries, as a large
portion of the general public don’t know how to appreciate their
privileges, and therefore abuse them, some through the relic monomania
and others actuated by pure mischief. Thus it was that Mr. William H.
Vanderbilt was very reluctantly obliged to exclude the general public
from his fine picture gallery, as certain visitors scratched the
etchings with their canes and put their fingers on the pictures, while
others were incessantly on the relic hunt and had to be carefully
watched during their visit.

                             PETER COOPER.

Peter Cooper was another of the philanthropists, with large means, who
sought to distribute a considerable part of it where it would do the
most good to humanity, especially to that portion of it who are in
pursuit of knowledge under difficulties. Mr. Cooper had a hard time of
it himself getting a fair education, and he knew how to appreciate the
boon. He was born in New York in 1791, and at the age of seventeen was
apprenticed to a coachmaker. He tried his hand at several other
occupations, was an inventor by nature, and the designer and builder of
the first locomotive in this country, which had its trial trip on a part
of the Baltimore & Ohio Railroad.

Mr. Cooper experienced his great success in fortune building in the
manufacture of glue. He afterwards erected extensive iron works at
Baltimore, Maryland, and subsequently in Trenton, New Jersey. During his
life he built the Cooper Institute, at a cost of $650,000, with a
subsequent donation of $150,000. This institution is devoted to the
instruction and elevation of the working classes. It consists of a large
reading room and library and a public lecture hall. The building
occupies a small block at the junction of Third and Fourth avenues and
Eighth street. It has evening schools, attended by 2,000 pupils; a
school of design for females, in which there are 200; also, a school of
telegraphy for women, from which, in two years, over 300 operators have
been sent out.

The rents from the building on the lower floor and the offices defray
the greater portion of the expenses. Ample provision was made in Mr.
Cooper’s will for the permanence of the institution. During his life he
was a general donor to all kinds of charitable institutions, and almost
every variety of labor organization. He ran for President in 1876 on the
Greenback and Labor ticket, and was defeated by an overwhelming
majority. He had an idea that a large issue of greenbacks would create
universal prosperity and make everybody happy. He died in 1883, at the
age of ninety-two, leaving five or six million dollars, the greater
portion of which fell to his son and daughter, the latter being the wife
of Mayor Hewitt.

One of the greatest of American philanthropists, especially as his
princely bequest was rather unexpected, was the Hon. Samuel Jones
Tilden, whose financial and political career I have referred to in
another chapter. He was about seventy-three years of age at the time of
his death, in August, 1886.

Mr. Tilden died worth about five millions, four of which he left to be
donated to public and beneficent objects. The greater part of this is to
be spent in the erection and endowment of a grand free library, which,
if the terms of the bequest are properly administered, will be the
greatest institution of its kind in this country.

The disposition of the Vanderbilt fortune, up to the present time, has
been briefly described in the lives of the various members of the family
in another chapter. The Clinic of the College of Physicians, however,
which has recently been opened at Sixtieth street and Fourth avenue, is
entitled to greater detail, as it is, perhaps, destined at some future
day to become a great medical centre. Mrs. W. D. Sloane, daughter of Wm.
H. Vanderbilt, subscribed $250,000 to build the Maternity Hospital, in
connection with this institution, her father having, prior to that,
donated the balance of the million necessary to finish the entire
structure, which consists of the Clinic, the Maternity Hospital and the
College Hospital. It is said that in all their appointments the
different departments of this institution are superior to anything of a
similar description in the world.

Among the men who disposed of great fortunes I may mention James Lick,
of California, who devoted millions to charitable purposes; William W.
Corcoran of Washington, who gave two millions for an art gallery and a
home for old, decrepit and superannuated women; also, Mr. Stevens, of
Hoboken, who devised two millions, one for the Stevens Battery and the
other for the Stevens Institute at Hoboken. Miss Catharine Wolf, who
died last year worth twelve millions, bequeathed largely of her estate
to charitable purposes, and donated her magnificent art gallery to the
Metropolitan Museum of Art.

What a lesson is taught in these examples of philanthropic celebrities
to our fellow-beings—I was going to say fellow citizens, but that would
not be appropriate in many instances—the Socialists. Those millionaires,
who have all more or less been denounced as hard-hearted monopolists,
have been among the hardest workers and thinkers all their lives, many
of them denying themselves the luxuries and some of them even the full
necessities of life. For what purpose? Simply to be the hard worked and
poorly fed mediums of accumulating wealth to relieve the necessities and
minister to the comfort of the less fortunate, the idle, the dissipated,
the poor and the needy, and in general those who misunderstood and
abused them on account of their good work.

It was good for those benefactors of humanity that virtue is its own
reward.


------------------------------------------------------------------------




                             CHAPTER XLIX.

       SOUTHERN AFFAIRS IN SPECULATION.


THE PRESERVATION OF THE UNION A GREAT BLESSING.—TO LET THEM “SECESH”
    WOULD HAVE BEEN NATIONAL SUICIDE.—HOW IMMIGRATION HAS ASSISTED
    NATIONAL PROSPERITY.—RESCUED FROM THE DYNASTIC OPPRESSION OF
    EUROPEAN GOVERNMENTS.—SHOWING GOOD FELLOWSHIP TOWARDS THE SOUTHERN
    PEOPLE AND AIDING THEM IN THEIR INTERNAL IMPROVEMENTS.—THE SOUTH,
    IMMEDIATELY AFTER THE WAR, HAD GREATER ADVANTAGES THAN THE NORTH FOR
    MAKING MATERIAL PROGRESS.—THE BUSINESS OF THE NORTH WAS
    INFLATED.—THE STATES OF GEORGIA AND ALABAMA OFFERED INVITING FIELDS
    FOR INVESTMENT.—ISSUING STATE SECURITIES, CHEATING AND
    REPUDIATING.—PRESIDENT JOHNSON CHIEFLY TO BLAME FOR THE BREACH OF
    FAITH WITH INVESTORS WHO WERE SWINDLED OUT OF THEIR MONEY.—REVENGE
    AND AVARICE UNITE IN FINANCIAL REPUDIATION.


During the war I did all that lay in my humble power to farther the
cause of the Union, believing that it was a righteous one, and that the
North went into the struggle to maintain, uphold and preserve the best
form of government known to man, and certainly the only one suitable to
America.

View it as we may, the wisdom of man has yet evolved nothing to surpass
the Constitution of the United States. Whether Thomas Jefferson or
Thomas Paine was the author of its leading features, is a matter that I
shall not stop to discuss, but suffice it to say, that upon it has been
established the best government in the world. There is no other system
in ancient or modern history that could weld together and bring into the
social and political affinity of one great integral harmony the immense
variety and diversity of human elements that are dwelling as one large
and comparatively happy family in the United States.

What other system could combine so many nationalities, creeds, passions
and prejudices, modifying all of them and uniting all for the general
good and the perfection of a higher development of human nature in
political and social life?

There is none. We must go to the pleasanter pages of political fiction
to find a comparison.

This country has made greater strides in each decade towards the
possible approach of More’s Utopia or Plato’s Republic than any other
country has done in the same number of centuries.

It must be admitted that we are a considerable distance from the happy
goal contemplated by the writers named, but we are moving in the
direction to show that its attainment is possible. We shall yet
accomplish what the world has hitherto considered a pleasant fiction
overworked through the highest ideal of Greek art.

This high state of development is what we are coming to in spite of the
fact that the average ward politician has immense chasms to cross before
the hill tops of his evolution shall appear in sight. When he begins to
climb, however, his ascent will be marvellously rapid and he will leave
that vehement youth of Longfellow’s, whose watchword was Excelsior, far
in the distance. Moreover, his steps will be steady and prudent, and not
liable to unfortunate reaction or fatal mishap.

It has been said that revolutions never go backward. With much stronger
emphasis it may be asserted that evolutions in a Republic like those I
am now contemplating never recede, but still press forward and upward
towards the mark of a higher ideal.

A large proportion of the people who come here do so for the chief
purpose of getting away from other forms of government that are despotic
in their rule and oppressive to their subjects.

These people who come to us are saved and redeemed Their lives would
have been wasted if they had remained in the land of their birth. In
this country, they not only add to the wealth of the nation, but they
become useful members of the social fabric, with few exceptions,
enjoying happiness themselves and bringing up children, whom they teach
to admire, honor and revere the institutions of this country in contrast
with the land of their own nativity.

This country has thus become the asylum for the down-trodden of every
nation, and it is a great gainer by the contrast thus constantly
presented to the minds of those who come here. Our own people are also
in this way taught to appreciate their privileges and set a higher value
upon the advantages they enjoy.

If it were not for the constant stream of immigration to these shores,
the people of this country might begin to think that Republicanism was
the birthright of all, and forget that they enjoyed especial privileges
by birth, and came into this world with a very important start of other
nations. I fear that some of them are prone to imagine, especially some
of the fair sex, that we suffer here from that long felt want of a
hereditary and native nobility. Some of these fair ones have had sad
experience, that should have disabused their young minds of these
notions not very long ago. The force of these examples will have some
effect, at least, in moderating the folly of their mothers. It can
hardly be expected that many of the young ladies will learn much
themselves, except by a repetition of the same sad experience, but the
persuasive powers of the mammas may exercise a deterring effect in many
instances where hasty matrimonial alliances to catch the bauble of a
foreign title would be the forerunner of much misery and sometimes
shame.

I might cite many instances of these from our own city, but the
sensational papers will deal with them _ad nauseam_. I don’t aspire to
be sensational in this book. I only attempt to state in matters of this
kind what may suffice to point the moral, leaving the sensational
story-teller to adorn the tale Nor do I mean to cast any reflection on
such happy marriages as that of Miss Jerome to Lord Randolph Churchill,
and others I could mention.

Our expansive territory has enabled the adventurous and energetic of all
nations of the world to come here and make homes for themselves, instead
of remaining in the land of their birth, where many of them were
existing in a modified condition of slavery under other names.

The idea of encouraging this large exodus from other lands, and this
freedom of assimilation with our people, has been one of the great
bulwarks of our prosperity.

I realized this fact very clearly at the commencement of the war of the
Rebellion, and have cherished it ever since.

I therefore felt deeply earnest in my sympathy with the North against
the South, whose great effort was to break up the present form of
government, attempting to destroy its autonomy and powerful
cohesiveness.

The nation would have been split in twain to start with, if Horace
Greeley’s advice had been taken, “Let them secesh.” Mr. Greeley’s
counsel was well meant, as he thought the Southern people would soon be
glad to return to the Union, but it would have been national suicide to
follow it.

The two parts of the dissevered nation would have been constantly
menacing each other, and kept on a war footing, with occasionally
recurring hostilities across the border on every slight provocation. The
result would have been that some or all of the European powers would
have taken advantage of this state of affairs to plant the standard of
despotism once more on these shores, making this fair land a battle
ground for Imperial and kingly ambition.

These designs were foreshadowed by Napoleon III., whose actions I have
dealt with more fully in another place, and Great Britain was only
awaiting the opportunity to avenge Bunker Hill, Saratoga and Yorktown.

In fact, all the powers of Europe would have taken advantage of the
chance of acquiring a slice of such a fine domain, where in the event of
successful secession only feeble resistance could have been offered to
foreign aggression.

In the event of a decisive victory for the Confederate arms, faction
fights would have always been springing up, and the tendency would still
have been increasing to create a greater number of separate and
independent governments.

Napoleon had been looking at matters in this probable light, when he
resolved to make Mexico a backdoor, with Maximilian as its keeper, to
enable him to gain an entrance to this country when a favorable
opportunity for the completion of his purposes should arise.

Having myself been born in a foreign land, where I passed my boyhood’s
days, I have a vivid recollection of the workings of the harsh system of
a European government, although by the accident of birth I was placed in
circumstances where the pressure on myself was not very galling.

I saw enough, however, to make a durable impression on my mind, to
arouse my sympathies for others and to excite my lasting indignation
against dynastic oppression.

I lost no opportunity during the dark days of the rebellion in this
country, to be outspoken in favor of the cause which I had espoused from
a firm conviction that it was right. I did all I could to help to
promote ways and means for aiding the North in carrying on the war. I
went into the contest with my whole heart, and gave my entire and
undivided attention to the sale of Government securities to raise the
sinews of war.

In this way, I believe, I rendered more valuable assistance to the cause
than if I had been performing deeds of valor amid the roar of cannon and
the rattle of musketry.

I became pronounced in my opinions and made myself active in organizing
meetings to celebrate every victory of the Union army, thus inspiring
the men in the field and the recruits on their way thither, and
sustaining the hearts of our business men to place implicit confidence
in the future triumph of the nation.

It required more courage than many people now imagine to take this stand
at that time, for opinion was largely divided in this city on the
prospects of the issue, and a strong sentiment in favor of the enemy
threatened at one time to become predominant.

Many people were eyed with very strong suspicion during the greater part
of the struggle in regard to their loyalty, who had followed the course
of extreme prudence in keeping their counsel, being doubtful of the
result. I took the ground that citizenship would not be worth much in
the event of final disaster to the Union cause. I was also of the
opinion, when the war was ended to the glory of the country and the
maintenance of the Government on a substantial basis, that the time had
come to bury the hatchet.

I believed not only in bringing back the South under the old flag, but
also in extending the right hand of fellowship to the people, who,
whatever may have been their faults, had been terribly punished.

I believed that no good could come out of a policy that persisted in
trampling upon a fallen foe, especially as that foe had, after all, only
been an erring brother, and could be brought back again into the family
fold to share its mutual sympathy and material prosperity.

I felt, therefore, that I could afford to be prominent in a movement
that had this great and harmonious end in view, the more especially as
my loyalty had never been questioned in the hour of our greatest peril.

I not only extended the right hand of fellowship to Southern men, but
gave aid and comfort to them wherever they appeared in our midst.

My office, therefore, after having been the headquarters of loyal
Northern men, and for every project in the interest of the Union cause,
became notorious as the rendezvous of Southern generals and Southern
people generally, almost as soon as the war was over.

General Beauregard was one of the prominent leaders of the Confederacy
to whom I exercised the liberty of extending hospitalities on his first
visit here. I relaxed no effort to make his visit agreeable, and show
him the sights around the city. I recollect escorting him as my guest to
the Gold Room, which was then quite an institution in Wall Street. At
this time gold was selling at a premium of about 50.

On our entrance to the Room it was at once whispered around that my
distinguished guest was General Beauregard. The President of the Board
was at that time outspoken and bitter in his opinions against everything
Southern, and had not the good sense and common manners to conceal his
animus on this occasion. Others took a similar attitude, and the feeling
manifested became as belligerent as if the war had been actually raging.

This exhibition of bad blood and bad manners was very distasteful to me.
I was a member of this Exchange, and I thought I knew my rights, and I
was disposed to maintain them. I regarded the insult to Beauregard as
offered to myself, and was prepared to resent it accordingly. He was my
guest, and I had determined to stand by him at all hazards. I informed
those who were foremost in manifesting these unworthy feelings of
resentment that I should protect my friend no matter what course they
should take, as long as he desired to remain in the room. This had some
effect in smoothing down the asperities of the most hostile, and we were
permitted to depart in peace. I escorted General Beauregard afterwards
to the New York Stock Exchange, where he was kindly received, and
without a murmur of feeling. I introduced him to many of the members
individually, who shook hands with him and interchanged civilities in
the warmest manner, giving him a hearty welcome to our city. Beauregard
was delighted with this reception at the Stock Exchange, but was greatly
chagrined at the conduct of the people in the Gold Room.

After this, many other Southern notabilities from time to time came to
the Street, and received at my hands similar treatment. Among others,
General Forrest, of Fort Pillow carnage notoriety, paid me a visit.

I could relate a great many other instances, if time and space would
permit, showing very explicitly the efforts I have made to help along
harmony and reconstruction. I was anxious, in the interest of general
prosperity, to assist the South to recover from the dreadful blow
inflicted upon her by a fratricidal war as soon as possible.

So, as the work of reconstruction progressed, I became interested in the
internal improvements of that section of our country, as my subsequent
investments there will fully attest. I thought that the South had
experienced fighting enough, as the North had, and that the people of
that section would gratefully accept the terms in the main agreed upon
under the appletree at Appomattox, between General Grant and General
Lee. I had hoped that the peace would be such as to conserve all the
interests of the country, including every man, from the boldest and
bravest Confederate general down to the lowest of the negro race,
without any invidious distinction. I had the hopeful impression that all
would go to work and do all in their power to till the soil, or do
anything else that would add to the material wealth of the country and
the individual happiness of its recreated citizens; that they would
apply themselves to every form of industry that would help in any degree
to a recovery from the disasters growing out of the war, and the
lamentable destruction of property attending it.

The South immediately after the war had greater advantages than most
people imagine, if it had only taken hold of them in the right spirit.
It had various sources of prosperity, which under prudent management
would have enabled it to leave the North far behind in the race for
wealth. Its leading staples, cotton, tobacco, and rice, had all a gold
value in the markets of the world.

This opportunity of going in to produce at hard-pan prices on a gold
basis invested it with an immense leverage against the North, with its
inflated currency and war prices, growing out of the large issue of
paper money necessary to carry on the war, and consequent
over-speculation as a natural result or sequence.

It seemed to me, then, that, while the South had a grand opening for
growth in prosperity on a solid basis to begin with, the business of the
North was, in comparison, in an inflated position, that must burst
before it could get a fair start on a solid foundation. It appeared as
if it would sooner or later suffer a temporary collapse, while the South
had only to begin and build without fear of any such interruption.

I, therefore, selected for my investments as the best fields in the
South the two States that stood the highest in their financial credit,
in their character for integrity and enterprise, and that then had the
brightest outlook, namely Georgia and Alabama.

These States took my money freely, issued their State securities, their
County securities, sold me their bonds, and got me thoroughly
interested, and that to a very large extent, and then treated me with
the basest ingratitude, repudiating their bonds, and cheating me out of
my money and property in every way conceivable.

I attribute the cause of this unjust treatment, however, to Andrew
Johnson, who, by accident, through the assassination of President
Abraham Lincoln, became President of the United States.

Mr. Johnson was a Tennesseean, loyal during the war to all appearances,
and for all practical purposes of the Union cause, and he would
doubtless have so remained had it not been for the unfortunate
circumstance of Abraham Lincoln’s death.

This made him Executive of the nation, for which by ability he was amply
fit and qualified, but through bias and temperament, entirely unfit to
fill creditably this eminent position for the best interests of the
country at large.

The position I took, as above stated, was, that since the war was over,
it was a thing to be forgotten as speedily as possible. The finality was
seriously delayed owing to the hostility that President Johnson did his
best to excite and prolong amongst the people of the South.

Congress, it will be remembered, was leniently disposed in the passing
of measures and framing of laws to bring the traitorous States of the
South back again into the Union. The members of Congress most cautiously
and delicately worked to patch up old sores that were supposed to exist
between the victors and the vanquished, but when their bills went to the
President they were unmercifully subjected to a wholesale process of
vetoing, almost indiscriminately. This produced a condition of chronic
hostility between the legislative and executive branches of the
Government, and the wider the breach became the stronger and more
vindictive grew the spirit which it naturally aroused in the Southern
people.

These people were sadly misled by the President, whom they trusted, and
his hobbies were humored at the expense of their prosperity.

Johnson made the people of the South believe that his vetoes would only
delay legislation until Congress should be forced to find them something
better. They, accordingly, reposed faith in him, and were badly
deceived.

The feeling of animosity excited by this condition of things so worked
on the minds of the people, causing the South to wax bitter and
revengeful, that it appeared to people on this side of Mason and Dixon’s
line that their Southern brethren had become even more implacable than
during the hottest scenes of the war.

It was for the reasons above stated that bonds which had been issued by
the South for money invested by the North were, in a large measure,
repudiated. As soon as it was discovered that most of the vested
interests were owned by Northern people, the spirit of revenge and
avarice combined was aroused to the point of repudiation. And, unlike
the courage of Macbeth, it did not require any stimulant to make that
the sticking point. Every method that ingenuity could devise to strike a
blow at the North was employed. No opportunity was allowed to slip that
afforded any advantage, either material or moral.

Thus, instead of accepting the situation as General Lee had done, they
were led astray by every one who had a political axe to grind. They took
an active part in politics instead of looking after the various
industries of the country and developing its resources. They engaged in
political discussions and their attendant broils, to the neglect of
necessary enterprises that would have brought them material prosperity.

Thus they became poorer and poorer. Many years were lost in these
political turmoils, and the people became more and more embarrassed.

From these circumstances there were many financial victims, but few, if
any, suffered more in that respect than myself.

I had over two and a half millions of dollars invested in the State of
Georgia securities, and in other ways, a million more at least in
Alabama and North Carolina together, all of which was perfectly
annihilated, the entire disastrous result growing out of the factious
spirit that was created and fostered by the vile and narrow prejudices
of President Andrew Johnson, of whom I have still more to say in another
chapter.


[Illustration:

  _Most Very Sincerely Robert Garrett_
]


------------------------------------------------------------------------




                               CHAPTER L.

    WESTERN AND SOUTHERN FINANCIAL LEADERS.


ALFRED SULLY, HIS ORIGIN AND SUCCESSFUL CAREER.—CALVIN S. BRICE, A
    FINANCIER OF ABILITY.—GENERAL SAMUEL THOMAS, PROMINENT IN THE
    SOUTHERN RAILROAD SYSTEM.—GENERAL THOMAS M. LOGAN, A SUCCESSFUL MAN
    IN RAILROADING AND MINING.—FINANCIAL CHIEFTAINS OF BALTIMORE.—THE
    GARRETTS.—THEIR GREAT SUCCESS AS RAILROAD MANAGERS.—PORTRAIT OF
    ROBERT GARRETT.


Alfred Sully, who has become so prominent in the financial world within
a year, is tall, rather slightly built, nervous, and energetic. His
face, by its long, square contour and thoughtful lines, suggests that of
Senator Wm. M. Evarts; the eyes are keen and penetrating but kindly. At
heart his tastes are those of a genial literary recluse. Circumstances
and unquestioned ability have made him a financial leader. He was born
about 46 years ago in Ottawa, Canada, where he received a good
academical education. He tried his fortune in the West. He went to
Cincinnati, studied law, and was graduated from one of its best schools,
whereupon he went to Davenport, Iowa, and formed a co-partnership which
became known as the leading law firm of the city. He acquired some
means, and in 1872 came to New York, the proper place for men of
ability. It is understood that at this time he had some idea of
indulging his tastes for authorship, but Austin Corbin put a veto on
that. The two had become acquainted in Davenport, where Mr. Corbin was
formerly a banker, and the latter, on meeting Mr. Sully in New York,
tendered him the position of General Manager of the Corbin Banking
Company, which he had established here. He accepted it. But this post,
responsible as it was, could not long hold a born financier, and we soon
find him obtaining control of the Indiana, Bloomington & Western Road.
He next bought the Ohio Southern, of which he is still President, a
transaction in which he and his friend nearly doubled their money. Then
he made a great deal of money in the Central Iowa and other roads in
Illinois. He and Austin Corbin secured control of the Long Island Road,
and he gave much time and labor to the Manhattan Beach Road and
associated interests at Coney Island. Then he went into the scheme of
restoring the financial health of that enfeebled giant among railroads,
the Reading, and was one of the prime movers in the reorganizing and
consolidation of the Richmond Terminal, the Richmond & Danville, the
East Tennessee, Virginia & Georgia, and numerous other Southern roads,
which now form one vast system, which will probably yet obtain an
entrance into New York.

                            CALVIN S. BRICE.

Calvin S. Brice was Vice-President of the East Tennessee, Virginia &
Georgia Road, and is a Director in the Richmond Terminal and numerous
other Southern roads. He is now connected with the United States Express
Company, in the management of which he will take an active part. He was
born in Lima, Ohio, about 48 years ago, and was educated as a lawyer. He
is below the medium height, and rather slightly built, but has broad
shoulders, a fitting pedestal for a good head, with firm square features
and keen bluish gray eyes. He wears a sandy beard, closely trimmed,
which tends to heighten the effect of decision of character. He is a
financier of ability.

                          GEN. SAMUEL THOMAS.

General Samuel Thomas, who is prominent in the Southern railroad system,
is now about 50 years of age, is a Western man, and before the war was a
civil engineer in the service of an Ohio railroad. After the war he
again became a civil engineer, but, drifting after a time to New York,
engaged in railroad enterprises, and ultimately secured a large interest
in Southern railroads. He is now President of the East Tennessee,
Virginia & Georgia, and is largely interested in the Richmond & West
Point Terminal, the Richmond & Danville, the Memphis & Charleston, and
other Southern roads. He is tall, well-built, energetic, and affable. He
lives in fine style, and is a member of the Union League. He is worth
several millions.

Gen. Thomas M. Logan is President of the Virginia Midland Railroad,
Vice-President of the Richmond & Danville and Richmond Terminal, and a
Director in all the roads in this system. He was born in Charleston, S.
C., about 44 years ago. He served with distinction in the Confederate
Army, and rose to be a Brigadier-General, being one of the youngest in
the service. He is a graduate of the University of South Carolina, and
formerly practiced law in Richmond, Virginia, where he is also engaged
in extensive manufacturing and mining enterprises. He resides in
Richmond, and is a member of the Westmoreland Club, but often comes to
New York on railroad business, in which he has amassed a comfortable
fortune.

John W. Garrett’s name will always be associated with that great
property, the Baltimore & Ohio, which he rescued from the verge of
bankruptcy. He was a man of great force of character, and inherited an
aptitude for business. He was a graduate of Lafayette College in
Pennsylvania, and engaged in business in Baltimore. He became a Director
of the Baltimore & Ohio Railroad, and in 1858 was elected its President.
He was a staunch supporter of the Union in the civil war. Despite a
disloyal sentiment plainly noticeable in Baltimore and elsewhere in
Maryland, he lent the Government all the assistance in his power in the
transportation of hundreds of thousands of Federal soldiers. He was
quick to repair burned bridges, and to do anything to facilitate the
military operations of the Federal Government. President Lincoln and
Secretary Stanton thanked him warmly. His salary as President was
$10,000 a year. The Directors repeatedly offered to increase the
remuneration, but he declined to accept it. He often refused offers as
high as $50,000 a year to become the President of other roads. He was
autocratic in his administration. His will was law. He found the
Baltimore & Ohio Railroad a weak and struggling underline in the
railroad world, and he left it a giant in the American system of
railroad transportation.

Robert Garrett, the son of the preceding, and now the President of the
Baltimore & Ohio Road, is one of the railroad kings of the United
States. He became the President of the Baltimore & Ohio in his
thirty-seventh year, after having served as Third Vice-President and
First Vice-President under his father’s administration. He is a graduate
of Princeton, a man of genial characteristics, and a favorite in
society. He has made a study of railroad administration, but is now
understood to seek some relief from the burdens unavoidably incident to
his position as the head of a great railroad. And he is wise. He is many
times a millionaire. Why should he devote his life to unnecessary care
and labor? Rich men in this country are apt to work too hard. They do
not enjoy life as men of far less wealth do in Europe. Under almost any
administration the Baltimore & Ohio Road has a great future before it.
The road was built to draw the Western trade to Baltimore. This trade
had been diverted from that city by the building of the great canals.
New York & Philadelphia were receiving the lion’s share of the traffic.
The first stone on the Baltimore & Ohio Road was laid by Charles
Carroll, one of the signers of the Declaration of Independence, in 1828.
The road was opened to Wheeling in 1853. The firm of Robert Garrett &
Sons was established in 1849, and was originally engaged in the
wholesale grocery trade. When the road reached Wheeling its finances
were at the lowest ebb. The house founded by the grandfather of the
present head of the road bought largely of its bonds at a very low
figure, and this marked the first connection of the Garrett family with
this great property. The house of Garrett & Sons still exists as a
banking establishment under the management of T. Harrison Garrett. In
1853 Baltimore & Ohio stock could be bought for a song. Since then it
has sold at as high as $225 a share. The improvement in the property was
very largely doe to the efforts of John W. and Robert Garrett.

The recent embarrassing complications of Mr. Garrett in connection with
the management of his railroad and telegraph companies, it is hoped,
will only be temporary, and I expect to see him again, at no distant
day, reinstated at the head of the great corporation over which he and
his father presided. His present difficulties are matters of current
newspaper record and comment, and I need not, therefore, enlarge upon
them here. As shown by the latest report, the Baltimore & Ohio Railroad
is virtually in a good, prosperous and solvable condition, and I have no
doubt that the Drexel-Morgan syndicate which has undertaken to put the
property on a still more solid and durable basis with the ten million
loan which it has negotiated, will uprightly do its whole duty, and in
due time return the trust considerably enhanced in value to Mr. Garrett,
his heirs and assigns.

John H. Inman, another member of the Southern railroad circle, was born
in Tennessee. He is tall, fine looking and soldierly in appearance. He
is one of the shrewdest of the capitalists who have invested large
amounts in Southern enterprises. He came to New York from Atlanta, quite
poor, after the civil war. In the war he was a quartermaster’s clerk,
and his old quartermaster afterwards became one of his brokers on the
Cotton Exchange. Young Inman went into the office of an uncle on
arriving in New York, and learned the business of a cotton broker. He
was clear-headed and successful. After he became a partner in the firm
he added very materially to his wealth by carrying cotton for the
premiums on the options. He is recognized as one of the leaders of the
Cotton Exchange. In recent years he has become a financier, has made
large loans to railroads in the South, and has invested heavily in
Atlanta real estate, and in iron enterprises in Birmingham, the rising
Southern market. He was prominent in the reorganization of the Richmond
& Danville railroad system, in which he is largely interested. He is a
director in the Richmond Terminal and associate lines, as well as the
Louisville & Nashville and other Southern roads. He invested nearly two
millions in the Tennessee Coal & Iron Company. He is now about 50 years
of age. He seems to be a man of destiny. He is a man of great force of
character and exceptional business skill. He resides in New York, and is
possessed of a large fortune.

                 ANCESTRY IN ENGLAND—BRAINS IN AMERICA.

In this country no one cares about ancestry. The spectacle of Mark Twain
weeping at the tomb of Adam is a humorous expression of American
opinions on this general subject of ancestry. To save time he paid his
devoirs to the fountain head without stopping at the Guelphs, the
Tudors, the Bourbons, the Hohenzollerns, the Hapsburgs, or the
Romanoffs. There is no time, if there was any wish in this great
country—shaking to the tread of gigantic business—to inquire, “Who was
his father?” There is only time for such questions as, “What do you
know?” “What can you do?” “How have you succeeded?” Integrity and
ability stand a man in better stead in America than show of purple veins
of Norman blood. Even in the aristocracy (so to speak) of brains,
ancestry in one sense, so far from being an advantage, is apt to be
precisely the reverse. A son of Henry Clay or Daniel Webster can never
hope to attain the lofty pre-eminence of the sire, and suffer by
comparison. Great men do not always have great sons. For one Pitt, the
son of a great Chatham, there are hundreds of sons who intellectually
dishonor great fathers. Brains, intelligence, industry, energy, and
pluck; these are the talismanic words which stand for success in
America, where no ghost of a dead feudalism hovers over the land,
darkening it by its blighting presence. In England the first question, a
silly echo of centuries, is, “Who is his father?” But who are the
nobility? Have they any title as such to the respect of right-thinking
persons? The nobility is running to seed, or rather the once noble tree
is withering and dying; it has borne its fruit and its time has passed
away. In Scriptural language, Why cumbereth it the ground? How many of
the nobility are now worthless roues, habitual seducers, dried up or
half consumed by the fires of passion and debauchery! They are dying as
the fool dieth, with a drunken leer on their shrunken faces and the
stain of dishonor on their escutcheons. The Commons of England will yet
redeem the nation from the thraldom of a worthless aristocracy. America
is the true field for the human race. It is the hope and the asylum for
the oppressed and down-trodden of every clime. It is the inspiring
example of America—peerless among the nations of the earth, the
brightest star in the political firmament—that is leavening the hard
lump of aristocracy and promoting a democratic spirit throughout the
world. It is indeed the gem of the ocean to which the world may well
offer homage. Here merit is the sole test. Birth is nothing. The fittest
survive. Merit is the supreme and only qualification essential to
success. Intelligence rules worlds and systems of worlds. It is the
dread monarch of illimitable space, and in human society, especially in
America, it shines as a diadem on the foreheads of those who stand in
the foremost ranks of human enterprise. Here only a natural order of
nobility is recognized, and its motto, without coat of arms or boast of
heraldry, is “Intelligence and integrity.”


------------------------------------------------------------------------




                              CHAPTER LI.

                 ARBITRATION.


HOW THE SYSTEM OF SETTLING DISPUTES AND MISUNDERSTANDINGS BY ARBITRATION
    HAS WORKED IN THE STOCK EXCHANGE.—WHY NOT EXTEND THE SYSTEM TO
    BUSINESS MATTERS GENERALLY?—ITS GREAT ADVANTAGES OVER GOING TO
    LAW.—IT IS CHEAP AND HAS NO VEXATIOUS DELAYS.—TRIAL BY JURY A
    PARTIAL FAILURE.—SOME PROMINENT CASES IN POINT.—JURY “FIXING” AND
    ITS CONSEQUENCES.—HOW JURIES ARE SWAYED BY THEIR SYMPATHIES.—A
    CURIOUS MISCARRIAGE OF JUSTICE BEFORE A REFEREE.—THE LITTLE GAME OF
    THE DIAMOND BROKER.


Wall Street has derived great prestige and character from the New York
Stock Exchange. In fact, the Stock Exchange is Wall Street, so to speak,
so much so that if the Exchange moved to any other locality, the latter
would become the new Wall Street, to the utter oblivion of the old,
which would soon be eclipsed and regarded as a thing of the past.

The New York Stock Exchange has distinguished itself in many respects,
but there is probably nothing for which it is likely to become more
famous in history than its solution of the great problem of settling
disputes and misunderstandings by arbitration. Other financial bodies
have tried the same substitute for ordinary law proceedings, but it
would appear that greater success has crowned the efforts of the Stock
Exchange in this particular experiment than any other corporate body.

The large number of cases on record that have been amicably settled by
arbitration within the past few years, in which law would have been
formerly considered indispensable, seem to point to a period, probably
not far distant, when arbitration will be the great and ultimate court
of appeal in the large majority of civil cases. Several considerations
will make it the most popular. It is cheaper, less complicated, not
subject to vexatious delay; it is more equitable, and the members
composing the Arbitration Committees are business men, who are quick to
discern, accurate in perception, sound in judgment and decisive in
drawing their conclusions on business principles.

The expense of arbitration is a mere trifle compared with the enormous
sums swallowed up in litigation.

Transactions involving millions of dollars annually in the Stock
Exchange are made subject to settlement by this method of arbitration in
the event of any difference of opinion arising in any particular case.
Very few instances occur in which there is any necessity to carry the
case beyond the jurisdiction of the Arbitration Committee.

The number of cases actually settled in this way would probably cost
half a million dollars annually if they had to be brought into court, to
say nothing of the incidental expenses, which would amount to as much
more, arising from delay, on the scale of present charges by the legal
profession, even leaving out our own Evarts, who is probably the Boss
charger of the Bar.

The success attending the system at the Stock Exchange, I think, goes
far to prove that the method might be universally extended to the great
pecuniary interest and personal comfort of business men throughout the
country, for the adjustment of their misunderstandings and grievances
among one another.

My object in writing upon this subject has for its basis the hope that
this chapter may catch the eye of some of our great merchants in this
and other large cities, and that it may suggest to those of them who
have not contemplated the subject already, the advisability and
necessity of establishing for themselves a similar method of arbitration
to that which has been so successful in the Stock Exchange, to be final
and without appeal, in their respective business affairs.

Experience has fully demonstrated that trial by jury is in innumerable
instances a signal failure; especially has this been so since what is
known as “jury fixing” has become so common in the courts. The practice
of bribing jurors has now become a secret profession, and is so ably
conducted that it is almost impossible, except in rare instances, to
expose it.

But apart from this vicious and criminal practice of tampering with
juries, there are many other reasons why it is next to impossible, in a
large variety of instances, to obtain justice from an ordinary jury.

Human sympathy plays a very important part in the verdicts of juries
generally. I mean by this, class sympathy. A business man who is
regarded by the community as rich and powerful, can hardly expect
justice from a common jury unless the party opposed to him occupies a
similar station in society. Where the position of either the plaintiff
or defendant calls forth sympathy with regard to worldly means, in the
large majority of cases the ordinary jurors will bring in a verdict in
favor of the man of small or moderate means, believing that they are in
duty bound to sympathize with the oppressed. In a case where a clerk or
a woman, for instance, is a party to the suit, it is next to impossible
for a man of means to receive equity at the hands of the great palladium
of our liberty. I am sorry it is so, but I speak feelingly in this
matter, as I have myself been a victim of this unworthy class prejudice,
in a country where all men are theoretically equal.

Counsel usually make a great display over the cases of impecunious
clients, out of all proportion to their magnitude. Mole hills become
ostensibly transformed into mountains in the eye of the highly
imaginative lawyer, who works himself up into such a dramatic pitch of
enthusiasm about the wrongs of his client, that he appears to be in dead
earnest. He infuses the same feeling into the jury, who are beguiled
into solemnity by the force of forensic oratory, and fail to appreciate
the farcical side of the case, but are totally swayed by sentiment and
prejudice, to the utter exclusion of the evidence.

There are many objections, also, to trial or partial trial, by referee,
although it is in many instances an improvement on the jury system. It
is, however, amenable to numerous and flagrant abuses.

As an instance of this, I shall briefly relate a case which some time
ago came within the sphere of my own observation.

A gentleman of my acquaintance had a claim for a very large amount
against a financial man in good circumstances, and it was sent to a
referee, who, after a long, tedious and exhaustive investigation of all
the facts, gave a decision in favor of the plaintiff for several hundred
thousand dollars.

Soon after the decision, the defendant saw the plaintiff, and made him
an offer of thirty thousand dollars to settle the matter, at the same
time stating that if he did not accept the offer, he would either appeal
the case or hunt up fresh evidence for a new trial.

This offer of settlement, which was but a small part of the amount
awarded by the judgment, was naturally declined by the plaintiff, and
application was made to the court under the pretense of newly discovered
evidence, for a new trial, which was granted. Thereupon, after another
tedious trial, the old beaten track having been gone carefully over
again, without omitting any of the aforesaid “whereases, neverthelesses
and notwithstandings,” or any of the monotonous flummery connected
therewith, the case was again sent to the same referee, before whom the
same wearisome inquiry was repeated. This time, however, the referee
relieved the monotony, at the close, by rendering a decision in favor of
the defendant, for a large sum, instead of the plaintiff, as on the
former occasion.

This decision was a genuine surprise to the plaintiff, who then called
upon the defendant and expressed in severe terms his indignation at the
change that had been unwarrantably made in the decision of the referee,
saying he would not submit to it. He was extremely firm in his manner
and said: “I positively assure you that if the judgment is enforced this
town will not be large enough to hold you and myself.”

The successful defendant then said, “What do you want me to do?”

“Well,” replied the plaintiff magnanimously, “I simply desire to be
released of that judgment.”

“Will that satisfy you?” asked the other litigant.

“Yes,” he replied, “under the circumstances. I have had enough of such
law, and want to get rid of it.”

“Well,” said the defendant, “I will do it, and give you a receipt in
full in satisfaction of all claims.”

After this cordial termination of the trouble, the defendant turned to
the plaintiff and said confidentially, “I am sorry you did not take the
thirty thousand dollars which I offered you. I would sooner you had it
than anyone else, as I had to pay it all the same.”

The profound lesson of humility taught in Scripture, that “the first
shall be last and the last first,” was fully verified in this instance.

As litigation is now carried on either before a jury or a referee, it
has a tendency to stir up bad blood, which grows worse as the case
progresses through its various and lengthy stages, leaving relations
more strained and matters for both parties much worse at the end than at
the beginning. As the case drags its slow length along criminations and
recriminations between plaintiff and defendant are constantly elicited,
and family matters that should be regarded as sacred are dragged before
the eyes of the public, subjected to unfriendly criticism, and innocent
parties who have no interest in the case are subject to have their
private affairs made known, to their great mortification, and often to
their great detriment, having a cloud thrown over their reputation long
after the litigants have passed away.

Thus the evils of litigation are far reaching in their consequences, and
frequently exercise a most deleterious influence over the character and
prosperity of those who have nothing to do with the original parties to
the contest, and have no interest in the suit.

The expense is also another important consideration in going to law, and
is only to be measured by the bank balances of the contending parties.

The time lost in the methods of procedure now generally adopted is of
the utmost importance, especially to people the success of whose
business in a large measure may depend on their personal attention
thereto. It is perfectly astounding to reflect on the important portion
of a person’s existence that may be lost in one case, which, from its
inception in the lower court up through the regular gradations of the
Supreme Court and Court of Appeals when a new trial is had, probably
thus going over the entire ground twice, may consume all the way from
five to ten years under the perpetual pressure of mental anxiety and
torture before the end is reached, when at least one, and sometimes both
parties, are financially ruined.

The worry, wear and tear of attending to a lawsuit in the capacity of
either plaintiff or defendant is perfectly incomprehensible to those who
have never passed through the trying ordeal. A person in either
capacity, with his train of witnesses, is obliged to dance attendance on
court every day, no matter how pressing the necessities of his own
business may be. Books must be carried thither, and all his
establishment must be upset for the convenience of the court and to
gratify the whims and caprices of the opposing litigant. The business
places of the two contending parties are entirely disarranged, and the
help thrown into a state of partial disorganization. Each party to the
suit seeks to give the other all the trouble he possibly can, and to
subject him to all the sources of annoyance his imagination can devise.
Such is the spirit imbued by going to law.

A lawyer, therefore, who has about half a dozen moderate cases has thus
his entire time occupied, and while his clients keep out of bankruptcy
his income is as good as the annuity of a life insurance company, and
frequently the security is better.

The effect of the change which I propose, in the majority of cases where
merchants and business men find it necessary now to resort to legal
methods, would perhaps not render the life of the ordinary lawyer so
happy as it is under the present system, but the merchants would gain
ten-fold more than the lawyers would lose, so the effect upon the entire
community would be incalculably beneficial.

The system of arbitration which I contemplate could be extended in every
line of business throughout the entire country, with a Central
Association in New York or any other city that might be agreed upon. In
fact, there might be several business centres, one in each important
city, with its ramifications extending throughout the section in which
its commercial interests more immediately clustered. Branch associations
could be organized in the smaller cities and towns, enjoying all the
facilities of direct communication with the central body, and availing
themselves of all the information and statistics there collected, and
the nature of decisions in special and leading cases of settlement.

Each association in its own city or town should be considered fully
competent to deal with its own affairs, the Central Association being
only consulted as an advisory body. I should recommend also that each
association should have a governing committee, which should constitute
its Court of Appeal, whose decision should be deemed final.

It would hardly be necessary to prescribe penalties for the few isolated
cases that would kick against the arbitration system, and resort to law,
as their legal experience before they got through would be punishment
sufficient without the association taking any further action.
Discipline, however, of a mild character, would have to be enforced in
these and other special cases, for the better efficiency of
organization.

It might be well to have a rule whereby the parties submitting their
cases to arbitration should recognize the necessity, after having the
methods of procedure thoroughly explained to them, of putting themselves
under obligations to abide by the decision.

In carrying out a national idea of this kind of association, business
could be greatly facilitated and much expense saved by the various
committees having due regard to their places of meeting, so as to be as
near as possible to the centre of the greater number of the witnesses in
each particular case.

The courts, which are now greatly overworked, would be immensely
relieved by this system, and they would have more time to sift important
and exceptional cases which, in their nature, could not possibly be made
subjects of arbitration. There are quite enough of such cases to occupy
the time of the various courts.

One of the most vexatious and irritating things connected with court
trials is the constant attendance required, even when no progress is
being made in the case. The expenses, too, are always accumulating.

Though nothing is accomplished the attendance of the lawyers is far from
being a labor of love. Their services must be handsomely rewarded by the
litigants.

Such a process of settlement as I suggest would not, after all, be any
great hardship to the best of the legal fraternity, as there would be
enough work left for them, but it would afford immense relief to the now
overworked judges, while it would facilitate and forward the ends of
justice to an extent that can hardly be imagined by those who have been
always accustomed to the slow and monotonous machinery of the law
courts, and it would help to weed out the large camp following of
pettifoggers, whose occupation would be partially gone.

There is a great deal of time lost in regular court business, causing
much exasperation to the parties to a suit, in settling mere
technicalities and side issues of law, before the real merits of the
case can be reached. Many of these technical delays could be easily
disposed of by business men, on business principles, and by taking a
simple and common-sense view of the matter, by the usual methods pursued
in arbitration.

This new method of settling disputes would do away with the farce of
giving bonds in many cases, which is another great source of annoyance,
and which, after all, only amounts to a mere formality in a large number
of cases, and in many others a very hollow and fraudulent pretense, as
many of the bondsmen are only men of straw, and though technically
qualified, are not in reality responsible for the obligations undertaken
by them.

When good, reliable sureties are offered, in many instances they are put
through an irritating course of examination in relation to their private
affairs, much of which is entirely unnecessary, and only designed to
perplex and annoy them. They are thus obliged to expose matters relating
to their private business, about which the public have no right to know
anything, and they are often examined in such a way, as if they
themselves were on trial, and were attempting criminal concealment of
something that they had a right to disclose. A good deal of this arises
from the impudent, unmannerly style of certain lawyers, who treat a man
as a criminal suspect, when he has no interest in the case whatever, but
has simply come voluntarily forward to assist a friend in trouble.

This is all, however, in the present method of procedure, connected with
the machinery of so-called justice, and this kind of abuse has been
carried to such an extent in some of the instances just referred to,
that very few responsible parties, who know anything about the _modus
operandi_ of qualifying as a surety, are willing to respond to such
calls of friendship. Hence, one of the difficulties in obtaining good
bondsmen, and an additional reason why the professional straw men are so
plentiful.

It probably helps the business of the latter, between whom and the
abusive lawyers there may be an understanding on “boodle” principles.

I shall relate an instance which I consider worthy of permanent record
illustrative of the matters to which I here refer, in which my firm was
victimized.

On the occasion referred to, my firm sued a client for a just debt of
sixteen thousand dollars. The case was sent to a referee, whose
standing, in his particular line, was unquestioned at the time, and very
few men, in his circle, had better family connections. He stood high in
his profession and both sideS were satisfied with the choice. The case
was very long and tedious, having been drawn out to a most provoking
extent by encumbering the record with immense piles of irrelevant
matter. The renewed calls for legal fees on both sides were numerous and
vexatious, yet there was no help but graceful submission to the payment
of this tribute.

After a number of years it was reluctantly conceded by the lawyers that
the evidence was all in on both sides. The litigants breathed heavy and
responsive sighs of relief, each side being confident of victory.

A short time prior to the close of the case, the referee spoke to me,
gratuitously offering his advice to settle the case, as he said he
intended to give a decision adverse to my firm. To this I demurred, and
expressed my determination to fight the case to the bitter end.

The result was, however, that my firm not only did not get a decision in
its favor for the $16,000 to which it was justly entitled, but this
claim was wiped out by this Daniel come to judgment, who gave a decision
in favor of the defendant for $132,000.

I regarded this award as such a terrible outrage upon justice that I
obtained a stay of proceedings, and made an appeal, setting forth
therein the advice given to me by the referee to settle before the case
was closed.

Judge Fancher, who wrote the opinion on behalf of the bench, consigned
that referee to everlasting disgrace, and set aside his opinion. There
the case ended.

Another instance in my experience will illustrate the point which I have
made in regard to the sympathy exhibited by juries with those whom they
regard, rightly or wrongly, as oppressed. At one time I had employed a
clerk at the rate of $2,000 per annum. He was a great disappointment to
me in regard to competency, for the work for which I had engaged him,
and for his entire lack of application to, as well as deficiency in, the
department to which he was assigned. At the end of the first year,
therefore, I gave him notice, in presence of two competent witnesses,
that I should not require him after his year had expired, and advised
him to look out at once for another situation. On the last day of the
year he came to me with tears in his eyes and said that he had been
unable to obtain another place, owing to the bad times prevailing, and
begged me, in the name of his family, who was solely dependent upon him,
to keep him in my services still longer, until he could get another
situation. Purely out of sympathy for his condition, and believing his
story, which was very plausible and pathetic, I told him that he might
remain a short time longer on the same salary, but that I should require
him to use all his exertions to get another place as speedily as
possible.

When he entered on the second term his services were no more use to me
than a fifth wheel is to a coach. After the expiration of a few weeks, I
sent for him and inquired if he had got another situation; I said I had
given him ample time to obtain one, and that I could not consent to keep
him any longer. I therefore requested my cashier to draw a check to his
order for the balance of his wages, up to date, filled in as a part of
the body thereof with the words “payment in full for all claims and
demands.”

Thereupon he left my employment, but called repeatedly at the office
afterward. I assumed that his visits were simply for the purpose of
paying his respects. At the expiration of the second year I received a
notice of suit which he had commenced in Brooklyn for the balance of
salary due him for the year, being at the rate of $2,000 a year for ten
months.

The case came up duly in the Brooklyn court, his only witness being his
father, who had made several calls upon me after the discharge of his
son, on the strength of which he set forth, in his evidence, certain
conferences that should have taken place between him and myself, the
greater part of which were purely fictitious. He was the only witness
called on the side of the plaintiff, while I had five or more witnesses
to substantiate the facts, as I have related them, in relation to the
young man’s discharge, all of them being of most excellent character.

Strange to say, the jury entirely ignored the overwhelming testimony on
my side, and seemed to be altogether influenced by the “spread-eagle”
address of the defendant’s counsel, which I am free to say was both able
and ingenious. He drew a harassing picture of the poverty of the young
man, and presented the imminent destitution of his family in a most
pitiable light, brought about solely by the ruthless treatment of this
hard-hearted millionaire and bloated bondholder. Hence the verdict was
made, through the force of counsel’s oratory, to depend exclusively on
the sympathy of the jury, irrespective of the evidence.

The case occupied several days, with five or six employees from my
office in constant attendance, who were obliged to carry to and from
court, every day, huge books and large quantities of papers, disturbing
the regular business of the office in a very disagreeable manner.

After counsel had gone over the ordinary rigmarole in reviewing the
testimony, the jury went through the formality of retiring, to keep up
appearances, and after a brief interval of absence returned to court
with a verdict for the deeply injured clerk for back pay, together with
interest for the ten months during which he had not rendered me an
hour’s service.

My lawyer was easily able to obtain fresh evidence from other sources,
but he had not considered it necessary to put any more witnesses on the
stand, as he had regarded the testimony already produced more than
ample, so sanguine was he of success, and so fully satisfied of the
plainness of his case, which he considered had only one side, and that
in my favor.

The jury, however, put the boot on the other foot, upset all my
counsel’s calculations and showed him that his law went for nothing
where the famous twelve had the right to judge and legislate at the same
time in accordance with their sympathies and prejudices. Still he went
through the formality of going before the judge with new evidence, and
applied for a new trial, which was ordered on the ground that the
verdict was not in accordance with the weight of evidence.

The new case was called after the customary delays, and the same ground
was duly traversed again, with my additional witnesses, before another
highly intelligent jury, whose prejudices were all on the side of the
greatly injured young man, who sought twelve months’ pay for two months’
useless services. The only witness that appeared again for the defendant
was his faithful and veracious father, whose memory was marvellously
correct in relation to his former statements on the first trial.

There is an old proverb which says that it requires such men to have
good memories. I need not quote it, as almost everyone knows it.

To make a long story short, however, that forensic orator appeared again
for his poverty-stricken client, armed with all the old enthusiasm
exhibited on the former trial. He had not much new matter to present,
but his dramatic attributes, by dint of longer practice, and more
familiarity with his side of the case (it was only necessary for him to
study the one side) had become considerably improved since his former
effort, and it is needless to say that he carried the jury with him.

By that intelligent safeguard of our liberties, the jury, the second
trial was only regarded as an aggravated case of persecution, on my
part, and the verdict was given more cheerfully in favor of the
plaintiff than on the former occasion.

Although it would have been much better for me, from a financial point
of view, to have paid the amount of the exaction, with all the legal and
illegal fees and impositions connected therewith, yet I felt disinclined
to be bamboozled in that way.

When the court was applied to for another new trial, the judge said, “I
have already given you one new trial, taking the responsibility. The
relief you now ask has already been before two juries, and I am not
willing to take upon me any additional responsibility in the matter. You
must therefore look for any further rights or redress to which you may
consider yourself entitled, to the Court of Appeals.”

The case is now, therefore, awaiting the good time and discretion of the
Court of Appeals, where it will, in all probability, be heard and
adjudicated upon sometime within the next ten years. In the meantime the
young man is happy in the reflection that his judgment is a good
investment, drawing six per cent. interest.

There is still another case illustrative of some of the peculiar points
referred to, and showing the truth of the maxim among lawyers that, “You
never know what a jury will do,” in which I had the honor, or the
misfortune to be joined.

A well-known outside broker in Wall Street, who had a large experience
in transacting business for Mr. Sage and other notabilities of the
street, in “puts,” “calls,” and other exterior securities, came to me
one afternoon and asked me if I didn’t want to buy a pair of diamond
earrings.

At that time I had not begun my career as a dealer in diamonds, except
in one solitary instance, and that was when I purchased the wedding
ring, which is one of the requisites in a matrimonial contract for a
long term. I was, therefore, comparatively a tyro in the business, and
the party with whom I was dealing did not fail to take advantage of my
inexperience. I made some inquiry about the diamonds from this broker,
to which I received apparently satisfactory answers, and I concluded
they would suit my wife, and as I had had a good day’s business I made
him an offer of a thousand dollars for the precious ornaments, which he
quickly accepted, and I paid him the money.

In the course of a few weeks after I was waited upon by a diamond dealer
and his lawyer, with neither of whom I had the honor of any previous
acquaintance, and they accordingly introduced each other. The diamond
dealer introduced the lawyer and _vice versa_. I immediately concluded I
was going to get a good stock order from both of them, but I was soon
disappointed as well as surprised to find that these gentlemen had
called on an entirely different kind of business, which was totally
devoid of commissions on any stock transactions.

They said I had a pair of earrings belonging to them, and I declined to
give them up except on return of my thousand dollars.

These two gentlemen bade me good day, and in the course of time I was
served with the usual legal papers in a suit which reached the calendar
after some time. The young man who sold me the diamonds was put on the
stand. He testified that he had received them from a certain diamond
broker, but not the dealer in question, with whom he had had no
connection whatever.

The diamond broker, it appeared, had long been agent for this dealer,
selling diamonds and had, as set forth in the evidence, sold over ten
thousand dollars’ worth in a few years.

During the trial a paper was produced to prove that this broker had
received these diamonds to show them to a customer, and as it turned out
I happened to be the customer. The money which I had paid him for them
he had failed to turn over to his employer, of whom I had no knowledge,
nor had I any chance of knowing him in the transaction.

All the facts were presented, as above related, to the jury, who, after
due deliberation, decided that I must give up the diamonds and suffer to
be cheated out of my thousand dollars.

This case is now on appeal. I have since offered to relinquish the
diamonds and lose my money, rather than suffer the expense and trouble
of continuing the litigation, but plaintiff wants to bleed me further to
the tune of $300 to cover his law expenses. To this illegal tribute I
have not yet submitted, and have resolved to see what virtue there is in
further defense before a higher tribunal.

“Millions of dollars for defence, but not a dollar for tribute,” is a
maxim which it is expensive to follow, but after all, the result of such
a course, if one can afford it, may be morally healthy.

I consider that these cases, in which I acted a rather unenviable part,
are only samples of many which constitute one of the best arguments for
a general system of arbitration, such as I have briefly and imperfectly
outlined.


------------------------------------------------------------------------




                              CHAPTER LII.

        NEW YORK AS A FINANCIAL CENTRE.


ITS PAST, ITS PRESENT, ITS FUTURE.—BANKING DECADENCE.—GROWTH OF INTERIOR
    CENTRES.—OBSTRUCTION FROM THE NATIONAL BANK LAWS.—RELIEF
    DEMANDED.—REQUIREMENTS OF THE FUTURE.


What New York has been as a centre for the settlement of financial
transactions is a matter of history; what it is destined to be, in that
respect, may not be so entirely certain as some people hastily assume.
There are some facts which seem to suggest the question whether our city
may prove able to retain its past proportion of the vast settlements of
this ever-growing continent; and, although there is nothing to warrant
very positive opinions about the future, it must be conceded as an
unquestionable historic fact that in late years there have been symptoms
of positive decadence in the status of our financial metropolis.

In the past there have been three separate successive sets of conditions
directly affecting the financial standing of New York. First, there was
the period when this city was the distributing point for nearly all the
importations, and for the bulk of our domestic manufactures through all
parts of the country. Equally, New York was the almost sole port of
export for Western products, and although the exports for the cotton
States were made direct from their local ports, yet the financial
transactions connected with those shipments were effected through this
city. Then New York had virtually no competitor as an exchange centre.

Next came a period during which the larger Western cities, especially
Chicago and St. Louis, aspired to become distributors of foreign and
Eastern merchandise; a change very naturally following the rapid growth
of population in the West and Southwest. Thus a vast jobbing trade
became rapidly established at these interior centres, and New York’s
share in the distribution of goods to the retail trade became, in a
large measure, confined to the Middle and nearer Western States, and to
a portion of the South. The jobbers of these new interior centres,
however, had still to get their supplies of merchandise from or through
the Eastern metropolis; so that, whilst we lost much of our jobbing
business, we retained, with some limited exceptions, the importing and
commission branches, together with their ordinary rate of increase.

We are now in the beginning of a third and still more important era,
during which both the importing and commission branches of our trade are
threatened with invasion. The Western jobbing houses have attained a
standing which warrants their importing direct from the countries of
production, instead of through New York. Another Western and
Southwestern consumption has risen to such a magnitude as to encourage
the creation of manufacturing establishments in the vicinity of the
markets. The West is rapidly becoming a competitor in the leading
branches of manufacture with the East, and is evidently destined to
supply itself, at no distant day, with a very large portion of the
domestic merchandise hitherto contributed through New York merchants,
and with the facilities of New York banks. Nor is this all. Chicago and
some other Western cities are throwing off their dependence on New York
intermediaries for the exportation of grain and provisions, selling them
direct to Europe, and shipping the goods on through bills of lading.

These changes are not the result of any mere spirit of blind
recklessness grasping after business. They are the product of actual
natural economies, and appear to be so decidedly in the interest of the
Western merchants that it can hardly be doubted that the new methods
have come “to stay.”

Clearly, then, the natural development of national production of
commerce is to build up independent financial centres at the interior,
the effect of which can only be to check in some measure the growing
ascendancy of New York. Perhaps few among my readers will be prepared
for the following statistical facts bearing on this question; the
conclusions to be drawn from which are not very flattering to the pride
of the “Gothamites.”

The transactions at the New York Clearing House are the surest
indication of the standing and progress of this city as a financial
centre. The records of that institution show that its annual exchanges
rose step by step from 5,750 million dollars in 1854 to 48,566 in 1881,
an increase of 744 per cent. in 27 years, or at the average rate of
1,585 millions per year. From 1881 there has been the following
remarkable rate of decline:


    In 1881, the exchanges were 48,566 millions of dollars.
    In 1882, the exchanges were 46,553 millions of dollars.
    In 1883, the exchanges were 40,293 millions of dollars.
    In 1884, the exchanges were 34,092 millions of dollars.
    In 1885, the exchanges were 25,251 millions of dollars.

Thus it will be seen that there has been a decline in the transactions
of the Clearing House banks of 23,315 millions, or at the rate of 48.4
per cent., within the last four years. Last year the exchanges fell
below even those of twenty years previous, when the amount was 26,032
millions. Of course, this very remarkable decrease in the volume of
transactions is, in part, attributable to the great falling off in the
amount of speculative transactions in 1885, as compared with 1881. This,
however, can only account to a comparatively small extent for such a
vast change. Something is also to be attributed to the general decline
in the prices of merchandise and investments during the period; but this
explanation is also entirely inadequate, for the average fall in prices
did certainly not exceeded 20 per cent., while the decrease in the
exchanges, as already shown, had been 48.4 per cent. Moreover, on the
other side, some offset against the decline in speculation and in prices
must be allowed on account of an increase of five to six millions in the
population of the country during the interval; which, alone should call
for an increase of 10 per cent. within this period. It is still more
significant that, since the year 1872, the capital of the banks in the
New York Clearing House has been reduced from $84,400,000 to
$58,600,000, a decline of 30 per cent.; which at least implies that
banking has become less profitable than it formerly was, and which could
scarcely have happened if New York had retained its wonted share of the
increase of financial operations arising from the growth of population
and commerce in the nation at large.

Some light may be thrown on these changes by a comparison between the
ratio of progress in the transactions of the Clearing Houses of New York
and Chicago respectively.

In 1866, the first complete year of the Chicago Clearing House, the
clearings amounted to $453,800,000, while in 1885 the figures reached
$2,318,500,000—an increase of 410 per cent. At New York, in 1866, the
clearings were $28,717,000,000, and in 1885 they had fallen to
$25,250,000,000—a decrease of 12½ per cent. within two decades of great
national progress, and while the population tributary to this city had
increased over twenty millions.

In the year 1879—the period of the resumption of specie payments and of
the beginning of a great revival of commerce and of financial
enterprise—the Chicago Clearings were $1,257,700,000, and last year they
were $2,318,500,000, showing an increase of 84.3 per cent. The clearings
at New York, within the same period, show an increase of about ¼ of one
per cent.

It has already been shown that the capital of the banks in the New York
Clearing House (exclusive of surplus) fell 30 per cent. below 1872 and
1886; on the other hand, the capital of the banks in the Chicago
Clearing House rose from $9,845,000 in 1872 to $16,928,000 in the
present year, an increase of 72 per cent.

The foregoing comparisons show that although the clearings at Chicago
are only about one-tenth those of New York, yet the former city is
making very rapid strides, while here we are virtually retrograding, and
confirm the conclusion above expressed, that the importance of New York
as a financial centre is suffering from diversion of settlements and of
banking facilities to the larger cities of the interior, and especially
to Chicago.

So far as this tendency is the result of natural changes in conditions,
it is inevitable and must be permanent, if, indeed, it be not destined
to gain in force and extent. But so far as the change is due to
artificial obstructions to banking operations, it is susceptible of
modification.

And here I may be permitted to venture certain suggestions which may
quite possibly encounter objections from men more than my peers in
banking experience and wisdom. It has long been my conviction that the
banking arrangements existing at New York are far from satisfying the
requirements of a city that not only aspires to be, but also possesses
many adaptations for occupying the position of the great financial
centre, not only for domestic settlements, but also for international
exchanges.

The bulk of our banking transactions are done by banks incorporated
under either national or State laws. Admirably as the national banking
system, taken as a whole, is constructed, yet it includes some important
positive disqualifications for its institutions performing an important
class of operations essential to a great centre of exchanges. It was,
perhaps, not to be expected that a system designed mainly for provincial
cities and for rural populations should adequately provide for these
broader wants. Nor could any uniform and homogeneous system be expected
to be very perfect and satisfy at the same time both classes of
requirements. Interior banks, whose management must be expected to be
more or less lacking in experience and competency, may need to be placed
under legal restraints, which, in the case of a thoroughly conducted
metropolitan bank, would be not only needless, but positively injurious.
Unfortunately, this discrimination has received little recognition in
our national bank legislation; on the contrary, that larger discretion
which should have been conceded to the higher training and more select
ability that administer the metropolitan banks, has been ignored, and
heavier restrictions have been placed upon the New York national banks
than upon those of any other part of the national system.

The “reserve” laws are oppressive to no better purpose than that of
positive injury. All other banks than those of New York are permitted to
count in their reserves any funds resting with their “redemption
agents;” and this item usually constitutes, in the case of banks of the
“other reserve cities,” 41 per cent. of the total reserves held, and in
the case of all other banks about 60 per cent. The New York banks, on
the contrary are compelled to hold their _entire_ reserve (25 per cent.
of their deposits) in the form of lawful money. Nor is this the heaviest
embargo. The reserves are not permitted to be used when the occasion
arises for which a bank reserve is always presumed to be provided. The
moment a bank allows its reserve to fall below the required 25 per cent.
it becomes the duty of the Comptroller of the Currency to close its
doors and put it into liquidation if the deficiency be not immediately
made good. If panic occurs, and depositors want their money, there is
nowhere any power to relax the crushing force of this law, and the banks
are therefore compelled to suspend payment to depositors and in order to
avert general ruin at such times they have to resort to the expedient of
making their cash assets available in common, thereby saving themselves
and their customers outside of and in spite of the destructive tendency
of the law. Of course, the danger of running into such a crisis as this
creates a feverish dread in all times of special stringency in the money
market. All eyes are at such times fixed upon the reserve “dead line;”
and, as that limit is approached, loans are artificially contracted,
depositors draw their money, and the very reserve that should be used
for elasticity and to relieve periods of special tension become the
certain cause of panic and ruin. A banking centre whose banks are
periodically exposed to dangers of this serious character, and where the
law unites with adverse circumstances to foster panics, is hampered with
the worst possible disqualification for performing those higher and
broader functions of banking which demand freedom of discretion and
elasticity of resource.

This evil appears all the greater when it is considered that the amount
required to be set apart as so much idle reserve ordinarily exceeds the
entire capital of the banks. It might be supposed to be serious enough
that such a large proportion of the resources of the bank should be held
perpetually idle and earning no interest; but when this sacrifice of
earning capacity is made for a purpose that brings no advantages, but
rather a very serious danger, the effect can be nothing less than an
unwholesome and very injurious restriction upon banking operations, and
it is not surprising, therefore, that the national banks of New York
city exhibit decadence instead of progress.

What is needed to enable this metropolis to reach the financial status
to which it is entitled is a class of banking institutions possessing
facilities and functions much broader and freer than those conferred by
the national charters. It is out of the question to hope that these
facilities may be provided through modifications of the national bank
system. The banks, and especially those of New York, have to encounter
so much prejudice and ignorant demagogism from Congress, in seeking any
modification of the national system, that they would sooner endure
almost any wrong than demand changes in the law. Their only redress is
in reorganizing under the State laws, which many of them have already
done, whilst new institutions almost uniformly prefer the State system.
To meet the wants here contemplated, it would probably be necessary to
get from the State Legislature special authorization for forms and
functions of banking not now distinctly provided for under either
Federal or State laws.

The special business to be done by such a class of banks scarcely needs
enumeration, much of it being so self-evident. In the present stage of
our national development, it is becoming a grave reflection upon our men
of capital that we should remain almost entirely dependent on foreign
bankers for the facilities for transacting our immense external
commerce. The necessity that formerly existed for this dependence can no
longer be urged as an excuse. All the capital and the banking experience
necessary to found and to administer large credit and exchange
institutions are ready to hand. A business of $1,200,000,000 per annum
connected with our imports and exports would be available for this form
of enterprise. Our export trade is crippled in many branches of business
simply because it is found impossible to get the liberal credits
necessary to facilitate consignments to distant markets. Manchester
defeats us on cotton goods, not so much on the ground of prices or
superiority of fabrics, but because her merchants can get any time or
amount of credit required, whilst we have to market our goods on
restricted credits and through Manchester agents, who at the same time
are selling English products in competition with ours. The English
exporter has the advantage of being able to get his credits from the
bank with which he keeps his account, while the American has to go to a
foreign banker, who has no inducement to consider his convenience or to
moderate his charges. The natural place for an export merchant to keep
his account is with the bank that grants him his credits; and this fact
suggests the facility with which banks of the kind here suggested could
build up a large business.

Every year we find it necessary to largely pledge our cotton crop in
advance to provide the means for gathering and marketing it. Why should
this money have to be drawn from England, especially as the crop is
thereby subjected to the control of the foreign buyers, and we are
unable to protect our own products? These advances afford an
illustration of another class of important operations in which the
existing banks cannot directly participate, but which ought properly to
be undertaken by domestic banks.

With respect to our importations, what sufficient reason can be urged
why the importer should have to get his credit from the agent of a
London banker, instead of receiving it from an American bank through
which he chose to transact his entire business, and which, therefore,
would be the fittest source for procuring his credits? It cannot be to
the advantage of the importer to be exposed to the vicissitudes of the
European money markets, nor can the London banker grant credits to
merchants 3,000 miles distant, whose position he imperfectly knows,
without compensation for the extra risk. The business is, therefore,
done at a disadvantage to both parties. The credit should be issued
directly from the point where the importer does his business; and this
would soon become the fact were banks to be provided possessing special
adaptations for doing such a business.

Other functions proper to institutions of the character here suggested
would be the negotiation of corporate loans, temporary advances to
corporations, the receiving of corporate accounts, and the facilitation
of corporate reconstruction. Banking for the larger corporations
presents many possibilities of advantage to both banks and companies of
which our existing banks cannot, as at present restricted, avail
themselves.

It is needless to say that these suggested institutions, whilst
undertaking operations of the special character above indicated, should
also aim to secure the best class of deposits and to discount the higher
class of paper. As the national bank laws would prohibit to them the
profits of circulation, it might well merit consideration whether they
should not issue to customers of high standing their own acceptances,
within certain safe limits. These credits, yielding the current rate of
interest, would be a highly profitable, as well as an entirely
legitimate branch of business; and they have the sanction of successful
usage among the best banks of London. I am unable to see what objection
there should be to further following London precedent by allowing on
deposits a rate of interest below that current in the market for the
time being. Such a course would attract accounts and would immensely
increase the power and the earning resources of the banks. Moreover, as
such institutions, being exempt from embarrassing reserve restrictions
and other needless limitations, would be less subject to the
oscillations of the money markets than are the present banks, they would
afford better advantages to members of the Stock Exchange in the form of
loans upon securities than they now are able to get. The importance of
this business may be inferred from the fact that the yearly transactions
in stocks at the Exchange have averaged, for the last six years,
102,000,000 shares, which, at an estimated average of $60 per share,
represents an annual business of $6,120,000,000, to say nothing of the
business in bonds, which also is very large.

Banks of this character would naturally attract a large portion of the
Stock Exchange houses, which experience has shown to be exceptionally
safe and profitable. The single fact that these banks would not be
obligated to conform their loans to arbitrary 25 per cent. reserve would
be a decisive reason for Wall Street firms doing their business with
such institutions.

To some extent the wants here alluded to have been met by our loan and
trust companies. As institutions of loan and deposit these institutions
are doing important public service, and the deficiencies in the
functions allowed to the national banks are diverting to them a large
and valuable business. The companies of this character in New York and
Brooklyn have nearly $14,000,000 of capital and $15,000,000 of surplus
and profits. Their resources aggregate $175,000,000, and their deposits
$137,000,000. Their rapid progress is indicated by the fact that, since
1883, their resources have increased $32,000,000, or at the rate of 27
per cent. during three years of depression in business. But while this
success demonstrates the great necessity for enlarged local banking
facilities, the facilities afforded by the trust companies are entirely
too limited to satisfy the large special requirements of a great
financial centre above referred to, and only add to the necessity for a
class of banks which shall do for New York what the great joint stock
banks and the mammoth private discount houses of London are doing for
the business of that cosmopolitan centre.

These suggestions are offered for what the men of Wall Street may deem
them worth. They demonstrate that there is ample scope and urgent need
for a new element in our banking arrangements to accommodate the larger
operations of finance and commerce; and it would not be difficult to
prove that the country is suffering seriously from lack of such
facilities. It will not be pretended that there is any lack of either
the capital or the managerial talent requisite for such enterprise. Nor,
since the rate of interest has come to rule as low in this country as it
is in Europe, have we any longer anything to fear on that ground from
the competition of foreign bankers. At any rate, if New York aspires to
a position of financial independence and to become, in the broadest
possible sense, the financial centre of the vast and growing exchanges
of this continent and of its transactions with other nations, there
should be no delay in giving this greater breadth and scope to its
banking institutions. Our merchants, I am satisfied, are ready to
respond to a movement of this character; are the bankers and the
capitalists equally prepared to provide the facilities?


------------------------------------------------------------------------




                             CHAPTER LIII.

 EARTHQUAKE THEORIES AND WALL STREET AFFAIRS.


THE SHOCK OF EVERY CALAMITY FELT IN WALL STREET.—EARTHQUAKES THE ONLY
    DISASTERS WHICH SEEM TO DEFY THE POWER OF PRECAUTION.—BECOMING A
    SUBJECT OF SERIOUS THOUGHT FOR WALL STREET MEN AND BUSINESS MEN.—THE
    VOLCANO THEORY OF EARTHQUAKES.—OTHER CAUSES AT WORK PRODUCING THESE
    TERRIFIC UPHEAVALS.—WHY CHARLESTON WAS MORE SEVERELY SHAKEN UP THAN
    NEW YORK.—WHY THE SOUTHERN EARTHQUAKE DID NOT STRIKE WALL STREET
    WITH GREAT FORCE.—EARTHQUAKES LIKELY TO BECOME THE GREAT DISASTERS
    OF THE FUTURE.


Wall Street is the financial centre of this country as much so as London
is recognized to be the financial centre of the world at the present
time. Hence it is really the heart of the nation, through which its
financial blood flows to invigorate and impart new life to every section
of the land. Hence, also, every section and city have an influence on
Wall Street. When the Chicago fire occurred it immediately created a
panic. When a calamity occurs at any part of the country the shock is
first felt in Wall Street. When a large failure happens, such as that of
a bank or important railway, in any other locality, the influence is at
once imparted to Wall Street. This is owing to the fact that Wall Street
is the recognized and only market for securities of every description.
All sections are dependent upon it, because it controls the money
market. It is the great connecting link of the financial transactions of
the whole country. A probable disaster through fire, like that which
occurred at Chicago, is now no longer a terror to the Street or to the
country, as was the case for a long time after that terrible calamity,
for the reason that methods have been adopted for the purpose of
restricting the conflagration and confining it within narrow limits.
Fires which occur now are soon extinguished, and it is unlikely that
they can ever play such havoc as they have done in the past. The
possibility, with our enlarged experience, of taking precaution against
those various calamities has robbed fires of most of their former
terrors. Science and machinery have furnished us with the means of
grappling with them.

But the one great, and now very alarming exception, which seems to defy
the power of science and every human precaution, is an earthquake. This
remarkable phenomenon has awakened great interest and inspired terror in
the minds of the people at the present time, because the exhibition of
its destructive powers is fresh in our memories on account of its
terrific visitation at Charleston. Hence, many people are in great fear
that some other section of the country may be stricken at any moment
with a similar overwhelming disaster. It is the insidious and uncertain
nature of the calamity that strikes the mind with awe. There is no
possibility of anticipating it or making the least provision to avoid
its dreadful consequences. The Charleston earthquake wiped out over ten
millions of property. It came, like a thief in the night, and before
morning the greater portion of the city was a mass of ruins. When we
reflect on the extent of the destruction of property, it is marvellous
how few people were killed—only about one hundred, and only two or three
hundred were wounded. One of the greatest wonders why this calamity
should have occurred in Charleston is, that part of the city has stood
for nearly two centuries, and the recent earthquake has been the first
it has experienced. Another curious circumstance is, that the disaster
should have occurred on so large a scale there, as the locality is so
far removed from the region of any volcano.

This clearly demonstrates that the old “volcano” theory of earthquakes
is thoroughly exploded, and we must seek for causes and the explanations
in other quarters. Although Wall Street has not been governed by any
known law of earthquakes, except as regards the fluctuations of the
properties in a bear market dealt in at the Exchange, yet a great number
of Wall Street habitues, as well as other business men, are beginning to
think seriously on the subject of earthquakes, and are attempting to
penetrate their causes. Reflecting upon the upheaval—or rather the
settling down of Charleston—I have come to the conclusion that similar
disasters may be looked for in other localities, hitherto not subject to
them, and considered by scientists absolutely free from these phenomena,
at least on so large a scale. These peculiar disturbances that now make
life so precarious on this planet, I attribute to the innumerable and so
largely increasing excavations going on in various parts of the country,
in the different mining operations, which displace the underpinning of
the surface and cause it to sink beneath the weight which it carries. Of
all the great mining industries which conspire to produce earthquakes, I
think that of oil plays the most important part, and is the most
treacherous in its operations beneath the surface of the earth. The
pumping of oil from the bowels of the earth has been going on for thirty
years in this country in several districts. I believe it is not too
large an estimate to state that in that time an enormous lake of oil has
been removed, that would probably fill the basin of Lake Erie or
Ontario. That fluid made its way, probably, some of it from long
distances in subterraneous rivers before reaching the place where the
nature of the soil permitted it to gush through a shaft to the surface,
as it does in such abundance in the oil regions of Pennsylvania. Some of
those undercurrents may have come from other States, percolating through
and disintegrating the soil in their passage for hundreds of miles,
until they found an outlet, on the principle that all fluids have a
tendency to find their level. There may be a great underground reservoir
of this oil, which has taken many years to penetrate through the earth
owing to the tendency stated, cleaving, in its subterraneous journey,
fissures through ranges of mountains, and thus loosening the earth and
taking away the support from the surface wherever it has penetrated. The
fluid, percolating through various strata of clay and rock, has
displaced these in its course. Owing to this displacement there must, of
necessity, be a settling down of the land in the various regions through
which the oil has passed, which will, of course, differ in degree owing
to the density of the rock or clay. If the earth should be of a pulpy,
soft nature the settling will be greater, and when it happens to be the
foundation of a town or city the catastrophe will also be greater in
inverse proportion to the degree of consistency of the earth. It is
presumable, therefore, that some of the streets beneath the foundation
of Charleston is of this pulpy, yielding character, and hence great was
the fall of that city.

When New York was visited by the earthquake in 1884, and at various
other times, there was only a moderate shaking up, comparatively
speaking. Why? Because its substructure is solid stone to an immense
depth, even lower than the depths of the ocean. Of these subterraneous
rivers of which I have spoken we have many examples besides that of oil,
and also proofs that they traverse great distances, as, for instance, in
the case of the Saratoga Springs. It is clearly demonstrated that in the
case of these and other springs the waters must come from various
sources, and pass through many varieties of minerals before they arrive
at their destination, and thus receive the combination of elements which
impart to them their medicinal qualities. Then there are numerous
instances of this remarkable power of water in the case of these
monstrous land slides in mountainous regions, such as the Alps. In the
act of attempting to find its level, too, water sometimes exerts its
influence, in breaking up rocks, equal in its manifestation to a
powerful explosive. Thus we see the great influences that are at work
everywhere capable of producing earthquakes without the necessity of
resorting to the volcanic theory and without the aid of fire.

In further illustration of this theory of earthquakes, let us suppose
that one of these immense oil lakes which must exist in the bowels of
the earth should be situated beneath a mountain, where it has been
undisturbed for ages, but through some recent disturbing cause—most
likely that of excavating, to which I have referred—it begins to find an
outlet through various fissures. When once started, this great mass of
fluid matter begins to go with a rush, forcing innumerable outlets,
until the internal lake is in a measure exhausted. This creates an
immense vacuum, which deprives the mountain of a large portion of its
support; hence there is a settling down of several inches or several
feet, according to the nature and the solidity of the support. It is
this process of settling down and the struggle of the large masses of
fluid to force their way out, that create the rumbling noise resembling
that of distant thunder, and which also cause the tremulous and
quivering motion felt at the surface of the earth, and still more
distinctly in the houses, and most distinctly of all in the upper
stories thereof. These effects may be produced at a great distance from
the original cause of action, varying, of course, in their intensity
according to that distance. Several of these effects have been
distinctly experienced in Charleston since the first great catastrophe,
but showing that the cause is weaker and further removed from the scene
of the disaster than it was during the first fearful shock.

The Charleston earthquake did not strike Wall Street with very great
force. The very fact of its weak effect upon the great financial centre
of gravity created about as much surprise in the Street as the frightful
shock itself did in a very different and opposite manner upon the people
of Charleston. The reason that the great catastrophe which overwhelmed
Charleston had so little effect on Wall Street was chiefly owing to the
fact that comparatively little loss fell upon the corporations or the
people connected with Wall Street interests. The loss of ten millions
fell mainly upon the people of the doomed city alone. Only a small
portion fell upon people located elsewhere either in the North or the
South. Had such a disaster happened in any of the large cities North,
East or West, owing to their intertwining connections with Wall Street,
a panic would have been the result not unlike the one which followed the
Chicago fire.

Earthquakes are likely to become the great disasters of the future most
to be dreaded. Our population now comprises sixty millions, which, at
the present rate of increase, will soon reach one hundred millions.
Among these is a large proportion of go-ahead, driving men, who are
constantly diving into the bowels of the earth to dig up the vast
treasures which are there concealed. Through this laudable enterprise
the underpinning of the surface of our globe is being constantly
disturbed; and though it is far from a consoling reflection, the time
may come, and may not be far distant, when such calamities as that of
Charleston may be as common as railroad accidents are now.


[Illustration:

  _August Belmont_
]


------------------------------------------------------------------------




                              CHAPTER LIV.

                AUGUST BELMONT.


THE AMERICAN REPRESENTATIVE OF THE ROTHSCHILDS.—BEGINS LIFE IN THE
    ROTHSCHILDS’ HOUSE IN FRANKFORT.—CONSUL GENERAL TO AUSTRIA AND
    MINISTER TO THE HAGUE.—A GREAT FINANCIER AND A CONNOISSEUR IN ART.


August Belmont has achieved the highest credit of any banker in the
United States. His bills are always in demand and command a little more
than those of any one else. He came to New York comparatively poor, but
is now worth millions. As a representative of the Rothschilds in this
country he has for many years held a high position in the financial
world. He has managed the business of that historic house with prudence
and exceptional acuteness and sagacity. Contrast his success in this
country with the experience of Americans abroad. George Peabody, and J.
S. Morgan, the successor of that philanthropist, may seem to be
exceptions to the rule, but they did not win such social and business
success as has been achieved by Mr. Belmont in this country, and the
fact remains that no American could have been so successful abroad as he
has been in the United States. Europe does not afford the opportunities
that so often arise here. This is the country of great and frequent
opportunities; there is a large and inviting field for enterprise and
business skill, although, of course, all cannot win such a position in
the financial world as that occupied by Mr. Belmont, who is reckoned
among the wealthiest as well as the most honored of America’s adopted
citizens.

He was born in the Rhenish Palatinate sixty-eight years ago. His father
was a man in well-to-do circumstances, who sent him, when he was
thirteen years old, to become an apprenticed clerk to the Rothschilds in
their Frankfort house. According to the German custom, he received no
pay; he was compensated by the opportunity of learning the banking
business. He made rapid progress. Before he was twenty-one he was
selected to accompany one of the Rothschilds to Italy and France as his
secretary. In 1837 the famous house, recognizing the promising field in
this country for profitable investments, sent young Belmont to New York
as their agent, a position which he held till 1858, when he became their
American correspondent and general representative, and this responsible
post he has held ever since. In 1844 he was appointed Consul-General for
Austria, and held the position for five years, when he relinquished it
because of his personal friendship for Louis Kossuth and his sympathy
with Hungary in the quarrel with Austria. In 1849 Mr. Belmont married
the niece of Commodore Perry, the hero of Lake Erie, a beautiful and
accomplished lady, who did much to strengthen his social position. In
1853 he was appointed Minister to the Hague by President Pierce, and
served four years. He has always been a staunch Democrat, and was for
several years chairman of the Democratic National Committee. He has
generally refused to accept public office, but his eldest son, Perry,
has served several terms in Congress.

Mr. Belmont is under the medium height, rather stout, with iron-gray
side whiskers, round German features and keen dark eyes, and among the
strong characteristics of the man is his marked chivalric courtesy and
knightly courage. As a financier he has few equals and no superior, and
to his politic and conservative management, as well as his foresight and
intimate knowledge of affairs, is due the American prestige and success
of the Rothschilds. Mr. Belmont’s house on Fifth Avenue, with its
splendid art treasures, is worth a large fortune in itself. He is a
connoisseur in works of art, and has one of the finest private
collections of pictures in the world. For many years he has also had a
princely residence at Newport and a stock farm at Babylon, Long Island.
Though not, strictly speaking, a club man, he was one of the founders of
the Manhattan Club. His successful career is an illustration of the fact
that this country affords a fine opportunity for the intelligence,
thrift and industry not only of native Americans but of the Republic’s
adopted citizens.


------------------------------------------------------------------------




                              CHAPTER LV.

   THE SOCIALIST OBJECTIONS TO THE PRESENT ORDER OF
                        SOCIETY EXAMINED.


INCREASE OF POPULATION AND THE GROWING PRESSURE UPON THE MEANS OF
    SUBSISTENCE.—EDUCATION AND MORAL IMPROVEMENT THE TRUE REMEDY FOR
    EXISTING OR THREATENED EVILS.—ERRORS OF COMMUNISM AND SOCIALISM.—HOW
    SOCIALISTIC LEADERS AND PHILOSOPHERS RECOGNIZE THE TRUTH.—GROWTH OF
    POPULATION DOES NOT MEAN POVERTY.


Mr. Mill says: “It is impossible to deny that the considerations brought
to notice in the preceding chapter make out a frightful case either
against the existing order of society or against the position of man
himself in this world.” How much of the evils should be referred to the
one, and how much to the other, is the principal theoretic question
which has to be resolved. But the strongest case is susceptible of
exaggeration; and it will be evident to many readers, even from the
passages I have quoted, that such exaggeration is not wanting in the
representations of the ablest and most candid Socialists. Though much of
their allegations is unanswerable, not a little is the result of errors
in political economy; by which, let me say once for all, I do not mean
the rejection of any practical rules of policy which have been laid down
by political economists—I mean ignorance of economic facts, and of the
causes by which the economic phenomena of society as it is are actually
determined.

In the first place, it is unhappily true that the wages of ordinary
labor, in all the countries of Europe, are wretchedly insufficient to
supply the physical and moral necessities of the population in any
tolerable measure. But, when it is further alleged that even this
insufficient remuneration has a tendency to diminish; that there is, in
the words of M. Louis Blanc, _une basse continue des salaires_ (a
continual decline of wages); the assertion is in opposition to all
accurate information, and to many notorious facts. It has yet to be
proven that there is any country in the civilized world where the
ordinary wages of labor, estimated either in money or in articles of
consumption, are declining; while in many they are, on the whole, on the
increase—and an increase which is becoming, not slower, but more rapid.
There are, occasionally, branches of industry which are being gradually
superseded by something else, and in those, until production
accommodates itself to demand, wages are depressed; which is an evil,
but a temporary one, and would admit of great alleviation even in the
present system of social economy. A diminution thus produced of the
reward of labor in some particular employment is the effect and the
evidence of increased remuneration, or of a new source of remuneration,
in some other; the total and the average remuneration being
undiminished, or even increased. To make out an appearance of diminution
in the rate of wages in any leading branch of industry, it is always
found necessary to compare some month or year of special and temporary
depression at the present time, with the average rate, or even some
exceptionally high rate, at an earlier time. The vicissitudes are no
doubt a great evil, but they were as frequent and as severe in their
former periods of economical history as now. The greater scale of the
transactions, and the greater number of persons involved in each
fluctuation, may make the change appear greater, but though a large
population affords more sufferers, the evil does not weigh heavier on
each of them individually. There is much evidence of improvement, and
none that is at all trustworthy, of deterioration, in the mode of living
of the laboring population of the countries of Europe. When there is any
appearance to the contrary it is local or partial, and can always be
traced either to the pressure of some temporary calamity, or to some bad
law or unwise act of government which admits of being corrected, while
the permanent causes all operate in the direction of improvement.

M. Louis Blanc, therefore, while showing himself much more enlightened
than the old school of levellers and democrats—inasmuch as he recognizes
the connection between low wages and the over-rapid increase of
population—appears to have fallen into the same error which was at first
committed by Malthus and his followers, that of supposing that because
population has a greater power of increase than subsistence, its
pressure upon subsistence must be always growing more severe. The
difference is that the early Malthusians thought this an irrepressible
tendency, while M. Louis Blanc thinks that it can be repressed, but only
through a system of Communism. It is a great point gained for truth when
it is recognized that the tendency to over-population is a fact which
Communism, as well as the existing order of society, would have to deal
with. And it is encouraging that this necessity is admitted by the more
considerable chiefs of all existing schools of Socialism. Owen and
Fourier, as well as M. Louis Blanc, admitted it, and claimed for their
respective systems a pre-eminent power of dealing with this difficulty.
However this may be, experience shows that in the existing state of
society the pressure of population on subsistence, which is the
principal cause of low wages, though a great is not an increasing evil;
on the contrary, the progress of all that is called civilization has a
tendency to diminish it, partly by the more rapid increase of the means
of employing and maintaining labor, partly by the increased facilities
opened to labor for transporting itself to new countries and unoccupied
fields of employment, and partly by a general improvement in the
intelligence and prudence of the population. This progress, no doubt, is
slow; but it is much that such progress should take place at all, while
we are still only in the first stage of that public movement for the
education of the whole people which, when more advanced, must add
greatly to the force of the two causes of improvement specified above.
It is, of course, open to discussion what form of society has the
greatest power of dealing successfully with the pressure of population
on subsistence, and on this question there is much to be said for
Socialism; what was long thought to be its weakest point will, perhaps,
prove to be one of its strongest. But it has no just claim to be
considered as the sole means of preventing the general and growing
degradation of the mass of mankind through the peculiar tendency of
poverty to produce over-population. Society as at present constituted is
not descending into that abyss, but gradually, though slowly, rising out
of it, and this improvement is likely to be progressive if bad laws do
not interfere with it.


------------------------------------------------------------------------




                              CHAPTER LVI.

          STOCK EXCHANGE CELEBRITIES.


HOW WALL STREET BANKERS’ NERVES ARE TRIED.—FINE HUMOR, JOCULAR
    DISPOSITIONS, AND SCHOLARLY TASTE OF OPERATORS.—GEORGE GOULD AS A
    FUTURE FINANCIAL POWER.—AMERICAN NOBILITY COMPARED WITH EUROPEAN
    ARISTOCRACY.—HOW THE IRISH CAN ASSIST TO PURGE GREAT BRITAIN OF HER
    BILIOUS INCUBUS OF NOBILITY.—THE NATURAL NOBILITY OF OUR OWN
    COUNTRY, AND THEIR DESTINY.


Among the well-known members of the Stock Exchange not elsewhere
mentioned are James D. Smith, who is now in his second term as
President, and who is also President of the New York and Exchange clubs
and Commodore of the New York Yacht Club, a man of a genial nature and
everyone’s friend; Brayton Ives, twice President of the Stock Exchange,
the colonel of a cavalry regiment under General Sheridan in the civil
war, and later a Brevet-Brigadier General; a graduate of Yale, and a
member of the Union League, Century, Athletic and University clubs;
Charles Johnes, the King of board room traders, once a clerk for Henry
Clews & Co., now worth a million, and a Prince of good fellows, as
bright and quick as he is popular; Louis Bell, a daring and successful
operator, a son of the well-known Isaac Bell, and who was at one time a
clerk with Brown Brothers & Co., the bankers; John Kirkner, another
plucky operator, keen in forecasting the market, and tenacious of his
opinions, whether contrary to generally accepted views or not; Eugene
Bogert, Wm. B. Wadsworth, William Henriques and James Raymond, also
successful traders; John Slayback, Edward Brandon, James Mitchell,
Vice-Chairman Alexander Henriques, ex-President J. Edward Simmons,
Secretary Geo. W. Ely, Donald Mackay, Thomas B. Musgrave, Frank Work,
the Wormsers, R. P. Flower, John T. Lester, Frank Savin, Charles
Schwartz and A. E. Bateman, are all worthy of special notice. Some of
the foregoing have a large following, more particularly the large room
traders, like Messrs. Johnes, Bell, Bogert, Kirkner and Wadsworth. There
are eleven hundred members of the Stock Exchange, and it is seldom that
a black sheep is discovered among them. There are some lambs, perhaps,
who receive a spring and fall shearing, but if they have pluck the wool
comes back again, and they push up the thorny and brambly path to
wealth, leaving, it is true, a little fleece here and there in the
struggle, but generally “getting there,” nevertheless. It is, however, a
mistake to suppose that all the members of the Stock Exchange are
wealthy. They have their ups and downs like everybody else, and some are
in very moderate circumstances.

The strain on a Wall Street broker is so great, the tension of the
nerves, in one of the most trying vocations known in the business world,
is so severe, that joking and in fact boyish pranks constitute a safety
valve for the relief of brains that would otherwise become disordered.
Without the relief of joking and skylarking, Nature’s own remedy for the
burdened mind in such circumstances—many a stock broker would go mad.
“There is nothing so good as a laugh,” says the song, and this expresses
a profounder truth than is generally suspected. Charles Darwin relaxed
the severe mental strain induced by his inquiries into occult questions
of biological science by reading the humorous extravagances of Mark
Twain, and the greatest thinkers, men who are far out on the cold
frontiers of thought, seeking, as intellectual pioneers, the solution of
the fundamental problem of existence, are proverbially jocular in their
hours of relaxation. Nature herself may be said to laugh, and why not
overburdened business men? The pranks at Christmas on the Stock
Exchange, the sound of hand organs in the Board Room, the smashing of
hats, pushing and jostling, the blowing of tin horns, the waltzes and
lanciers, the walking matches, wrestling and sparring—these are only the
natural reaction through the safety valve of humor which tend to relieve
undue tension and keep the spirits clear and fresh. There is more or
less skylarking on all dull days, and the effect is mental invigoration.
It is a mistake to suppose that only the younger men participate in
these amusements. The older members are the most incorrigible. When a
new member, for instance, is receiving his vigorous initiation and being
hustled here and there like a chip in raging waters, his silk hat
skimming along the floor, the foot ball of hundreds of feet, his collar
at right angles with his person and his coat tails flying like a Dutch
lugger under full sail, a group of older members may look on with
apparent disapproval, but the moment the newcomer is driven in their
direction he finds that his last state is worse than the first. The
veterans give him a reception that makes him look wilder and gasp more
than ever, and he is glad to escape from these gray bearded evil-doers.
The horse play is rough but it does no harm, and the new member, after
buying a new hat, is ready to “get square” on the next unfortunate wight
to be initiated.

As to the Stock Exchange as a great financial institution, none stands
higher in the world. Its transactions involve hundreds of millions in a
year, and nowhere is there more regard for strict equity in business.
Its members are as exemplary a class of business men as can be found
anywhere. Its methods are strictly upright, and a black sheep finds no
mercy. Wealth will not necessarily procure a membership in this great
financial emporium. The applicant must be a person of good repute. It
numbers men of great wealth, men of a high order of talent, men of
scholarly tastes, connoisseurs in art, students of science, literature
and philosophy, and men capable of standing at the helm and giving
direction to vast enterprises in the domain of finance and commerce.
There is not a more intelligent body of men in the world. The very
nature of their business compels them to study great public questions,
and many of the members are men of a distinctly statesmanlike caste of
mind, of whom the Stock Exchange may well be proud, while they
themselves derive no small distinction from being identified with so
illustrious and honorable a body.

                         WASHINGTON E. CONNOR.

Washington E. Connor was born in New York city about 37 years ago. He
first appeared in Wall Street as a clerk for Wm. Belden & Co., a firm in
which the redoubtable Jim Fisk was once a partner. Black Friday of
September, 1869, when a financial hurricane whistled through Wall
Street, brought young Connor to the front, and he has ever since
remained there. He was long the able lieutenant of Mr. Gould in large
speculations. He is a natural leader in speculation—cool, quick and
adroit. From time to time he has been a director in the Western Union,
Union Pacific, Missouri Pacific, Missouri, Kansas & Texas, Kansas
Pacific and Wabash Companies. He was president of the Central
Construction Company, which established the lines of the American Union
Telegraph Company. He was a director in the famous Credit Mobilier
Company, the Texas & Colorado Improvement Company, the Metropolitan and
New York Elevated roads and the New Jersey Southern. He is a member of
the Union League and the Lotus clubs, and especially enjoys the society
of artists, writers and other persons of talent and cultivation. He has
a good library, and is of a somewhat studious turn of mind. As a youth
he studied at the College of the City of New York.


[Illustration:

  _George J. Gould_
]


                       A FUTURE FINANCIAL POWER.

George J. Gould will be one of the few very rich men in this country, as
he will, of course, be his father’s successor. He possesses good
abilities, has an attractive presence, and is modest and retiring in his
manners. He has, thus far, made an excellent record, and the Stock
Exchange was glad to admit him to membership. He is connected with all
of his father’s roads, and is gradually relieving him of much of the
onerous work connected therewith. If anything should happen to Jay
Gould, George Gould would stand in the same financial relation to his
affairs that Wm. H. Vanderbilt sustained to his father, the Commodore,
and, like him, would be found equal to the new honors and
responsibilities devolving upon him. This reasonable expectation should
dispel any apprehension of a financial shock in the event of Jay Gould’s
demise.

George Gould is bright and agreeable, and a good husband. If Jay Gould
has made enemies, that is no reason why his son should not be popular.
It is proverbial that the male descendants of a family are more akin to
the side of the mother than to that of the father, and as Mrs. Jay Gould
has always been recognized as a most exemplary wife and mother, she may
rightfully be regarded as the equal of any woman in New York, and one to
be respected and honored accordingly by those whom we ought to take as
social exemplars. There should be no other standard of social test than
that of merit; not judging individuals by what they were, but by what
they are to-day; not judging by the ridiculous test of ancestry—a
criterion which would upset some of our social demi-gods—but by the real
worth of the living man or woman. Suppose, for instance, the young
Vanderbilts, who rank high in society, and are splendid specimens of
nature’s noblemen, should be measured by the standard of the old
Commodore when he was a boatman on Staten Island. Everybody would
recognize such a test of fitness as to the last degree absurd. In the
United States nature’s nobility is at the front, as against the
parchment nobility of England and the Continent. The _personelle_ of the
English nobility makes a sorry showing beside that of young George
Gould, the young Vanderbilts, and others of our wealthy Americans.

The modern nobility spring from success in business. Peace has its
victories in the formation of character greater than those of war; and
peace and republicanism will develop the future greatness of the human
family, and not pretentious yet effete monarchies, of which mankind is
heartily sick. Many of the so-called noblemen of to-day shine only by a
faint reflected glimmer from the armor of mediæval ancestors; or their
ancestry may be much more recent, and steal slyly off in the gloom of
forgotten crimes to the prison or the gallows; or their patent of
nobility may be a thing of yesterday, a child’s bauble solemnly
displayed by addle-pated dotards, ridiculous even to the unthinking. The
English nobility is coming to the auction block. Not a few in former
times laid their heads there for treason, but now it is articles of more
value, namely, the curious, the antiquities, the bric-a-brac, the works
of art, the rare furniture, which comes to the block, and they are
purchased by the new nobility raised up by success in finance and
commerce. There is very little in Europe which is not obtainable at a
price. Titles in England may yet be sold as they have been in Italy. Who
cares for a title of Italian or French nobility? To this low estate must
English titles come at last. It is marvellous that they have endured so
many centuries after the downfall of the feudal system that originally
gave them birth.

Why is it that Gladstone has always refused a title?

One reason is that at his birth nature gave him a higher title to
nobility than parchment can ever confer.

Another is that he did not care to be ennobled and then wrapped, as a
titled mummy, in the sweet-scented cerements of political death, to be
buried in that Egyptian tomb of political extinction, the House of
Lords. And to-day he is a Colossus among statesmen, whose grand figure
will loom up in history as one of the foremost men of the nineteenth
century, a Titan dwarfing the proudest of a senile nobility. And yet he
is simply a great Commoner.

If the Irish wish to assist nature in purging Great Britain of her
bilious incumbus of nobility, they should recognize the fact that
ridicule is a good medicine. The Irish are proverbially prolific. Let
them make a point of christening the rising generation with titled
names. Then there would be myriads bearing the name of Duke O’Reilly,
Earl McCarty, Marquis O’Brien, Baron Sullivan, Sir Timothy Finnegan,
Lord McSwynny, and so on. The objection to this plan, however, is that
it would brand thousands of innocent and helpless children of worthy
parents with titles which have become contemptible to all right-thinking
persons as the badges of imbecility, mediocrity, or dishonor. This is a
rather lengthy digression after beginning with one of the natural
nobility which we have in this country, namely, the nobility founded
solely on merit, but the case of a young man like George Gould naturally
suggests contrasts. He is destined to take a commanding position in the
world of finance in future years, and it is gratifying to know that he
is a man of high character, excellent capacity, and of great promise.
There is usually a disposition to criticise the sons of very wealthy
men, due to that envy to which poor human nature is so prone, but the
fact in this case is indisputable that young Gould is held in high
esteem wherever he is known. He is a graduate of Harvard and Columbia,
and a member of the Manhattan and other clubs, and he is, in the
business world, where he is most powerful, simply a reserved and quiet
associate, always controlling his lines, but never interfering in a
strident way with those who are working for them.


------------------------------------------------------------------------




                             CHAPTER LVII.

            A LOOK INTO THE FUTURE.


WHAT WE ARE.—WHAT WE ARE PREPARING FOR.—WHAT WE ARE DESTINED TO DO AND
    TO BECOME.—WE ARE ENTERING ON AN ERA OF SEEMING IMPOSSIBILITIES.—YET
    THE INCONCEIVABLE WILL BE REALIZED.


In reviewing the past, I am struck with the enormous growth of New York
as a city, New York as a State, and the United States as a Nation. The
fact is that we hustle through the business world so fast (and this is
especially applicable to Wall Street), that we do not realize how
rapidly we are going. To any one who is familiar with the appearance of
the down town or business part of the city, as it was twenty years ago,
ten years ago, or even eight years ago, the difference to-day will give
some intimation of the changes which are going on around us, and are
merely features of development. Why, even ten years ago, the old
Equitable Building was a structure to which attention was attracted
because of its greatness and its superiority over any other building in
New York city—its height, its width, its breadth, its depth, its
elevators, its beauty of arrangement inside and its artistic aspect
outside. Millions of dollars have been spent in the past few months in
making this one building about four times as large as the original
structure which brought pride to the hearts of New Yorkers, and
surprised and startled their friends from the country. To-day it is one
of the greatest buildings on the Island, and even rivals the State
Capitol, which is supposed to be the pride of the people of the Empire
State. This is only one instance. All along lower Broadway, the great
business artery of the country, four-story and five-story buildings have
been torn down, and nine-story buildings put up in their place. Four and
five buildings have been dug away and a single structure put up in their
place, and in some of the buildings—indeed in scores of them—within a
few blocks of the Stock Exchange, there are whole communities of people
who are performing life’s work in their own good way, rather than
interfering with their neighbors or themselves, and who know nothing of
what goes on around and about them, and care less. Small armies of
retainers and servants, and the most perfect mechanism, are needed to
enable these communities to carry on their work with dispatch and
convenience. That is to say, where offices are rented in the eighth and
ninth stories of a building, the occupants expect to be shot up to them,
and down from them, with no trouble to themselves, and no weariness of
limbs—and they are. This must be done, too, without loss of time—and it
is. All the attendant arrangements must have the elements of
luxuriousness and comfort—and they do.

This is a small feature of our development, however. So far as the
development of the city is concerned, this appears to be an era of
bridges, and Rapid Transit Elevated roads. So far as the development of
inter-State communication is concerned this is an era of Express Trains,
which, although they have reached a speed of a mile a minute in certain
perfected sections of the roads, do not at all indicate what will come
to pass in the future. Electricity is, of course, the means for
instantaneous communication between separate points known to human
intelligence, practically annihilating time between the New World and
the Old World, and between separated points in either world, or even in
the cities. But electricity does not travel with anything like the speed
of light and air. Now, in some few instances, we have utilized
compressed air as a means of locomotion. Efforts are being made, but are
still in a crude state of development, for the utilization of
electricity as a motive power. Suppose we look one handled years ahead,
and, calculating upon the factors and experiences of the past one
hundred years, imagine what the picture will be of this town as a city,
and this people as a nation. I believe that one hundred years hence the
era of bridges between this city and those which adjoin it across the
rivers, will have passed away, and that instead of one or two or five
bridges across the East River, we will have pneumatic tubes at every
pier, and I believe the same will be true on either side and at the end
of the island. These tubes will spread from New York, as the blood
vessels in the human body spread out and are supplied from the heart;
for New York is not only the business heart of this country, but it is
destined to be, so surely as God permits growth, the business heart of
the world, and the money centre of the world. And the arteries from this
centre will distribute the blood all over, and in all directions.
Through these pneumatic tubes I believe there will be almost
instantaneous communication or transportation of people from one point
to another. Nor will this be confined to New York city alone. In the
near future the Trunk Line Railroad to leading points, such as
Washington, Philadelphia, Boston and Chicago, will probably run trains
at the rate of one hundred miles an hour, and even this will only be a
beginning. To admit of this, steel rails will be required of about
double their present weight, and the wheels must be proportionately
massive and strong. The risk attendant upon such increased speed will be
no greater than the ordinary speed of the present day, say forty miles
an hour. But the time will come, during the next five generations, when
the pneumatic tubes will extend from here to these central points of the
East and the West and the South; and it will be possible for a man to
leave New York at seven o’clock and go to Chicago for breakfast,
transact his business and return to New York for lunch or business
appointment by twelve o’clock noon of the same day. Of course, one of
the problems to be solved in connection with this sort of meteoric speed
will be to supply air for breathing purposes; and the same compressed
air which will shoot the carriage through the tube, will be in some form
utilized for the purpose. This, however, only for a period; for I think
the time must come when electricity will be the one motive power of this
country and of the world, so far as the transportation of people and
property is concerned. Time is money, and the American idea is to save
time. We now waste little enough of it in all conscience. The greatest
business of the world, that of the New York Stock Exchange, is already
compressed into five hours’ time; and yet it is a business in which the
most trivial error or accident because of haste might cause losses of
millions. The obliteration of time is a necessity of American
enterprise. When Electricity is made the general propelling power, it is
likely that a stationary engine will be located at Niagara Falls, and
the force and power of those waters utilized to supply all the needed
propelling power for this State, if not even beyond, to remote and
far-off sections of our country. I heard it once said by an intelligent
authority, that it had been predicted that instead of the coal mines of
this country sending their products hundreds and thousands of miles
away, for transportation-power, at a great expense, that a stationary
engine would be located at the mouth of the mine, and the power derived
from the coal transmitted therefrom over an electric wire. This would,
indeed, be a great transformation, and a great improvement and a great
economy. But a greater change, one quite as likely in the future, and
perhaps possible within the lifetime of some of our children, will be
the abolition of railroads by the pneumatic tube process, and the
transmission of power as I have suggested.

A hundred years hence the people who then occupy our places will look
upon us as primitive and crude, or, in accordance with the Darwinian
theory, as the monkeys from which their perfected race has been
developed. In fact, there is a good deal of Darwinism in our
development, in a business sense, if not in a human sense. As the
surroundings grow, so does the intellect of the human race, and there is
no telling what we may do or what we may become—provided we live long
enough. We have plenty of room, plenty of power, plenty of natural
ability, and we make our own opportunities; all we lack in this world is
time and perfect science, and if time is given us we may be able to show
what giants of enterprise a free people may become; that, as the first
choice of God’s creation, we lack nothing.

We are proud now of our Brooklyn Bridge. But when the Bridge was opened,
and the foot passenger rate was made one cent per person, and the car
rates three cents, it was a grave question of consideration for the men
upon whom devolved the responsibility of the conduct of the Bridge,
whether or not the cities would supply passengers enough to make the
Bridge self-supporting. It was not expected that they could or would.
But to-day, the rate for foot passengers is one-fifth of one cent, and
the car passengers are transported for two and one-half cents. The time
is not far distant when these rates will be made much less, if not
abolished entirely. They certainly will be abolished so far as the
promenade is concerned; and, at the rate of one cent per passenger now,
the Bridge would earn dividends for each of the two cities which issued
bonds for its construction; while the taxable value of the property in
both has been so largely enhanced, that the Bridge has paid for itself
already, and, yet it has been open less than five years. More than a
year ago the experience of the Directors was that the facilities of this
Bridge were perfectly inadequate; and, while everything has been done to
increase them and extensions and improvements have been made, the Bridge
is still too slow, and its power facilities too limited for the proper
accommodation of the people who cross it from city to city.

This is only one evidence of the growth of New York; it is merely an
incident. There is another incident, which, in connection with what I
have said about the difference in construction of buildings during the
past few years, I think I will mention right here. The city of New York
donated to the Government the site in the City Hall Park where the New
York post-office now stands. It was the original intention that the
building should be only three stories in height. The capping was already
on, and the roof was in the primitive stages of construction, when,
walking down Broadway one morning, as I passed the structure, the
thought occurred to me that, for a building of its size and heavy
granite exterior, its height was disproportionate, and gave it a dwarfed
appearance, and a lack of symmetry. Besides that, whatever space could
be added to it by the increase in its height, even though the additional
room might be a surplus for the time being, the time would soon come
when even more would be needed. I wrote to Architect Mullet, calling his
attention to these facts, and insisting that, in confining the building
to three stories, he was making a mistake; that it was not in keeping
with the magnificence of the structure; that it should have one or more
additional stories, with a mansard addition besides, and that the
business experience of the past most certainly demonstrated that the
room would soon be needed by the Government for the proper conduct of
its affairs in this the greatest business center of the country. Within
a week Mr. Mullet called to see me, and I convinced him that I was
correct in my criticism and predictions. He said, in reply: “But there
is no appropriation; the money appropriated is exhausted, and the
building cannot be enlarged.” I asked him: “Well, what is necessary to
be done in the matter? Suppose I write to Mr. Boutwell, the Secretary of
the Treasury, about it, and urge that the building be enlarged as I
suggest.” Mr. Mullet approved of the suggestion, and I added: “I will
write to several members of Congress to the same effect.” This I did,
and it was not long afterward that Mr. Mullet informed me that my
efforts in the matter had been successful, and he had received orders to
go ahead and make the building four stories in height, with a mansard
roof story besides. This additional room was not needed at the time, but
it has already become inadequate for the accommodation of the Government
postal employees, and a few others who have been granted quarters there.
And now there is a proposition under consideration for the construction
of an additional Government building in this city which will cover two
blocks of ground or more, and in which may be centered the various
departments of Government, which are now scattered in a half dozen or
more places. Is not this evidence of growth? Is not this evidence of
development which justifies what has been said as to our prospective
growth? Yet this is merely incidental to the strides of progress going
on; and, if we are walking at this pace, will not our children’s
children be racing at the different paces suggested by some of the
predictions I have made?


[Illustration:

  _Jay Gould_
]


------------------------------------------------------------------------




                             CHAPTER LVIII.

                  JAY GOULD.


HIS BIRTH AND EARLY EDUCATION.—CLERK IN A COUNTRY STORE.—HE INVENTS A
    MOUSE TRAP.—BECOMES A CIVIL ENGINEER AND SURVEYS DELAWARE
    COUNTY.—WRITES A BOOK AND SELLS IT.—GETS A PARTNERSHIP IN A
    PENNSYLVANIA TANNERY AND SOON BUYS HIS PARTNER OUT.—HE COMES TO NEW
    YORK TO SELL HIS LEATHER, FALLS IN LOVE WITH A LEATHER MERCHANT’S
    DAUGHTER AND MARRIES HER.—SETTLES IN THE METROPOLIS AND BEGINS TO
    DEAL IN RAILROADS.—BUYS A BANKRUPT ROAD FROM HIS FATHER-IN-LAW,
    REORGANIZES IT AND SELLS IT AT A CONSIDERABLE PROFIT.—HENCEFORTH HE
    MAKES HIS MONEY DEALING IN RAILROADS.—HIS METHOD OF BUYING,
    REORGANIZING AND SELLING OUT AT A LARGE PROFIT.—HOW HE MANAGED ERIE
    IN CONNECTION WITH FISK AND DREW.—HIS OPERATIONS ON BLACK
    FRIDAY.—CHECKMATED BY COMMODORE VANDERBILT AND OBLIGED TO SETTLE.—HE
    MAKES MILLIONS OUT OF WABASH AND KANSAS & TEXAS.—HIS VENTURE IN
    UNION PACIFIC.—HIS CONSTRUCTION COMPANIES.—ORGANIZATION OF AMERICAN
    UNION TELEGRAPH, AND HIS METHOD OF ABSORBING AND GETTING CONTROL OF
    WESTERN UNION.—THE STRIKE OF THE TELEGRAPHERS AND HIS GREAT
    ENCOUNTER WITH THE KNIGHTS OF LABOR AND TRADES UNIONISTS.—GOULD’S
    FIRST YACHTING EXPEDITION.—AN EXCEEDINGLY HUMOROUS STORY OF HIS
    EARLY EXPERIENCE ON THE WATER.—HIS STATUS AS A FACTOR IN RAILROAD
    MANAGEMENT.—HIS ACQUISITION OF BALTIMORE & OHIO TELEGRAPH, &C.


If Fenimore Cooper, Sir Walter Scott, Charles Dickens or Dumas, in the
height of the popularity of any of these great writers of fiction, had
evolved from his inner consciousness a Jay Gould as the hero of a novel,
its readers would have found serious fault with the author for
attempting to transcend the rational probability allowed to the latitude
of fiction. Few novel readers, in fact, would have patiently submitted
to such a strain on their credulity prior to the era in the financial
development of this country which produced some of the leading
characters which Wall Street has brought to the front, as stern
realities of every day life, since my advent in the great arena of
speculation.

Among these Jay Gould is conspicuous, and of all the self-made men of
Wall Street he had probably the most difficulty in making the first
thousand dollars of the amazing pile which he now controls.

Jay Gould was born at Stratton Falls, Delaware county, New York, about
the year 1836. He was the son of John B. Gould, a farmer, who kept a
grocery store. At the age of sixteen young Gould became a clerk in a
variety store belonging to Squire Burnham, about two miles from the
Falls. Here, in his leisure hours, he assiduously improved the little
learning he had received at the village school, by applying himself to
the study of book-keeping in the evenings.

It was when he was at this store, according to the most reliable
accounts, that he manifested his natural aptitude for making sharp and
profitable bargains. His employer, the Squire, had his eye on a piece of
land in Albany, which he expected to obtain cheap and so make a profit.
He whispered his intention to some friend in the store and his young
assistant overheard him. When he went to put his design of purchasing
the land in execution he found that young Mr. Gould had been there
before him, and had secured the title.

About this time there was a firm which had undertaken to survey the
county and make office maps of it, and young Gould was employed to
assist them. Having mastered the elementary principles of geometry, and
being naturally quick and correct at figures, he soon became a fair
expert in common land surveying, and made himself exceedingly useful to
his employers. But the idea of not only being his own boss but an
employer of other people’s brains and muscles was one of his ruling
propensities, and he used every effort to attain this object. In a short
time he bought out the firm, wrote a history of the county to accompany
the maps and peddled his book among the residents.

This natural inclination to buy out every concern with which he has been
connected has been the ruling passion of his life, and still tenaciously
adheres to him. Prior to his negotiations with the firm of surveyors, he
had invented a mouse trap in his intervals of leisure in the store, and
with the proceeds of this and the bargain in the land, out of which he
had outwitted his employer, he was enabled to make himself master of the
situation with the surveyors. Shortly after this Gould became interested
in a Pennsylvania tannery with Zadoc Pratt, who was the capitalist.
Through the advice of Israel Corse, the Commission Merchant of the firm,
Col. Pratt proposed to dissolve the partnership. Gould induced Charles
M. Leupp & Co. to purchase Pratt’s interest for $150,000. The business
did not meet the expectations of Leupp, who in a fit of despondency
committed suicide. After his death Gould failed to retain possession of
the property, which was sold to H. D. H. Snyder, thus terminating Mr.
Gould’s career as a Pennsylvania tanner.

On his visits to New York Mr. Gould was attracted by the greater
advantages which the Empire City afforded for extending his business,
and came here to reside. He had ingratiated himself in the favorable
esteem of one of the grocery merchants with whom he had done business.
The merchant took him to his house to board and Mr. Gould fell in love
with his handsome daughter. It was a mutual affair of the heart, like
that of his son George and Miss Edith Kingdon, and a speedy marriage was
the result. The results of the happy union seem to have been all that
could be desired, and the domestic felicity of Mr. and Mrs. Gould, so
far as the public have been able to ascertain, has never suffered the
slightest jar or interruption.

The father-in-law owned shares in a railroad which was in a bad
financial condition. He employed his new son-in-law to see what he could
do to extricate him from a position in which he was likely to become
embarrassed, and he wanted to sell his shares. Mr. Gould examined the
road, (with the locality of which he had been well acquainted in his
boyhood,) saw the favorable possibilities of its future, under good
management, and instead of selling his father-in-law’s shares to a
stranger, he took them at their market value himself, purchased more,
finally obtained control of the entire property, and sold it to a rival
company at a large profit.

This, I believe, was Mr. Gould’s first transaction in railroad matters,
and from that day to this his great speculative forte has been buying
and selling railroads. It was in that kind of business, and not in the
stock market, as is popularly supposed, that he made the great bulk of
his enormous fortune.

On his entrance to Wall Street he began business alone. Afterwards he
formed a partnership with Henry N. Smith and — Martin, the firm taking
the name of Smith, Gould & Martin. Martin is now in a lunatic asylum,
and Henry N. Smith, who was the chief cause of the failure of Wm. Heath
& Co. for a million dollars, is now a poor pensioner on the bounty of
his wife. But Mr. Gould still towers aloft, in the full enjoyment and
the continued progress of his speculative prosperity, without being
dismayed by any competitor, however powerful, and overcoming all
obstacles, no matter how gigantic.

As I have noticed pretty fully some of Mr. Gould’s greatest speculative
transactions, mostly behind the scenes in the chapter on Black Friday
and also in the account of the “Commodore’s Corners,” it will be
unnecessary to repeat them here.

There was one clever transaction in the Black Friday affair that should
be put on record to the credit of the able management of that great
deal. One prominent individual connected therewith was personally
responsible for $4,500,000. This was a pretty heavy load at that time
even for him to carry, but it did not weigh very heavily upon him for
any appreciable length of time. He adroitly managed to shift it over on
to the shoulders of that broad-backed, soulless creature called the Erie
Corporation, making it responsible by simply signing himself “T. R.,”
instead of “J.G.,” the large letters representing the ordinary
contraction “Tr.” for Treasurer. By this simple and ingenious device
this shrewd gentleman got rid of the burthensome legacy on the negative
side, bequeathed to him by the “Black Friday corner.”

There is a story told, with several variations, in regard to a
sensational interview between Mr. Gould and Commodore Vanderbilt. The
scene is laid in the parlor of the Commodore’s house. It was about the
time that the latter was making desperate efforts to get a corner in
Erie, and at that particular juncture when, having been defeated in his
purpose by the astute policy of the able triumvirate of Erie—Gould, Fisk
and Drew—he had applied to the courts as a last resort to get even with
them.

They had used the Erie paper mill to the best advantage, in turning out
new securities of Erie to supply the Vanderbilt brokers, who vainly
imagined that they were getting a corner in the inexhaustible stock. Mr.
Vanderbilt was wild when he discovered the ruse and had no remedy but
law against the perpetrators of this costly prank. These adroit
financiers usually placed the law at defiance, or used it to their own
advantage, but this time they were so badly caught in their own net that
they had to fly from the State and take refuge at Taylor’s Hotel in
Jersey City.

It seems that during their temporary exile beyond the State Gould sought
a private interview one night with the Commodore, in the hope of
bringing about conciliatory measures.

The Commodore conversed freely for some time, but in the midst of his
conversation he seemed to be suddenly seized with a fainting spell, and
rolled from his seat unto the carpet, where he lay motionless and
apparently breathless.

Mr. Gould’s first impulse was to go to the door and summon aid, but he
found it locked and no key in it. This increased his alarm and he became
greatly agitated. He shook the prostrate form of the Commodore, but the
latter was limp and motionless. Once there was a heavy sigh and a half
suffocated breathing, as if it were the last act of respiration.
Immediately afterward the Commodore was still and remained in this
condition for nearly half an hour. Doubtless this was one of the most
anxious half hours that ever Mr. Gould has experienced.

If I were permitted to indulge in the latitude of the ordinary story
teller, I might here draw a harassing picture of Mr. Gould’s internal
emotions, gloomy prospects in a criminal court and dark forebodings. His
prolific brain would naturally be racked to find a plausible explanation
in the event of the Commodore’s death, which had occurred while they
were the sole occupants of the room; and at that time, in the eyes of
the public, they were bitter enemies.

I can imagine that, in the height of his anxiety, he would have been
ready to make very easy terms with his great rival, on condition of
being relieved from his perilous position. It would have been a great
opportunity, if such had been possible, for a third party to have come
in as a physician, pronouncing it a case of heart disease. No doubt Mr.
Gould would have been willing to pay an enormous fee to be relieved of
such an oppressive suspicion.

The object of the Commodore’s feint was evidently to try the courage and
soften the heart of Mr. Gould, who never seemed to suspect that it was a
mere hoax. His presence of mind, however, was equal to the occasion, as
he bore the ordeal with fortitude until the practical joker was pleased
to assume his normal condition and usual vivacity. If Mr. Gould had been
a man of common excitability he might have acted very foolishly under
these trying circumstances, and this doubtless would have pleased his
tormentor intensely.

The _modus operandi_ of Mr. Gould, in the purchase and sale of
railroads, has been to buy up two or more bad roads, put them together,
give the united roads a new name, call it a good, prosperous line, with
immense prospects in the immediate future, get a great number of people
to believe all this, then make large issues of bonds and sell them at a
good price, for the purpose of further improving and enhancing the value
of the property. After these preliminaries had been gone through, if
profitable purchasers came along, they could have the road at a price
that would amply compensate Mr. Gould for all his labor and acute
management. If these purchasers should be unable to run the road
profitably and were obliged to go into liquidation after a year or two,
as frequently happens, then Mr. Gould or his agents would very likely be
found on hand at the sale to take back the road at a greatly reduced
price. Mr. Gould would then get a fresh opportunity of showing the
superiority of his management. He would be able to demonstrate that the
road had left his possession in excellent and progressive condition, but
through loose management had been run down. He would then set about the
work of reorganization again and go through the same role substantially,
with slight variations, as before, realizing a handsome profit on each
successive reorganization.

It would take too much time, and swell this volume far beyond the space
which I have laid out for it, to go minutely into the history of all Mr.
Gould’s great enterprises. In fact, it would take a large volume in
itself to do justice to the various schemes which have been put under
way by him directly and indirectly and carried to a successful issue
during his busy life of a quarter of a century in Wall Street. This
seems a long time for a man who is still so young, although he is a
grandfather, and enjoying the use of his mental faculties more
vigorously than ever.

Owing to my own busy life I have only time to sketch the most salient
points of Mr. Gould’s prosperous career. Some future historian of Wall
Street is destined to make a big “spread” upon him, as the newspaper
reporter would say. He will have ample material if he only begins his
work soon; but whoever undertakes the job should not forget the maxim of
that great veteran of literature, old Dr. Samuel Johnson, about material
for biography having a general tendency to become scarce, and, in some
instances, eventually to vanish. While the reliable material for Mr.
Gould’s biography may be subject to the common fate of growing less, as
time advances, there is no danger of utter oblivion in his case. He has
impressed his footprints on the sands of time too firmly for that.

I don’t for a moment mean to insinuate the reason for this, which is
given by Shakespeare as applicable to similar cases, although some
ill-natured and envious people might use the well-known quotation in
this connection:

             “The evil that men do lives after them,
              The good is often interred with their bones.”

I have no hesitation in saying that Mr. Gould will leave a large amount
of good after him, and, indeed, it seems now as if the Shakespearian
adage was to be reversed in his case. The evil that he may have done is
likely to be forgotten. He bids fair to outlive most of it, if he only
goes on to the end as he has been doing for the past few years. He is
now showing a decided disposition to become more of a builder up than a
wrecker of values.

Through his great executive ability in railroad management and
construction he has been instrumental in making many blades of grass
grow where none had grown before, causing the desert to blossom like the
rose, assisting thousands who had formerly been poor and almost
destitute, pent up either in European hovels or New York tenement
houses, to find happy homes in the West and South. He has been a great
factor in improving the value of the land, and thus, while he was
enriching himself, adding materially to the wealth and prestige of the
nation and thereby elevating it in the appreciation of the world at
large.

The correspondent of the London _Times_ recently sent over here to write
up a description of the country, dwells emphatically on this
characteristic of Mr. Gould and other great millionaires and railroad
magnates, who contribute so largely to the general prosperity of which
they seem to be the indispensable mediums.

It was as the managing power in the Erie Railroad that Mr. Gould laid
the broad foundation of his fortune. His speculative connections with
Erie are more fully dealt with in the lives of Daniel Drew and Commodore
Vanderbilt. The money and influence which he gained, in connection with
the Erie corporation, enabled him to extend his operations in the
acquisition of railroad property until, through Union Pacific and its
various connections, Wabash and a number of Southwestern roads, it
seemed probable, at one time, that he was in a fair way of grasping the
entire control of the trans-continental business in railroad matters.
And this was prior to the time when he obtained his present hold on
telegraph facilities.

Some of the able schemes in which Mr. Gould has had credit for playing
an important part, and sometimes a role that was considered rather
reprehensible, were managed, so far as the outside business was
concerned, chiefly by one or more of his wicked partners. In one of the
most noteworthy of those projects, namely, the attempt to capture the
Albany & Susquehanna Railroad, Mr. Gould seldom or never appeared in
person before the public. His partner, James Fisk, Jr., was cast in that
role and played it with great ability. With the essential aid of those
two shining lights of the New York bar, David Dudley Field and Thomas G.
Shearman, the Prince of Erie, (as Jim Fisk was called,) came pretty near
snatching possession of 142 miles of a very important railroad, with the
control of only 6,500 out of 30,000 shares of the stock, and 3,000
shares of these 6,500 had been illegally obtained, as was eventually
decreed by the court.

Mr. Fisk, though the silent member of the Erie firm, had also control of
Judge Barnard, of the Supreme Court of the City and County of New York.

The Albany & Susquehanna road would have been a valuable prize for Erie.
It runs from the eastern extremity of the New York Central at Albany to
a junction with Erie at Binghamton. At that time Erie aspired to be a
successful competitor with Central for New England business, and had
determined to monopolize the coal trade between that section and
Pennsylvania. This connecting link of 142 miles was therefore regarded
as a very valuable acquisition by both the large roads. Hence it was
worth a desperate effort, and Jim Fisk showed that he had a true
appreciation of its value, for he organized a company of New York
roughs, placed himself at their head, and being armed with bludgeons and
pistols and an injunction from Judge Barnard, obtained from him in New
York city—while he was really in Poughkeepsie at the time—went to Albany
and took forcible possession of the offices of the railroad. He had the
President, Secretary, counsel and receiver of the road arrested and put
under $25,000 bonds each. Mr. Fisk went through the farce of an election
of Erie candidates for the offices which he had forcibly made vacant in
the Albany & Susquehanna, bringing his roughs up to vote as
stockholders.

The President of the road, Mr. Joseph H. Ramsey, fought stoutly for his
rights and ousted the intruders. He had spent eighteen years building
the road, and was naturally attached to it. He also found a Judge to aid
him. Justice E. Darwin Smith, of Rochester, eventually rendered a
decision in favor of the Ramsey party, with the opinion that “Mr. Fisk’s
attempt to carry the election by his contingent of ‘toughs’ was a gross
perversion and abuse of the right to vote by proxy, tending to convert
corporation meetings into places of disorder, lawlessness and riot.”
Costs were decreed to the Ramsey directors, and a reference made to
ex-Judge Samuel L. Selden, of the Court of Appeals, who fixed the
allowance to be paid by the Fisk board to the Ramsey board at $92,000.
It is worthy of note that the Fisk board consisted of the unlucky number
of thirteen.

The Erie party appealed, but long before the appeal could be heard the
Albany & Susquehanna was leased in perpetuity to the Delaware & Hudson
Canal Company, against whom the Erie party was not strong enough to go
to law. Thus ended the struggle for this great connecting link.

It is worthy of remark that this was one of the few cases in which,
where Mr. Gould made up his mind to obtain the control, possession or
ownership of property, he did not succeed.

The methods of acquiring the control and the possession of other
people’s property have been raised to the dignity of a fine art by Mr.
Gould. This art has been prosecuted, too, through “legitimate” means. He
has had the law at his back every time, and been supported in his
marvellous acquisitions by the highest Court authority.

The manner in which he managed to get Western Union into his hands
affords a very striking illustration of his methods and the great secret
of his success.

When first laying his schemes to obtain the control of the telegraph
property he got up a construction company to build a telegraph line.
This was a company of exceedingly modest pretensions. It had a capital
of only $5,000. It built the lines of the Western Union Telegraph
Company, with which Mr. Gould paralleled most of the important lines of
Western Union, and cut the rates until the older and larger corporation
found that its profits were being reduced towards the vanishing point.
Then it was glad to make terms with its competitor; a union of interests
was the result, and Mr. Gould obtained control of the united concern.

“Impossible,” said Norvin Green, in high dudgeon, when the insidious
intentions of Mr. Gould were broached to him a few months before the
settlement took place. “It would bankrupt Gould and all his connections
to parallel our lines, and to talk of harmony between him and us is the
wildest kind of speculation.” The genial Doctor was then master of the
situation in Western Union, or imagined himself so at that time, and
regarded with contempt the efforts of Gould and his colleagues to bring
the company to terms. In a few months afterward the Doctor tamely
submitted to play second fiddle to the little man whom he had formerly
despised.

The arrangement in reference to the cable companies followed the capture
of Western Union. The struggle is still pending for the entire monopoly
in the cable business, and it now seems only a question of time when the
Bennett-Mackay party will have to succumb, leaving Gould in the supreme
control of the news of the world. If this should happen he would become
an immense power for either good or evil both in speculation and
politics. In fact it would be too great a monopoly to be entrusted to
the will of one man. Although it might be judiciously managed, as the
cup of his ambition would then be surely full, yet the experiment would
be extremely hazardous.

The controlling interest in the Elevated Railroads of this city,
recently achieved by Mr. Gould through his business and speculative
relations with Mr. Cyrus W. Field, are of too recent date to require any
special notice or comment here. Suffice it to say, that I fear my friend
Mr. Field has not come out at the big end of the horn, although
everything has no doubt been in conformity with the most approved
business principles and in strict adherence to the most honorable
methods of dealing in railroad securities. It is significant, however,
that Mr. Field has preserved a prudent reticence on the subject.

Mr. Gould, from my point of view, has been a public benefactor in the
bold and successful stand which he has maintained against strikers.
Though Western Union lost over half a million dollars by the strike of
the telegraphers, which greatly alarmed the stockholders, yet Mr. Gould
held out until the strikers were obliged to give in. He pursued the same
policy, with a similar result, in the case of the Knights of Labor.
During the strike of the latter I explained my views on the subject in a
circular to my customers as follows:

    “The Knights of Labor have undertaken to test, upon a large
    scale, the application of compulsion as a means of enforcing
    their now enlarged demands. This has necessitated a crisis of a
    very serious kind. The point to be determined has been, whether
    capital or labor shall in future determine the terms upon which
    the invested resources of the nation are to be employed. To the
    employer, it is a question whether his individual rights as to
    the control of his property shall be so far overborne, as to not
    only deprive him of his freedom, but also expose him to
    interferences seriously impairing the value of his capital. To
    the employes, it is a question whether, by the force of
    coercion, they can wrest to their own profit powers and control
    which, in every civilized community, are secured as the most
    sacred and inalienable rights of the employer. This issue is so
    absolutely revolutionary of the normal relations between capital
    and labor, that it has naturally produced a partial paralysis of
    business, especially among industries whose operations involve
    contracts extending into the future. There has been at no time
    any serious apprehension that such an utterly anarchial movement
    could succeed, so long as American citizens have a clear
    perception of their rights and their true interests; but it has
    been distinctly perceived that this war could not fail to create
    a divided if not a hostile feeling between the two great classes
    of society; that it must hold in check, not only a large extent
    of ordinary business operations but also the undertaking of
    those new enterprises which contribute to our national progress,
    and that the commercial markets must be subjected to serious
    embarrassments. * * * * * From the nature of the case, however,
    this labor disease must soon end one way or another; and there
    is not much difficulty in foreseeing what its termination will
    be. The demands of the Knights and their sympathizers, whether
    openly expressed or temporarily concealed, are so utterly
    revolutionary of the inalienable rights of the citizen, and so
    completely subversive of social order, that the whole community
    has come to a firm conclusion that these pretensions must be
    resisted to the last extremity of endurance and authority.”

The manner in which Mr. Gould acquired his great control in some of the
Western and Southwestern railroads was pretty fully developed in the
recent investigation held in this city, Boston and San Francisco by the
Pacific Railway Commissioners. Mr. Gould’s testimony, as reported in the
daily papers of May, 1887, probably contains almost as correct and
succinct an account of his pooling arrangements and schemes in
connection with certain railroads and his methods of making money out of
them as can be obtained anywhere. His testimony, on the whole, was
exceedingly affable, comprehensive and precisely to the point, and has
not been contradicted in any material points by any of the succeeding
witnesses that have yet been examined on this widely interesting
subject. Its substance was as follows:

                   [_From the Herald, May 18, 1887._]

    A dapper little man in plain pepper and salt (the pepper
    predominating) business suit entered the Pacific Railway
    Commissioners’ offices yesterday morning and sat down quietly
    with his not over shiny silk hat on his knee.

    The natty gentleman, unobtrusive possessor of the small dark and
    brilliant eyes, was the man of millions.

    He had lots of information for the Commission, and he gave them
    more of the inside facts of the early consolidation deals of the
    Union Pacific than they hoped to get.

    It had been expected that Mr. Gould would prove a wily witness,
    hard to corral and liable to shy over the fence at the slightest
    provocation, but at the very outset his manner was a complete
    surprise. He told the Commission that he was suffering from
    neuralgia, and said that he could not speak very loud in
    consequence. There were times during his examination that his
    tone was faint, and it was only loud two or three times, when he
    became very much interested in some explanation. At all times,
    however, it was well modulated, and now and again had a musical
    cadence about it that was very pleasing. He first became
    interested in Pacific roads in 1873. He bought Union Pacific
    stock in the market, but it went down to fourteen cents on the
    dollar. He held about 100,000 shares. He had a consultation with
    Sidney Dillon, and finally made a proposition to fund the
    floating debt in bonds, of which he took a million dollars’
    worth at above their par value. In 1874 he became a director and
    served on the executive committee. He continued in the direction
    during 1874, 1875 and 1876, and went over the road twice a year.
    He had no interest in the Fisk suit, but knew it was brought. He
    had no contingent interest whatever in the suit.

    He became interested in the Kansas Pacific in 1878, but thought
    he knew the road in 1874. He remembered a proposition looking
    toward a unity of interest between the Denver Pacific and the
    Colorado Central.

    Being examined as to the positions of the roads, and as things
    did not appear to be very clear, Mr. Gould, putting his hand to
    his inside pocket, said: “I have a little map here if you are
    not familiar with the location.”

    The little map was brought out and all hands gathered around it,
    while Mr. Gould’s index finger went on an excursion over States
    and Territories in absolute defiance of the Inter-State Commerce
    Law. He recalled the fact that the plan of consolidation was
    considered as early as 1875, after Mr. Anderson read some
    extract from a paper, but he said it was not carried out then.
    He might even have had a talk with Scott about it on further
    consideration.

    The little road connecting with the Colorado Central was built
    by him, and was the result partly of the contest between the
    Union Pacific and the Kansas Pacific. Prior to 1878 he could not
    recollect having owned any stock or securities of the Kansas
    Pacific. His interest in the Union Pacific has increased to
    200,000 shares, the total issue of stocks being 367,000 shares.
    He kept books of his transactions. Mr. Morosini kept them a part
    of the time.

    Q. Where are the books? A. I have them.

    Q. Where? A. In my possession.

    Q. Are they at the service of the Commission? A. If they desire
    them, with the greatest of pleasure.

    This was the first sensation of the day, and the witness smiled
    blandly as he felt the full force of it.

    Up to this time he had answered every question promptly. There
    appeared to be no hesitation on his part, and, indeed, there was
    none during the entire day’s session. Almost every preceding
    witness had taken refuge behind “I don’t know,” or “I cannot
    remember,” or “Really I am not sure,” but there was none of this
    from Gould. And the apparently full and free offer of his books
    capped the climax.

    After this whenever his memory was in any way at fault the
    witness fell back on the books. In asking him what he had bought
    certain stocks for he said the books would show.

    “Will your books also show who the broker was?”

    “Oh, yes; certainly, certainly, certainly.”

    In the matter of the St. Louis pool he had conversed with a
    number of persons.

    Q. With whom did you converse? A. I presume with all the signers
    of the agreement.

    Q. Will you tell us all about the preliminary measures leading
    up to this? A. I would have the neuralgia a good deal worse than
    I have if I undertook to tell you all of the details.

    This was the original proposition of consolidation, which was a
    stock instead of a bond agreement, and it was soon demonstrated
    that it would not work.

    Q. How soon after this was the new arrangement entered into? A.
    Almost immediately afterward, I think. The object was the
    funding of a heterogeneous mass of securities into one class of
    securities.

    Q. Did you confer with others? A. I conferred with myself as
    well as others. What I thought was a fair price for me was a
    fair price for the others.

    Q. To whom did you deliver your bonds? A. I suppose to the
    committee, but I do not know.

    Q. But you would not deliver $2,000,000 to a man in whom you did
    not have confidence? A. Probably not.

    Q. Who kept the accounts? A. I don’t know.

    Q. You don’t remember? A. I don’t charge my memory with these
    things after they are over, but my books will show, and they are
    at the service of the Commission.

    Mr. Gould’s manner in saying this was unusually suave and
    polite, and the lines of his mouth relaxed just enough to
    suggest a smile.

    In speaking a few moments later of the securities bought by Mr.
    Gould from the “St. Louis parties” he was asked of whom he
    bought them.

    “I cannot tell about that off-hand, but my books will show it.”

    “Which of the St. Louis people did you confer with?”

    “I think they came on here to see me. They were tired out and
    wanted to sell, and came over to do it.”

    “Then you bought all the securities first and tried to get some
    other gentlemen to go in with you afterward?”

    “Yes, several gentlemen whom I thought would be of service to
    the road. There ought to be some books. Somebody must have kept
    accounts of the transactions. My recollection is that these
    people came on and told me they wanted to sell. I asked them how
    much they thought they ought to have and they gave me the price
    quoted in the agreement.”

    “I simply said, ‘I will take them,’ and that was all there was
    to it. That is my recollection. In 1879 I owned about $4,000,000
    worth.”

    The examination led into the stamped income bonds of the Kansas
    Pacific, and Mr. Gould was asked as to the condition of the
    road. He thought it was poor. The road had a large intrinsic
    value, but it had been badly financed and its securities were
    way down.

    Q. Did you not buy some of your securities abroad? A. I bought
    two millions of Denver Pacific at seventy-four cents, I think,
    from some Amsterdam people. I was in London and heard that they
    wanted to sell. I was afraid to go over, because I had very
    little time, and thought they would probably take a couple of
    days to smoke before finding out whether they would sell or not.
    But I was mistaken. I went over and got to Amsterdam in the
    morning; washed and had my breakfast. I saw them at eleven,
    bought them out at twelve, and started back in the afternoon.

    When Mr. Gould was asked as to the prices he had paid for the
    securities with which he had acquired the Kansas Pacific bonds
    he took out his papers and handed the Commission a series of
    neatly written reports on these purchases and sales.

    He purchased in 1879 St. Jo. and Denver first mortgage bonds,
    $1,562,886.69, for $603,204.78.

    Of these, $617,000 worth he sold to Russell Sage, F. L. Ames,
    Sidney Dillon, S. H. H. Clark, Ezra H. Baker, F. G. Dexter and
    Elisha Atkins for $246,800.

    On January 24, 1880, he surrendered $956,779.76 in these bonds
    and scrip in exchange for 9,568 shares of Union Pacific at par.

    For St. Jo. and Denver Pacific receivers’ certificates to the
    number of fifty-nine he paid $60,695, and on January 24, 1880,
    he surrendered them for 590 shares of Union Pacific at par, or
    $59,000.

    Of St. J. and Denver stock during 1879 he acquired 8,819 shares,
    and sold 3,806 shares to the same persons purchasing the bonds.
    On January 24 he surrendered the 5,013 shares he had remaining
    on hand at par for $100,200.

    During the same time he bought $784,000 worth of the St. Joseph
    Bridge bonds for $586,940, of which he sold to Sage and Dillon
    $150,000 worth for $112,500.

    He also bought 4,000 shares of stock for $6,000, making the
    total cost of $634,000 bonds and 4,000 shares of stock $480,440.
    Received in exchange for the whole business, 6,340 shares of
    Union Pacific stock at par, making $634,000.

    The gentlemen to whom Gould sold the securities were all
    directors of the Union Pacific. These gentlemen, the witness
    thought, retained their bonds until the consolidation, as they
    were bought with a purpose. “The Denver stock was called
    trimmings,” said Mr. Gould, smiling, “and went with the bonds.”

    On the consolidation of the company he transferred 27,000 shares
    of Union Pacific Railroad stock for new stock.

    He had transferred his Union Pacific stock at one time to some
    other parties on account of a peculiar law in Massachusetts,
    which enables an attachment of stock on a suit, whether there
    was anything in it or not.

    “I found out about that law,” said Mr. Gould, “and put the stock
    in somebody’s else’s name. You can’t tell anything,” he
    continued, sharply, “about any stock list. There are many shares
    of stock held by brokers for years.”

    After the consolidation he had begun to distribute his stock
    among other holders.

    “I made up my mind,” he said, “it would be better to have four
    or five stockholders do a little of the walking instead of one.”

    Q. That idea was very much stimulated by the rise in the stock
    after the consolidation, was it not? A. Yes, because the stock
    went up then so much that there wasn’t enough to go round.

    The witness told the story of the employing of General Dodge and
    Solon Humphreys to recommend the consolidation. They were fair
    men, he thought, and would make a fair report.

    He had not talked to them after they went West to make their
    report.

    Q. How is that? A. Well, he naively replied, while they were
    making their examination my interests had changed.

    Q. They had changed? A. Yes, I had bought the Missouri Pacific.

    Q. Did General Dodge and Mr. Humphreys look into the past
    history of the road? A. I consider the future of a road more
    important than its past.

    Q. Yes, but what I want— A. The past was no criterion as to the
    Union Pacific road.

    Q. But don’t you think that General Dodge and Mr. Humphreys—? A.
    “All my life,” said Mr. Gould, warming up; “all my life I have
    been dealing in railroads—that is, since I have been of age, and
    I have always considered their future and not their past.”

    “That is the way I have made my money,” said he. “The very first
    railroad I ever bought had a most deplorable past, but its
    future was fair. I paid ten cents on the dollar for its bonds,
    and finally sold the stock for $1.25. It was the future of the
    Union Pacific that drew me into it. I went into it to make
    money.”

    “You were not in favor of the consolidation at the time it was
    made?”

    “No, my interests had changed.”

    “Did you try to stop it?”

    “Well,” said Mr. Gould, slowly, “my opposition to it was known
    and they were greatly alarmed.”

    “Who?”

    “Ames, Dexter, Atkins and Dillon. They came on from Boston to
    see me about it. They had heard that I was going to build an
    extension to the Denver Pacific and connect the Missouri
    Pacific. They said I was committed to the consolidation and laid
    right down on me. I offered my check for $1,000,000 to let me
    out, and I have offered it since.

    “I will pay it now,” said the witness, with a strong rising
    inflection of the voice and looking hard at the Union Pacific
    people in the room.

    “I offered them a million, but they would not let me out of the
    room until I had signed an agreement to carry out the
    consolidation.”

    “Where is that paper?”

    “I suppose it is in Boston. If I could have carried out my
    Missouri Pacific plan I would have a property now that would be
    worth par.”

    “I don’t think you have any reason to complain of your profits
    in the matter,” replied Mr. Anderson, at which Mr. Gould partly
    closed his eyes to hide their twinkle, and said nothing.

    The paper which he signed was an agreement to carry out the
    consolidation on certain terms. The consolidation was an assured
    fact after January 15, because the witness held the controlling
    interest.

    “But I have now ceased to be the tower of the Union Pacific,” he
    said.

    In asking Mr. Gould about his connection with Lawyer Holmes at
    the time of the consolidation, Mr. Anderson asked him whether he
    was sure about a certain conversation.

    “Yes,” he said, “for I had it impressed on my mind.”

    “How was that?”

    “Well, I remember parting with a lot of stock at ten cents for
    which I could have got par a few days afterward. Wouldn’t that
    impress the occasion on your memory, Mr. Anderson?”

    Everybody laughed at this, and the witness, although he had lost
    a million or two, laughed as heartily as the loudest.

    As far as the Denver Pacific stock was concerned Mr. Gould said
    it was worth practically nothing unless the consolidation was
    made. It was the signature of the Union Pacific that made it
    good.

    “Do you consider that the trustees fulfilled their duty in
    letting this stock out of trust?” he was asked.

    “I consider that it was the only thing to do, and I stand on
    what was done. I am ready to take the responsibility for it that
    day, or this day, or any other day.”

               [_From the New York Times, May 19, 1887._]

    Jay Gould gave another day to the Pacific Railway Commission
    yesterday. His manner was, as usual, cool and collected, and he
    was apparently full of a patient desire to tell everything he
    knew. Yet Mr. Gould told very little, although he answered
    hundreds of questions, some of them puzzling enough to drive a
    less long-headed financier into a corner. The Denver Pacific
    stock and the way it got out of the trust were first taken up.
    Mr. Gould said he thought the course taken was best for
    everybody. Naturally he wanted the Denver Pacific to go into the
    consolidation, holding as he did, $1,000,000 of the securities,
    and being trustee of over $3,000,000 more. At first it was
    doubtful if the Union Pacific would take it, but it did for the
    franchises. “I want to say again,” declared Mr. Gould, “that no
    director or person connected with the Union Pacific ever made a
    dollar out of Denver Pacific. I am glad to put a final nail in
    that coffin.”

    His plan at one time was to build a line from Denver to Ogden,
    via Salt Lake and Loveland Pass. It would have been shorter than
    the Union Pacific and obtained more local business, for the
    Union Pacific ran north of the mineral belt and the Southern
    Pacific south of it. After he obtained the Missouri Pacific he
    saw what a good thing he had in it, but he was persuaded to give
    his pledge to go on with the consolidation of the other roads.
    The Boston folk became agitated within a month after he bought
    the Missouri Pacific, and got the pledge from him. If the
    Missouri Pacific had been put through it would have injured the
    Union Pacific a great deal.

    “According to the ethics of Wall Street,” Mr. Gould was asked,
    do you consider it absolutely within the limits of your duty,
    while a director of the Union Pacific, to purchase another
    property and to design an extension of the road which would
    perhaps ruin the Union Pacific?”

    “I don’t think it would have been proper. That’s the reason I
    let it go.”

    “Did you consider your duty to the Government?”

    “I had considered it.”

    “How would the Government claim have been affected by building a
    parallel line?”

    “It would have been wiped out.”

    After the Thurman bill had been sustained by the Supreme Court
    Mr. Gould had a plan to build a road from Omaha to Ogden, just
    outside the right of way of the Union Pacific, and give that
    road back to the Government. It would give others “a chance to
    walk.” The Government tried to squeeze more out of the turnip
    than was in it. For $15,000,000 a road could be built where it
    had cost the Union Pacific $75,000,000.

    “You were not devoted to the interests of the Government?”

    “I wanted to protect them. Their legislative action hurt their
    own interests and put those of the stockholders in jeopardy. The
    Government repudiated their own contracts. Cash was offered to
    pay the Government the Union Pacific debt. I had the debt
    reckoned up and offered to pay it. In 1877 or 1878 I made the
    offer to the Judiciary Committee, of which Mr. Edmunds was
    Chairman. I made the offer myself. The debt was estimated at
    $15,000,000 or $17,000,000. But the Government would not concede
    that interest terminated with the bonds. No action was taken on
    the proposition.”

    Mr. Gould thought he wrote his own resignation as Director of
    the Union Pacific. He resigned because he ought not to deal with
    the company while one of its directors. He put it in President
    Dillon’s office. Mr. Dillon knew what it meant.

    “What did it mean?”

    “That if the consolidation went through it involved large
    transactions with Jay Gould, and if I had stayed in it would
    have complicated things. Before January 10, 1880, no bargain was
    made to pay par for St. Jo. and Western bonds, nor Kansas
    Central, nor 239 for Central Branch stock. That came afterward.”

    The Colorado Central lease was canceled on account of a State
    law against consolidating competing lines. Mr. Gould did not
    know that the Dodge and Humphreys letter was to be presented to
    the meeting of January 24. He was probably informed of the
    consolidation on the day it took place. He was also probably
    present at the first meeting of the new company on January 24.
    Mr. Gould’s resignation from the Kansas Pacific Board was gone
    over, and in summarizing his reasons for resigning Mr. Gould
    said he did not want to be mixed up with trusteeships and
    directorships. When he was not a Union Pacific director he felt
    at liberty to take care of himself. There was a chance that the
    properties might be made hostile to him, and then it would have
    been improper for him to be a director. He did not know that
    Russell Sage was to move the acceptance of his resignation.

    “At the Kansas Pacific meeting a list of the branch lines
    obtained from you was read. President Dillon said the company
    had bought them. What did he mean?”

    “Possibly he referred to the directors’ agreement with me.”

    “But we can find no record of this in the books. Don’t you think
    he referred to the agreement with the Boston gentlemen?”

    “Very likely, but it had no authority until it was accepted or
    rejected.”

    Mr. Gould was set to explaining some discrepancies between the
    accounts of his dealings in branch securities, handed in on
    Tuesday, and the list submitted by Controller Mink. Mr. Mink
    gave 15,162 shares of St. Jo. and Western stock, and Mr. Gould
    8,119. The difference was explained by Mr. Gould’s getting some
    stock for building the Hastings and Grand Island. He retained
    control of the $150,000 St. Jo. Bridge bonds he sold Dillon and
    Sage and turned them over with his own. His $479,000 Kansas
    Central bonds and 2,521 shares of the stock cost him $431,820.25
    at the time he bought the Missouri Pacific. They all went into
    the consolidation for $479,000. Mr. Gould bought the Central
    Branch of the Union Pacific from Oliver Ames and President
    Pomeroy, who came to New York and induced him to go and look at
    the property.

    “I thought it was doing a big business,” said he. “Afterward I
    learned they had kept the freight back for a week to impress me.
    So I saw a freight train at every station when I got there. I
    bought the road anyway.” Its total cost to Mr. Gould was
    $1,826,500. Over the Central Branch, whose stock was disposed of
    by Mr. Gould for 239, there was a little stir in the hearing,
    but the witness tranquilly explained that the road was
    practically stocked at only $2,500 a mile, and therefore the
    stock ought to range way above par.

    “Has the road earned dividends?” he was asked.

    “I don’t think so.”

    “Have the aggregate earnings exceeded the fixed and Government
    charges?”

    “I never figured it out. Stock doesn’t always depend upon
    dividends altogether. I paid 750 for my Missouri Pacific—4,000
    shares at that figure. You pay more for rubies than for diamonds
    and more for diamonds than for glass.”

    Then the examination turned to the days just after the
    consolidation, and the witness was asked if there was any
    corporate action of the new company before the stock was turned
    over to him.

    “All I know,” he said, “is that the stock of the new company was
    delivered.”

    “Was the new company bound to carry out the Kansas Pacific
    obligations of this sort?”

    “Well, I suppose it assumed the Kansas Pacific obligations.”

    “Why were you not paid in Kansas Pacific consols instead of
    stock?”

    “I suppose they preferred stock to bonds. I was clever to them
    and took stock.”

    Another turn carried questions and answers to other differences
    in the accounts, but the commission got little light. “It’s safe
    to say the lawyers got the difference,” chuckled Mr. Gould, at
    the end of the set of questions. He had made large cash
    advances, at different times, to the Kansas Pacific to meet the
    floating debt, and very likely these would have to be counted in
    to explain matters in all cases. There was one point upon which
    the witness strongly insisted, and that was that all through the
    negotiations and transactions no class of people nor any
    particular holders of securities experienced any discrimination
    in their favor, as compared with the treatment given everybody
    else.

    After the consolidation Mr. Gould said he had few transactions
    in Union Pacific branch lines. He had an interest in the Denver
    & South Park, however, a minority interest at first, but
    subsequently he bought the whole road from Governor Evans. “I’m
    showing you my whole hand,” he said, cheerfully, at the end of
    the catalogue of the branches. Of the Union Pacific’s legal
    expenses he knew of none which were not perfectly legal.

    “Who were the road’s counsel in Washington?”

    “Messrs. Shellabarger & Wilson were the only ones, as far as I
    knew.”

    “Have you ever been to Washington on business of the company?”

    “Yes. And I paid my own hotel bills.”

    “Do you recall persons sent to Washington from other places in
    the interest of the road?”

    “Judge Usher and Mr. Poppleton.”

    “Who represented the Kansas Pacific?”

    “Judge Usher. I don’t know that they had anybody in Washington.”

    “How often did you go to Washington for the road?”

    “I was there while the Thurman bill was pending. It passed, and
    I haven’t been there since. No, I take that back. I was down
    before the Labor Committee. I got rather disgusted.”

    “Do you know whether anything was spent to influence
    legislation?”

    “No, sir. I know of no such expenditure.”

    “Where could we find records of such transactions?”

    “I don’t think such transactions exist.”

    “Do you remember advising, at a meeting, that Mr. Ordway, of
    Washington, be employed in the interests of the Kansas Pacific?”

    “No, sir.”

    Mr. Anderson read from the minutes of a Kansas Pacific meeting,
    in 1876, and Mr. Gould remembered that Senator Rollins, a great
    friend of Mr. Ordway, asked him to write a letter about it. He
    knew of nothing coming from the letter.

    “Do you remember any talk of fighting the Credit Mobilier?”

    “I saw some of their stockholders and they said they would turn
    in their stock to us. Others wouldn’t. The Credit stockholders
    alleged that the Union Pacific owed their company a great deal
    of money. I succeeded in getting the great bulk of the stock
    turned over before a judgment was obtained.”

    “You remember your address to the Union Pacific president and
    directors.”

    “I wanted to put myself in a position to bring a suit.”

    “Who opposed this proposed action of yours?” asked Mr. Anderson,
    reading from the minutes of a directors’ meeting that Mr. Dexter
    moved “to decline to bring suit, as requested by Mr. Gould.”

    “I think the directors declined, and I brought the suits
    individually.”

    “There is another letter of yours to the directors, requesting
    them to begin suit against the Credit for a full accounting of
    all profits, under certain alleged contracts,” etc.

    “I think that was on a different set of contracts.”

    Mr. Frederick L. Ames, the first witness called, testified that
    he was formerly a stockholder in the Union Pacific Railroad, and
    is a cousin of the Hon. Oliver Ames, Governor of the
    Commonwealth. He was familiar with the relations of this road
    and the Kansas Pacific Road prior to 1877. “I personally
    attended,” he said, “to the affairs of the road under the
    direction of my father, Oliver Ames. The first dividend of the
    road was paid in 1875 or 1876. I do not remember the rate paid.
    I was somewhat familiar with the condition of the Kansas
    Pacific. I did not think the stock of much value in 1877. Mr.
    Jay Gould was instrumental in buying up the Kansas Pacific
    securities in 1876. I understood that he owned a large amount of
    the funding bonds and unstamped incomes. I never knew what the
    respective interests of any of the gentlemen interested were. I
    owned no securities that entered into that pool. I received two
    certificates for $50,000 each. I have not these in my possession
    now. They were turned over to somebody. These certificates were
    probably issued to every member of the pool. I think I paid
    $100,000 to the Farmers’ Loan and Trust Company.”

    Mr. Anderson—Have you been able to find those certificates, Mr.
    Mink?

    Controller Mink—They are not in our possession, sir.

    Mr. Anderson—It is very strange that we cannot get any clue to
    these certificates.

    Continuing, Mr. Ames testified as to the manner in which the
    business of the pool was conducted, a copy of the consolidated
    mortgage being introduced in evidence.

    “I do not remember,” he said, “that I ever contributed the
    $388,000 funding bonds named in this mortgage. My connection
    with this pool was limited to the advancement or the $100,000.
    The pooling rates and mortgage rates were identical. I was a
    director in the Kansas Pacific Road in 1879. I cannot explain
    why bonds were issued to persons having claims against the road
    at a rate which would exaggerate its indebtedness more than
    $1,000,000. I exchanged my bonds for Kansas Pacific bonds. I do
    not remember that, in 1880, $2,950,000 of preferred stock was
    issued to Jay Gould at 75 when the bonds were worth 94. I do not
    know of any other transaction of the kind. I do not know how the
    Kansas Pacific Road came to be indebted to Jay Gould for
    $2,000,000 at this time. All the directors were in favor of the
    consolidation except Jay Gould. He was unwilling to accede to
    any such terms as we thought we were entitled to, and seemed
    very much agitated at the course we had taken. The final
    consummation was reached at Mr. Gould’s house. I do not remember
    that we would not let Mr. Gould leave the room until he had
    signed the paper. The paper was signed by all present. The basis
    of the consolidation was $50,000,000.”

    When asked how he explained the payment of dividends by the
    Union Pacific with a condition of affairs which requires a sale
    of stock for the extinction of a floating debt, Mr. Ames said
    that the declaration of the dividend was made upon the statement
    of the net earnings, and the road might very well have earned
    the dividends several times over and at the same time have been
    building roads and borrowing money and using its funds for other
    purposes, in addition to the property, which would not interfere
    with the right to declare dividends. Mr. Ames also said that the
    directors of the Union Pacific were largely controlled in
    signing the agreement read at the forenoon session by the fact
    that they were cornered by Jay Gould. “I think it has resulted
    favorably for the Union Pacific,” he continued, “and I would not
    take back the action if I could. I made nothing by the
    consolidation, as I did not sell my Kansas Pacific stock, but
    hold it now. Mr. Gould made about $3,500,000.”

    Judge Dillon cross-examined Mr. Ames, and showed from his
    evidence that he had no personal ends served by the
    consolidation. He said that his interest in the Union Pacific is
    larger now than it was in 1880, and that he is one of the
    largest stockholders.

                       JAY GOULD AND HIS SYSTEM.

The following from the New York _Times_ of April 27, 1887, contains a
graphic account of Mr. Gould’s mode of reviewing his system of
railroads:

    On first thought it seems almost impossible that Jay Gould has
    only been a railroad magnate of the first class little more than
    half a decade, yet such is the fact. In 1879 he owned only the
    nucleus of his present Southwestern system of railroads, and as
    the rival of the Wabash through considerable territory was the
    Missouri Pacific, he felt by no means at ease regarding the
    ultimate fate of his venture. Commodore Garrison owned a
    controlling interest in Missouri Pacific, which was managed by
    his brother Oliver. Commodore Garrison did not like Mr. Gould,
    and would not have objected to make Gould’s purchase of Wabash a
    dear bargain. He probably would have done so had it not been for
    Oliver Garrison. The latter and Ben W. Lewis, Gould’s manager of
    the Wabash, were close friends, and Garrison, as chief executive
    of the Missouri Pacific, did nothing to injure Gould’s property.
    But when Mr. Lewis called upon Mr. Gould in New York one day
    toward the close of 1879, and tendered his resignation on the
    ground of other interests which claimed his attention, Gould
    immediately saw breakers ahead, and said so. Lewis suggested
    that he remove the breakers by buying the control of Missouri
    Pacific. The suggestion was not allowed to get moldy. Gould
    called upon Oliver Garrison and offered $1,500,000 for the
    Garrison interest in the road. Garrison was much surprised, and
    said it would be necessary to consult with the Commodore. He
    said, however, that $1,500,000 was at least $500,000 too low.
    When the Commodore heard of Gould’s offer he rubbed his hands,
    laughed, and put the price at $2,800,000. Gould retorted that he
    could have bought it on the previous day for $2,000,000. The
    Commodore explained that the difference between yesterday and
    to-day was $800,000. Gould said nothing and retired. He made
    another effort on the following day. The Commodore had been
    thinking. His thoughts cost Mr. Gould $1,000,000, for his price
    on the third day of the negotiations was $3,800,000. Mr. Gould
    did not express his thoughts, but his speech demonstrated that
    he appreciated the danger and expense of delay. He said, “I’ll
    take it,” and he did. Thus from a beginning of less than 1,000
    miles he secured control of a system of over 5,000, forming the
    Missouri Pacific, Iron Mountain, and International and Great
    Northern and their branches into one compact system. The
    bargain, in comparison with the present value of the properly,
    was as close a one as Mr. Gould ever managed to make, and from
    the day it was closed he has lost no opportunity of extending
    his railroad properly, which, with lines that are yet on paper,
    but are almost certain to be built, is soon likely to embrace at
    least 6,000 miles of rail.

    Though the General Manager’s office is at St. Louis, and none of
    the Gould roads—for the Wabash is not considered in the
    system—run east of the Mississippi, nothing of importance is
    transacted there without the knowledge and sanction of Mr.
    Gould. Private wires run from the St. Louis office to the
    Western Union Building, in which is Mr. Gould’s private office,
    where he spends some hours each day sitting at a desk that never
    ought to have cost more than $25.

    He has traveled many times over every mile of his railroads.
    There is an immensity of interest in such a trip when made for
    the first time, or even the second or third, but it has been
    made so often by Mr. Gould that he has thoroughly absorbed all
    the pleasure to be obtained from it except that which smacks of
    dollars and power. His trips occupy about three weeks from the
    time his special car, the Convoy, leaves St. Louis until it
    returns to that hot and dusty city of pageants and conventions.

    When word is flashed to St. Louis that Mr. Gould is on his way,
    every official on the system packs his head full of information,
    and there is unwonted activity from Omaha to Galveston and from
    Fort Worth to San Antonio. All of the system’s executive force
    was selected either by Mr. Gould or by trusted officials in whom
    he had implicit faith, and the heads of divisions who work for
    Jay Gould could not work harder for anybody else, although in
    some instances their bank accounts do not show it.

    Mr. Gould lately was in the Southwest on a tour of inspection.
    On his trips he is always accompanied by General Superintendent
    Kerrigan, a New Yorker by birth, a South-westerner by education.
    Physically they are in marked contrast. The cleanly shaven,
    fair-complexioned Superintendent would make two of his employer.
    In manner they are much alike, though Kerrigan has a spice of
    bluffness that is lacking in the other. He has the composed,
    unexcitable manner of Gould to perfection, and is never known,
    no matter how great the provocation may be, to speak except in a
    low-pitched tone. He is a walking railroad encyclopedia, and has
    the topographical features of the Southwest—every corner of
    it—at his fingers’ ends. He has been employed on railroads of
    the system for over thirty years. From his Superintendent Mr.
    Gould obtains such details as the latter gathers from the
    Division Superintendents and other officials, but in making a
    trip Mr. Gould insists upon stopping at every point included in
    one of Mr. Kerrigan’s regular trips of supervision. He is always
    accompanied by a stenographer, who is also a typewriter, and the
    Superintendent and the heads of divisions follow the same plan.

    Upon arriving at a station at which it has been decided to make
    an inspection, Mr. Gould asks how long a stop will be made. The
    answer may be “an hour.” Mr. Gould looks at his watch. He then
    accompanies the Superintendent on a part of his rounds, listens
    quietly to his talk with the railroad officials of the place,
    and having heard all he cares to listen to, wanders around by
    himself while the Superintendent picks up the information which
    later he will give to his employer. Mr. Gould manifests no
    impatience until the hour has been exhausted. But if the
    engineer is not ready to start on the minute, and all hands are
    not in their places on the car, he begins to fidget, and is
    restless until a fresh start is made.

    He is a strong advocate of method. The day’s work is laid out in
    the morning and almost before the train starts in the morning he
    has settled how many stops can be made during the day and where
    the night can be spent. He dines and sleeps on board his car
    from the start to the finish of a three weeks’ trip. At night
    the Convoy is run to the quietest part of the yard, as the owner
    objects to more noise than he can avoid at night, though he can
    apparently stand as much as any one else in daylight. His car is
    always a curiosity along the line, and people come from far and
    near to look at it as it stands in the evening in a secluded
    spot, secure in its loneliness. In some parts of the country
    through which his roads run he is quite as much of a curiosity
    in the eyes of the country folk as a circus, and were he to
    stand on the platform after the manner of James G. Blaine, would
    attract quite as big a crowd as that gentleman. He is never
    apparently anxious to achieve notoriety in that way, and is
    quite as modest in his demeanor while on one of his tours as he
    is in his office or his Fifth Avenue mansion. In the latter, as
    a few newspaper reporters know, he is more unassuming and far
    more polite than a majority of his thousand-dollar employes.

    Mr. Gould meets some odd as well as prominent people on his
    trips and occasionally has a peculiar experience. On his first
    visit to Galveston, Texas, he discovered that it was on an
    island. Like a good many others he imagined it was on the
    mainland. On this occasion a number of citizens had been
    appointed to do him honor and he had promised to take up his
    quarters at a hotel. The committee had neglected to secure
    carriages for the party, and made a desperate effort just before
    the arrival of his car to repair the omission. This it was
    unable to do. There was an election at Galveston on that
    particular day. It was a hot one, both the day and the election,
    and everything on wheels had been bought up by the contending
    parties. Twenty dollars was offered for a hack and refused. The
    committee felt forlorn until Mr. Gould laughed at its dilemma
    and remarked that he saw no hills that he couldn’t climb. This
    is the only joke charged against Mr. Gould by the people who
    live on the line of his roads, for the highest point of
    Galveston is only three feet above the sea level. The
    inhabitants claim four feet, and denounce as a libel the
    statement made by people who live inland to the effect that tide
    water is three feet higher than Galveston.

    While skimming along over the International and Great Northern,
    between Houston and Galveston, Mr. Gould cannot look on either
    side of him without looking at land owned by A. A. Talmage,
    manager of the Wabash Railroad. Mr. Talmage owns a tract or
    ranch—though there are but few cattle on it—of 160,000 acres.
    For this land Mr. Talmage paid 12½ cents per acre. He would
    probably refuse to sell it to-day for $6 an acre. If Mr. Talmage
    owned nothing else besides this ranch he might be considered
    above want. Mr. Gould owns some land in different parts of the
    country also, but as a proprietor of the soil he occupies a much
    lower grade than Manager Talmage. George Gould probably owns as
    much land—railroad land grants not considered—in the Southwest
    as his father, and is always on the lookout for bargains. These
    are always to be had at the close of a disastrous agricultural
    or cattle season. Newcomers in Texas are liable to forget that
    disastrous years only occur occasionally, and that in three
    favorable seasons the profits will be large enough to stand one
    bad season in three. They may hear of all this after they sell
    out, but the old settler is not offering information that can
    only be bought with experience until it is valuable as a
    mournful reflection.

    The Iron Mountain Railroad has a station called Malvern. It is
    44 miles south of Little Rock. As his car pulls into Malvern Mr.
    Gould sees on a narrow gauge railroad that also has a station
    there an engine with a diamond-shaped head-light. The narrow
    gauge road runs from Malvern to Hot Springs. Mr. Gould has no
    interest in it, but he knows it was built and is owned—every
    spike in it—by a man who received his first start in life from
    the same man who placed him on his feet. The Hot Springs
    railroad is owned by “Diamond Joe” Reynolds, who was started in
    business many years ago by Zadock Pratt, of the town of
    Prattsville, Greene county, N. Y., when the young man lived in
    Sullivan county, right across the line of Delaware county,
    Penn., where Jay Gould was enabled by Mr. Pratt to tan hides
    with oak and hemlock bark, not after the fashion of Wall Street.
    Reynolds and Gould were assisted by Mr. Pratt about the same
    time. Reynolds is not as wealthy to-day as Mr. Gould, but he
    owns all the money he wants, and Mr. Gould has often said it did
    not need fifty millions to secure contentment. “Diamond Joe”
    Reynolds is a rich man and he spends much of his time between
    Chicago and Hot Springs. On his first visit to Hot Springs he
    was compelled to stage it from Malvern. The ride disgusted him
    as much as the Springs delighted him. He found a man who had
    obtained a charter for a railroad from Malvern to the Springs
    and who had no money. The charter and some money changed hands.
    Reynolds built the railroad and owns it, rolling stock and all.
    The road is 24 miles long. He made his money in wheat, but not
    in Sullivan county. After getting a start there he went West and
    shipped wheat from Wisconsin to Chicago. He shipped it in sacks
    and marked the sacks with a diamond and inclosed in it the
    letters “J. O.” It was from this circumstance, because the sacks
    and trade mark became widely known, that he obtained the
    sobriquet of “Diamond Joe,” and not as those who have only heard
    of him think for a penchant for gems, and Mr. Reynolds is modest
    as well as rich.

    Mr. Gould travels like a rocket while inspecting his roads. In
    this way he gets a certain amount of exercise, for, as travelers
    know, a heavy train drawn at the rate of 50 miles an hour will
    make little fuss in comparison with the antics of a single car
    tacked to an engine making the same rate. Mr. Gould often
    travels in the Convoy at a 50-mile gait, and during such a trip
    he has been known to change seats—from one side of the car to
    the other—not of his own volition, but without changing
    countenance. So long as Superintendent Kerrigan keeps his hand
    off the bell rope Mr. Gould makes no remonstrance, but accepts
    his shaking without a grumble. He changed engineers on one of
    his recent trips without knowing it. The engineer had been
    running slowly, for reasons of his own, in spite of numerous
    pulls at the bell cord. When, however, he discovered that dinner
    was under way he pulled the throttle open, and the locomotive
    darted ahead suddenly as if going through space. The jar cleaned
    the table like a flash. At the next station the engineer was
    promoted to a freight train.

                   A REMINISCENCE OF KANSAS PACIFIC.

There is an interesting piece of information regarding the deal in
Kansas Pacific in the testimony of Mr. Artemus H. Holmes, formerly the
attorney of that company, showing how the stock made a marvelous leap
from two or three dollars to par in seven days. Mr. Holmes testified as
follows:

    From 1873 to 1877 the market value of all the Kansas Pacific
    securities was extremely low. The Kansas Pacific stock was $2 to
    $3 a share and practically valueless. Land grant bonds were
    worth 10 cents on the dollar, and Denver extension about 40, but
    ranged from 50 to 70 in 1876 to 1878. The first mortgage bonds
    were below par, the company’s credit was gone and the stock
    unmarketable. Sidney Dillon, who was then President of the
    Kansas Pacific Company, was anxious to have the matter settled
    as quickly as possible. At the former’s suggestion a friendly
    suit was brought on January 17, 1880, before Judge Donohue, in
    the Supreme Court, in this city, to settle the ownership of the
    Denver Pacific stock. The trustees said they could not do
    anything with the stock that would injure it. On January 20,
    1880, Horace M. Ruggles, as referee, heard argument, the case
    was closed in two days, the decision was made January 23 and the
    decree signed by Judge Donohue on January 24, giving the stock
    to the Gould party. Mr. Holmes stated: “All the time this was
    pending the articles of consolidation were being drawn up, but I
    did not know anything about it until they were signed on January
    24.” Referee Ruggles decided that 29,000 snares of Denver
    Pacific stock free from mortgages should pass to the Kansas
    Pacific. This was put into the Union Pacific and 29,000 shares
    of the consolidated company’s stock given in exchange, which
    sold at par. The witness was sharply questioned as to what he
    knew about Referee Ruggles’ report. He was asked if he knew who
    wrote the report, or had any knowledge as to who did.

    Q. In order to prepare the decree which was signed on Jan. 24,
    you must have had the finding before you, did you not? A. No.

    Q. How could you prepare it without knowing what the finding
    was, for the decree was presented the very next day? A. I must
    withdraw that answer, and change it to yes.

    Gov. Pattison—Do I understand you to say that the stock which
    was exchanged had risen in a few days from $2 to $3 a share to
    par. Mr. Holmes said that was a fact, and then this question was
    put to him:

    Q. In other words, Mr. Dillon had sworn on Jan. 17, 1880, that
    the stock had no financial value, and yet on Jan. 24 it was
    worth par. A. Yes.

This discloses another of Mr. Gould’s valuable secrets of the way to
make money rapidly.


                   GOULD’S FIRST YACHTING EXPERIENCE.

There is a humorous story told of Mr. Gould’s first yachting experience,
which was recently published in the Philadelphia _Press_, and its
veracity vouched for by a living witness to the event. It is
characteristic of Mr. Gould in some special respects, and runs as
follows:

    At the residence of a club man, whose reputation as a
    _raconteur_ is nearly as great as that of his Burgundy, I
    noticed a pretty model of a jib and mainsail yacht. Replying to
    my admiring inquiry the club man explained:

    “That is the model of a boat upon which were passed some of the
    sunniest hours of my life. She was owned by one of the Cruger
    family, of Cruger-on-the-Hudson, and has an added interest from
    the fact that upon her Jay Gould acquired his first yachting
    experience, and so eventful a one that I’ll bet he remembers it
    to this day.

    “Crugers—one of the oldest and best known families in the State,
    intermarried as they are with other Knickerbockers like the
    Schuylers, Livingstons and Van Rensselaers—owned all the land in
    the neighborhood of the station subsequently named after them. A
    portion of this property consisted of a brick yard, which was
    rented to the son of old Schuyler Livingston. It was in 1853 or
    1854, and Jay Gould had just failed in the tannery business in
    Pennsylvania.

    “Young Livingston’s leased brick yard wasn’t paying, and he
    concluded that it needed a shrewd business man at its head. He
    advertised for a partner, and one day there appeared in response
    a small, dark gentleman, looking scrupulously neat in his black
    broadcloth. He gave his name as Jay Gould. Pending negotiations,
    Mr. Gould became the guest of the Crugers at the old mansion on
    the hill. Every effort was put forth to entertain him during his
    stay, the more as he seemed to regard favorably a partnership
    with their young friend.

    “One day Mr. Cruger invited Gould to a sail to Newburgh, and got
    ready his yacht, of which that model is the reduction. Several
    of us youngsters were taken along to help work the boat. Eugene
    Cruger, a nephew of the yacht’s owner, was one of us. Peekskill
    was reached and the whole party went up to the hotel.

    “All the way up the river we had noticed that Mr. Gould was
    uneasy, shifting about constantly on the deck, where he sat, and
    squirming and twisting as if seeking to find a softer spot.
    Nothing was said about it, of course, but when we landed Mr.
    Gould himself furnished the explanation. From the heat of the
    sun the yellow paint on the boat’s deck had become baked and
    chalky, and it was not long before the little man discovered
    that the dry powder was coming off on his trousers. Hence his
    uneasiness. He concluded by saying he was afraid his broadcloth
    nether garments would be, if they were not already, ruined, and
    was determined to abandon the trip and return by rail. This Mr.
    Cruger would not hear of, and promised to obviate the
    difficulty. We all adjourned to a general store and Cruger
    bought, for two shillings and a half, a pair of jean overalls.
    These Mr. Gould put on when we went aboard the boat and
    expressed his unqualified satisfaction at the result.

    “On our trip back from Newburgh we again called at Peekskill,
    and once more the party started for the hotel. This time Mr.
    Gould declined the invitation to take something and preferred to
    remain on board. About an hour was spent in the hotel, when
    suddenly Mr. Cruger remembered that he wanted some white lead,
    and young Eugene Cruger and I went with him to the store to
    carry it down to the boat.

    “‘How’d the overalls work, Mr. Cruger?’ was the salutation of
    the storekeeper. Then before answer could be returned, he added
    admiringly: ‘That friend o’ yourn is purty shrewd.’

    “‘Who, Mr. Gould? Yes, he appears to be a thorough business
    man.’

    “‘Well, I sh’d say so! He can drive a mighty sharp bargain.’

    “‘Drive a sharp bargain?’ repeated Cruger, all at sea. ‘What do
    you mean?’

    “‘Why, don’t you know he was in here ’bout three quarters of an
    hour ago, and sold me back the overalls you bought for him.’

    “‘Thunder, no!’ roared Cruger in astonishment.

    “‘Well, sir, he jest did that. He kem in here, tole me he’d no
    fu’ther use for ’em, that they was as good as when I sold ’em,
    an’ after we’d haggled awhile he ’greed ter take two shillin’
    fur ’em, which I paid him. Here’s the overalls.’

    “I can shut my eyes now,” went on the jolly club man, with a
    hearty laugh, suiting the action to the words, “and call up Mr.
    Cruger’s face with its mingled expression of amazement and
    incredulity. He left the store in silence. Not until we had
    nearly reached the boat did he speak. Then he only said, ‘Boys,
    I’ll fix him for that?’ We reached home without any reference to
    the incident. On the way back Mr. Gould sat upon his
    pocket-handkerchief.

    “The same night Mr. Cruger perfected his plan. Next day Mr.
    Cruger proposed a fishing party. Mr. Gould declined to go. He
    had concluded, he said, not to take an interest in young
    Livingston’s brickyard, and would return to the city on the
    afternoon train. A business engagement, involving quite a sum of
    money, had to be kept. His host argued with him, but for a time
    to no purpose. The saturnine little man had a tremendous amount
    of determination in his composition. Finally a compromise was
    effected, it being agreed that he should put Gould off at a
    station in time to catch the train. That he must catch it
    without fail, he most emphatically declared.

    “The day passed on and we were off Sing Sing, when we saw the
    smoke of the coming train. We had been running free before the
    wind, but immediately Mr. Cruger, who was at the stick, shoved
    it down; we hauled in on the sheets and headed for the Eastern
    shore. Mr. Gould was by this time on his feet, clinging to the
    windward coaming, the deepest anxiety pictured on his face. Just
    there the water shoals rapidly. We were within fifty feet of the
    shore, opposite the railroad depot. The time had now come for
    Mr. Cruger’s revenge.

    “‘Let go the main and jib sheets!’ he shouted. ‘Down with your
    board!’

    “Never was order more eagerly obeyed. The sheets whizzed through
    the blocks, ready hands slipped out the pin and jammed down the
    centre-board, and in a second the yacht, with a grating shock
    and shaking sails, came to a stand, fast on the sandy bottom.
    There she was bound to stay until the obstructing board was
    lifted again.

    “‘What’s the matter?’ exclaimed Mr. Gould, anxiously. Of course
    he had not detected the ruse, for he knew no more about the
    working of a yacht than a sea cow does about differential
    calculus.”

    “‘I’m afraid we’re aground,’ replied Mr. Cruger, with a fine
    assumption of sadness. ‘Boys, get out the sweeps and push her
    off.’

    “We struggled with the long oars in a great show of ardor, while
    Gould watched us in breathless suspense, between hope and fear.
    But as we had taken care to put the sweeps overboard astern, the
    harder we shoved the faster we stuck. The little man’s
    suspicions were not in the slightest degree aroused and he
    turned in despair to Mr. Cruger.

    “‘What shall I do!’ he almost wailed. ‘I’ve got to catch that
    train!’

    “‘Then,’ replied the joker, solemnly, ‘you’ll have to wade or
    swim.’

    “Already the train was in sight, two miles away, and whatever
    was to be done had to be done quickly. As I have said, there was
    plenty of grit in the embryo railroad king, and quick as a wink
    he was out of his sable clothes and standing before us clad only
    in his aggressively scarlet undergarments. Holding his precious
    broadcloth suit above his head, he stepped into the water,
    which, shallow as it was, reached to the armpits of the little
    gentleman. Then he started for the shore, his short, thin legs
    working back and forth in a most comical fashion as he strove to
    quicken his pace. The station platform was crowded with people,
    and very soon the strange figure approaching them was descried.
    A peal of laughter from 500 throats rolled over the water to us,
    the ladies hiding their blushes behind parasols and fans. The
    men shouted with laughter. Finally the wader reached the base of
    the stone wall, and for a moment covered with confusion—and but
    little else—stood upon the rock, one scarlet leg uplifted,
    looking for all the world like a flamingo on the shore of a
    Florida bayou, while the air was split with shrieks of laughter,
    in which we now unreservedly joined. Then came the climax of the
    joke, which nearly paralyzed the unfortunate victim.

    ‘Haul on your sheets, boys, and up with the board!’ was Cruger’s
    order. As the yacht gathered headway and swept by within ten
    feet of the astonished Mr. Gould, we laughingly bade him
    good-bye, advising a warm mustard bath when he got home.

    “Then his quick mind took in the full force of the practical
    joke we had worked upon him and his dark face was a study for a
    painter. But the train had already reached the station, taken on
    its passengers and the wheels were beginning to turn again for
    its run to the city. As Gould scrambled up the wall, his glossy
    black suit still pressed affectionately to his bosom, the ‘All
    aboard!’ had sounded and the cars were moving. Every window was
    filled with laughing faces as he raced over the sand and stones
    and was dragged by two brakemen on to the rear platform, panting
    and dripping. The last glimpse we caught of him was as the train
    entered the prison tunnel. Then, supported on either side by the
    railroad men, he was making frantic plunges in his efforts to
    thrust his streaming legs into his trousers as the platform
    reeled and rocked beneath him.”

    “Did he ever return Mr. Cruger the two shillings?” the writer
    inquired.

    “Return the two shillings!” echoed the club man. For a moment he
    was silent. Then, as a retrospective gleam crept into his eyes,
    he slowly shook his head and, with seeming irrelevancy, said:

    “I—guess—you—are—not—very—well—acquainted—with—Mr.—Jay—Gould.”

    The above story was submitted to Mr. Eugene Cruger at his
    residence, No. 1211 Livingston Avenue, together with the inquiry
    as to its accuracy. Mr. Cruger made the following reply: “I must
    say that I can’t imagine who can have furnished these
    particulars, for most of those who took part in the incidents
    related have gone forever. Whoever the informant may be,
    however, it cannot be denied that you have received a true
    account of what occurred. I enjoyed the affair at that period,
    but time has softened things and the recollection is not without
    its unpleasant side.”

The success of Mr. Gould in securing the Baltimore and Ohio Telegraph to
be consolidated with Western Union, has placed him at the head of the
greatest telegraph monopoly in the world, practically beyond
competition. It remains to be seen whether or not Congress will take any
action towards the creation of a Government telegraph that will afford a
guarantee of protection against extortionate rates. It is true that
Western Union has lowered its rates, but this is generally regarded as a
conciliatory move of a temporary character on the part of Mr. Gould for
the purpose of showing that Government telegraphy is not a necessity,
and that as soon as the attention of Congress is turned away from the
question rates will go up again.

While I should not approve of the Government going so far as to condemn
Western Union property, and making a purchase thereof on an appraised
valuation, still I do believe that proper Congressional action should be
taken to provide supervision and protective control over the telegraphic
communication throughout the country. My idea is that the Government
should interfere rather as a regulator than an owner, being careful to
avoid everything that could be construed into monopoly on its own part,
any more than in connection with our railroad system.

Mr. Gould went to Europe late in the fall, and visited several places
there ostensibly for health, pleasure, and recreation. What his secret
and ultimate designs may be has not yet transpired, although they have
been a leading topic of much conjecture among financiers and Wall Street
magnates since his arrival on the other side. One of the best things got
off on this subject was, that when Mr. Gould sent in his card to one of
the Rothschilds, the latter requested the messenger to inform the
gentleman that Europe was not for sale.

He returned about the end of March to find some of his railroads,
especially in Missouri Pacific system, in a somewhat crippled condition.

With a feeling of deep humility that I have made many important
omissions in Mr. Gould’s variegated career, although I have surrendered
all the space to him that I can very well afford, I now beg to take my
leave of him, at least so far as the present edition is concerned.


[Illustration:

  _Cyrus W. Field._
]


------------------------------------------------------------------------




                              CHAPTER LIX.

                 MEN OF MARK.


CYRUS W. FIELD—HON. STEPHEN V. WHITE—AUSTIN CORBIN—PHILIP D. ARMOUR—HON.
    LEVI P. MORTON—JOHN A. STEWART—ANTHONY J. DREXEL—THE JEROME
    BROTHERS—ADDISON CAMMACK—RUSSELL SAGE—CHAUNCEY M. DEPEW—JAMES M.
    BROWN—STEDMAN THE POET—VICTOR H. NEWCOMBE—MOSES TAYLOR—FORMER GIANTS
    OF THE STREET—HENRY KEEP—ANTHONY W. MORSE.


                            CYRUS W. FIELD.

Cyrus W. Field has been termed a locomotive in trousers. The simile
illustrates the indefatigable energy of the man. His indomitable
resolution and his energy of character have placed him high among the
distinguished men of the age. He was born at Stockbridge, Mass., in
1819. His father was a clergyman. At fifteen years of age, Cyrus W.
Field came to New York with a trifling sum in his pocket. For three
years he was in the employ of A. T. Stewart, the dry goods merchant, and
then went to Lee, Mass., to work in his brother’s paper mill. Two years
later he became a partner in the paper firm of E. Root & Co., in Maiden
Lane, but the co-partnership was not successful. Later on he again went
into the paper business, and by 1853 had acquired a competence,
whereupon he partially withdrew from mercantile pursuits, and his health
having failed he took a trip to South America. He was about to withdraw
entirely from business, when he was induced, with considerable
difficulty, to look into a project for laying a telegraphic cable to
England. Frederick N. Gisbourne had interested Matthew D. Field, a civil
engineer, and a brother of Cyrus W. Field, in a project for establishing
a telegraph line between New York and St. John’s, Newfoundland, partly
on poles, partly under ground, and partly under water. At St. John’s,
the fastest steamers ever built were to sail for Ireland, and the time
between the two countries was to be shortened to six days or less. A
company had attempted to carry out this project, and had become
bankrupt. The idea was un-American; it was unsatisfactory; much quicker
communication was needed. It was not till Mr. Field conceived the idea
of laying a cable direct from Newfoundland to Ireland, that he became
really interested in the enterprise. He was assured by high scientific
authority that the idea could be carried out. In March, 1854, Mr. Field
went to St. John’s, Newfoundland, and obtained from the legislature a
charter, granting an exclusive right for fifty years, to establish a
telegraph line from the Continent of America to Newfoundland and thence
to Europe. Then, with considerable difficulty, he obtained in New York
subscriptions amounting to $1,500,000, which he thought would be
sufficient. The line really cost $1,834,500, being more than 2,600 miles
long. His first attempt failed in 1857. He succeeded in the following
year, and then the cable became silent, and the incredulous public
thought that this would end all attempts to do something that seemed
miraculous. For seven years no attempt was made to lay a cable, as the
Civil War intervened, but in 1865 Mr. Field again took up the
enterprise, in which he had never lost faith. By this time sub-marine
telegraphy had been greatly improved, a better cable was constructed,
and a better machine for laying it was invented. The famous steamer
_Great Eastern_ took the cable, but after going some 1,200 miles, the
great vessel gave a lurch that broke the cable and an attempt to grapple
it was unsuccessful. In 1866, however, a cable was successfully laid. A
private citizen seldom receives such honors as was showered on Mr.
Field, in 1866, when Europe and America realized that largely through
the exertions of one man, they were joined by the Atlantic cable. He had
pushed a vast project to a successful consummation in spite of
incredulity, ridicule, indifference and strenuous opposition.

Peter the Hermit did not preach the crusade with more fervor and
enthusiasm than this priest of commerce, so to speak, advocated the
great work with which history will always link his name. If any one had,
a few centuries ago, ventured to predict that the day would come when
there would be six or seven cable telegraphs stretched along the ocean
bed between America and Europe—along dim prehistoric valleys, four miles
under water and over great sub-marine mountains—by means of which a
message could be sent nearly three thousand miles and an answer received
in thirty seconds; he would have been in danger of incarceration as a
lunatic, or even of death on the scaffold or at the stake. This daring
utilitarian age, however, has grown accustomed to startling exhibitions
of human ingenuity. Mr. Field owns considerable Western Union stock, and
is interested in a number of railroads, including the Manhattan
Elevated. He owns one-fifth of the stock of the Acadia Coal Co., is a
special partner in the grain firm of Field, Lindley & Co., and owns the
_Mail and Express_, one of the great papers of the metropolis. He has a
house in Gramercy Park and a fine mansion at Irvington on an estate of
about 500 acres. He is a large owner of real estate in that very
pleasant section, owning some 56 houses besides considerable land. He is
fully six feet in height, of light complexion, with penetrating,
bluish-gray eyes, which peer sharply into those of an interlocutor. The
nose is prominent, the brows knit with years of thought, the mouth and
jaw indicate great decision of character. He is a man of courtly manners
and exceptional abilities.


[Illustration:

  _Philip D Armour_
]


                         HON. STEPHEN V. WHITE.

Hon. Stephen V. White is a short, compactly built, dark-complexioned man
of 54. In manners he is courteous and unassuming; in business methods he
is quick and straightforward. He is a Director in the Western Union and
the Lackawanna road. He is a bold, dashing operator in stocks, and in
Wall Street has met with considerable success. One of his greatest
favorites is Lackawanna. He expects to see it some day go to 200. He has
several times badly squeezed the shorts in that stock, and, now that he
has practically demonstrated what they ought to have known before,
namely, that the stock can easily be cornered, the bears are apt to
fight shy of it. He has a large _clientele_, and, being a natural
leader, he has plenty of followers in his speculative campaigns. He was
born in North Carolina. He was graduated from Knox College at Galesburg,
Illinois. He studied law in the office of the Hon. John J. Kasson,
afterward United States Minister to Germany. He drifted to St. Louis,
and there became a reporter for the Missouri _Democrat_. He went to Des
Moines, practised law for nine years, and was elected a Judge. He came
to New York, and for a time practised law, but soon became a stock
broker as well. He still occasionally appears as counsel in the Federal
Courts, and sometimes in the Supreme Court of the United States. He is a
ready and forcible speaker, full of vim and fire. He was a warm personal
friend of the late Henry Ward Beecher, the grand old Chrysostom of the
nineteenth century, who has left the world brighter for his memory and
darker for his absence. In the frank, keen, practical financier and
lawyer, and the great, warm hearted preacher, glowing with fervid
idealism and generous enthusiasm and high aspirations for the human
race, there were kindred qualities that made them friends. Mr. White, in
1886, was elected to Congress from Brooklyn, where he resides. He is
scholarly in his tastes, well versed in the classics, and is especially
fond of astronomy, for the study of which he has a fine observatory in
his palatial home. He is popular in Wall Street.


[Illustration:

  _L. P. Morton_
]


                             AUSTIN CORBIN.

Within a year Austin Corbin has become a prominent figure in the
financial world, winning wide business celebrity by his identification
with the reorganization of the Reading Railroad. He is by nature the
reverse of an iconoclast, namely, a builder up. He would construct
rather than destroy. He would save a property if it were at all
possible, and in pulling that poor, tired, financial pilgrim Reading out
of the slough of despond, and in directing its way toward a primrose
path of prosperity, he is engaged in a congenial task. He is about 58
years of age, and was born in Newport, New Hampshire. He studied law,
and was graduated from the Harvard Law School. For a time he practised
law in his native town as a partner of Ex-Governor Metcalf, of New
Hampshire, but in 1851 he went to Davenport, Iowa. There he really
organized the first national bank under the new system, which was to
prove of such incalculable financial benefit to the nation. Mr. Corbin
made the first application under the new law, but it happened to be
faulty in some minor technicalities, and before their trivialities could
be corrected four other national banks were organized, so that his bank
became number five under the new system. He came to New York in 1865,
and established a banking-house here. He is President of the Reading,
Long Island, Indiana, Bloomington & Western, Elmira, Cortland &
Northern, and Manhattan Beach Railroads. He is a member of the Union
League, Manhattan and Saturday Night Clubs of New York, the Somerset
Club of Boston, and the Conservative Club of London. He is a man of
strict probity, genial in his manners, and deservedly held in high
esteem.

                           PHILIP D. ARMOUR.

Philip D. Armour was born in a little village near Watertown in the
interior of New York State, in 1832. He is powerfully built, with broad
shoulders, a large head and firm, square features and light gray eyes,
that never seem excited or disturbed. His manners are quiet, composed
and courteous. In 1849, leaving his native village, he went to
California. He crossed the plains with a six-mule team which he drove
himself. He worked for a few years in the gold fields, accumulated a
little capital, and in 1855 went to Milwaukee and engaged in the grain
and warehouse business. He prospered moderately but steadily. Then he
thought of going into the lumber business, but bought an interest in the
pork packing establishment of Layton & Plankington, the former retiring.
At this time he was worth half a million. He soon increased this
three-fold. In the war, provisions were very high, but when Gen. Grant
was closing in on the Confederacy for the final struggle that could only
end in the triumph of the North, Mr. Armour saw that prices must come
down with the Confederacy. He came at once to New York and began to sell
pork short. He began to sell at $40 a barrel. He covered at $18 and
netted, it is said, nearly two million dollars. He now enlarged his
business, established new packing houses in Chicago and Kansas City as
well as agencies all over the world. He has sold sixty million dollars’
worth of food products in a year. He has five thousand names on his pay
roll. He has cornered pork three times within recent years, and in 1880
made, it is said, three millions in punishing bears who tried to sell
the market down. A campaign against the bears in pork or meats he calls
protecting his cellars. Those cellars are well protected. No bearish Ali
Baba has the pass-word to go in and plunder them, and the number of
cinnamons and grizzlies, big and little, who have licked their paws in
rueful remembrance of the attempt are not a few. He has made millions in
successful grain speculations. He invested four millions in St. Paul
stock, buying it outright. He is now one of the recognized financial
leaders of the country, as aggressive as a Wellington at the proper time
and cautious as a Fabius when caution is the watchword of wisdom. He
lives in a plain house on Prairie Avenue in Chicago, and is himself a
man devoid of ostentation. He works from 7 A. M. till 6 P. M. His
fortune is estimated at fifteen millions of dollars.

Hon. Levi P. Morton received his business training in the dry goods
trade. Then he became a banker. He has a national reputation as a
financier. He is shrewd, genial and successful. President Garfield made
him Minister to France. He had previously done good service as a member
of Congress. He is now in his sixty-third year. He is a lineal
descendant of George Morton, one of the Pilgrim Fathers who came to this
country in 1623. Mr. Morton was born in the State of New Hampshire. At
20 he became a clerk in a country store. He had to shift for himself.
Necessity is the stimulus that men of real ability require. He stayed
five years in the obscure New Hampshire village and then went to Boston,
where he ultimately engaged in business. But New York attracted him. He
embarked in the dry goods business here and went into banking
afterwards, and soon laid the broad foundations for the successful firms
of Morton, Bliss & Co., of New York, and Morton, Rose & Co., of London.
His Congressional and diplomatic laurels followed. He filled the French
Mission with great satisfaction to the French people as well as those of
the American traveling public, as he was a free and generous
entertainer. His large fortune has been amassed since he came to Wall
Street. He has a fine villa at Newport and also one on the Hudson.


[Illustration:

  _John A Stewart_
]


                            JOHN A. STEWART.

John A. Stewart is President of the United States Trust Company, one of
the largest banking and trust corporations in America. Its deposits are
over forty millions of dollars. Its great success is largely due to the
able management of President Stewart, who has in fact shown marvellous
ability in the management of large financial interests. Mr. Stewart
during the war period was urged by Secretary Chase to became
Sub-Treasurer of the United States in this city, and he finally
consented to take the position, although at a great personal sacrifice,
being actuated solely by a patriotic spirit. He is one of the financial
lights of the metropolis, and is respected for his financial acumen and
his sterling qualities as a man.

                           ANTHONY J. DREXEL.

Anthony J. Drexel is the head of the house of Drexel & Co. in
Philadelphia and Drexel, Morgan & Co. in New York. The house was founded
by Joseph Drexel, who emigrated to this country from Germany early in
the present century, and began business in Philadelphia in a small way
as a sort of exchange broker. When the California gold fever broke out
he made connections with parties in San Francisco and received large
amounts of gold. In these transactions he got his first great start. The
returns from the exchange were large. As his means increased he
gradually extended his business, and finally, by thrift and diligent
attention to business, he accumulated quite a snug fortune. In the end
he built up a successful banking business, in which his sons became
interested, and at his death inherited his wealth and the business. The
elder brother died a few years ago, leaving ten million dollars to his
family and to various charities. Anthony Drexel, the present head of
this signally successful firm, is 55 years of age, and is a man of
excellent business capacity. He is one of the successful business men of
the United States.

                          THE JEROME BROTHERS.

Addison Jerome, who died some years ago, was a gigantic operator in his
day, and displayed great ability in the conduct of speculative
campaigns, but he went beyond his depth and disaster followed. Like many
others in Wall Street, he gained his business education in the dry goods
trade. He met with one of his greatest reverses in his attempt to corner
Lake Shore. Others followed, one after another, and the end was
financial shipwreck.


[Illustration:

  ANTHONY J. DREXEL.
]


[Illustration:

  _yours truly
  Leonard W Jerome_
]


At this time his brother, Leonard W. Jerome, was one of the foremost men
of Wall Street and was a partner of Wm. R. Travers, the firm name being
Travers & Jerome. Leonard Jerome is splendidly built and nearly six feet
in height. His ancestors were Huguenots. He was born in Pompey, Onondaga
county, New York. His grandfather was a Presbyterian clergyman. At 14
Leonard was sent to Princeton College and was graduated with credit. He
then spent three years reading law in Albany, and at 22 was admitted to
the bar. He practiced law with his uncle, Judge Jerome, of Rochester.
Afterward with his brother Lawrence he established a newspaper, called
the _Rochester Native American_, and he made a good editor. President
Filmore appointed him Consul at Trieste. He came to Wall Street in 1854.
His first operation was in putting up all he could spare, about two
thousand dollars, as margin on five hundred shares of Cleveland and
Toledo stock, one of the old-time speculative favorites. He bought it on
a sure point from the treasurer of the road. He bought. The treasurer
sold. Result: The stock fell, and Jerome lost all his spare funds. He
was not discouraged. He studied Wall Street tactics, and in the end he
made the treasurer pay dearly for his former success in spearing a lamb.
He invested $500 in buying calls and made $5,000 within thirty days. He
became a partner of William R. Travers. They were very successful on the
short side of the market. He was to meet with some reverses, however. In
1862 the agent of the State of Indiana, in a manner that would have
deceived the very elect, through an unauthorized issue of Indiana 5 per
cent. bonds, swindled him out of $600,000 by the hypothecation of the
bonds. The State repudiated the acts of its agent, and as an individual
is not allowed to sue a State, Mr. Jerome was robbed of the money. Still
another reverse was met in Pacific Mail. When the capital stock was
increased to $20,000,000 he took 50,000 shares at 200. The price
advanced soon thereafter to 243, and he sold a part of his stock, but
kept a large block of it on account of his faith in its value. At the
next quarterly meeting of the Board of Directors, however, it was
decided by a majority of one, five directors being present, to reduce
the dividend from five to three per cent. The street was thunderstruck
at the audacity of this move; the market broke, and in two hours Mr.
Jerome’s stock depreciated $800,000. Still he made large gains in
Pacific Mail as well as big losses. He left Wall Street years ago with
an ample fortune. He went there with next to nothing, and in spite of
reverses, came out a substantial victor in the financial tourney. In the
war he was always enthusiastic in his devotion to the cause of the
North, and subscribed with princely liberality to aid patriotic
movements. When the first great Union meeting was held at the Academy of
Music he paid all the expenses. He was Treasurer of the Union Defense
Committee, and he likewise paid all of its incidental expenses. He was
the most liberal in his contributions and the most devoted in his
allegiance to the Government in its darkest and gloomiest hours. He was
the founder of the fund for the benefit of the families of those who
were killed or wounded in the New York riots of 1863, growing out of the
draft. His checks for $10,000 and more to aid the Union arms were
frequent; he contributed $35,000 toward the construction of the
“Meteor,” a war vessel built to destroy the famous “Alabama” of the
Confederacy. During the war Mr. Jerome purchased and held for some years
the largest interest in the _New York Times_, then edited by the great
war editor, Henry J. Raymond, an old friend of Mr. Jerome’s. Like Mr.
Travers, his early partner, Mr. Jerome has done much to encourage all
out-of-door sports, especially on the race course. He established the
Jerome Park Jockey Club, and became half owner in a famous speed horse
which cost $40,000. No one has done more to improve the breed of blooded
horses in this country than Mr. Jerome. He has also been prominent in
yachting. He first owned the “Undine”; then, with Commodore McVickar, he
bought the “Restless,” and still later, with Commodore James Gordon
Bennett, the “Dauntless.” He paid $125,000 for the steam yacht “Clara
Clarita,” which proved a failure, and since then he has not been so
enthusiastic a yachtsman as formerly. He made $45,000 on the great ocean
yacht race of 1866. He had much to do with introducing the taste for
four-in-hands in this country. He has been a liberal patron of American
art in all its branches. He paid for the musical education of a number
of well-known singers, whose voices were trained in the best Italian
schools. His social position has always been high, but it has been still
further promoted by the marriages of his beautiful daughters. The elder,
Clara, is married to Mr. Morton Frewen, a member of an old English
family which long represented their shire in Parliament. Another, Leoni,
married Mr. John Leslie of the Guards, and son and heir of Sir John
Leslie; while Jennie married Lord Randolph Churchill, the notable but
erratic statesman. Leonard W. Jerome, whose history I have followed
somewhat minutely, is one of the best-hearted men that Wall Street ever
knew. The more he made the more he gave. He was liberal to a fault. He
was never happy but when making others happy. He was a Sir Philip Sidney
of chivalry and peerless generosity—a man in whom the warmest and most
ingratiating traits of human nature were as natural as the winning
sunniness of his disposition and the courage which once made him one of
the great gladiators in the arena of Wall Street. Both he and his
brother Lawrence are old members of the Union Club. Lawrence was
formerly a stock broker. He had his ups and downs, and withdrew from
Wall Street several years ago. He sold his seat in the Stock Exchange
and placed the proceeds, about $30,000, in an annuity which insures him
about $4,000 a year for the remainder of his life. This, with his other
income, places him in easy circumstances and preserves his naturally
cheerful disposition, rendering him one of the most companionable men in
the city. He is about five feet ten inches in height, stout and of light
complexion. Since the death of his old friend, Wm. R. Travers, to whom
he was as Damon to Pythias, he stands pre-eminent among the wits of New
York. He is the prince of metropolitan wags and wits. His friends are
legion. The great, genial, warm hearted, boyish Larry Jerome, as his
friends love to call him, is literally a man without an enemy, and long
may he live to brighten society with his happy exuberance of spirits,
his scintillating humor and his brilliant wit.

                            ADDISON CAMMACK.

Addison Cammack is about sixty years of age and was born in
Hopkinsville, Kentucky. He was reared in comfortable but humble
circumstances. Early in life he began his business career as a clerk in
the house of J. P. Whitney & Co., then the largest ship brokers in New
Orleans. He showed decided business talent, and ultimately became a
partner in the firm. In the early part of the Civil War he was located
in Havana, but in 1863 he went to London and and engaged in business and
speculation there. He returned to this country in two years, and in 1866
embarked in the wholesale liquor business in New York with J. W. George,
the firm being J. W. George & Co. In about two years the firm was
dissolved and Mr. Cammack became a member of the Stock Exchange, having
previously formed a co-partnership with the late Chas. J. Osborn, under
the name of Osborn & Cammack. This co-partnership, after some years of
great prosperity, was dissolved, and since then Mr. Cammack has been an
operator on his own account. In this capacity he has become widely
known. He is a shrewd operator, and quickly changes his mind if he
thinks he has been wrong. He jumps from one side of the market to the
other with the greatest celerity when occasion demands it, but in the
main he seems most at home on the bear side. In bear operations he has
met with some reverses, while in this direction he has also made
millions. He seems to place great faith in Benner’s book of “Financial
Prophecies.” At times he operates on a very large scale, and he has been
known to cover fifty thousand shares of stock in a single day. He is
tall, well built, and has strong features, with keen, gray eyes. In
manners he is very democratic and candid, and occasionally somewhat
bluff; but he is a man of generous impulses, very charitable, and has
plenty of friends, both for his financial acumen and for his qualities
as a man who never deserts his friends, and who has not a few of the
characteristics of mediæval chivalry joined to the shrewd practicality
of a great stock operator of this practical epoch.


[Illustration:

  _Very Respectfully
  Addison Cammack_
]


                             RUSSELL SAGE.

Russell Sage is one of the best known of Wall Street celebrities. He was
born seventy years ago in Oneida county, of this State. As a boy, he was
employed in a country general store, beginning life in this fashion at
14. His business aptitude early manifested itself, and at 20 he bought
out his employer in Troy, to which he had in the meantime removed. He
became later on a member of the Troy Board of Aldermen, served seven
years, and was then elected Treasurer. Still later he was elected to
Congress, serving from 1853 to 1857. He started the project of
purchasing Mount Vernon and making it a national domain, and took great
pride in the success which attended his efforts in this direction. While
in Congress he became connected with the Pacific Mail Steamship Company,
and later Vice-President of the Chicago, Milwaukee & St. Paul, also for
a time its acting president. He is now a director in the Gould telegraph
and railroad systems, is interested in a number of trust companies and
is also said to own a large amount of stock in the Importers’ and
Traders’ Bank. He is the king of puts and calls. He has usually been
successful in writing privileges, but in the summer of 1884, when the
market broke so badly as to produce a panic, Mr. Sage met with a decided
reverse. He had sold a large number of puts, and the loss was several
million dollars. He is known as, in one sense, the largest capitalist of
Wall Street, inasmuch as he keeps the largest cash balance. It runs far
up in the millions, giving him quick resources with which to carry out
any project that may seem desirable. He is quiet and simple in his
habits, making no display. He lives on Fifth Avenue, and also has a
place at Babylon, Long Island. He is worth about twenty millions. He is
tall, light complexioned, with keen, gray eyes, and in Wall Street might
be taken for a country gentleman seeing the sights.

                           CHAUNCEY M. DEPEW.

Chauncey M. Depew owes his rise to native abilities and the friendship
of the Vanderbilt family, which he has thoroughly merited. He made the
acquaintance of Wm. H. Vanderbilt about the year 1866 and became the
attorney of the New York and Harlem Railroad. On the union of the New
York Central and Harlem roads, in 1869, he was appointed attorney of the
consolidated company, and in 1875 he was made general counsel. A few
years previous he had been elected director of the New York Central
road, and subsequently became a director in the Chicago and
Northwestern, Michigan Central, St. Paul and Omaha, the Lake Shore and
the Nickel Plate. In 1882 he was elected second vice-president of the
New York Central, and in 1885 succeeded Mr. Rutter as president of that
great railroad. He was born in Peekskill in 1834, and comes of an old
French Huguenot family. He still owns the homestead purchased two
hundred years ago by his ancestors. His mother is a descendant of the
brother of Roger Sherman, of revolutionary fame. Mr. Depew was graduated
from Yale College in 1856, and three years later was admitted to the
bar. In 1862 he was elected to the New York Assembly and acted as
Chairman of the Committee of Ways and Means and part of the time as
Speaker. In 1863, the year after Governor Seymour’s election, Mr. Depew
was a candidate for Secretary of State on the Republican ticket,
overcame the Democratic ascendancy, and was elected by about thirty
thousand votes. He declined re-election and was appointed Minister to
Japan by Secretary Seward. He held the post several years, and resigned
it to resume business. His commission as Collector of the Port of New
York was once made out by President Johnson, but in consequence of
Senator E. D. Morgan’s refusal to sustain Mr. Johnson’s veto of the
Civil Rights bill the President never sent the nomination to the Senate,
but tore it up in a rage. In 1872 Mr. Depew was a candidate for
Lieutenant-Governor of New York on the Liberal-Republican ticket, and
was defeated. Two years later the Legislature elected him Regent of the
State University. He served one year as one of the Commissioners to
build the new Capitol at Albany. In the memorable contest for the United
States Senatorship in 1881, Mr. Depew for eighty-two days received the
votes of three-fourths of the Republican members, retiring then to
ensure the election of Warner Miller. Mr. Depew is President of the
Union League and a member of many other clubs and societies, and is very
popular wherever he is known. He is one of the wittiest and readiest
after-dinner speakers in this country, and when occasion requires, rises
to the height of a born orator. His tastes seem to be those of a
statesman and a scholar rather than those of a financier in the ordinary
acceptation of the term, but his conservative and able administration of
his office as President of one of the greatest trunk lines in this
country, reveals a thorough apprehension of railroad problems and a
natural capacity for whatever duties may be imposed upon him. His great
versatility is exemplified by the fact that he has succeeded in law,
politics and railroad management.


[Illustration:

  _Russell Sage_
]


                            JAMES M. BROWN.

James M. Brown, the banker, was born in New York city, and is about 65
years of age. He is ex-President of the Chamber of Commerce, and is held
in general esteem and respect. The house of Brown Bros. & Co., in which
he is now the senior member, has an interesting history. Early in the
present century Alexander Brown came from Belfast, Ireland, to this
country, and settled in Baltimore, where he engaged in the dry goods
business under the firm name of Alexander Brown & Sons. Subsequently the
firm comprised five sons of Alexander Brown. The business of the dry
goods firm prospered, and branch houses were established in
Philadelphia, New York and Liverpool, a son going to each of these
cities to represent the parent house in Baltimore. In New York and
Philadelphia the style of the firm was Brown Brothers & Co., as the
father had died in the meantime. In Liverpool they associated with them
Mr. Shipley, and the firm there was Brown, Shipley & Co. Another house
was established in London later on under the same title as the Liverpool
firm. All the houses were still engaged in the dry goods trade. Here in
New York, in which we are more particularly interested, the firm made
advances on cotton, and received linens from abroad, and also orders to
buy cotton for Liverpool. Gradually the house began to make larger
advances to planters and others engaged in the cotton trade, and finally
the banking business became so large as to swallow up the dry goods
trade and the house thereupon dropped merchandise and became bankers.
Later on a branch house was established in Boston, and at times it has
had branch houses in New Orleans, Mobile, Galveston, Savannah and
Charleston conducted under the name of the parent firm. At present it
has houses in London, Liverpool, New York, Philadelphia, Boston,
Baltimore and New Orleans. All of the original Brown brothers are dead.
James M. Brown is a near relative of James Brown, whose picture appears,
and who was the original head of the house in New York. James M. Brown
did not enter the house in his youth. He was for years the senior member
of the dry goods house of Brown, Seaver & Dunbar. On the dissolution of
this firm James M. Brown became a partner in the house of which, by
reason of his years and large experience, he may be considered the head.
The other partners here are Howard Potter, John Crosby Brown, Charles D.
Dickey, Waldron Post Brown, a son of James M. Brown, and W. F. Halsey.
The New York partners are interested in the branch houses in this
country and abroad. James M. Brown was a member of the famous Committee
of Seventy which contributed to the downfall of the Tweed Ring in this
city. He is of the medium height and florid complexion, well preserved,
genial in manners, and is a man of high character.


[Illustration:

  _Yours Very Truly.
  Chauncey M. Depew._
]


                    STEDMAN, THE POET AND FINANCIER.

A small, slightly built gentleman with iron gray side whiskers, a
refined face and expressive gray eyes, is one of the notable figures in
Wall Street. It is Edmund Clarence Stedman, the banker poet. He was born
in a small town in Connecticut in 1833, studied at Yale, entered
journalism in 1852, came to New York in 1855, and soon began to
contribute poems to the _New York Tribune_. He became a war
correspondent for the _World_ on the outbreak of the rebellion, and
continued in this capacity till 1863. In that year he became private
secretary to Attorney-General Bates at Washington. Meantime he studied
law, and contributed to the _Atlantic Monthly_ and other leading
magazines. As a poet, he holds high rank; as a writer of polished,
graceful prose he has few equals; as a thorough gentleman and a
scrupulous man of business he is held in the highest respect. Through
the imprudence of another he has within a few years met with some
financial reverses, which he met courageously and honorably, and he is
now well on his way towards his former position of financial ease.
Although a poet, he understands Wall Street business thoroughly, and is
considered a keen judge of financial opportunities.

Victor H. Newcombe was born in Louisville, Kentucky, about 48 years ago.
His father was President of the Louisville & Nashville Railroad, and the
son succeeded the father in that position. The elder Newcombe was a
financial power in Kentucky. He was sagacious and far-seeing. In every
respect, he was an excellent business man. Victor Newcombe has fallen
heir to his father’s laurels and is a successful operator in Wall
Street. He has achieved signal success in most of the campaigns in which
he has engaged, whether on the bull or the bear side of the market. He
is cautious, and turns quickly when he thinks there is occasion. He
seems to act on the French saying, that “only a fool never changes his
mind.” He lives in fine style on Fifth avenue, and also has a beautiful
residence at Elberon. He is one of a number of prominent gentlemen from
the South who have enrolled themselves among the citizens and taxpayers
of New York. He is an ex-director in the New York & New England road,
and a prominent member of the Union and Tuxedo Park Clubs.

                             MOSES TAYLOR.

Moses Taylor, now deceased, was one of the notable figures in Wall
Street life for many years. He started as a South street merchant, after
having been a clerk with G. G. & S. Howland. Wm. H. Aspinwall was also a
clerk with that house at the same time. When Mr. Taylor gave up his
situation to embark in business for himself, Mr. Aspinwall was admitted
into the Howland firm as a junior partner. Moses Taylor was a man
governed largely by intuition. There was little argument; with him, so
to speak, it was a word and a blow. Having formed his impression and
taken his quick resolution, there was no length to which he would not go
in the transaction, either in buying or selling or advancing money. He
was President of the City Bank and owned a large amount of its stock.
Under his administration the bank was wonderfully successful. His
son-in-law Percy R. Pyne, is now its President. Moses Taylor was a
valuable aid to the Union cause during the war. He was a close friend of
Secretary Chase, and whenever the Government needed the assistance of
the banks, the Secretary’s influence with the great merchant speedily
brought about the desired result. Moses Taylor realized the fact that
the support of the Government by the entire banking system was an
imperative necessity. The presidents of the banks would be called
together on one of these appeals from the Secretary of the Treasury, and
whatever action Mr. Taylor favored would be adopted, so strong was his
influence, and so high his standing as a merchant and financier. He
accumulated wealth very fast in connection with the sugar branch of his
business. Most of the large sugar planters consigned their product to
his firm, and they were also governed by his superior judgment in
investing their money, so that he always had important connections with
Wall Street, a fact that entitles him to a place in this book. While
investing millions for Cuban capitalists, he also invested very largely
for himself. Moses Taylor was the first to discover the value of the
Delaware, Lackawanna & Western Coal property, and while the stock was
kicked about Wall Street, because the company was bankrupt, he picked it
up at a few cents on the dollar, and made millions of dollars from this
investment alone. At his death he was one of the largest owners of the
stock, as his faith in it was so strong that he had refused to sell it,
even though the price had risen above 140. He died worth at least forty
millions of dollars. He had no social aspirations, and no interest in
anything but business. It was his idol. Few men have been harder workers
from early in life up to their last days. He never felt that he could
spare time for recreation, and was seldom known during his long business
career to leave the city over night, summer or winter, except on
business. Moses Taylor had for partners in his business his son-in-law
Percy R. Pyne and Lawrence Turnure, both excellent business men, and Mr.
Taylor owed much of his success to the selection of these gentlemen to
aid in the management of his affairs. Mr. Taylor placed in the hands of
these two gentlemen, especially during the last ten years of his life,
the laboring oar of his vast business, and the successful results are
the evidence of their sagacity and marvellous ability.


[Illustration:

  _James Brown_
]


                           ANTHONY W. MORSE.

Anthony W. Morse was once one of the remarkable men of Wall Street. He
made $150,000 in speculation, bought a yacht and went to Europe during
the war. While in England, he mingled with the aristocracy, and became
strongly imbued with the idea that the North would not be successful in
the war, and that the National currency would become almost valueless.
He thought that the more the National currency depreciated, the more
railroad stocks and bonds would advance; in short, that whatever the
currency would buy would advance, while the currency itself would become
nearly worthless. He therefore became a rampant bull on stocks. He
bought almost the whole list, and also did a large business in buying
for others whom he succeeded in impressing with his own ideas. He had
many followers and made a tremendous inflation. Secretary of the
Treasury Chase was advised of this Morse speculation, which might prove
prejudicial to the National credit, and he announced that if the
inflation was carried any further, he would prick the bubble by selling
gold. Anthony W. Morse thereupon personally sent Secretary Chase a
dispatch saying that he would take all the gold that the United States
Government had to sell. Mr. Chase immediately ordered Assistant
Treasurer John J. Cisco to sell $10,000,000 of gold to the highest
bidders. The usual notice appeared in the morning newspapers, and a
panic at once followed. At 12 o’clock, or two hours after the opening of
the Exchange, it was announced from the rostrum that Anthony W. Morse
had failed. This terminated the career of Mr. Morse as a large operator
and manipulator, and with his downfall the death knell was sounded to
his imported theories. He straggled manfully for several years to regain
his footing, but his prestige was gone, and he failed in every effort to
push his way again to the front. His ill-success soured him. His health
failed, and he went to Havana to recuperate. There he died with
profanity on his lips, enraged at the failure of all his hopes. He paid
the penalty of disloyalty. His friends of the English nobility were
largely to blame for all his misfortunes. Their predictions of the
success of the South led him on to irretrievable ruin. He did not see
that their wish was father to the thought.


[Illustration:

  _Edmund Clarence Stedman_
]


                      FORMER GIANTS OF THE STREET.

Henry Keep, once President of the Lake Shore road, and also of the New
York Central, was in his day a power in Wall Street. He was the first to
discover the intrinsic value of railroad property in the Northwest, and
manipulated Chicago & Northwestern stock, both common and preferred,
very successfully, making a great deal of money for himself and friends.
He died very wealthy. He came to New York city from Watertown, in the
interior of New York, and at first was an exchange broker, dealing
mainly in uncurrent money. He had previously served in some humble
position on a railroad. By careful and economical habits he was able to
leave a fortune of several million dollars, largely in common and
preferred Northwestern stock. The plot of ground on which William H.
Vanderbilt built his palatial Fifth Avenue home was once the property of
Mr. Keep, who originally bought it for about $250,000 for the purpose of
building a charitable institution, but changed his mind when the
property quadrupled in value. Then he concluded that charity should
begin at home. He sold the plot, extending for one block along Fifth
Avenue, to Mr. Vanderbilt for one million dollars. Still his original
intentions were good, and it was only after the real estate market, as
with Satanic malice, had in that locality advanced 400 per cent. and
taken him up into a high mountain of temptation, that his
philanthropical project turned awry and lost the name of action. While
Mr. Keep made a signally good President of the Lake Shore road and was a
great manipulator of stocks, he was a failure as President of the New
York Central, and he resigned that post having no confidence in the
future of the property. Commodore Vanderbilt, who believed in the
property, became his successor, and in a previous chapter I have given
the story of the rise of that remarkable man. It is of interest to
recall, by the way, that while President of the Lake Shore road Mr. Keep
went largely short of the stock. As the President he naturally had
inside information. Addison Jerome, a brother of Leonard Jerome, was a
big operator of the day, and undertook to corner President Keep. In
those days a great deal of stock was sold on seller’s option for thirty
and sixty days. Mr. Keep had sold largely in this way, and Addison
Jerome and his clique had bought heavily, expecting that the corner
would be complete when the options should mature. A surprise awaited
them. Mr. Keep made deliveries promptly in brand new shares. They were
really an over-issue by the Company. It was a Waterloo in a double sense
for Jerome and his fellow bulls. They were in over their heads. It had
such a dampening effect that they immediately threw up the sponge and
the stock came down with a crash. The issue of this new stock was
smoothed over by turning the avails into the treasury of the Company, a
fact, however, which did not prevent Mr. Keep from making a pretty good
turn on his shorts.

                          J. PIERPONT MORGAN.

J. Pierpont Morgan, known as the “Railroad Reorganizer,” and who has won
a place in the front rank among American financiers, is a son of the
well-known Junius S. Morgan, the head of the firm of J. S. Morgan & Co.,
of London, and the successor of George Peabody, the great philanthropist
in the banking business there. George Peabody, some years before his
death, visited this country, and, desiring a partner in his great
banking house, made inquiry in Boston for a suitable person. Junius S.
Morgan was recommended as a young man of exceptional business talents
and he was selected for the responsible post, the firm being known as
George Peabody & Co. On the death of the celebrated head of the firm,
the name was changed to J. S. Morgan & Co. The success of the father has
been repeated in the signally successful career of the son. During the
palmy days of the firm of Duncan, Sherman & Co., once renowned among the
financial strongholds of the country, J. Pierpont Morgan was one of the
clerks. It was there he graduated as a practical student of financial
achievements; it was there he won his spurs for the monetary campaigns
that awaited him. Leaving the house that was then a synonym for
invincible solidity, Mr. Morgan established the firm of Dabney, Morgan &
Co. Mr. Dabney was formerly one of the firm of Duncan, Sherman & Co.
After a few years the firm in which Mr. Morgan had thus first engaged in
business on his own account was dissolved. But the check, if it may so
be termed, was only momentary, and colossal feats of financiering were
to deck his career with triumphs. He formed a connection with the
wealthy Drexels, of Philadelphia, and a New York branch of their banking
house was established, under the name of Drexel, Morgan & Co., which has
for some years been largely engaged in the reorganization of crippled
railroads like the West Shore, Reading and many others. And they have
been very successful. They have been financial physicians, healing sick
corporate bodies; monetary surgeons, amputating needless expenditures
and reckless methods; or, in perhaps more happy figure, skilful pruners
of the vine, that the ultimate vintage might be more abundant.


[Illustration:

  _Yrs Sincerely
  H. Victor Newcombe_
]


Mr. Morgan is endowed with very positive traits of character. He has the
driving powers of a locomotive. He cares nothing for show; he is a plain
man of action. He strikes hard blows; he is naturally aggressive. In
speech he is candid to the verge of bluntness; in action he is short,
sharp and decisive. Like a true soldier, he is a man of acts rather than
words. Rugged as a Spartan in his nature, hating circumlocution, bombast
and palaver, going straight to the mark, yet with due caution and
prudence, he exhibits many of the best traits of the practical
financier.

I have asked Mr. Morgan for his picture for publication in this book,
but with natural personal modesty, he has recommended that his handsome
partner, Anthony Drexel, of Philadelphia, be selected in his place, and
with a view to encouragement in Wall Street of blushing modesty—that
century flower of the financial conservatory—I have complied with his
request.


                            THOMAS L. JAMES.

President of the Lincoln National Bank, has had a career in New York
brilliant in the service of the public, and marked in the practical
skill with which confidences and enterprises have been directed by him.
His training has contributed largely to his success as a financier. He
came from Utica in 1861 and entered the Custom House as Deputy, and
finally attained the position of Postmaster-General after a long and
successful term as Postmaster of the City of New York. Mr. James
directed the affairs of the Lincoln Bank so successfully that what
promised to be a small up-town bank has developed into a National bank
of considerable importance. He is one of the men of the times, one who
feels the tide of local affairs, a man of the people who acts from
wholly conscientious motives, and whose ambition has never exceeded his
sense of duty.


[Illustration:

  _Moses Taylor_
]


------------------------------------------------------------------------




                              CHAPTER LX.

          JAMES B. AND JOHN H. CLEWS.


The subjects of this sketch, whose portraits adorn these pages, are both
members of my firm and I think this book would be incomplete without
putting in a few words in reference to them. As will be seen by the
sketches which follow, they both commenced their business careers in a
modest way and through perseverance and industry have attained positions
in the financial world which are in every way creditable to them. I have
made it a rule never to introduce a blood relative into my office for a
position of trust unless I believed him worthy of confidence and capable
of performing the duties assigned to him in an intelligent manner. To do
so would be an act of injustice, not only to him but to his associates
in the office, and generally causes ill feeling and bad results in the
end. Happily with my nephews I have had no such cause or ground for
complaint. On the score of merit alone they have succeeded in advancing
themselves to their present positions.

James Blanchard Clews was born in Dunkirk, N. Y., August 4, 1859. After
graduating from Chamberlain College, in this State, he entered the
general office of the Red Line Transit Company, in Buffalo, N. Y., where
he spent two years. He then accepted a position of responsibility in the
General Manager’s office of the Union Steamboat Company, also located in
Buffalo. Here his ability and his growing capacity for making a good
business man were further satisfactorily illustrated and recognized by
those officially over him. Realizing, however, that Wall Street offered
better opportunities for advancement, he resigned his position and
obtained one in my banking office as book-keeper. Commencing at the
bottom of the clerical staff, he displayed so much ability, coupled with
untiring energy in the performance of his duties, it was a pleasure to
promote him from time to time, whenever an opportunity offered, with the
result that after eight years of vigorous training through the
successive grades of Book-keeper, Cashier, and General Manager, he was
rewarded in 1890 by being made a member of my firm. It will thus be seen
that my nephew possesses a thorough and practical knowledge of the
inside workings of a banking house which is so essential to a successful
Wall Street business man. Being besides a student of nature, he has also
improved every opportunity to learn the value of railroad and other
investments and to-day is a recognized authority on all such matters. He
has served as President of an important railroad and is a Director in a
number of large corporations.

John H. Clews,[1] junior member of the firm of Henry Clews & Co., was
born October 28, 1856. In beginning his business career he entered the
service of the Erie Railroad Company, in the transportation department,
where he gained a general knowledge of railroad management and its
affairs. After a few years with that company he was offered a position
with the Western Transportation Company, the water line of the New York
Central Railroad. Here he had the opportunity of completing his
education in all the branches of transportation. He was then appointed
Agent of the New York, Chicago & St. Louis Railway at East Buffalo, N.
Y., the distributing point for all freight between the East and the
West. From this place he entered Wall Street, where he evinced the same
progressive spirit. In 1890 he became a member of the New York Stock
Exchange, acting as one of the chief brokers for Henry Clews & Co., and
January 1, 1898, he obtained an interest in the firm.

Footnote 1:

  Deceased April 10, 1907.


[Illustration:

  _Thomas L. James_
]


------------------------------------------------------------------------




                              CHAPTER LXI.

       A REMARKABLE CHAPTER OF HISTORY.


Any review of the advance of this country during the past fifteen years,
forms a record of the most wonderful progress ever made by any nation in
such a short period. A record of the development of the country’s
resources through a resistless energy that seems destined to control the
markets of the world, reads almost like one of Grimm’s famous tales, for
after numerous trials, and the surmounting of many obstacles, the fairy
wand is turning what we will into gold.

One of the effects of the Vanderbilt boom of 1885 is to be found in the
enormous mileage of new railroad construction in 1887, namely 12,000
miles. It may have looked at the time excessive, but it has turned out
to be a fortunate anticipation of the great business strides made since
that time. As far back as that year, our exports of manufactured
articles began to show an appreciable increase.

The year following will always be memorable as the time of the great
blizzard which tied New York up so effectually for several days. As a
direct result of the exposure to its severity, the country lost in
Roscoe Conkling one of the most picturesque figures in American politics
and a man of unblemished reputation. He was taken from the arena of
affairs too soon to allow his participation in the presidential campaign
of that year.

My own experience at the time has impressed the memory of the great
storm strongly upon my mind. I had gone to Newport accompanied by Mrs.
Clews to inspect some improvements then being made at my summer home,
and in returning we came across the bay in the regular boat for the
purpose of taking the noon-day train which ran from Boston to New York.
When we were about half way over the bay, a vicious squall struck us and
we began to doubt if we should ever reach the shore again. Finally,
however, we did manage to land, and connected with the belated train.
Progress of course was slow, so slow in fact that the next morning saw
us only as far as New London, whence further movement was out of the
question. Many of my readers will recall the railroad ferry over the bay
from New London. The last train previous to ours had been started
across, but the violence of the tempest had compelled the pilot to give
up the task and return. With more incoming trains, New London was soon
congested by the sudden increase in population, and accommodations of
any sort were at a premium. We were for a time at a loss as to where we
could go, but fortunately succeeded in inducing the manager of the hotel
there to install us in the private apartments of the proprietor, who had
the day before started with his family for Florida. He spent the ensuing
four days upon the railroad, between New London and New Haven, banked in
by a snow drift six feet high, while we enjoyed the hospitality of his
apartments during that time. I am sure that we could not conscientiously
complain of the exchange. Telegraphic communication with New York was
completely shut off. As our children had remained in the city, we were
naturally anxious to know of their welfare and relieve any anxiety they
might have as to our safety. There remained but one means of
communication, and that a wire to Boston, whence messages could be
cabled to Liverpool, and back to New York, and that is the way we got
word to and from the metropolis. That was a rather circuitous way, but
it was effective.

[Illustration:

  _John H. Clews._
]

Mr. Cleveland’s renomination and accompanying free trade talk, disturbed
the markets more or less from the date of his nomination in 1888 up to
the time of General Harrison’s election. The latter’s entrance into the
White House started the entire business of the country going, and
through his wise management, we were brought to a very high point of
prosperity, the last year of his term being, up to that time, one of the
most prosperous in our history. One of General Harrison’s most signal
achievements was in the exchange of reciprocity treaties, which was
managed in such a masterly manner by his resourceful Secretary of State,
Mr. Blaine.

In the middle of General Harrison’s term, occurred the greatest
financial shock the world had experienced in the last quarter century,
or since the panic of 1873.

The suspension of the great firm of Baring Bros. of London in the fall
of 1890 proved a demoralizing force from the effects of which finances
did not thoroughly recover for several years. The direct cause of the
failure, as is now well known, was over-commitment in Argentine
enterprises. Through the representations of an agent of theirs who had
visited the country, everything bearing the name of Argentine was
colored a most rosy hue, and the investments of that great house and its
following were enormous. The inevitable reaction from such inflation
found them with an immense load of these securities unmarketable, and
they were forced to suspend. The assistance rendered in rehabilitating
the firm has been signally successful. Through the efforts of Mr.
Lidderdale, Governor of the Bank of England, that institution took over
some seven million pounds sterling of the congested obligations of the
firm. By the wise, patient, and sagacious management of these former
unmarketable properties the bank was finally enabled to realize enough
therefrom to pay up all the arrears of the firm.

The liquidation of American securities by British holders which was
consequent upon their failure was enormous in volume and extended over
several years.

The year 1890 was further noteworthy as marking the birth of that
unfortunate compromise of the silver agitation known as the Sherman
silver-purchase law, which was to bring about such direful results
within a brief three years. After the shock of the Baring panic had
subsided, the beneficial effects of the McKinley tariff law began to be
felt and with increased exports, largely of grain, in the succeeding
year, together with ample protection for home industries, we were
ushered into 1892 under very auspicious circumstances.

Bountiful crops again provided a basis for what developed into a
wonderfully prosperous year. During the year, Jay Gould (largely through
the aid of his son George), by one of his characteristic strokes,
succeeded in obtaining control of the Union Pacific system, while Mr.
Huntington was thinking the matter over; but his personal control was
not to last very long, for in December of that year, Mr. Gould died,
after a career of great activity and venturesomeness, which has
elsewhere been reviewed in this book.


[Illustration:

  _J. B. Clews_
]


The Democratic party still clung to their idol, and Mr. Cleveland was
renominated for the presidency in 1892, and by one of those inexplicable
turns of public opinion which foolishly wished a change of
administration in the midst of prosperous times, he was elected, and
returned to Washington the following March, be it said, enjoying the
confidence of the great majority of the people. Almost from the time of
that election, the Wall Street markets were depressed, the fear of free
trade measures being the basis of distrust. Late in the year, the
Treasury’s stock of gold began to show signs of diminishing, and with
the exception of a few rallies, one notably in the following January,
prices continued on the downward course. Co-incident with the decrease
of gold reserves arose reports of a disposition on the part of the
Secretary of the Treasury to interpret the word “coin” in our Government
obligations as allowing the redemption of the bonds in either gold or
silver at the option of the Government. The effect of any doubt or
question upon this most important subject could only result in
unsettling confidence; of which Addison speaks as the “high priest in
the temple of trade.” For the first time in very many years, our
Treasury operations showed a deficit, and things were going from bad to
worse. The first great smash in prices occurred in May, when the famous
Cordage Trust went to pieces. At the same time, Sugar stock and the
remainder of the then few industrial shares took part in the sharp
decline. The gold reserve had by the middle of the year reached
alarmingly low figures, so that the pressure of public opinion compelled
the calling of an extra session of Congress for the purpose of repealing
the silver purchase clause of the Sherman law,—which had proved to be a
veritable “Old Man of the Sea” upon the back of the country, threatening
to throttle business interests everywhere.

The Congressional procrastination, and obstructive tactics in the Senate
worked havoc with trade and finance, and when relief finally came in the
repeal of the silver purchase clause, the vitality of the patient had
sunk so low, that it was a matter of years before returning health, in
the form of confidence, brought back our native buoyancy and push. It
became necessary early in the following year to issue $50,000,000 worth
of bonds in order to keep the gold reserve from getting too near the
vanishing point. Tariff agitation, which had been started by President
Cleveland’s message to Congress in December, 1893, upset all the
calculations of business men, who hoped, after a disastrous summer, that
the tide had turned. But, no sooner was the fear of a silver deluge
quieted, than revenue reform brought on another period of anxiety and
delay. Fortunately when that distorted measure (with its 640 Senate
amendments) which bore the name of the late William L. Wilson, a man of
deep thought and the highest integrity, did become a law in the
following year, it was not burdened with an income tax.

There are those who argue, probably to their own satisfaction, that this
latter is an equitable form of taxation, but it has always appeared to
me as putting a premium on idleness by taxing thrift.


[Illustration:

  ROSWELL P. FLOWER.
]


Another issue of $50,000,000 bonds was necessary before the year was
out, and in spite of this replenishment, gold exports to pay our debts
to Europe for securities sent back to us by the ream, continued in such
volume as to render a further issue imperative in the following
February. This will be remembered as somewhat unique in our Treasury
operations, being in the form of a purchase of 3,500,000 oz. of gold,
which cost the Government $62,500,000. The famous syndicate which
undertook the delivery of the precious metal, agreed to do all in its
power by the further deposit of gold in the Treasury and as far as
possible, a control of foreign exchange rates to keep the reserve
intact. Its powerful aid unquestionably saved the people from many more
business disasters, by a bolstering up of confidence in the power of the
Government to pay its debts. The syndicate lived up to its agreement
fully, depositing in the month of August some seven and a half millions
of gold.

One scarcely hears mentioned nowadays the name of that poor fellow whose
fabulous fortune (on paper) finally proved too burdensome for his
uneducated mind. Barney Barnato was in his way a picturesque character,
and a most vivid illustration of the overthrow of mind by matter, when
the former is not in control.

The sharp break in South African shares in the London market during
October, of course exerted a sympathetic influence here; but worse
things were yet in store for us. Our President’s famous Venezuela
message to Congress in December, 1895, acted like an earthquake—which
shook the markets to their very foundations and engulfed hundreds of
millions of values before it subsided. The final outcome of the dispute
between England and Venezuela has to a very great extent vindicated the
former’s claims. Let us, however, look upon the whole matter as a step
forward for civilization in the advancement of the principle of
arbitration, the true solution of all international difficulties. In
1896, we did finally reach the end of our troubles, though not without
much worriment. A further bond issue of $100,000,000 to meet deficits,
brought that total up to $262,500,000 issued in two years. A rather
expensive administration, but “troubles come not singly, but in
battalions.”

The Presidential Campaign just past, with the same nominees at the head
of the respective parties, recalls the wild free silver talk of four
years ago. Panic and depression succeeding each other had left the
people almost hysterical. After Bryan’s nomination in July, gold
hoarding was the order of the day. Of course the effect of this on the
money and security markets meant, under the circumstances, another
downward plunge in prices. New York Central sold at 88, the lowest price
in the past fifteen years, and C., B. & Q. at 53, the lowest price in
nearly forty years, and all other stocks sold down in the same
proportion.


[Illustration:

  J. PIERPONT MORGAN.
]


I have said that we reached the end of our troubles in 1896, but the end
did not come till the November election, which showed that William
McKinley, “the advance agent of prosperity,” had been elected President.
The nomination of William J. Bryan, hitherto a comparatively unknown
man, but who electrified the Democratic National Convention by his
specious eloquence, the eloquence of a political Belial, able, in the
Miltonic phrase, “to make the worst appear the better reason,” whose
famous phrase, “you shall not press down upon the brow of labor this
crown of thorns, you shall not crucify labor upon a cross of gold,”
swept the convention off its feet and made him the nominee for
president, was a blow that for a time seriously disturbed Wall Street
and commercial circles everywhere. Mr. Bryan called for the free coinage
of silver at the ratio of 16 to 1, and by his tireless activity in
stumping the country created a feeling of depression that reached the
pitch of panic and left the people almost hysterical with fear. But as
Martin Van Buren said on one occasion, “the sober second thought of the
people is never wrong and is always efficient.” The sober second thought
of the people carried the day. Crowds might flock to hear the orator,
but they voted with the party of prosperity and honor. The carefully
written speech of Mr. Bryan, a speech which, for once, he read from his
manuscript in the great Madison Square Garden meeting, did not deceive
the people; it fell flat.

With Bryan’s fiasco in this city, the clouds finally began to break. How
plainly the record of these four years shows the absolute domination of
the markets by Washington. And not of the financial markets alone by any
means, but of the whole business interests of the country, which finally
were well-nigh paralyzed by four years of increasing anxiety and wonder
as to what might happen next.

It is gratifying to turn away from that period of distress to the
succeeding years of prosperity. The vindication of the good sense of the
people in the election of William McKinley did, at last, turn the tide;
and for good and all, let us hope. With an unquestioned currency basis,
improvement became possible. We were greatly favored too, in the first
year of Mr. McKinley’s administration, by bountiful crops at a time of
shortage in Russia, France, and the Danubian Provinces. It was a great
year of prosperity for our farmers, who, through good prices, and the
exportation of some 120,000,000 bushels of wheat, were enabled to pay
off mortgages in wholesale fashion, and herein we see the beginning of
present good times. Furthermore our export trade showed great increase.
As was to be expected, there was a great rush of importations just prior
to the passage of the Dingley Tariff Bill in July, and a consequent
decline in revenues immediately thereafter; but the completed record of
its operation up to the present time is a splendid tribute to the wisdom
of its author. The Supreme Court decision in 1897 in what was known as
the Trans-Missouri Case, declaring all railroad pooling illegal, proved
somewhat of a shock to the market, but with improvement in business, our
roads soon found enough traffic before them to more than go ‘round,
without worrying about its division.

The year 1898 began very favorably with large gold imports and easy
money. Cuban affairs, which had begun to threaten late in the previous
year, finally culminated in the outbreak of war with Spain in April.

The condition of things in Cuba having become a reproach to the
civilized world, this Government, acting for the conscience of
Christendom, directed that the war which Spain was waging against the
Cuban revolutionists should cease, with all its indescribable horrors,
its barbarous cruelties to women and children, and as Spain did not heed
the warning, our Government intervened in the interest of common
humanity, an event which marked a distinct advance in the history of the
human race, for history makes no mention of any war waged on such a
scale in behalf of the cause of humanity. Certainly never was a war more
clearly justified or one which showed greater courage on the part of the
intervening nation, for there can be no doubt that more than one of the
Continental powers of Europe would have been glad to side with Spain and
would have done so, but for the emphatic negative of Great Britain.

Naturally there ensued a period of depression, but it was short-lived.
The ensuing months of activity and buoyancy surpassed anything of the
kind in our history. After the apprehension as to how the business world
would adjust itself to war conditions had passed away, business began to
boom all over the country. We were on our feet again with financial
health restored. That wonderful boom in the stock market, begun in the
summer of 1898 and lasting until the spring of 1899, will not soon be
forgotten.

It seems more like a dream than a fact that trade and commerce and
financial operations could swell to such well-nigh inconceivable
figures, revealing a degree of prosperity almost past belief, like some
marvelous good fortune of an individual in a Persian tale, favored by
good Genii, actual fact rivalling fancy or throwing it far into the
shade. In other words the oldest and most experienced merchants and
financiers in this country were astounded at the degree of solid
prosperity attained by the great Republic, the lion’s whelp, rivalling
or surpassing the strength of the old lion, the mother country across
the sea.

To the late Ex-Governor Flower belongs the credit of fearlessly taking
the initiative in that marvelous rise in values to which I shall revert
later on.

The formal close of the Spanish war gave fresh impetus to trading and
prices kept soaring well on into the spring of 1899. The year 1898 has
the distinction of marking the beginning of the greatest era of trade
combinations, those gigantic commercial engines, that the world has ever
seen. The capitalization of those inaugurated during 1898 and 1899
reached the fabulous aggregate of $3,500,000,000. The mind is staggered
by the possibilities of enterprise which such a sum suggests.

The tendency towards centralization in the railroad world was first
shown in the merger of the Lake Shore road with the New York Central.

The year 1899 was one of great prosperity, the greatest since we have
been a nation, albeit its close was marked by one of the worst
semi-panics the Street has ever experienced. In order to account for
some of the most important features of the panic of December, 1899, it
is necessary to take a glance backward at certain great financial events
of the year even as early as April.

In that month was formed the famous Amalgamated Copper Corporation, a
creation of the Standard Oil magnates.

The capital stock of the company was $75,000,000. The shares were said
to be subscribed five times over. Owing to its parentage, the stock
became popular, and was sustained at par for some time, but scarcely two
months had elapsed before a break of 25 per cent. in the price occurred.

This break was regarded as a rather suspicious circumstance, and was
supposed by the “knowing ones” to be a part of the deal. The Amalgamated
Company was a mammoth combination, comprised of large share interests in
over 30 companies, the famous Anaconda of Montana heading the list, and
being the most prominent

The panic fell most severely upon the copper companies, the shrinkage on
the share capital of which for the year is alone estimated at nearly
$200,000,000.

Besides this, the currency movement to the South and West had been
unusually large and prolonged, and finally tightness of money brought
about an immense drop in the entire stock market. But with general
conditions prosperous all over the country, such panics happily do not
leave lasting scars.

The last year of the wonderful nineteenth century has been a remarkable
one in our history. Since the first defeat of the silver agitators in
1896, our financial strides have been so rapid that it seems now a
question of but a short time when New York will be the financial centre
of the world. What a contrast between our position in 1900, and that in
1895, when we were knocking at the door of Europe with bonds for sale to
provide running expenses for our Government. To-day England finds it to
her interest to place $25,000,000 of her war loan with us, Germany asks
for $20,000,000 of American gold, Russia is seeking to borrow from us
and Sweden has not gone empty-handed away. And these accommodations have
been accorded without causing so much as a ripple in our money markets.
The source of such plenty is of course found in our wonderful increase
of exports. For ten months of this present calendar year, the trade
balance in our favor approximates $500,000,000, making, in the past
three years, the vast total of fifteen hundred million dollars balance
to our credit. There we see both the lever and the fulcrum with which to
move the financial world.

A little over a year ago occurred the death of Cornelius Vanderbilt, the
grandson and namesake of the Commodore. Here was a gentleman whose
charities were almost boundless. His gifts to the people through art and
in many other ways were princely, but perhaps his memory is greener in
the minds of those who, through his great private charity, were lifted
above want.

These great latter day fortunes have not often failed, in this country,
in being administered by men whose conception of life, and of duty
toward their fellow men has turned the duty into a pleasure. This is a
very great tribute to American citizenship and should not be forgotten
or lost sight of by our sometime critics.

The passage of the Currency bill in March, 1900, undoubtedly did much to
increase Europe’s faith in our monetary stability and, furthermore, the
result of the Presidential election of 1900, the triumph of the party of
sound money seems to preclude the recurrence of any attacks upon the
financial honor of this country. There has been a campaign of education
going on in this country ever since the advocate of the free and
unlimited coinage of silver at the ratio of 16 to 1 first promulgated
his doctrines. The benefit to the people of this knowledge of public
affairs is clearly apparent. They will have none of false theories and
suicidal experiments, they will not go after false financial gods, they
will not bow the knee to the Baal of repudiation and confiscation.

While the modern method of commercial development is open to criticism
in some respects, still I take it that the evils complained of are not
those of very existence but are rather those of circumstance, and are
open to correction by the will of the people. How often have we heard
that these combinations stifle competition—but for how long? Does not
their existence excite competition? Furthermore, their management calls
for the very highest ability and creates a keen intellectual competition
which cannot fail to be of educational value at large. It remains for
ensuing years to provide correction for those defects which are bound to
appear in any new and untried system.

We end the century that almost covers our national existence with a past
record and prospects unparalleled. We enter the new century full of
faith in our institutions, that have stood severe tests even in our
short life, and full of hope for even greater national achievements. We
are fast taking the lead in the affairs of nations as well as in the
affairs of commerce and finance, and have need of great steadiness of
character, and fixity of national honor, which now seems assured for all
time. It augurs well that we begin the twentieth century, which displays
such vistas of greatness, at peace with all the world.


------------------------------------------------------------------------




                             CHAPTER LXII.

             BOOMS IN WALL STREET.


Wall Street has lately been enjoying quite a boom in some respects
differing from any in its previous history. Probably the most
interesting feature about this boom is that it is not in any sense
spectacular. In that respect it is unique. Prices of many stocks are
higher and intrinsic values greater than they have ever been before. The
market has all the qualities that normally would cause intensest
excitement and focus the attention of the entire country on the Stock
Exchange. Yet in spite of these conditions, the Street is in a normal
state of mind, and it is doubtful if the general mass of the people, who
get their information from the newspapers are fully aware that there is
even an ordinary boom in Wall Street. This unusual condition is due, I
believe, to the fact that the boom we are enjoying is built on a
foundation that reaches clear to the bowels of the earth. There is
nothing unnatural or artificial about it. Wall Street is simply one of
the centres that reflects the general prosperity throughout the country.
Farmers, merchants, mechanics, mill workers, and miners are all so
intent in keeping pace with the progress in their own pursuits that they
have no time to cast eyes our way. The same conditions that are booming
stocks, are booming everything else in the country at an equal rate, so
that we are in nowise singular or deserving of special attention.


[Illustration:

  Photograph from Underwood & Underwood, N. Y.
  JOHN D. ROCKEFELLER.
]


Another factor too, has developed in the Street that prevents the usual
excitement and hurly burly incident to a rising market. This is the
absence of a pronounced central figure, or controlling force. Usually a
boom centres about some one man who stands boldly out in the open, or
whose hand it is known is manipulating values. At present the
manipulation is being carried on in a method that is as quiet as it is
novel and unusual. That the market is being manipulated, is apparent
enough even to the most casual observer. But the source of this
manipulation is probably known only to a few; all others are but
students in the Street. They know that a new order has come, and that
this order is due to the most powerful and resistless influence that has
ever manifested itself in Wall Street. This influence is very largely
composed of the Standard Oil Combination, who have introduced in their
Wall Street operations the same quiet, unostentatious, but resistless
measures that they have always employed heretofore in the conduct of
their corporate affairs. Beside this group, every other man or
combination of men that has ever operated in the Street are materially
belittled by comparison. The heretofore conspicuously big operators that
have flashed up and across the horizon, appear comparatively small
beside the men who are running things for us now.

At his best, Jay Gould was always compelled to face the chance of
failure. Commodore Vanderbilt, though he often had the Street in the
palm of his hand, was often driven into a corner where he had to do
battle for his life, and so it has been with every great speculator, or
combination of speculators, until the men who control the Standard Oil
took hold. With them, manipulation has ceased to be speculation. Their
resources are so vast that they need only concentrate on any given
property in order to do with it what they please. And that they have so
concentrated on a considerable number of properties outside of the
stocks in which they are popularly credited with being exclusively
interested is a fact well known to every one who has opportunities of
getting beneath the surface. They are the greatest operators the world
has ever seen, and the beauty of their method is the quiet and lack of
ostentation with which they carry it on. There are no gallery plays,
there are no scareheads in the newspapers, there is no wild scramble and
excitement. With them the process is gradual, thorough and steady, with
never a waver or break. How much money this group of men have made, it
is impossible even to estimate. That it is a sum beside which the gains
of the most daring speculator of the past were a mere flea bite, is
putting the case mildly, and there is an utter absence of chance that is
terrible to contemplate. This combination controls Wall Street almost
absolutely. Many of the strongest financial institutions are at their
service in supplying accommodations when needed. With such power and
facilities it is scarcely conceivable what these men must be making,
what they can do on either side of the market. So far, fortunately,
their manipulations have all been one way, upwards, and in conjunction
with the general prosperity it has resulted in making large sums of
money for nearly everybody in the Street.

Here and there we have heard of losses, some of them fairly large, but
in comparison with the general money making these are hardly to be taken
into consideration.

The last preceding boom that Wall Street enjoyed was as different from
the present as it is possible to imagine. It had all the elements which
this one has not. It centred about one man who stood out in the
lime-light clear and distinct. It kept the Stock Exchange in a constant
state of ferment. It filled the newspapers with column upon column of
sensational stories. It made millions for an army of retainers, on
paper, and it kept the market jerking up and down for months. Roswell P.
Flower, ex-governor of the State of New York, was the leader of the
boom, and a more picturesque figure has never been seen in Wall Street,
which is saying a great deal. Mr. Flower was an individual of very plain
exterior. He often used language that was noticeable more for its force
and directness and emphasis, than it was for polish. He had an ambling
gait and looked like a well-fed farmer. He was rarely seen without a
huge quid of tobacco that almost filled the left side of his mouth.
Spittoons were an essential part of the furnishings of his office. His
clothing hung on his person not unlike meal sacks. His hat was rarely
brushed, and for days at a time, apparently, he forgot to shave.
Altogether he was the last person, in appearance, who might be expected
to lead in a district that is famous for its well groomed men. His
education was certainly not collegiate; doubtless all his peculiar
traits the ordinary man would have judged a handicap, still they were
Mr. Flower’s strongest aids. The lack of artificial polish gave people
confidence in his statements. His limited education enabled him to think
clearly along certain lines without being hampered with mental
digressions, which would probably have come with a higher original
mental culture.

As the administrator and manager of the estate of his brother-in-law,
Henry Keep, he came into the Street twenty or twenty-five years ago. He
in that way controlled a large amount of funds, which by conservative
direction he increased very substantially. He scarcely ever figured in
the speculative field to any great extent, until after he had completed
his term as Governor of New York State. When he returned to the Street
from Albany, he naturally came with a considerable prestige.
Ex-governors of the Empire State are not very plentiful in and about the
Stock Exchange. He also brought with him a large political following. In
both of the great parties in New York State there are many men of
standing and influence who like to take a flyer in Wall Street. Almost
to a man they associated themselves with Mr. Flower, who, during his
term at the capital had made hosts of friends with Republicans and
Democrats alike, and this, though his party loyalty had never been
questioned. He also had close associations with most of the big
capitalists. After he had settled down to business, on leaving politics
behind, Mr. Flower picked out several stocks as his specialties, Chicago
Gas, Federal Steel and Rock Island being some of these. Under his
manipulation all these properties went up and soon began to show a big
advance, unusual strength and great activity. The bears made frequent
assaults on his position and now and then pushed him towards the wall,
but he always fought his way to the front again, and came out master in
every encounter. When he had himself pretty well entrenched in the
specialties he was handling, he suddenly plunged into Brooklyn Rapid
Transit, and for months he kept things stirred up in a way that even
Wall Street has not seen very often., He picked up the stock commencing
at six dollars a share, and in an incredibly short time ran it up to
over 138. Almost every politician in the State made a fortune on paper.
Mr. Flower was immensely popular with the Wall Street news reporters,
who helped his boom along through the glowing accounts they wrote from
day to day.

Under the impetus of the swirl in Rapid Transit, practically every
property in the Street went flying upward, until the end did not seem to
be in sight. The bears were beaten to a standstill every time they
showed their heads, the only result of their attacks being that Flower
stocks would jump up a notch higher. The ex-governor preached
Americanism and confidence, until everybody believed that if a stock was
only grounded, and the property located in America, you could buy it at
any price and still be on the safe side.

That a terrible panic did not grow out of this boom was due only to one
fact: Mr. Flower’s sudden death. Had he lived thirty days longer, the
bubble must have been pricked, and the result would have been
disastrous. Mr. Flower went to the country for a day’s rest, ate freely
of ham and radishes and washed his frugal meal down with a copious
supply of ice water; he naturally, in consequence, died in a few hours
afterwards of an attack of acute indigestion; his death alone saved the
Street.

The Rockefellers, the Vanderbilts and his other wealthy friends rushed
into the market with millions and sustained values. They were in a
position to attribute the threatened reaction to his death and pointed
out the absurdity of letting such an incident affect the value of
stocks. They discounted the break that must have come in the natural
course of events under the forcing process that was going on. Reasoning
such as this spread broadcast through the papers stopped the break.
Where the bottom would have fallen out entirely there was only virtually
a moderate break all along the line; why it was not worse was due to the
market being bolstered up by the Standard Oil Combination and others
with them coming to the rescue just in time to prevent a big smash. The
small speculators operating on moderate margins were of course all wiped
out almost to a man, but many of the big fellows were saved. It is
probably the only instance on record where the death of a big operator
saved a general smash. Those hurt were numerous politicians and small
fry operators who instead of getting away with snug fortunes in the
shape of profits, lost their all.

An interesting circumstance of the Flower boom was developed
involuntarily by young Joe Leiter. Leiter himself, although he had gone
to the wall some time previously, indirectly had brought about certain
conditions that served Mr. Flower’s purpose admirably. These conditions
were the general release of hundreds of millions of dollars on mortgages
on farm lands. When Leiter began to corner wheat, it was ruling down in
the neighborhood of sixty cents a bushel. He lifted it to considerably
over a dollar before he went broke. This enabled thousands of farmers to
realize on their crops at the dollar figure and above, which brought
prosperity almost over night to the wheat growing belt. With the money
realized from their wheat the farmers paid off their mortgages to the
extent of two or three hundred million dollars. These mortgages were
generally held in the East. This released that much Eastern capital,
causing that vast volume of money to seek investment. The men
controlling this money were overjoyed when Mr. Flower made an opening
for them through the Wall Street boom, and hence it was a comparatively
easy matter for a time to push up values.

J. Pierpont Morgan, now a noted character, was trained as a clerk in the
one-time famous banking house of Duncan, Sherman & Co. Later he made a
connection with Anthony J. Drexel, probably the wealthiest banker in his
time in America. Out of this grew the house of Drexel, Morgan & Co.,
with Mr. Morgan as the managing partner in New York. When Mr. Drexel
died, Mr. Morgan absorbed the entire business, and a few years later
when his father died, Mr. Morgan became the head of the London house of
J. S. Morgan & Co. as well. This put him in a very prominent position.
He soon thereafter demonstrated his influence by reorganizing the
bankrupt Richmond & West Point Terminal Railway & Warehouse Co.,
changing its name to the Southern Railway Co. A number of small roads
were added to it, many of which were in financial straits, and
practically all of them had been badly managed. He combined them into
one system under the one head. This railroad combination is now one of
the great properties of this country. Mr. Morgan next turned his
attention to the reorganization of the Reading and the Erie roads, which
were in a bad way. He soon produced order out of chaos there, and that
resulted in a boom in railroad stocks all along the line. He had several
sharp tussles, however, with some of the big stock holders, who tried to
stand out against him on account, as they thought, of his plans being
too drastic; and during these tussles he not infrequently resorted to
the usual methods to break values, buying at the reduced prices so as to
strengthen his control.

The people who followed Mr. Morgan’s lead in these transactions
generally made money.

A different sort of deal was engineered a few years before by S. V.
White, popularly known as Deacon White, because of his position as
deacon in Plymouth Church. Mr. White is one of the oldest operators in
the Street, and one of the most striking figures. He has made half a
dozen great fortunes in speculation and lost them, but he is as
undaunted as ever, and in spite of the fact that he is now over seventy
years old, he is still active daily in the market.

Probably one of the most unique stock deals ever carried out in the
Street resulted from the transaction of Joseph Bannigan when President
of the Rubber Trust. The history of this deal which for a time resulted
in a great boom in industrials, has never been told, and is known to but
very few persons, most of whom, by the way, were its victims.

Bannigan was an uneducated Irishman who could hardly read and write. He
commenced life in a New England rubber factory and worked for $1.50 per
day and died worth five million dollars. He was shrewd and bright and
knew the value of money. He saved to such good purpose that when the
Rubber Trust was formed he was at the head of one of the biggest
factories in the country, located in Providence. His knowledge of the
trade was so thorough that despite the fact that he almost invariably
used small i’s in writing a letter, he was made President of the Trust,
his holdings amounting to about forty thousand shares. When matters had
been moving along for some time, Bannigan made up his mind that the
other men in the trust, the big fellows, were not treating him right,
and that the best thing he could do was to get out. So he packed his
stock certificates in a grip sack, left Providence on the night boat,
landed in New York bright and early, had his breakfast and then made a
bee line for a stock brokers’ office. He had assured himself in advance
that this stock broker was to be relied on and told him frankly what he
intended to do.

“I want to sell out bag and baggage,” he said. “I want to get rid of
every one of my forty thousand shares. Here they are, put them on the
market and sell them.” The stock broker told him that that would never
do. If he wanted to realize full value for his holdings he would have to
go about it in a different way, for if he threw his forty thousand
shares into the market it would knock the bottom out and he would get
little or nothing for his stock. Mr. Bannigan saw the point, and asked
what he was to do.

“Buy,” said the broker.

“But I don’t want to buy; I have got more now than I want.”

“That is all right; buy anyway, that will make a market for the stock,
and then you can unload when the time comes.”

“How much must I buy?”

“Oh, about $250,000 worth.”

“But I have not got $250,000 in cash to go and buy Rubber stock.”

“Well, you can borrow it; a man in your position, Mr. Bannigan, would
have no difficulty in borrowing $250,000.”

Much against his will the old man was finally persuaded to do as he was
told. About two weeks later the broker wrote to him that he must buy
some more, this time, $200,000 worth. Mr. Bannigan used rather strong
language, but finally yielded as he had before. He borrowed $200,000,
and turned it over. With this additional capital to work on, the brokers
continued to manipulate the market. The insiders soon discovered that
some strong party was buying; but they did not know who, Bannigan having
carefully kept himself in the background. His brokers operated skilfully
in the stock, one day buying, the next, selling to keep the stock
active. The brokers after awhile commenced to borrow large amounts of
the stock. This convinced the insiders that there was a big short
interest somewhere, and they got together in order to squeeze the
shorts. The inside holders who held most of the stock, who had combined
to squeeze the shorts out, as they thought, put the price up to 61, and
at about that figure Bannigan’s was all unloaded. Bannigan now found
himself full of money and the other fellows had his stock. They never
awakened to the fact that the President had sold out on them until his
shares were delivered against their purchases, as they thought, of short
stock. Rubber soon thereafter did not stop tumbling until it had gone
from 61 to 16. This deal had all the elements of a comedy-drama and the
playwright who can do it justice will find material there which will
make him an everlasting fortune and reputation. I have touched but
lightly on a few of the important incidents. It is not often, however,
that newcomers in the Street fare as well as this in the end. For a time
they will go on merrily enough, and send things booming; but in the end
many get the worst of it. A. B. Stockwell is a good illustration of the
truth of this. He is still around the Street somewhere, but is one of
the “has beens,” like numerous other former conspicuously large and
supposed to be brilliant operators. At one time he was worth many
millions of dollars. To-day, he is upside down. His start in life was as
purser on a Lake Erie steamboat; his father, it is said, kept a livery
stable in Cleveland. On one of his trips, Stockwell was in a position to
show considerable attention to Elias Howe, the inventor of the eye at
the upper end of the sewing machine needle. Mr. Howe was accompanied by
his daughter. Stockwell made himself agreeable to Miss Howe also, and
with such good effect that he managed to win her affections and soon
thereafter married the young lady. When Mr. Howe died, Mrs. Stockwell
came into possession of her father’s millions. With this nest egg
Stockwell started in Wall Street, and before anyone realized what had
happened he was the most talked of man in the district. He put all his
wife’s millions into Pacific Mail stock, and secured entire control of
the Company. He came into the Street as plain Stockwell, then as the
news of his liberality and good fellowship spread, he became Mr.
Stockwell; after he got hold of Pacific Mail he was Commodore Stockwell,
by common consent. Everybody bowed and scraped to him and no man was so
high and mighty that he was not proud to shake his hand. Stockwell took
hold of Pacific Mail at about 40 and sent it up to 107. It was at this
period that he was worth over fifteen million dollars; but he found,
unfortunately, when it was too late to retreat, that while Pacific Mail
was up to 107, it was not worth that figure when the unloading
commenced. He was landed high and dry with it all and the Street told
him he was welcome to it. He tried to sell, and found that there was no
market. Then came violent demands on him to pay up his numerous call
loans, and in order to respond thereto, he had to sell regardless of
price and thus created a whirlpool, which finally sent the stock down to
the price at which he commenced his original purchase at 40. In this one
upset, he lost all his paper profits and his wife’s millions besides.
This catastrophe not only stripped him of all his worldly possessions,
but reduced him to the position of being plain Stockwell again, and
there are many also who even go so far as to call him “that little
red-headed cuss.” That was the most famous boom in the history of
Pacific Mail, notwithstanding Leonard Jerome’s previous brilliant ups
and downs in that former erratic property.

Leonard and Addison Jerome had a good time with Pacific Mail for a
while. They ran it up to high figures several times; but finally meeting
with the same experience that Stockwell did. The two Jeromes from being
among the wealthiest and most dazzling operators in the Street, were in
the end practically wiped out. Leonard Jerome, who was the father of
Lady Randolph Churchill, had nothing left to bequeath his daughter
except an equity in the house now occupied by The Manhattan Club on
Madison Avenue, which yields an income of about $15,000 a year, of which
Lady Churchill gets $10,000.


[Illustration:

  WILLIAM ROCKEFELLER.
]


These are a few of the booms that have stirred up things in Wall Street
at one time or another, as did the Keene booms, of which there were
several, the Gould booms, and the Vanderbilt booms, all of which have
been referred to in previous chapters in this book.

The question of trusts or trade combinations has, in recent years,
excited a good deal of interest. One of the most interesting figures in
this connection is John D. Rockefeller, who will undoubtedly be regarded
by the future historian as a striking character in the business history
of the nineteenth century. And be it remembered that history now
concerns itself, not so much with the doings of governments; not so much
with the personalities of emperors, kings, presidents or even with
political parties, as with the life of the people themselves. This is
clearly shown by such historians as Lord Macaulay and John Bach
McMaster. And looking at history in this way, surely John D. Rockefeller
must be regarded as one of the most interesting types of the great
commercial powers of the day. He was a pioneer, a commercial Daniel
Boone, striking out into a new and untrodden field of enterprise, taking
great risks, undergoing grave financial perils of a novel kind and at
length winning a complete and lasting success—a success which has filled
business history with his achievements and the world with his fame. It
was a great stride from the little farmhouse in Tioga County, New York,
to the place which he fills to-day. Born in 1838 he is now in the prime
of life. Reared by strict, church-going people, his word is as good as
his bond; he is the soul of business integrity, and a striking example
of what thrift, enterprise and persistency will do for a young man who
starts out in life with apparently little or no chance of success. His
old schoolmaster, it seems, was the first to get the young man to look
into the refining of petroleum. Not so many years ago, they used sperm
oil, and it cost $1.50 a gallon. How to refine the thick, ill-smelling
oil found in the water courses of Pennsylvania was a problem. It was
black slime, and John D. Rockefeller, by hitting upon a method of
refining it and introducing it in the home throughout the world has made
a fortune that recalls the fable of Midas. Before he was twenty-one he
formed a partnership with a man named Hewitt and at first engaged in the
warehouse and produce business. Then came the great oil craze in
Pennsylvania. Poor farmers suddenly became rich; thousands flocked to
the oil fields. Young Rockefeller kept his head. Asked to make
investments in oil wells for Cleveland friends he dissuaded them from
the project on the ground that the thing was being overdone, and with
Samuel Andrews, who was familiar with the general processes of
distilling, engaged in the refining branch of the petroleum trade. The
firm subsequently became Rockefeller, Flagler & Andrews, which rapidly
expanded its field of operations, and in 1870 organized the Standard Oil
Company with a capital of $1,000,000. It started pipe lines to ship the
oil to the seaports. It made millions in by-products once considered
worthless. It established markets all over the known world, cheapened
its methods of production and outstripped all competitors. Little wonder
then, that its “extra” dividend in the year 1899 amounted to $23,000,000
over and above the regular dividends on the whole capital stock. Mr.
Rockefeller attributes his success to early training and perseverance.
That is, like other men who have stamped their individuality upon the
affairs of mankind, he is what is termed a causationist; in other words,
he believes that nothing is got for nothing; that effects proceed from
causes, and the cause of success he believes to be largely perseverance.
He believes that perseverance overcomes almost everything, even nature
itself, and in that opinion this practical business man is at one with
the philosophers of antiquity.

He and his associates in the Standard Oil Company are naturally a power
in the stock market. They are, of course, very large holders of railroad
stocks and bonds and at times their influence is as irresistible as the
laws of gravitation. John D. Rockefeller’s influence alone could be so,
as he is supposed to be the richest man in America and indeed the
richest man ever known in human history. His is believed to be the
greatest fortune ever accumulated by any man within his own lifetime.
That he feels the responsibilities of his great wealth is obvious from
his munificent gifts to educational and charitable institutions, to
churches and to a hundred other praiseworthy objects. His princely
donations to schools, colleges and universities rival those of that
other public-spirited citizen, Andrew Carnegie. They are equally strong
in their belief that the greatest charity lies in helping others to help
themselves.


------------------------------------------------------------------------




                             CHAPTER LXIII.

          A GLIMPSE INTO THE FUTURE.


I believe that it would be difficult to set bounds to the possibilities
of American development. The inventive genius of the people, their
adaptability to all circumstances, their tenacity of purpose, their
wonderful energy, and the fabulous resources of the country all make it
certain that the United States will reach a degree of power and
prosperity hitherto unexampled in human history. Carlyle’s “French
Revolution,” has been strikingly described as “history read by flashes
of lightning,” and I am tempted to use the same language in describing
the commercial revolution which has taken place in this country during
the last few years. Great as it is, however, I think it merely a prelude
to what is to come. We are destined for one thing to have a great
Pacific trade. Fifty years ago, Humboldt said that the day would come
when the trade of the Pacific Ocean would be as great as that of the
Atlantic. And the increase within a year or two in this commerce augurs
well for the ultimate fulfillment of the great scientist’s prophecy. We
readily adapt ourselves to the requirements of foreign markets and that
is a very important point. Lord Charles Beresford bears testimony to
this fact. He says with truth that Americans find out what the foreign
markets want, then they supply it. The English say in effect, “We know
what you want better than you know yourselves.” The American sends the
Chinese thirty-inch-wide calico, which is what they want; the Englishman
sticks to twenty-seven inches, with the remark expressed or implied,
“Take it or leave it.” And the Chinese will leave it rather than take it
and the American manufacturer will be the gainer thereby. Minister Wu’s
recent remarks on the necessity of finding out just what the Chinese
want and then conforming to their wants, cannot be too carefully borne
in mind. Furthermore, we are ready to adopt the newest and most highly
perfected machinery regardless of cost. Mr. Carnegie, for instance, on a
single occasion discarded machinery which had cost him $2,000,000, and
replaced it with the latest which inventive genius could supply. The
London engineering journals, on the other hand, admit that the British
manufacturers will not change their machinery no matter how apparent it
may be that they are being distanced by their more progressive rivals in
this country. They reason that they have put just so much money into the
“plant” and must get just so much out of it before they will replace it.
This seems a good deal like the ostrich which thrusts its head into the
sand and refuses to look danger in the face. In the meantime the British
are left behind in the race and Glasgow merchants have to try the
puerile and utterly futile device of getting up a boycott against
American steel and iron products. Such a device, under the
circumstances, seems a good deal like the attempt of the celebrated Dame
Partington, as the famous English wit Sidney Smith describes it, to
sweep back the Atlantic Ocean. She trundled her mop vigorously and made
a gallant onslaught, but the Atlantic was aroused and it is needless to
say who was the victor. And the American iron trade’s invasion of
English markets must result in a victory, unless there is a radical
change in conditions, which no one can now foresee. We study the
markets; we take pains to ascertain their wants, and it is an axiom of
trade that a man or nation that supplies the demand, whatever it may
happen to be, gets the trade. This is a law as inexorable, as
unchangeable as the laws of the Medes and Persians.

We are now one of the five great world powers, financial and political,
with a population second to none except Russia. That is to say, we have
a population of 76,300,000, Germany has 55,000,000, Austro-Hungary
45,000,000, the United Kingdom 41,000,000, France 39,000,000, Italy
32,000,000, Spain 20,000,000, Russia 136,000,000, Japan, 45,000,000,
India 340,000,000, China 400,000,000. The Mongolian race is numerically
powerful, but in the long run can the yellow race stand up against the
white? I doubt it. Meantime the population in this western home of the
Caucasian race is steadily increasing. In 1800 the United States had a
population of only 5,308,483. It is now 76,304,799. Then we had sixteen
states. Now we have forty-five. Then our territory consisted of 909,050
square miles. It is now 3,846,595 square miles. We have practically a
new race made up of an amalgamation of all branches of the Caucasian
race, speaking the English tongue, which in my judgment is destined to
be the one tongue spoken in the world. It is a people determined to
uphold just and equitable principles of trade and to have sound money.
The amount now in circulation is $2,074,687,871, or an increase within
three years of $400,000,000. Russia has only 26,000 miles of railroad;
we have 190,000. In the last fifteen years we have made more progress in
the things which tend to increase practically the term of human life by
annihilating time and space and supplying necessities and comforts of
one kind or another than ever before in our history. We are told that
what does not happen in a year may happen in a minute. Similarly what
might not have happened in a thousand years under adverse conditions,
has happened in fifteen.

What of the future? In the language of Daniel Webster, “the past at
least is secure.” We see that the bank exchanges which in 1888 were
$48,750,886,813, have risen in 1900 to approximately $92,000,000,000.
During four years of a sound money Republican Administration, exchanges
in our clearing houses steadily increased from $48,750,886,813 in 1888,
to the magnificent total of $60,883,572,438 in 1892. But from 1892,
during four years of Democratic rule, our clearings fell from
$60,883,572,438 to $51,935,651,733 in 1896, running as low as
$45,000,000,000 in 1894. From 1896, during Mr. McKinley’s
Administration, we gained on an average more than ten billions each
year, the exchanges having gone up from $51,935,651,733 in 1896, to the
surprising sum of $92,037,588,818 in 1900. From 1888 to 1892 during a
Republican Administration, we increased our exports $317,787,505,
reaching the then gratifying figure of $1,015,732,011. From 1892 to
1896, during a Democratic Administration, our exports decreased by
$152,531,524, falling from $1,015,732,011 to $863,200,487. From 1896
down to June 30, 1900, with two months estimated, during McKinley’s
Administration, our exports have gone up from $863,200,487 in 1896, to
$1,400,000,000, gaining $537,000,000, or nearly doubling; and of this
vast export of $1,400,000,000 more than $400,000,000 are manufactured
goods, and would require in their production more than a million of
American mechanics.

From the fall of 1888 to the fall of 1892, during a Republican
Administration, national banks gained in resources $694,400,000, going
from $2,815,700,000 to $3,510,100,000. From the fall of 1892 to the fall
of 1896, during a Democratic Administration, the national banks lost in
resources $346,500,000, going down from $3,510,100,000 to
$3,263,600,000. From the fall of 1896 to April 26, 1900, during
McKinley’s Administration, the national banks have gained in resources
$1,548,356,000, going up from $3,263,600,000 to $4,811,956,000. The
increase in both Republican periods was constant and gradual throughout,
demonstrating, as has been well said, the influence and power of
far-reaching politics which alone can bring about uniform and universal
prosperity worthy the genius of the American people. The Republican
party turned over the Government to the Democrats in March, 1893, with a
bonded debt of only $585,029,330, and this was increased to
$847,365,130, in times of peace. For the purpose of prosecuting the war
the debt was increased in 1898 by $200,000,000, and now stands at
$1,046,048,750, less such an amount of the twenty-five millions of 2 per
cent. bonds as the Secretary of the Treasury may have already redeemed.
During the last four years of Democratic administration, $201,003,808 of
gold was exported; while during the first three years of the recent
Administration, or down to June 30, 1899, we imported $201,071,000,
making a difference in favor of Republican politics of $402,074,808.
Look, too, at the per capita circulation in the United States. In 1802,
it was $5.00; in 1845, $9.00; in 1873, $15.85; in 1892, $24.40; in 1900,
$26.77.

As President McKinley pointed out in his message, our foreign trade for
the fiscal year of 1900 showed a remarkable record. The total of imports
and exports for the first time in the history of the country exceeded
two billions of dollars. The exports are greater than they have ever
been before, the total for the fiscal year 1900 being $1,394,483,082, an
increase over 1899 of $167,459,780, an increase over 1898 of
$163,000,752, over 1897 of $343,489,526, and greater than 1896 by
$511,876,144. The growth of manufactures in the United States is
evidenced by the fact that exports of manufactured products largely
exceed those of any previous year, their value for 1900 being
$433,851,756, against $339,592,146 in 1899, an increase of 28%.
Agricultural products were also exported during 1900 in greater volume
than in 1899, the total for the year being $835,858,123, against
$784,776,142 in 1899.

The imports for the year amounted to $849,941,184, an increase over 1899
of $152,792,695. The increase is largely in materials for manufacture,
and is in response to the rapid development of manufacturing in the
United States. While there was imported for use in manufactures in 1900
material to the value of $79,768,972 in excess of 1899, it is reassuring
to observe that there is a tendency toward decrease in the importation
of articles manufactured ready for consumption, which in 1900 formed
15.17 per cent. of the total imports against 15.54 per cent. in 1899 and
21.09 per cent. in 1896.

The election of November, 1900, stamped out of the minds of the people
all fear that any sort of governmental policy in any way inimical to the
finances or business or prosperity of the country may be adopted. A very
great factor in our future development, which our people are soon to
discover, will appear in the building up of the ports of trade on the
Pacific Coast, which will be so extensive and rapid in progress that the
Atlantic ports will before long begin to feel the competition of the
Western coast of our country. Our grasp of the Philippine Islands, and
the foothold in trade and greater share of confidence in our
disinterestedness as regards territorial encroachment which is fast
gaining in the Chinese Empire, will finally consummate the preparations
for as great business and prosperity for the Pacific coast States as
have heretofore been enjoyed by those of the Atlantic coast. Soon a part
of the trade and commerce of the Eastern States will be brought into
competition with that of the great Pacific coast, insomuch that it will
appear that indeed “Westward the star of empire takes its way.” It is
the foresight of such change in the Pacific States that has helped
produce such a pronounced electoral result.

Our country is now passing through a rapid growth of progress and power
and prestige which will soon place her in the leadership of the nations,
with every means necessary for extending civilization, enlightenment,
commerce and better government over the world. We have come to the time
when we must take up the mighty work of further cultivating and
improving the condition of mankind, and we will continue this great work
until our labors shall have brought to pass better conditions of
government, co-ordination of interests, education, and peace and good
will among the nations of the earth. In the progress of civilization
since the dawn of the Christian era, the momentous task of leadership
has devolved first upon Rome, then upon Spain, then upon England. It
seems to have been reserved for the “Young Giant of the West” to
complete the tasks undertaken, and assemble into one great community of
interest vast national forces which have been the growth of centuries.
In due time we shall no doubt finish the work and bring peace and good
will to men in every part of the world and prepare men everywhere to
turn the spear into a pruning hook, the sword into a ploughshare and to
give freedom and protection and prosperity to all sorts and conditions
of men, and put an end to strife between the nations. We believe that
such is the great office to which we have been called, and that our
functions as the leading nation of the world have already begun.


[Illustration]


                      ALL THE PRECEDING PAGES WERE
                  WRITTEN YEARS AGO, AND WHAT FOLLOWS
                       BRINGS THE WORK UP TO THE
                 DATE OF THIS ISSUE, MARCH 31ST, 1908.


------------------------------------------------------------------------




                             CHAPTER LXIV.

      MY CHRISTMAS ADDRESS TO CUSTOMERS DEC. 24,
                              1906.


You can now realize why we have for so long a period had a congested
stock market. It started by the accumulation of Union Pacific by
comparatively few people, the purchases being commenced in 1903, the
panic year, when the price dipped to 65. By the time the stock touched
100 the accumulation was complete. Then the manipulation was begun for
its advance to 190, at which time the ten per cent. dividend was
declared, since which the process of distribution has been going on. St.
Paul, Northern Pacific, and Great Northern have gone through a similar
process. Prior to the declaration of the increased stock issues by these
companies, the larger part of the old stock had been bought up by the
inside knowing ones, after which the new issues were announced to the
public. The profit to the holders of these stocks can be measured by the
market value of the rights. Now we all know what the large holdings of
these stocks meant. The inside magnates having nearly all of them, the
outsiders were left out in the cold, and were consequently in the dark;
but now the light of day flashes over the situation. You are asked to
buy the rights which represent insiders’ profits, all of which is water
pure and simple. The accumulation of stocks has now ceased and
distribution is under way, and that is why the market has this present
fit of liquidation, which must go on until completed. Then the situation
will have righted itself legitimately, and not until then. Remember what
I tell you: that the accumulation of stock as I have described has
produced the present congested money market, and the unlocking of the
former will, after a short time, unlock the other; then all will be well
again. The present turbulent waves will pass over without many
shipwrecks, and then will come calm weather and a smooth sea. Patience
is a great virtue; exercise it, and wait for bottom; then get in and get
rich.

Gentlemen, this is my Christmas greeting to you. You all have my best
wishes for a happy and prosperous New Year.


------------------------------------------------------------------------




                              CHAPTER LXV.

              EDWARD H. HARRIMAN.


Edward H. Harriman was born on Long Island in 1848. His father was a
clergyman, and the family in poor circumstances. At the age of fourteen
he left school, and began his business career in a Wall Street house. Of
an aggressive and masterful character, with a great capacity for hard
work and the ability to master every detail, he rapidly forged ahead. At
eighteen he became partner in a brokerage house; at twenty-two bought a
seat on the New York Stock Exchange. In 1883 he was chosen a director of
the Illinois Central Railroad Company, and four years later, when he
became its vice president, he retired from the brokerage business,
having amassed what was then considered a comfortable fortune. For a
time, while President Fish was abroad, Mr. Harriman was acting president
of the Illinois Central, and promptly put into execution his idea that
the way to make a road pay was to put it in the best of physical
condition, and thus attract traffic by the ability to handle it, rather
than by cutting rates. This policy afterwards brought the Union Pacific
up from a financial and physical wreck in 1893 to the most aggressive
and progressive railroad corporation of the day, operating, together
with the Southern Pacific, over 15,000 miles of road, besides
controlling the Illinois Central, Chicago & Alton, and St. Joseph &
Grand Island Railroad companies and the Pacific Mail Steamship Company,
and owning large interests in the Baltimore & Ohio, New York Central,
Atchison, Chicago & Northwestern, and Chicago, Milwaukee & St. Paul
roads. Mr. Harriman and his associates were defeated in an attempt to
obtain control of the Northern Pacific in 1901, but the Union Pacific
system benefited by this defeat, it is estimated, by about $60,000,000.
The purchase of Northern Pacific in the open market forced the price of
its stock up to $1,000 per share on May 9, 1901, causing the memorable
panic of that date.


------------------------------------------------------------------------




                             CHAPTER LXVI.

       THE UPS AND DOWNS OF WALL STREET.


         ILLUSTRATED BY PERSONAL REMINISCENCES OF ITS LEADERS.

The mutations and vicissitudes, the ups and downs, of Wall Street can be
best illustrated by sketches, from life, of the career and experience of
its leading operators, who have often, though not generally, gone up
like a rocket and come down like a stick.

I will not begin with those now foremost in the Wall Street arena, but
go back to Jacob Little, whose name is still a household word on the
Stock Exchange.

He died in the sixties, while the war between North and South was
raging, and he had gradually ceased to be a power in the Street after
the panic of 1857. He remained a bear on the rising tide of currency
inflation following the outbreak of the war, and was submerged and wiped
out.

He was an odd fish—singular in appearance, manner, and business methods,
but for more than twenty years he had a great name in Wall Street. To
speak colloquially, he was the cock of the walk by self-assertion and
common consent.

He was the successor of Jacob Barker, who came from Philadelphia, and
was the first great leader Wall Street had known. He was trained in his
office, and began as a stock operator on his own account in 1835.


[Illustration:

  HENRY H. ROGERS.
]


The panic of 1837 made his reputation and his fortune, for, being
naturally a bear, he was largely “short” of stocks. That panic swept the
whole United States with the besom of destruction, and sent prices down
to zero. It left him a greater bear than ever, a preacher of distrust
and a prophet of failure. He thrived on calamity, and grew richer and
richer during the years of depression that followed that memorable
revulsion.

From 1835 to 1846 he was in his glory and his prime, and no one disputed
his leadership in the world of Wall Street. But then he met with a great
reverse, not, however, through continuing to “bear” stocks, but through
a “bull” operation in Norwich and Worcester Railroad stock. He
attempted, with a Boston clique, to control it, and personally bound
himself to the clique, in the sum of $25,000, not to sell his stock
below 90.

He went to work to put it up, but it “bulled hard,” and refused to stay
up. So he paid the forfeit, and sold out at the best prices he could
get, losing a million, which was looked upon in those days as ten or
twenty millions would be now. This was the only large bull operation he
ever engaged in, and it confirmed him in his natural bearishness.

He more than recovered from this disaster, however, by breaking the
“corner” in Erie stock not long afterwards. He was largely “short” of
it, and the cornering clique had bought up all the stock on the market.
They put the price higher and higher from day to day, but Jacob Little
remained unterrified, and refused to “cover” his contracts. He was the
only one “short” who stood out against the cornerers, and made no effort
to buy in his stock. The eyes of all Wall Street were watching him, and
the prevailing opinion was that he would be forced to “cover” at a
ruinous loss, or fail.

But he had “a card up his sleeve” that the cornerers had never
suspected, and just when they were expecting his surrender, or failure,
at the maturity of his contracts to deliver, he produced a big bundle of
new Erie certificates of stock and filled his contracts by delivering
them. These had been issued to him in exchange for the company’s
convertible bonds, unknown to the clique, the issue of the bonds with
the convertible clause being also unknown to them.

Such a surprise and checkmate Wall Street had never known before, and
the “corner” was broken, with resulting demoralization and disaster to
the cornering clique, and great profit and eclat to Jacob Little. But
subsequently he failed several times on the “bear” side, yet always
managed to pay in full out of later successes. He was equally generous
as a creditor, and compromised on easy terms, so as to give his debtors
a chance to recuperate. Hence he was liked and respected notwithstanding
his aggressiveness and the havoc he often wrought among speculators on
the opposite side of the market.

He was a born speculator. Speculation was his daily bread. He liked it
for its own sake. His ambition was to control the stock market, and he
was willing to run extra hazardous risks to achieve this end. He once
said: “I care more for the game than the results, and, winning or
losing, I like to be in it!”

It was this feeling that kept him in Wall Street after his money power
and his prestige of success, as well as his health, had passed away. He
was out of debt, but without money in any considerable amount. He was a
mere shadow of what he had been, a name and nothing more. Nevertheless,
he risked his small operations with zest. But his health gave way more
and more, and he fainted one morning in the board room, in Lord’s Court,
and his end came not long afterwards.

He said, “I die poor!” But from the ashes of his estate and unsettled
accounts his family succeeded in collecting about $150,000, which he had
neglected to look after, for he had always been careless and easy-going
in money matters, and attached little value to money except for its use
in speculation. He was the very reverse of a miser, for he had never
cared to hoard.

It was Anthony W. Morse who gave the finishing stroke to the career of
Jacob Little, for, while Little was operating for a decline in the early
sixties, Morse sprang into the speculative ring as a rampant bull, and
bid prices up on the Stock Exchange, while it was still in Lord’s Court,
in a way that astonished him and the other fossils of the board. They
considered him utterly reckless. But Morse foresaw that the great war
issues of United States currency—greenbacks as they were called—then
being made would inflate the prices of stocks largely, and he
accordingly, metaphorically speaking, rushed in where angels feared to
tread.

He became the storm center, the hub, the pivotal point, in the wildest
riot of stock speculation this country has ever known, or probably ever
will know again; and who was he? A slight, fair-complexioned country
lad, he came to New York without a dollar, and became a clerk in a
stockbroker’s office. Then he married a woman with some money, and
induced her to let him speculate a little for her, and was successful in
making something for her, and enough for himself to buy a seat at the
Stock Exchange, which then cost only $500, the initiation fee.

That was in 1862, up to which time he was both insignificant and
unknown. But the bold, dashing style in which he immediately began to
astonish the natives and rattle the dry bones of the fossils, by his
rapidly advancing bids for railway stocks, showed that he was a man of
the time, fully up to date. Had he not proved to be right on the market
he would have been ruined at the start, but the market went with him,
and it went with a rush that made the old fogies of the board say:
“Well, well! this young fellow got the start of us—we are not in it!”

He first put up Cleveland & Pittsburg with the ease and celerity of a
man who thought it a mere trifle to handle. Then he successfully took
hold of Ohio & Mississippi, Rock Island, Erie, and Fort Wayne, and put
them up in the same pyrotechnical and flamboyant way. He, in one day,
marked Fort Wayne up from 118 to 152. He had unlimited confidence in
himself, because he saw that he was on the right track, and the Street
and the public followed him. He ran Pittsburg up from 65 to 108 amid
great excitement, and bid 100 for the whole capital stock, “seller one
year.” He then sold all his Pittsburg between 96 and 108. His firm,
Morse & Co., were overrun with commission business at their large
ground-floor office in William Street. By the early part of 1863 he had
punished the bears badly, and made, it was estimated, at least
$1,250,000, and his career of riotous success ran for just two years,
during which he was supposed to have made enormously. There was a rush
to join every pool he formed, so great was his prestige. Men crowded the
sidewalk in front of his office trying to find out what he said, or what
he was doing, so that they might do likewise; and if he gave a “bull”
point on any stock, nearly all who heard of it acted upon it, feeling
confident that it was a dead certainty. His fellow-brokers in the board
largely followed him, like the rank and file, and rag, tag, and bobtail
of the Wall Street crowd, because he had been always right. Never indeed
was a Wall Street leader, before or since, more blindly followed than
Morse. The whole country joined in the mad speculation there, and he was
on the crest of the wave.

One night at the Evening Exchange Morse bid 112 for 10,000 shares of
Erie stock, and Daniel Drew sold them. Then he bid the same price for
20,000 more, and Drew sold them. A day or two later Drew “covered” at a
heavy loss. When Morse took hold of Ohio & Mississippi he jumped it from
49 to 69 in a couple of days.

Money was cheap and abundant, owing to the currency inflation, and
speculation so active that many stock houses kept a relay of clerks for
night work. Meanwhile speculation in gold was as rampant as in stocks,
and hundreds of new mining and petroleum companies were launched, and
the stocks of these were actively traded in at high and rapidly rising
prices, while old and worthless stocks, like Bucks County Lead, were
resuscitated and boomed with the rest.

Clergymen and women were drawn into this whirlpool of speculation, and
any stock with “gold” in its name went off “like hot cakes.” One stock
was considered about as good as another to buy, as all were going up.
Morse led the crazy multitude in everything, and, among his other
achievements, he put Rock Island up from 106 to 149, and, in doing so,
bought the whole capital stock, which was then only 56,000 shares.

Morse’s doom was sealed by Mr. Salmon P. Chase, who as Secretary of the
Treasury sought to stop the wild inflation, and particularly the
tremendous bull speculation in gold, by selling gold for currency, and
locking the currency up in the Sub-treasury, so as to make a tight money
market. This had the desired effect, for it made money so scarce and
dear that it forced the large speculative holders of stocks to sell,
through the banks calling in their loans, and brought on a panic, just
at the time when Morse was more heavily loaded with stocks than he had
ever been before.

Broken in health, and looking weary and haggard, he tried to sell, and
this set every one of his followers selling like a flock of sheep, and
prices tumbled from bad to worse under the general rush to realize. Fort
Wayne fell at the morning session of the board on that fatal Monday of
the Morse panic, on the 18th of April, 1864, from 153 to 119. Then Morse
left the room for the last time, and, going to his office, said to his
partner, “The game is up!” Reading had also fallen that morning nineteen
per cent.; Pittsburg, seventeen; Hudson River, twenty-three; and all
other active stocks about as much.

This monetary tornado, that found Morse overloaded with stocks, there
and then swept him out of the Stock Exchange, for, knowing that he was
hopelessly ruined, he wrote an announcement of the suspension of Morse &
Co., and sent it to the board a few minutes after he had left it. The
failure proved a very bad one, and the firm was unable to settle or
resume. Morse was no longer the leader of Wall Street, and many of his
customers, in a semifrantic condition, rushed in upon him and denounced
him bitterly. The king had been dethroned, never to regain his crown,
nor ever to get a fresh start.

Pandemonium reigned during the rest of the day, and at the Evening
Exchange uptown at night Speculation had been so widespread, and Morse
had been so implicitly trusted as a leader, that the collapse ruined
thousands, including many women, and a raving, cursing mob crowded into
the Evening Exchange and overflowed into the Fifth Avenue Hotel. There
was a night of horror in hundreds of homes. Morse was upbraided and
cursed, and many of his customers, as is usual when they lose their
money in a broker’s office, blamed him for their losses.

Then for a year Morse disappeared. When he returned he looked more
haggard than ever, and he died poor soon afterwards. No one ever accused
Morse of being dishonest, therefore his Waterloo defeat gained him
widespread sympathy. Few Wall Street magnates had more friends than
Anthony W. Morse from start to finish of his career.

John M. Tobin, who had been a ferry gatekeeper for Commodore Vanderbilt
on Staten Island, figured largely as a speculator in the gold room, and
also as a stock operator, during the two years of the Morse campaign,
and saw many ups and downs. He began to loom up still more after Morse
sank below the horizon in 1864. He was known to be the agent of
Commodore Vanderbilt in cornering Harlem stock, and shone in
Vanderbilt’s reflected light, although a large operator on his own
account.

The Harlem “corner” was a memorable event. Through the winter of 1863-64
the stock had been selling at about 60, and Vanderbilt was a director
and large stockholder, and, moreover, determined to make what he called
“a big thing” out of it. The road was, however, generally considered of
little account except for carrying milk. So, in connection with his
street-railway projects for improving its value, he engineered the stock
up to 117. He counted upon getting a charter from the Common Council;
but its members tricked him, and after passing a favorable resolution
they sold the stock “short” and then rescinded the resolution, and it
fell to 72. So they made money at his expense.


[Illustration:

  JOHN D. ARCHBOLD.
]


He then applied to the Legislature at Albany for a Harlem franchise to
lay rails in Broadway; and the legislators saw there was room for stock
speculation in this. They made a favorable report on a bill granting
Vanderbilt’s application, and on this Harlem stock rose sharply to 150.
Then they and their friends, including the New York Common Councilmen,
sold it short largely, thinking they had a sure thing; and Tobin bought
for Vanderbilt all that was offered. On March 25, 1864, they voted, by
prearrangement, against the bill, and Harlem stock fell to 101.

The sellers of Harlem rejoiced, for they had large profits on paper; but
Tobin still continued to buy the stock, and under his purchases it
rapidly recovered. The commodore was determined to punish them. Within
ten days Harlem was up to 150 again. A week later it touched 185, and
thereafter, for ten days, fluctuated between 175 and 200. Daniel Drew
sold calls on it for 30,000 shares, thinking it could not stay up long,
and the professional speculators, both in and out of the Stock Exchange,
took a hand in selling it “short” on the same theory. The Morse panic
swept over it in April, but still it stood up, like a pyramid in the
desert, and Tobin still continued buying for Vanderbilt.

In May the price of Harlem was put up to 300. It stood at 285 on the day
15,000 shares had to be delivered, and they were settled for at this
price. Daniel Drew compromised by paying $1,000,000 to Tobin in
settlement of his own Harlem “shorts,” but the claim against him was
$1,700,000. He, however, threatened a suit for conspiracy. Tobin’s share
of the profits of the corner was about two millions, and this made him
worth three.

Commodore Vanderbilt chuckled, and disposed of the Harlem road by
leasing it at eight per cent. on the stock to the New York Central &
Hudson when he got control of it. So Harlem proved a bonanza to him till
the end, and is still one of the splendid assets of his descendants.
After the “corner,” Tobin bulled gold on a tremendous scale in the face
of the Union victories that terminated the war. He bulled it from 198 to
211 against the “short” interest at the beginning of 1865, and then it
broke on him so heavily that he lost more than $1,500,000. After that he
met with a succession of disasters in the stock market, and lost every
dollar that he had, besides running in debt with his brokers. He then
retired to live with his sister on a farm on Staten Island, and was
never seen again in Wall Street. He saw ups and downs with a vengeance.
So did his contemporary of the open board, E. A. Coray, who made and
lost about as much.

Addison G. Jerome had a career in Wall Street more brief than that of
Anthony W. Morse, but he is still well remembered there as a shining
light. He entered Wall Street as an operator early in 1863, after being
a merchant in the dry goods trade, and during the rest of that year was
called “the Napoleon of the public board,” so conspicuously active,
bold, and successful was he in his operations. He was a friend and
broker of John Tobin’s, and coöperated with him in bulling Harlem, with
the result that he made a very large amount of money out of it, first by
the rise from 60 to 117, when Commodore Vanderbilt was dealing with the
New York Common Council, and next when he was punishing the legislators
at Albany for going back on him, as he phrased it, in the 1864 “corner.”

He became a brilliant leader, and had a host of followers, and was
successful in everything he undertook until he bulled Michigan Southern,
and, with a clique that he formed, bought control of it. He put it to
high figures, and was sure of his position. But Henry Keep, the
treasurer of the company, and a keen operator in stocks, stepped in, and
turned Jerome’s success into utter and disastrous failure.

Henry Keep knew something that Jerome was unaware of, namely, that a
clause in the Michigan Southern’s charter permitted its directors to
increase its capital stock. So he called a secret meeting of the board,
and an increase of 14,000 shares was voted. Then, with this increase for
future delivery, he sold the stock against it, and borrowed to make his
deliveries, which made Jerome think Keep was largely “short” of Michigan
Southern. He and his clique, therefore, kept on buying and advancing the
price, while Keep kept on selling more and more. The final result was
that Jerome called in all his loans of the stock, so as to force the
“shorts” to “cover,” and that Keep responded by delivering the 14,000
shares of new stock, which caused a fall of twenty per cent. in Michigan
Southern in one day. This involved the loss of nearly all the three
millions of money Jerome had so quickly made, and killed him as a
leader, although he was respected as an honorable man. He took the loss
of his fortune and prestige so much to heart that he sickened and died
in the following year of some obscure disease, a virtually ruined man.
But, fortunately, during his nine months of phenomenal success he had
settled enough on his wife to keep the wolf from the door. His ups and
downs were remarkably swift even for Wall Street.

Leonard W. Jerome, a younger brother of Addison’s, was prominent in Wall
Street and society, and as the driver of a four-in-hand, long before the
latter appeared, and continued in the Street long after Addison passed
away. His career was also marked by memorable ups and downs. In 1863 he
was a large holder of Hudson River Railroad stock, which the bears had
hammered down to 107. So he formed a strong clique to bull it against
the “short” interest, and bought all the stock that was offered until he
had taken nearly all the capital. Then he bid up the price gradually
till it reached 175, and made the stock so scarce that he loaned it to
the bears to make their deliveries, at five per cent. a day. The shorts,
estimated to represent about 50,000 shares, finding there was no help
for them, covered at a very heavy loss, while Jerome made a great deal
of money by squeezing them, presumably two or three millions.

His prestige increased with his wealth, and he became a social as well
as a financial lion. He had been watching Pacific Mail since it
succeeded the Nicaragua Transit Company in 1856. In 1861 its stock fell
to 69, but in the next year its earnings were enormous, and 26,000 of
its 40,000 shares were bought by a combination of operators, mostly its
directors, who transferred it to Brown Brothers & Co., to be held in
trust for their benefit for five years; and they selected Leonard Jerome
to bull the stock in the open market. Under his manipulation it rose to
160 in thirteen months after he commenced operations for the ring. There
was a large “short” interest in it by that time, and, to force the
“shorts” to settle, he put it to 200, and kept it there, and they
settled.

In 1865 Pacific Mail’s capital was increased from four millions to ten,
and yet its stock stood at 240, and it paid twenty per cent. a year in
dividends. The year after, it was increased to twenty millions, yet it
sold at 180, with Jerome still bulling it. But in 1867 he met his
Waterloo in it. To use his own words, he had bitten off more than he
could chew. The company’s earnings fell off largely, and its report
showed assets reduced from thirty-four to twenty-two millions; the
Government paper-money issues were being rapidly contracted, and the
flood of “water” injected into the stock was beginning to tell upon it.
Moreover, Jerome had agreed to buy the old five-year combination’s stock
at 160. Owing to all this, accompanied by a generally weak stock market,
Pacific Mail broke, under enormous sales, from 163 to 115 in a few days
on his hands, and he lost practically everything he had, except some
real estate. After being thus ruined by Pacific Mail, Leonard Jerome
ceased to be a power in Wall Street. He had no longer any prestige
there, and soon retired from it entirely, and died, at the home of his
daughter, Lady Randolph Churchill, in London, a poor man. He had
experienced his full share of the ups and downs of Wall Street.

Pacific Mail was nothing to Leonard W. Jerome after he lost his money,
nor he to Pacific Mail. The company had seen its most palmy and
prosperous days, and its water-logged stock was heavy on the market. It
suffered from reduced traffic and bad management, and in 1871-72 its
stock had sunk to so low an ebb that the directors felt it was necessary
to do something to mend matters. So, having little of the stock, they
decided, instead of trying to reëlect themselves, to give up the ship.
They retired to make room for a new board in November, 1871, with Alden
B. Stockwell at the helm as president. Nominally the new board selected
him, but really he selected them to do his bidding.

His name was then very little known in Wall Street, but he was known to
have been a steamboat clerk on Lake Erie, and more recently to have
married the daughter of Elias Howe, the sewing-machine inventor and
manufacturer of Bridgeport, Conn., and thus acquired wealth and become
the president of the Howe Sewing Machine Company and the Willcox & Gibbs
Company.

He had come to Wall Street to see what he could do, and finding Pacific
Mail stock down to the 40’s in 1871, he began to bull it with a vigor
that excited some wonder; and the wonder grew when it was found that he
had secured stock and proxies enough to elect his own board of
directors. He elected them and himself by a vote of 118,000 shares, and
became Commodore Stockwell at a bound. His wish was law to his
codirectors, and the irreverent called it a dummy board.

With the assets of the Pacific Mail Company under his control, and
acting for it, he soon managed to get control, and become president, of
the Panama Railway Company. He began, on this acquisition of the Pacific
Mail Company, to bull Pacific Mail stock anew by making splendid
promises. In October, 1872, while the company’s steamers were foundering
and burning with alarming frequency, he claimed that it had increased
its property by large purchases, and was earning more than eleven per
cent. a year in excess of the Government subsidy. This, he said, would
enable it to pay twelve per cent. on its capital stock from January 1,
1872. Then he asked for authority from the Legislature at Albany to
reduce its capital stock from twenty millions to ten, which was granted;
but the company never availed itself of this authority, and to this day
its capital remains at twenty millions.

The stock, that had been as low as 40, responded to his “bull”
statements and manipulation, for Wall Street saw that the intention was
at least to put the stock up. It rose, after a good deal of see-sawing,
to about 107, and Commodore Stockwell was the sensation of the time in
Wall Street. He became, like Leonard W. Jerome, what was called a “big
swell.” He had one of the largest houses in Madison Avenue and one of
the showiest turnouts in the city, and yet he had been commodore for
less than a year.

He did not confine himself to Pacific Mail and the other interests
mentioned, but took hold of that railway cripple, Boston, Hartford and
Erie, and bought 30,000 shares of Atlantic and Pacific Railway preferred
at 25, a stock of uncertain legal status, although the certificates had
been printed by the company, because there was no legal authority for
its issue. But this did not prevent the stock from being made active for
a short time in Wall Street at prices a good deal above cost.

Before long, however, it became discredited, and so also did Boston,
Hartford and Erie stock, while Pacific Mail suffered under fresh losses
and reduced earnings. The stocks of the three companies were vigorously
attacked by the bears and they all went down together, Stockwell being
unable to support them, and all that he had made was lost. This state of
things involved him in a snarl about the 27,000 shares of the Pacific
Mail Company’s treasury stock, and a compromise was the result, by which
he is said to have given his note to the Pacific Mail Company for
$1,140,000, indorsed by the Howe Sewing Machine Company.

Then, at the next election, he ceased to be its president, and a new
board of directors was elected. He was also dropped from the Panama
Railroad directorate and the Atlantic and Pacific board. He had lost his
money and his prestige, and there were none so poor as to do him
reverence. He led a precarious existence as a small speculator
afterwards, and, not long before his death, failed for a small amount as
a member of the Consolidated Exchange.

He was a man of popular manners, and, in describing his change of
fortune, he humorously remarked: “When I first came into Wall Street, it
was asked, ‘Who is that man Stockwell?’ But I was respectfully spoken of
as ‘Mr. Stockwell’ after I had made a good deal of money bulling Pacific
Mail; and when I was elected president of Pacific Mail, I was styled
‘Commodore Stockwell’ and ‘a Wall Street leader,’ and a great man
generally. But when Pacific Mail broke, and broke me, I became ‘That
red-headed cuss Stockwell.’” Thus are the ups and downs of Wall Street,
and Wall Street opinion, illustrated in real life.

Of all the great operators of Wall Street, however, Daniel Drew
furnishes the most remarkable instance of immense and long-continued
success, followed by utter failure and hopeless bankruptcy. His early
success as a stock speculator was all the more surprising because he was
an illiterate man, who had barely learned to read and to write enough to
be able to sign his own name in a sprawling, illegible hand.

He had been a cattle drover, and after that the keeper of the Bull’s
Head Tavern, at the New York Cattle Yards, and was without any
experience of banking or Stock Exchange affairs when he first came into
Wall Street; and he never even read a newspaper. But he succeeded in
making money from the start, and then joined others in putting capital
into Hudson River steamboats; and his investments in these became large
and proved very profitable, although he knew nothing about running
steamers himself.

His shrewdness enabled him to make millions by stock speculation, and
before long, without knowing anything of the stock brokerage business
except as a customer, he entered into a Stock Exchange partnership, his
firm being Drew & Robinson. For many years this house was prosperous and
prominent, and Drew, after it was dissolved, and when at the summit of
his prosperity, said to a friend who rated him at twenty millions, “I
guess sixteen will cover it.”

After that Drew’s cunning and sagacity seemed gradually to fail him. He
met with a succession of disasters through bad judgment, but was more
liberal than before in endowing the Drew Theological Seminary and other
Methodist institutions. Yet, instead of giving the endowments in cash,
he gave his notes for them, and paid interest on these. The consequence
was that when he finally lost every dollar that he had, and was declared
a bankrupt, without any assets, the notes were worthless. While in this
bankrupt condition and dependent for a home on his son, he died, and his
death was as unnoticed as that of any other Wall Street wreck. He had
gone out of sight, and out of mind, when his money was gone. Never did
anyone go further up or further down in Wall Street as a stock
speculator than Daniel Drew.

Charles F. Woerishoffer was a brilliant Stock Exchange operator, who
made a large fortune out of nothing and then lost most of it again by
overstaying his market as a bear after the panic of 1884.

James R. Keene came to New York with several millions, made out of
mining stocks in California at the time of the great Bonanza gold
discovery at Gold Hill, when Flood and O’Brien, Mackay, and John P.
Jones made their millions. But Keene, after adding to his “pile,” lost
all he had through overextending his operations in bulling stocks and
grain in the eighties. He, however, got a fresh start through being
employed by large interests to manipulate stocks for them, and after
several more ups and downs he is rich again.

Henry N. Smith, a former partner of Jay Gould, made five or six millions
as an operator in stocks, only to lose them again and die poor. The
brief meteoric Wall Street career of Ferdinand Ward, who lured General
Grant into forming the firm of Grant & Ward, is well remembered. He went
up so high that when he came down he landed in Sing Sing prison. Fish,
the president of the Marine Bank, did the same, after being long in good
repute.

It is unnecessary to dilate on any of the Vanderbilts, or Goulds, or
Russell Sage, or Henry Keep, or Henry Villard, or William E. Travers,
because they had no totally overwhelming reverses in their Wall Street
career; but John F. Tracy, the president of the Rock Island Railroad in
the sixties, was ruined by his stock speculations after being worth more
than five millions, and he had to relinquish his presidency, and died in
poverty. Cyrus W. Field, too, lost nearly all his large fortune through
overloading himself with Manhattan Railway stock; and Addison Cammack,
the Ursa Major of Wall Street, died worth little in comparison with what
he had once possessed.

How violent the vicissitudes of Wall Street are at times we may easily
infer when we recall the tremendous convulsion produced by the gold
conspiracy of Black Friday, on September 24, 1869, which involved
thousands in enormous losses, and caused both the Stock Exchange and the
Gold Clearing House, and Gold Exchange Bank, to be closed; or when we
think of the devastating Northern Pacific panic of May 9, 1901, or of
the far-reaching and long-continued havoc worked by the panic of 1873.

The memorable failure of Jay Cooke & Co., early in the last-mentioned
panic, will be recalled by many as vividly as the collapse of the Ohio
Life and Trust Company that started the panic of 1857.

All these reminiscences of the ups and downs of Wall Street will serve
to remind my readers that, while it is often easy to make money, it is
still easier to lose it. Therefore, boldness should be always tempered
with caution in the pursuit of the Almighty Dollar in Wall Street.


------------------------------------------------------------------------




                             CHAPTER LXVII.

           RECENT WALL STREET BOOMS.


THE RESISTLESS POWER BEHIND THE MARKET.—THE ADVENT OF GOVERNOR R. P.
    FLOWER.—HOW STOCKS WERE BOOMED WITH A DASH.—A SUDDEN DEATH AVERTS A
    BIG PANIC.—MR. MORGAN AS A RAILWAY REORGANIZER.—HOW BANNIGAN
    UNLOADED HIS RUBBER.—MILLIONS WON ONLY TO BE LOST.


Wall Street, after the election of McKinley, enjoyed a boom such as it
has seldom known. Probably the most interesting feature about this boom
was that it was not in any sense spectacular. In that respect it is
unique. Prices of stocks went higher and the intrinsic value of most of
them was greater than ever before. The market had all the qualities that
normally would cause intense excitement and focus the attention of the
entire country on the Stock Exchange. Yet in spite of these conditions
the Street was in a normal state of mind, and it is doubtful if the
general mass of the people, who get their information from the
newspapers, were aware that there was even an ordinary boom in Wall
Street. This unusual condition was due, I believe, to the fact that the
boom we were enjoying was built on a foundation that reached clear to
the bowels of the earth. There was nothing unnatural or artificial about
it. Wall Street, instead of being the center, is simply one of the
centers that reflects the general prosperity throughout the country.
Farmers, merchants, mechanics, mill workers, and miners are all so
intent on keeping pace with the progress in their own pursuits that they
have no time to cast eyes our way. The same conditions that boom stocks
may boom everything else in the country at an equal rate, so that we are
in nowise deserving of special attention.

Another factor, too, had developed in the Street that prevented the
usual excitement and hurly-burly incident to a rising market. This was
the absence of a pronounced central figure. Usually a boom centers about
some one man who stands boldly out in the open, and whose hand is known
to be manipulating values. But then the manipulation was being carried
on by a method that was as quiet as it was novel and unusual. That the
market was being manipulated was apparent enough even to the most casual
observer. But the source of this manipulation was probably known to only
a few.

They knew that a new order of things had come, due to the most powerful
influence that had ever manifested itself in Wall Street. This influence
was very largely composed of the Standard Oil combination, who
introduced in their Wall Street operations the same quiet,
unostentatious, but resistless measures that they had always employed in
the conduct of their corporate affairs. The heretofore conspicuously big
operators were mere tyros beside the men who are running things for us
now.

At his best, Jay Gould was always compelled to face the chance of
failure. Commodore Vanderbilt, though he often had the Street in the
palm of his hand, was frequently driven into a corner where he had to do
battle for his life; and so it was with every great speculator, or
combination of speculators, until the men who control the Standard Oil
took hold. With them, manipulation has ceased to be speculation. Their
resources are so vast that they need only to concentrate on any given
property in order to do with it what they please; and that they have
thus concentrated on a considerable number of properties outside of the
stocks in which they are popularly supposed to be exclusively interested
is a fact well known to everyone who has opportunities of getting
beneath the surface. They are the greatest operators the world has ever
seen, and the beauty of their method is the quietness and lack of
ostentation with which they carry it on. There are no gallery plays,
there are no scare heads in the newspapers, there is no wild scramble or
excitement. With them the process is gradual, thorough, and steady, with
never a waver or break. How much money this group of men have made it is
impossible even to estimate. That it is a sum beside which the gain of
the most daring speculator of the past was a mere bagatelle is putting
the case mildly. And there is an utter absence of chance that is
terrible to contemplate. This combination controls Wall Street almost
absolutely. Many of the strongest financial institutions are at their
service in supplying accommodations when needed. With such power and
facilities it is easily conceivable that these men must make enormous
sums on either side of the market. So far, fortunately, their
manipulations have all been one way—upward; and in conjunction with the
general prosperity this has resulted in making large sums of money for
nearly everybody in the Street.

Here and there we have heard of losses, some of them fairly large, but
in comparison with the general money-making these are hardly to be taken
into consideration.

The last preceding boom that Wall Street had enjoyed was as different
from this as it is possible to imagine. It had all the elements which
this one had not. It centered about one man who stood out in the lime
light clear and distinct. It kept the Stock Exchange in a constant state
of ferment. It filled the newspapers with column upon column of
sensational stories. It made millions for an army of retainers, on
paper, and it kept the market jerking up and down for months.

Roswell P. Flower, ex-Governor of the State of New York, was the leader
of the boom, and a more picturesque figure had never been seen in Wall
Street, which is saying a great deal. Mr. Flower was an individual of a
very plain exterior. He often used language that was noticeable more for
its force, directness, and emphasis than it was for polish. He was
rarely seen without a huge quid of tobacco that almost filled the left
side of his mouth. Spittoons were an essential part of the furnishings
of his office. His clothing hung on his person not unlike meal sacks.
His hat was rarely brushed, and for days at a time, apparently, he
forgot to shave. Altogether he was the last person, in appearance, who
would be expected to lead in a district that is famous for its
well-groomed men. His education was certainly not collegiate. All these
factors the ordinary man would have judged to be handicaps, yet they
were Mr. Flower’s strongest aids. The lack of artificial polish gave
people confidence in his statements. His limited education enabled him
to think clearly along certain lines without being hampered by mental
digressions, which would probably have come with a higher mental
culture.

As the administrator and manager of the estate of his brother-in-law,
Henry Keep, he came into the Street about twenty-five years ago. He
controlled a large amount of funds, which by conservative direction he
increased very substantially. He scarcely ever figured in the
speculative field to any great extent until after he had completed his
term as Governor of New York State. When he returned to the Street from
Albany he naturally came with a considerable prestige. Ex-Governors of
the Empire State are not very plentiful in and about the Stock Exchange.
He also brought with him a large political following. In both of the
great parties in New York State there are many men of standing and
influence who like to take a flyer in Wall Street. Almost to a man they
associated themselves with Mr. Flower, who, during his term at the
capital, had made hosts of friends with Republicans and Democrats alike.
He also had close associations with most of the big capitalists.

After he had settled down to business, on leaving politics behind, Mr.
Flower picked out several stocks as his specialties. Under his
manipulation all these properties went up and soon began to show a big
advance, unusual strength, and great activity. The bears made frequent
assaults on his position and now and then pushed him toward the wall,
but he always fought his way to the front again, and came out master in
every encounter. When he had himself pretty well intrenched in the
specialties he was handling, he suddenly plunged into Brooklyn Rapid
Transit, and for months he kept things stirred up in a way that even
Wall Street has seldom seen. He picked up the stock commencing at 6 and
in an incredibly short time ran it up to over 138. Almost every
politician in the State made a fortune on paper. Mr. Flower was
immensely popular with the Wall Street news reporters, who helped his
boom along through the glowing accounts they wrote from day to day.

Under the impetus of the swirl in Rapid Transit, practically every
property in the Street went flying upward, until the end did not seem to
be in sight. The bears were beaten to a standstill every time they
showed their heads. The only result of their attacks was that Flower
stocks would jump up a notch higher. The ex-Governor preached
Americanism and confidence, until everybody believed that if a stock
were only grounded, and the property located in America, you could buy
it at any price and still be on the safe side.

That a terrible panic did not grow out of this boom was due only to one
fact: Mr. Flower’s sudden death. Had he lived thirty days longer the
bubble must have been pricked, and the result would have been
disastrous. Mr. Flower went to the country for a day’s rest, ate freely
of ham and radishes, and washed his frugal meal down with a copious
supply of ice water. He died, a few hours afterwards, of an attack of
acute indigestion. His death alone saved the Street.

The Rockefellers, the Vanderbilts, and his other wealthy friends rushed
into the market with millions and sustained values. They were in a
position to attribute the threatened reaction to his death, and pointed
out the absurdity of letting such an incident affect the value of
stocks. They discounted the break that must have come, in the natural
course of events, under the forcing process that was going on. Reasoning
such as this, spread broadcast through the papers, stopped the break.
Where the bottom would have fallen out entirely there was virtually but
a moderate break all along the line. The small speculators, operating on
moderate margins, were of course wiped out almost to a man; but most of
the big fellows were saved. It is probably the only instance on record
where the death of a big operator saved a general smash. Those hurt were
numerous politicians and small-fry operators who, instead of getting
away with snug fortunes in the shape of profits, lost everything.

An interesting incident of the Flower boom was the way it was
involuntarily helped along by young Joe Leiter. Leiter himself, although
he had gone to the wall some time previously, had indirectly brought
about certain conditions that served Mr. Flower’s purpose admirably.
These conditions were the general release of hundreds of millions of
dollars on mortgages on farm lands. When Leiter began to corner wheat it
was ruling down in the neighborhood of sixty cents a bushel. He lifted
it to considerably over a dollar before he went broke. This enabled
thousands of farmers to realize on their crops at the dollar figure and
above, which brought prosperity almost overnight to the wheat-growing
belt. With the money realized from their wheat they paid off their
mortgages to the extent of two or three hundred million dollars. These
mortgages were generally held in the East. This released that much
Eastern capital, causing a vast volume of money to seek investment. The
men controlling this money were overjoyed when Mr. Flower made an
opening for them through the Wall Street boom, and hence it was
comparatively easy, for a time, to push up values.

Mr. J. Pierpont Morgan, now a noted character in the Street, was trained
as a clerk in the one-time famous banking house of Duncan, Sherman & Co.
Later he made a connection with Anthony J. Drexel, probably the
wealthiest banker of his time in America. Out of this connection grew
the house of Drexel, Morgan & Co., with Mr. Morgan as the managing
partner in New York. When Mr. Drexel died, Mr. Morgan absorbed the
entire business, and a few years later, when his father died, he became
the head of the London house of J. S. Morgan & Co. as well.

This put him in a very prominent position. He soon thereafter
demonstrated his influence by reorganizing the bankrupt Richmond and
West Point Terminal Railway and Warehouse Company, changing its name to
the Southern Railway Company. A number of small roads were added to it,
many of which were in financial straits and practically all of which had
been badly managed. He combined them into one system under one head. Mr.
Morgan next turned his attention to the reorganization of the Reading
and the Erie roads, which were in a bad way. He soon produced order out
of chaos there, and that resulted in a boom in railroad stocks all along
the line. He had several sharp tussles, however, with some of the big
stockholders, who tried to stand out against him because they thought
his plans too drastic.

The people who followed Mr. Morgan’s lead in these transactions
generally made money.

A different sort of deal was engineered a few years before by Mr. S. V.
White, popularly known as Deacon White, because of his position as a
deacon in Plymouth Church. Mr. White is one of the oldest operators in
the Street, and one of its most striking figures. He has made half a
dozen great fortunes in speculation and lost them, but he is as
undaunted as ever, and in spite of the fact that he is now over seventy
years old he is still active daily in the market.

Probably one of the most unique stock deals ever carried out in the
Street resulted from the transaction of Joseph Bannigan when President
of the Rubber Trust. The history of this deal, which for a time resulted
in a great boom in industrials, has never been told, and is known to but
very few persons, most of whom, by the way, were its victims.

Bannigan was an uneducated Irishman. He began life in a New England
rubber factory and conscientiously worked his way up from a wage of
$1.50 a day to die worth $5,000,000. He was shrewd and bright and knew
the value of money. He saved to such good purpose that when the Rubber
Trust was formed he was at the head of one of the biggest factories in
the country, located in Providence. His knowledge of the trade was so
thorough that, despite the fact that he almost invariably used small
“i’s” in writing a letter, he was made president of the trust, his
holdings amounting to about 40,000 shares. When matters had been moving
along for some time, Bannigan made up his mind that the other men in the
trust, the big fellows, were not treating him right, and that the best
thing he could do was to get out. So he packed his stock certificates in
a gripsack, left Providence on the night boat, landed in New York bright
and early, had his breakfast, and then made a bee line for a
stockbroker’s office. He had assured himself in advance that this
stockbroker was to be relied upon, and so he told him frankly what he
intended to do.

“I want to sell out, bag and baggage,” he said. “I want to get rid of
every one of my 40,000 shares. Here they are; put them on the market and
sell them.” The stockbroker told him that that would never do. If he
wanted to realize full value for his holdings he would have to go about
it in a different way, for if he should throw his 40,000 shares into the
market it would knock the bottom out of prices, and he would get little
or nothing for his stock. Mr. Bannigan saw the point and asked what he
ought to do.

“Buy,” said the broker.

“But I don’t want to buy; I have got more now than I want.”

“That is all right; buy anyway; that will make a market for the stock,
and you can unload when the time comes.”

“How much must I buy?”

“Oh, about $250,000 worth.”

“But I have not got $250,000 in cash to go and buy rubber stock.”

“Well, you can borrow it; a man in your position, Mr. Bannigan, will
have no difficulty in borrowing $250,000.”

Much against his will the old man was finally persuaded to do as he was
told. About two weeks later the broker wrote to him that he must buy
some more—this time $200,000 worth. Mr. Bannigan used rather strong
language, but finally yielded as before. He borrowed $200,000 and turned
it over. With this additional capital to work on, the broker continued
to manipulate the market. The insiders soon discovered that some strong
party was buying, but they did not know who, Bannigan having carefully
kept himself in the background. His broker operated skillfully in the
stock, one day buying, the next selling, to keep the stock active. The
broker after a while began to borrow large amounts of the stock. This
convinced the insiders that there was a big short interest somewhere,
and they got together in order to squeeze the shorts. The inside holders
who controlled most of the stock combined to squeeze “the shorts” out.
In furtherance of this plan they put the price up to 61, and at about
that figure Bannigan’s stock was all unloaded. Bannigan now found
himself full of money, while the other fellows were filled up with his
stock. They never awakened to the fact that the president had sold out
on them until his shares were delivered against their purchases, as they
thought, of “short” stock. Rubber broke and did not stop tumbling until
it had gone from 61 to 16.

This deal had all the elements of a comedy-drama, and the playwright who
can do it justice will find material there which will make him an
everlasting fortune and reputation.

It is not often, however, that newcomers in the Street fare as well as
this in the end. For a time they will go on merrily enough, and send
things booming, but in the end most of them get the worst of it. At the
risk of repeating myself, I will say here:

Mr. A. B. Stockwell is a good illustration of the truth of this. At one
time he was worth many millions of dollars. His start in life was as a
purser on a Lake Erie steamboat; his father, it is said, kept a livery
stable in Cleveland. On one of his trips Stockwell was in a position to
show considerable attention to Elias Howe, the inventor of the eye at
the top end of the sewing-machine needle. Mr. Howe was accompanied by
his daughter. Stockwell made himself agreeable to Miss Howe also, and
with such good effect that he managed to win her affections, and soon
thereafter married her.

When Mr. Howe died, Mrs. Stockwell came into possession of her father’s
millions. With this nest egg Stockwell started in Wall Street, and
before anyone realized what had happened he was the most talked-of man
in the district. He put all his wife’s millions in Pacific Mail stock,
secured entire control of the company and elected himself its president.
He came into the Street as plain Stockwell. Then, as the news of his
liberality and good-fellowship spread, he became Mr. Stockwell. After he
got hold of the Pacific Mail he was Commodore Stockwell by common
consent. Everybody bowed and scraped to him, and no man was so high and
mighty that he was not proud to shake his hand.

Stockwell took hold of Pacific Mail at about 40 and sent it up to 107.
It was at this period that he was worth on paper over $15,000,000. But
he found, unfortunately, when it was too late to retreat, that though
Pacific Mail was up to 107 it was not worth that figure when the
unloading commenced.

He was landed high and dry with it all, and the Street told him he was
welcome to it. He tried to sell, and found that there was no market.
Then came violent demands on him to pay up his numerous call loans, and
in order to respond he had to sell regardless of price, and thus a
whirlpool was created which finally sent the stock down to the price at
which he had begun his original purchases. In this one upset he lost all
his paper profits and his wife’s millions besides. That was the most
famous boom in the history of Pacific Mail, notwithstanding Leonard
Jerome’s previous brilliant ups and downs in that property.

Leonard Jerome and his brother Addison had a good time with Pacific Mail
for a while. They ran it up to high figures several times, but finally
met with the same experience that Stockwell did. The two Jeromes, from
being among the wealthiest and most dazzling operators in the Street,
were in the end practically wiped out. Leonard Jerome, who was the
father of Lady Randolph Churchill, had nothing left to bequeath his
daughter except an equity in the house now occupied by the Manhattan
Club on Madison Avenue, which yields an income of about $15,000 a year,
of which Lady Churchill gets $10,000.

These are a few of the booms that have stirred up things in Wall Street
at one time or another, as did the Keene, the Gould, and the Vanderbilt
booms, and the rest I have mentioned.


------------------------------------------------------------------------




                            CHAPTER LXVIII.

  WALL STREET’S WILD SPECULATION, 1900-1904.


MCKINLEY’S REËLECTION AND THE DEFEAT OF BRYANISM SET THE BIG BALL OF
    SPECULATION ROLLING ON THE STOCK EXCHANGE.—THE TREMENDOUS VOLUME OF
    SPECULATION BY BOTH LARGE AND SMALL CAPITALISTS.—THE RUSH TO
    INCORPORATE NEW COMPANIES AND CREATE INDUSTRIAL TRUSTS AND RAILWAY
    COMBINATIONS.—THE ENORMOUS CAPITALIZATION OF THE UNITED STATES STEEL
    CORPORATION AND OTHER COMPANIES IN EXCESS OF REAL VALUES.—THE RAPID
    GROWTH AND POPULARITY OF NEW AND OLD TRUST COMPANIES AND THE EFFECT
    OF THEIR COMPETITION IN FORCING BANK CONSOLIDATIONS.—THE BOLD AND
    RECKLESS SPECULATIONS IN RAILWAY STOCKS OF THE NEWLY ENRICHED
    WESTERN CAPITALISTS.—THE GREAT NORTHERN PACIFIC PANIC OF MAY 9,
    1901.—THE CAPTURE OF CONTROL OF THE LOUISVILLE & NASHVILLE RAILWAY
    BY JOHN W. GATES, AND ITS REDEMPTION BY J. P. MORGAN & CO., ACTING
    IN THE INTEREST OF THE LOUISVILLE & NASHVILLE AND SOUTHERN
    RAILWAY.—THE SLOWING DOWN OF WILD AND RECKLESS SPECULATION IN STOCKS
    AFTER SEPTEMBER, 1902, THROUGH THE INFLUENCE OF THE BANKS AND
    CONSERVATIVE BANKERS, THUS AVERTING FURTHER INFLATION AND A GREAT
    CONVULSION.—THE LIQUIDATION AND DEPRESSION OF 1903 A NATURAL
    REACTION FROM THE INTOXICATION OF THE PRECEDING PROLONGED BOOM.—THE
    GREAT RISE IN COTTON AND THE COLLAPSE OF THE TREMENDOUS BULL
    SPECULATION LED BY DANIEL J. SULLY WHEN HE FAILED.—THE SUDDEN FALL
    IN THE IRON BAROMETER IN 1903, AND THE GENERAL SITUATION IN 1904.


Wall Street changed with almost magical suddenness from depression and
apprehension to confidence and buoyancy with the defeat of Bryan and his
silver heresy, and the reëlection of McKinley in November, 1900. Large
capitalists all over the country began to buy stocks and bonds on so
heavy a scale that prices shot up rapidly, like the celebrated
Gilderoy’s kite, and very soon orders poured into the Stock Exchange
from people of smaller means everywhere, and a tremendous bull market
for stocks resulted, with too many men staking, or ready to stake, their
bottom dollar on the rise.

The speculative capitalists and large operators of Wall Street, not of
course excepting many of the active Standard Oil magnates and James R.
Keene, naturally availed themselves of this state of affairs to
manipulate stocks on a grand scale. Having loaded up with them early at
low prices, they boomed them with vigor; and we witnessed the beginning
of a carnival of speculation, and an unexampled rush to form
combinations of industrial and railroad interests, or trusts, and
generally to capitalize the concerns taken in for many times the amount
of their previous capital or real value. The stock thus created, after
being admitted to dealings in Wall Street, was made active and bid up by
the promoters to high figures to catch buyers, while the public, which
had become crazy to buy, took it in enormous amounts. It bought in haste
to repent at leisure, for, I regret to say, most of the buyers have it
still; and the aggregate loss its shrinkage in price represents is to be
counted by very many hundreds of millions of dollars.

But it was fortunate for both Wall Street and the nation that the
inflation which ran riot till September, 1902, was then checked by the
conservative action and warnings of the banks and men like myself, for
if it had been allowed to continue for another half year it would have
ended in a disastrous convulsion, a bursting of the bubble, which would
have been felt all over the United States, and in every department of
business, as in and after the panics of 1857 and 1873. I was one of the
first to sound the alarm and call a halt in this dangerously wild
speculation in my weekly letter dated September 13, 1902, in the
following words:

    “A man becomes an inebriate by getting himself into a condition
    where he ceases to recognize effect as following cause. Under
    the influence, at times, of the intoxicating beverage he will
    defy both law and order. This is due to the callous condition he
    has allowed himself to get into. The stock market of late has
    been productive of a similar condition of mind with a majority
    of people. They have been engaged now for such a prolonged
    period in buying, buying, buying, making profits on all their
    ventures, as to make them like the inebriate, callous to all
    adverse factors whenever they come up. High prices don’t
    frighten them; scarcity and high rates for money don’t frighten
    them; cautionary signals don’t frighten them; strikes don’t
    frighten them. Buying and holding on have simply become chronic
    with them. This may not unlikely continue to be the condition of
    the stock market until compulsory liquidation sets in, which the
    strain in the money situation will sooner or later produce. I
    recommend great caution on the buying side, and, better still,
    not buying at all at the prevailing high prices. I see no
    possibility of relief to the money market excepting through the
    importation of gold. The activity of business all over the
    country, together with the moving of the crops, is going to keep
    money thoroughly employed at high rates from now onward and all
    the way through the new year; therefore, those who buy stocks to
    carry hereafter, excepting on big concessions from present
    prices, may meanwhile be overtaken with discomfort from
    depreciation in values as well as from the difficulty of
    obtaining money at reasonable rates.

                                                      “HENRY CLEWS.”

The intoxication of the time having gradually given place to sobriety,
and a slow but heavy downward reaction in prices, we escaped the violent
and widespread panic that threatened us, and that would have been
inevitable had we not “slowed down” in time. As it was, the decline was
long-continued and severe, and impoverished or ruined hundreds of
thousands of people, including a vast number of formerly very rich men.
Both big and little speculators became the victims of the downward
plunge of prices: but the country as a whole was saved from serious
disturbance and depression—that is, from the effects of such a
tremendous collapse and crash as menaced Wall Street during nearly the
entire year 1903. This was very fortunate for all our material
interests; and the conservative element in Wall Street is to be
congratulated on having so successfully put on the brakes in time to
prevent a collapse that would have involved and disturbed the nation
from the Atlantic to the Pacific.

The year 1901 was the most remarkable in the financial history of the
United States, and Wall Street was a theater of action whose
performances astonished not only the entire country, but the world.
Their like had never been seen before, not even during the great war
between North and South. It would take volumes to fully describe and
give retrospective clearness to the leading events of that extraordinary
period which made the Stock Exchange continually the scene of wild
excitement, daring manipulation, and unexampled inflation.

To say that Wall Street astonished the natives and made conservative
business men stand aghast is no exaggeration. There were six influential
factors actively at work in that year, namely, the consolidation of
railroad and industrial companies at enormously inflated prices,
including the disastrous Northern Pacific skyrocket “corner,” the
restless sea of reckless stock speculation that swept the American
people into its vortex, with all its razzle-dazzle extravagance, the
transformation of this country from a heavy lender in Europe to a heavy
and urgent borrower, the partial failure of the corn crop, the decline
in prices for nearly all the staples except grain and iron, and the
collapse in earnings and dividends of many new industrial combinations.
These included The Amalgamated Copper Company, and the panicky decline
in its stock, which impoverished or ruined many thousands of investors,
it being first run up to 130 and then rapidly down to 60 by the
manipulators, who sold out and then sold “short,” and who are said to
have made more than fifty millions by the up and down movement.
Subsequently even this low price was cut nearly in two, as the decline
did not stop until 32½ was reached.

A mere recital of events as they occurred would be an eloquent serial
story to those familiar with the alphabet of Wall Street; and there is
no more interesting or exciting serial story than the stock ticker
tells, from day to day, to those interested in the stock market, or one
that often excites more joy or sorrow, or carries with it more weal or
woe, prosperity or ruin. But the ticker, like Tennyson’s brook, will go
on forever during business hours, for we shall never be without a stock
market and speculation.

The transactions of the New York Stock Exchange in 1901 were so
tremendous in volume as to excite wonder. But they only represented the
speculative spirit, the intoxication of the time. The sales in the first
half of the year aggregated 175,800,600 shares of stocks and
$637,100,800 of bonds at par value, an increase of 109,906,300 shares
and $346,900,700 in bonds over the same six months in 1900.

As prices soared the volume of speculation increased, and on January 7th
the day’s total sales amounted to 2,116,500 shares, and then went on
increasing till they reached 3,271,000 on April 30th. Then came the
Northern Pacific bombshell, the panic of May 9th, when stocks came down
even faster than Captain Scott’s coon, and the actual sales were still
larger, but owing to the intense excitement, demoralization, and
confusion that prevailed, it was impossible to keep track of them all,
and the ticker registered only 3,073,300 shares.

This sudden catastrophe convulsed the stock market in a way that alarmed
money lenders, destroyed confidence, and caused a general rush to sell
stocks which brought them down with a crash, involving many thousands in
ruinous losses. The revulsion of feeling, the change in the sentiment of
the Street was as startling as a violent earthquake, and the
consequences were fraught with grave disaster. Up to the very eve of
this great convulsion in the stock market the dance of speculation had
been fast and furious, among both “the big men” and the little, and its
unlooked-for occurrence reminded one of Byron’s lines on the Brussels
ball, given on the eve of the battle of Waterloo, when the sound of
cannon unexpectedly boomed above the music:

       “On with the dance! Let joy be unconfined;
        No sleep till morn when Youth and Pleasure meet
        To chase the glowing hours with flying feet.
        The lamps shone o’er fair women and brave men;
        A thousand hearts beat happily; and when
        Music arose with its voluptuous swell,
        Soft eyes looked love to eyes that spake again,
        And all went merry as a marriage bell;
        But hush! hark! a deep sound strikes like a rising knell,
        Arm! arm! it is—it is—the cannon’s opening roar!”

Fortunately, in the midst of the Northern Pacific panic, the financial
belligerents combined to stop it. Their competitive buying for control
of the stock had caused the “corner.” But the extraordinarily high
prices to which it was bid up by those short of it were reached after
the competitive buying had ceased for the want of sellers. The
contestants saw the wisdom of coming to terms to restore confidence and
check the havoc that was being wrought on the Stock Exchange, where
prices had fallen from fifteen to fifty per cent. that day, while
Northern Pacific common stock had sold up to $1,000 a share. So J. P.
Morgan & Co., the bankers of the Hill-Burlington-Great Northern party,
and Kuhn, Loeb & Co., the bankers of the Harriman-Union Pacific party,
met in haste, and came to an agreement as to the Northern Pacific stock
they had bought, the formal announcement of which caused a violent
recovery of prices the next day, but not before the sweep of the besom
of destruction had caused several Stock Exchange failures to be
announced. The recovery was followed by a relapse of equal violence
under a fresh rush to sell, which carried stocks nearly as low as in the
panic, and then by a fresh recovery, a usual feature in a crisis where
credit has been severely shaken and many have been crippled.

The outcome of this agreement between the two sides was the formation of
the Northern Securities Company, practically as arranged for by J. P.
Morgan & Co. and Kuhn, Loeb & Co., Mr. Morgan naming the directors by
mutual consent. Into this repository, or holding company, the Hill and
Harriman companies—that is, both sides to the controversy—put their
Northern Pacific stock, as well as Great Northern stock, and the
Northern Securities Company later issued its own stock to them in
exchange for it.

But when, in 1904, the Northern Securities Company was held by the
United States Supreme Court to be a violation of the anti-trust law, and
it became necessary to distribute its assets, a new controversy arose.
Its directors proposed to make an equal, or _pro rata_, distribution of
the Northern Pacific and Great Northern stocks deposited with it,
whereas President E. H. Harriman, for the Union Pacific, which deposited
the lion’s share of the Northern Pacific, namely, $78,000,000, wanted
all its stock back again; in other words, to eat his cake and have it,
too. As this, if assented to, would have given the Union Pacific control
of the Northern Pacific, President Hill, for the Great Northern
Burlington system, naturally objected, and we all know of the litigation
that followed, and in view of the glorious uncertainty of the law, it
would have been rash to have predicted its final outcome.

On the Stock Exchange, April was the most active month of 1901, the
sales aggregating 41,689,200, a daily average of 1,812,600. On April
24th no less than 652,900 shares of Union Pacific were sold. These
specimen bricks furnish a practical commentary on the rampant
speculation then in progress.

The new incorporations of the year represented an amazing amount of
capital, the total being far in excess of any previous year, even that
of 1899, when many of the large trust combinations were formed. The
largest and probably the most heavily watered combination launched was
the United States Steel Corporation, with its $508,478,000 of common
stock, $510,277,300 of preferred stock, and $304,000,000 of bonds. The
mania for organizing new companies and making combinations of old ones
on largely inflated capital spread to every State in the Union, and the
promoters of industrial enterprises, in particular, seemed to be trying
to surpass each other in piling Pelion on Ossa in excessive
capitalization. Their obvious purpose in most instances was to sell the
stock to the public, and the poor public took the bait and suffered
accordingly, for much of the stock in a great many of the new schemes
became almost entirely worthless, both as collateral and in the stock
market, and the rest experienced very heavy depreciation, and,
figuratively speaking, like the shaky corporations it represented, went
limping along with an uncertain gait and a ragged and down-at-the-heel
appearance suggestive of reduced circumstances and hard times.

In every State there was a flood, if not a deluge, of new companies. In
New Jersey, 2,346 were formed in 1901, with a capitalization of
$4,773,702,000, against 2,181 in 1900, with a capitalization of
$1,350,208,400; and in New York, Ohio, and Texas the incorporation mills
were proportionately active in grinding out new companies with
fictitiously large capital stocks.

Commercial and manufacturing corporations were practically unknown, that
is, in any substantial form, in the United States till about 1850, and
then they followed the development of the railways. In 1848 the first
general corporation act, known as the Manufacturing Act, had been passed
in this State, and companies began to be organized under it; but the law
limited their capital and imposed other restrictions, whereas companies
may now be incorporated for a thousand years with an unlimited amount of
capital. The contrast between 1850 and this era of trusts marks the
great and rapid progress of the country in the interval in population,
commerce, manufacturing industry, banking, railway building, and general
material prosperity.

The growth of trust companies has been the natural outcome of our
industrial and economic development, and the freedom allowed by our laws
in monetary affairs. In England, France, and other European countries
the laws restrict corporation rights and privileges so rigidly that such
companies would find it impossible to do business there as they do here.
Hence trust companies have practically no existence except in this
country. How immensely they have prospered of recent years the banks
know to their cost. In 1882 the gross deposits of all such companies in
the United States were $144,841,000. In 1892 they were $411,659,000; but
after the new industrial combination era began, in 1897, they shot up
with amazing celerity, and new companies sprang up like mushrooms in all
our large cities, and here and there in small towns.

Being competitors of the banks they shared their business, and so
prevented or limited their natural growth, and forced many of the bank
consolidations that have since taken place. At the end of June, 1902,
their deposits had mounted up to $1,525,887,000. Here was an increase of
$1,114,228 in ten years to about half of the total individual national
bank deposits of the country, for these on July 16, 1902, were
$3,098,875,772. Moreover, in the city of New York the trust company
deposits exceed, or did exceed, the individual deposits of the national
banks, those of the latter on September 15, 1902, aggregating
$603,565,374, while on June 30, 1902, the deposits of the trust
companies, as shown by their semi-annual reports to the State
Superintendent of Banking, were $760,776,124. This comparison is a very
suggestive revelation of where the money goes and how the trust
companies prosper at the expense of the banks.

In 1902, again, a few leading factors, or influences, controlled
American finance, and shaped the real financial history of the year.
These were the good corn crop, following the bad one, and other
satisfactory harvests; the overstraining of American bank resources to
supply the vast requirements of the new trust and flotation enterprises
when the capital and currency of the country were required for its
regular trade and ordinary business; the enormous increase in our
foreign importations contemporaneously with a very heavy decrease in our
exports; the great rise in the price of the raw materials used in our
manufactures, as well as in the cost of labor; the strenuous efforts of
large speculative capitalists to extend and hold permanent control of
their respective railway and industrial enterprises and undertakings;
the reckless and unprecedented Vesuvius-like eruption of speculation in
railroad and other stocks by wealthy and newly enriched Western stock
operators known as “the Chicago Crowd” and “the Pittsburg Crowd,”
respectively, aided by heavy bank loans at high rates; and finally the
refusal of the public to follow them any longer as buyers. This accords
with what I have said about the influence of the conservative banks and
bankers in calling a halt on the wild speculation for a rise which raged
up to the latter part of September in that year.

The exploit, in 1902, of John W. Gates, backed by his speculative
associates, in buying a majority of the Louisville & Nashville Railway
stock, was his last successful venture to make a big haul of millions on
the Stock Exchange. After that he and they met with very heavy losses in
their continued efforts to boom stocks. But Mr. Gates was paid a profit
of ten millions of dollars on his Louisville & Nashville purchases by J.
P. Morgan & Co., a partner in that firm having made the bargain with him
at the Waldorf-Astoria Hotel, at three o’clock in the morning, after it
had been discovered that Mr. Gates had really bought control of the
stock.

It transpired, in evidence, that Mr. Perkins had gone there at that hour
for this purpose, and found Mr. Gates in bed. The object in giving him
so large an amount above what he had paid for the stock he had just
bought was to get him out of the way as a mischief-maker, for with him
in control of the Louisville & Nashville, there was no telling what he
would do to demoralize the Southern Railway system. He was looked upon
as a bull in a china shop, to be coaxed and tempted out, regardless of
expense, before he began to toss the crockery with his horns.

So when he said to Mr. Perkins, “As you want the stock so badly, to keep
the Belmont board in control and protect the Southern Railway, I will
let you have it if you will pay me ten millions more than it cost,” the
proposition was promptly accepted; and the deal was closed on this
basis. The Louisville & Nashville and the Southern Railway companies
were supposed to have been jointly interested in the purchase, but the
Gates stock was finally turned over to the Atlantic Seaboard Air Line.

Buying control of the Louisville & Nashville by Mr. Gates was a far
bolder operation than President Hill’s purchase of the stock of the
Burlington & Quincy for the Great Northern, or than the Moore Brothers’
purchase of control of the Rock Island and their subsequent great
inflation of its stock and bonded debt, because Gates bought it merely
as a speculation, without any desire to manage the road. He was
fortunate in being able to sell it so easily to those he had frightened
by his daring coup.

It is interesting to compare the leading influences, or principal
factors, in Wall Street in 1903 with those of 1901 and 1902. Stock
Exchange transactions in that year were very much smaller than in 1902,
but not nearly as much so as the total in 1902 had fallen below those of
1901, the year of the greatest activity and excitement in this memorable
speculative period. The sales in 1903 aggregated 161,099,800 shares,
against 188,497,600 in 1902 and 265,945,700 in 1901. The largest total
on any one day in 1903 was 1,539,000, against 1,996,000 in 1902 and
3,202,200 in 1901. The largest in any month in 1903 was that of January,
16,002,300, against 26,568,000 in April, 1902, and the smallest in 1903
was 10,731,000 in November, against 7,884,900 in June, 1902.

The barometer of the iron trade was still rising at the opening of 1903.
Good crops had been gathered and were being sold at good prices; railway
earnings were large, and railway companies were making heavy
expenditures for new equipment and improvements, and every department of
business and manufacturing industry seemed prosperous, with the iron
trade enjoying its full share of that prosperity. So heavy, indeed, was
the demand for iron and steel that the capacity of our works was unequal
to it, and we were importing iron and steel largely, as we had been in
1902.

But in June the iron industry experienced one of its time-honored
lightning changes. That barometer suddenly fell. The demand subsided
with surprising celerity in all lines, and by November prices in some of
these were fifty per cent. lower than in January. The boom in the iron
trade which commenced in 1899 was at an end after lasting for four
years. At the end of the year, however, the trade began to revive, and
1904 witnessed a slow but steady improvement in it, as the reports of
the United States Steel Corporation’s earnings have shown. Consequently
that highly inflated company, after being forced in 1903 to suspend
dividends on its common stock, was encouraged to continue them at seven
per cent. on its preferred stock. But this carried cold comfort to the
hundreds of thousands who had been impoverished by buying these stocks
at the high prices at which they were floated here and in Europe.

Before the end of 1903 liquidation on a large scale in stocks had run
its course and exhausted itself, and the market quieted into comparative
steadiness; and in 1904 we had, on the whole, nothing more than a dull
trading market, with the outside public very largely absent. But there
has been a general tendency toward slow improvement, although the net
earnings of both railways and industrial companies have, on the average,
shown a heavy shrinkage, a reflection of the reduced volume of trade and
more or less industrial depression following the overstimulated boom of
previous years. Just as 1901 was the year of the most unbridled and
unrestrained inflation, 1902 witnessed a constant battle against the
tendency to a downward reaction, and 1903 saw and felt the reaction,
which was all the more severe because it had been so long delayed.

In the cotton market, however, as wild and extraordinary a bull
speculation raged in 1903 and the early part of 1904, under the lead of
Daniel J. Sully in New York, and William P. Brown and a Southern clique
in New Orleans, as ever excited the Stock Exchange. Through their
manipulation, helped by the statistical position of cotton and the
prospect of reduced production, cotton rose, under an enormous and
unprecedented volume of transactions, from about eight cents a pound
here to seventeen cents, with frequent violent fluctuations, and Mr.
Sully was avowedly planning to carry it up to twenty cents, when he
found his resources insufficient to carry, on a falling market, the
amount of cotton sold to him. So after going up like a rocket, he came
down like the rocket stick, although his previous profits by the rapid
rise had run into several millions. It was well that a halt was thus
practically called to this excited speculation and excessive advance in
cotton, for it had inflicted heavy losses upon spinners and caused the
closing of many mills. Sully’s failure was the logical result of a too
daring speculative campaign, and reminds us of that vaulting ambition
which overleaps itself and falls on the other side.

Glancing at other countries, I find that Canada made more material
progress in 1903 than in any previous year in her history, business
increasing substantially in nearly every branch of trade and finance,
stimulated by bountiful crops and 150,000 immigrants. But in England the
continued decline of British Consols to the lowest prices in a
generation reflected a low financial barometer, the legacy of the costly
South African war. France, however, made the best showing of the year in
Europe in finance and general prosperity, while in Germany a vigorous
industrial revival lifted that country out of its previous depression
consequent on over-speculation and bank failures.

One question of great interest in relation to our new industrial
combinations is whether a proper readjustment of their hugely inflated
capital and excessive charges will place them permanently in a condition
of efficiency, productiveness, solvency, and prosperity, or whether they
will ultimately drift, one by one, into the hands of receivers through
their inability to make both ends meet, or become hopeless wrecks, like
the Shipbuilding Trust. The same fate is liable to overtake many other
large flotations into which there was a too copious flow of water,
supplemented by chicanery and misrepresentation. Many of these have been
organized in disregard and defiance of legitimate finance, and have
exposed the stock market and all the monetary interests depending upon
them to risks and disastrous disturbances inseparable from organizations
whose foundations rest largely on wind and water and on prospectuses and
book-keeping that often failed to tell the truth, the whole truth, and
nothing but the truth.

It was well that a stop was practically put to the creation of such
inflated industrial combinations, as well as to needless combinations
and highly inflated stock issues among the railroads for power and
profit and stock-jobbing purposes, by the course of the Wall Street
banking interest, to which I have referred, in coming to the conclusion
that the over-watering of new companies, the marketing of new stocks,
and the rise of prices on the Stock Exchange had been carried beyond the
point of safety, and that the outside public had bought more speculative
industrial and railway stocks than they would be able to carry on a
falling market.

They argued, therefore, that their buying power and their inclination to
buy were nearly exhausted, and that the stock market had become largely
a field of action for certain heavy and reckless speculators, each of
whom had suddenly made many millions by the formation of new trusts and
railway combinations. Some of these had become multi-millionaires
through the early sale of the heavy amounts of United States Steel stock
they received in exchange for their plants when that huge corporation
was launched in its sea of water. In this they were like some others who
enriched themselves by their industrial combinations in the West before
they branched out in Wall Street.

Very large bank loans to the brokers of these big operators were
gradually called in and fresh accommodations refused them. Without loans
it was impossible for them to buy and run up stocks to inordinately high
prices, as they had been doing. Therefore they found that, to a large
extent, their occupation was, like Othello’s, gone. They were eagles
with clipped wings.

The heavy liquidation by large and small operators in 1903 caused a
heavy and almost continuous decline in prices on the Stock Exchange.
Many rich men were compelled by this shrinkage and the calling in of
their loans by the banks to sell out heavy lines of both railway and
industrial stocks. Not a few of these lost practically all their
capital, while nearly all the rest sold a large part of their best
holdings to protect the remainder, which became unmarketable.

This period of liquidation and depression left Wall Street and the
country at large in 1904 thickly sprinkled with poor rich men,
capitalists with a good deal of property, real and personal, including
stocks, but all unsalable in the market except at an almost ruinous
loss. Their policy is naturally to hold on to what they have left till
the tide turns, and if they are strong enough to be able to do this they
will doubtless meet with their reward. History repeats itself in Wall
Street as well as elsewhere, and with this prospect in view they can
cheerfully say, as the old song says, “There’s a good time coming, boys;
only wait a little longer.”

Meanwhile, those who were active in Wall Street during this eventful
period of inflation and speculation must note, more than others, the
vast change that has come over sentiment and opinion in Wall Street and
everywhere else.

Both Wall Street and the outside public have lost the faith that they
had in many of the stock-market leaders, the men who were once followed
blindly in their schemes of inflation and regarded as omnipotent in
their execution. The power and prestige of these leaders, for the
present at least, have passed entirely away, and none are so poor as to
do them reverence. The devotees of the Street no longer worship the old
idols.

Wall Street and the public also lost faith in all new ventures and new
railway and industrial bond and stock issues, as well as in the good
judgment and good faith of the promoters and corporations concerned. The
revelations of fraud, chicanery, and excessive capitalization that have
been made in the courts and elsewhere, have undeceived even the dullest
and most credulous believers in the schemes and schemers that took the
country by storm in the days of Wall Street’s wild and pyrotechnical
speculation.

Out of evil there cometh good, and this great change from blind
credulity and inordinate inflation to discriminating distrust and severe
contraction has exerted a wholesome effect in paving the way to a
sounder, safer, and generally better state of things both in and out of
Wall Street. But meanwhile one bad sign is noteworthy. The large
corporations, being unable to market new bond issues, are borrowing
heavily from banking syndicates at five to six per cent. on notes
running from one to three years. There is danger in this, and the way of
the borrower on these terms may, like that of the transgressor, be hard.
But the end may justify the means; and the nation is still growing as
rapidly and as grandly as ever in our history from ocean to ocean.

There is nothing to provoke pessimism in the magnificent strides we are
making in the march of progress; Wall Street is always sure to reflect
this progress and our growth in material prosperity, as well as any
periods of depression we may encounter, for it is the great barometer
not only of the country and the times, but very largely of the world.


------------------------------------------------------------------------




                             CHAPTER LXIX.

        REVIEW OF THE PANIC YEAR, 1903.


The year 1903 passed into history with few pleasant memories. To a great
number of individuals it was a year of disappointment and loss. To the
very few it was a year of golden experience, demonstrating anew that
real success only comes from rigid adherence to sound business
principles and abstention from illegitimate speculation. Those who
remained steadfast to well-established methods of finance and business
weathered the storms of the year with little injury; while those who
defied economic laws and ventured on the untried highways to success
were, later, chiefly engaged in repairing battered fortunes and
gathering together their scattered senses.

Nineteen hundred and three was chiefly conspicuous as marking the
culmination and collapse of the great trust movement which began five or
six years ago. The country had fairly gone combination mad, both capital
and labor emulating each other in the furious race toward combination
and monopoly. All consequences were blindly disregarded, only the
advantages of combination receiving any serious attention, and no regard
whatever was paid to the workings of these huge combinations. Whoever
pointed out their inherent defects, their defiance of natural economic
laws, their ineradicable opposition to human nature, their socialistic
tendencies, their opposition to individuality, their inability to
suppress competition—whoever was bold enough to oppose these tendencies
on such grounds was swept aside with contempt and indifference. This
phase of the movement, however, was by no means the end of the trust
mania. It received an enormous stimulus from Wall Street, where the
clever promoter quickly discovered in the increased profits and power of
these combines something new to capitalize. These forced profits,
together with the premiums paid to original owners for control of good
will and for promoters’ commissions, were the basis of an enormous
overcapitalization, the new concerns frequently being capitalized at
several times their real value. Not less than $6,000,000,000 of these
new creations was made within a few short years, forming the basis of a
colossal speculation, backed by unequaled financial power and launched
upon an unprecedented industrial boom. It is not the purpose of this
brief review to cite instances of failure. Fortunately, the losses
resulting from inability to unload on the public fell chiefly upon those
best able to bear them, the panic being strictly financial and,
fortunately, not commercial or industrial. For the original shareholders
in these combinations who failed to sell, the losses were chiefly on
paper; but they were sufficiently heavy to seriously cripple many rich
men whose fortunes had been locked up in these enormously inflated new
creations. Syndicate after syndicate was formed to finance these
organizations; some made fabulous profits, but others were closed out
with heavy losses, bringing the country to the verge of the greatest
panic in history. Fortunately, the country’s general prosperity was only
slightly impaired by the tremendous strain thus imposed on Wall Street.
The storm was finally safely weathered because of the prudence of our
bankers and the strength of our national resources, as well as the
continued prosperity of the farmer, who once more proved himself the
backbone of the nation. These experiences have effectually killed the
trust mania, and its revival is exceedingly improbable. Big
corporations, it is true, will remain, for the reason that they are the
best known means of doing the world’s work; but the era of excessive
capitalization of good will, promoters’ fees, monopoly profits, and the
delusions of visionary economists is happily at an end. Whether the
final days of reckoning for the trusts have been seen or not is a
question that must be left until the ultimate test of business adversity
is applied, which we sincerely hope is still far distant. At best, the
future of the industrials is dubious. Along with, and as a natural
sequence of, the trust movement came the labor movement. The power of
combination once discovered was as badly misused by labor as by capital;
even worse, for the demands of labor were pushed to such extremes of
extortion and injustice as to throttle business and arouse popular
indignation among those who still preserved some ideas of individual
freedom.

Next to the trust movement the most potent influence in the business
world was the simply phenomenal boom in the iron and steel trade. The
world had never seen such rapid development before. This was based
principally upon the enormous demands of American railroads, which have
been practically reconstructed in order to meet the tremendous rush of
traffic which the nation’s growth has imposed upon them. The big car and
the big locomotive necessitated heavier rails, new bridges, and new
terminal facilities; so that hundreds and hundreds of millions were thus
expended, very largely out of current earnings, but in many cases, also,
by the creation of new capital issues. It is probable that the heaviest
portion of this work has been done, yet much remains to be completed,
and railroads will be heavy buyers of steel to continue projected
improvements. Another powerful stimulus to the iron trade was the use of
the steel frame building for office purposes. This meant a revolution in
office buildings, and the business centers of all our large cities are
undergoing a process of reconstruction which is far from complete, and
was brought to an abrupt halt by the extortionate demands of labor. In
addition to these two great sources of demand the uses of iron and steel
are steadily extending with the progress of invention, the cheapening of
their cost, and the high price of lumber. The iron trade’s pace was too
rapid to last, and the reaction came with unexpected severity in the
latter half of 1903, precipitated, of course, by the financial reaction,
which, along with the labor agitation, discouraged all new enterprise.


------------------------------------------------------------------------




                              CHAPTER LXX.

     LEADING WALL STREET EVENTS UP TO THE FALL OF
                              1907.


The natural result of the panic of 1903, and the long period of
depression in Wall Street, was that an unprecedentedly large surplus
reserve was accumulated by the New York banks in 1904, reaching its
maximum in August. This was still further swelled in 1905, when
speculation for a rise again assumed formidable proportions, and new
high records were made in the stock market. Both bank loans and deposits
reached a magnitude never before known, and the activity on the Stock
Exchange, combined with that in trade, and land, mining, and other
speculations outside of Wall Street, caused the clearing house exchanges
to greatly exceed those of any previous year.

Our foreign imports also increased till they made new high records,
although our exports failed to keep pace with them. This large import
trade reflected both the rising fortunes of the rich, who had suffered
severely during the depression of 1903, and the general prosperity. Our
imports are the barometer of the times. When these are good, they are
large; but in bad times they shrink enormously, for a large percentage
of them represent luxuries, and we are a luxury-loving people, and, in
comparison with Europeans, our manner of living is expensive, not to say
extravagant.

Before the end of 1905 the banks of the rest of the country followed
those of New York in reporting deposits and loans larger than ever
before, whereas in the early part of it their only high record was in
the amount of their cash reserves. This showed the great demand for
loans and discounts to meet the requirements of the rapidly increasing
volume of trade and speculation.

The amount of money available for loans was largely reduced in the early
part of 1905 by our heavy exports of gold. But it was subsequently
increased by the issue, up to December 1st, of sixty millions in
National Bank note circulation, which was so much fuel added to the fire
of speculation, not, however, in Wall Street, as much as in the
interior, where there was a rage for new enterprises of all kinds,
mostly speculative. Everyone with money enough to make a venture seemed
to be seeking a short cut to wealth.

This inland speculation and business activity, particularly in the West
and South, caused the exchanges or clearings of the banks all over the
country, except in New York, which was comparatively dull, to reach
larger totals than ever before. Our iron production and foreign imports,
at the same time, made new high records.

The gold in the United States Treasury, owned by the Government,
increased under the tariff on imports from $193,072,614, early in 1905,
to $291,258,135, near the end, and the total amount held by it,
including that held against outstanding gold certificates, increased to
$816,354,352, the largest in the Government’s history, and also the
largest held by any government or institution in the world. The next
largest sum ever held elsewhere was $591,600,000, by the Bank of Russia,
in 1898. Yet on January 31, 1895, the total amount of gold held by Uncle
Sam—that is, by the Treasury—was only $97,353,776, and on February 12th
this had dwindled to $41,340,181, owing to the run on the Treasury
through fear that the Government might be forced to suspend gold
payments. But President Cleveland’s prompt action in selling bonds for
gold—to the Morgan-Belmont syndicate—averted this possibility.

Before glancing at more recent events, it is well to refresh our
memories by looking back at the most conspicuous features of the
stirring period in Wall Street’s history, extending from the beginning
of 1901 to 1906. In 1901 we had a year of extraordinary developments,
including new company organizations and old company amalgamations, wild
and reckless speculation by the outside public, heavy borrowing of
European money to carry on this speculation, the failure of the corn
crop, and, except for corn, a heavy fall in the prices of our products.

In 1902 Wall Street was flooded with new bond and stock flotation
schemes, all clamoring for bank loans, although the activity of trade
called for all the loanable capital available. Coincidently, there was
wild and reckless speculation in stocks by newly made industrial
millionaires with large bank resources and enormous loans at their
command. The outside public, however, were not tempted by the bait they
offered. Hence, the banks had an excessive burden of loans, all the
greater because of the determination, at any risk, of the speculative
capitalists to carry out their flotation schemes so as to control great
industrial, railway, and other corporations. Meanwhile, there was an
immense increase in our foreign imports and a decrease in our
agricultural exports, and a great rise in raw materials and the cost of
labor. But, fortunately, the year gave us a good corn crop and other
satisfactory harvests.

Then came 1903 with its train of disasters. Investors took alarm at the
masses of new securities thrown upon the market, and withdrew from it.
The securities consequently became unsalable, and prices declined
rapidly. This forced liquidation in bonds and stocks of all kinds,
particularly the better kinds, to save the poorer from sacrifice by the
syndicates, corporations, firms, and persons who were over-extended and
unable to respond to the calling in of loans by the banks and other
money lenders. Wall Street was full of “undigested securities,” on which
it was impossible to borrow any longer. So multitudes of holders had to
sell them for what they would bring. Then came a heavy decline in iron
and steel, among other things, an equally heavy reduction of the profits
of industrial corporations, with many corresponding reductions in
dividends, and a very sharp contraction in our before greatly expanded
foreign imports owing to the hard times. We had a rich man’s panic, and
plenty of poor rich men. But, again, we had abundant grain crops,
although the cotton crop was very short, which resulted in our shipping
more cotton to Europe in the autumn than ever before, while its price
was abnormally high.

In 1904 we saw one effect of the depression of 1903 in the abnormally
large surplus reserves of the New York banks, when money on call for
about eight months loaned largely as low as one per cent. Only four
times before had these reserves been exceeded. Then came the largest
gold exports ever made by us. In June the stock market began to recover
under spirited speculation for a rise, together with much buying by
investors. But reckless professional speculators carried prices so high
that the market collapsed in December. During the year there had been a
slow yet general revival of trade, in the face of extremely high prices
for cotton, resulting from a short crop and a bull movement, which
paralyzed the cotton manufacture, and caused many mills to close both
here and in England. But happily this was followed by the most bountiful
cotton crop we ever had, owing to the high price of the staple having
stimulated cotton planting all over the South. A heavy fall in the price
of cotton resulted, in which the bull leader failed. But the grain crops
met with disaster, and were the smallest since 1900, which resulted in
the highest prices since 1898, and the smallest exports to Europe since
1872. The presidential campaign in the meantime passed without creating
a ripple in the tide of Wall Street.

In 1895, simultaneously with much discussion of the world’s increasing
gold product, we saw both here and in the Old World, especially in the
latter part of the year, unexampled monetary stringency with very high
rates for money. The surplus reserve of the New York banks was wiped out
twice, that is, they twice fell below the dead line of the required
twenty-five per cent. reserve on their deposits, while the Bank of
England’s condition was the lowest since 1890, and the Bank of Germany’s
the lowest since 1897. Yet we had a very active and excited bull
speculation in stocks, just as Germany had, despite the high rates for
money, and its abnormal scarcity consequent on its vast employment in
trade and speculative enterprises outside of Wall Street.

That the world’s increased gold product largely stimulated speculation
for a rise, both by adding to the amount of gold in circulation and the
amount of paper money issued by the banks against it, is certain. Its
effect has not been seen in lowering rates of interest, but in lowering
its own value, or purchasing power, by reason of its increased supply
or, in other words, by raising the prices of stocks, commodities, labor,
and whatever else money buys. So the increased supply of gold has only
quickened the uses for it by fostering speculation, and the demand for
speculation has outrun the increased supply of gold—that is, money—and
correspondingly raised interest rates, as well as prices. In 1905 our
national prosperity was crowned with abundant harvests, the corn crop
having been the largest on record, and that of wheat the second largest.
This gave a fresh impetus to trade and speculative enterprise, with
increased railway and industrial earnings, and production, especially in
iron and steel products, at a higher pitch than ever before. Dividends
and reserves also increased in proportion. Russia’s disastrous war was
waged without causing any national disturbance in Wall Street, and her
largely reduced crop of wheat helped us to secure better prices for our
own surplus wheat in Europe. So it is an ill wind that blows no one any
good.

In 1905, too, we witnessed the stormy upheaval in the Equitable Life
Assurance Society, begun by the acrimonious duel between President
Alexander and Vice President Hyde, which led to the general exposure of
the waste, extravagance, graft, and corruption in life-insurance
management, through the investigation of the New York Legislative
Committee. The loss of new insurance business, caused by the popular
distrust of the companies exposed, had its principal effect in Wall
Street in their reduced power to buy bonds; and the prolonged stagnation
in the bond market after they ceased to be large buyers was largely
attributable to this cause. But the exposure was much needed and did
great good in correcting abuses of power and turning the rascals out.

Our exports of domestic merchandise kept pace with our tremendous
industrial prosperity, and these more than doubled in the ten years
ending with June, 1906. Raw cotton, provisions, and iron and steel
manufactures were exported in the fiscal year 1906 to a value exceeding
$300,000,000, iron and steel showing the largest increase, and seventeen
articles, or classes of articles, had an export value of from ten to
forty-two millions. While iron and steel have taken third place, raw
cotton still holds the first, and provisions the second, and copper
manufactures have advanced from the eleventh to the fourth place. But
refined mineral oil, that was third, is now the eleventh, and flour has
dropped from fourth to seventh, although showing an increase of seven
millions, and wheat from seventh to thirteenth.

On the other hand, our exports of agricultural implements were five
times as great in 1906 as in 1896, which advanced them from the
twenty-third to the fourteenth place in the list. Our cotton
manufactures, too, advanced in value from twelfth to eighth, that is,
from $16,750,000 to $53,000,000. There is, however, still room for a
great increase in these, and the outlook favors a large and growing
demand for them in China, the Philippines, and South America. We have
become a great manufacturing and mining, as well as agricultural,
nation, and a lower tariff on raw materials would swell our exports
enormously. That will come in time; but at present politics stand in the
way.

In 1906 we saw a continuation of the same big bull speculation in stocks
that, with varying fortunes, had been progressing since June, 1904, with
Edward H. Harriman, president of the Union Pacific Railway system, and
James J. Hill, president of the Great Northern Railway system, the most
conspicuously dominant figures in the railway world, and, incidentally,
in the world of Wall Street. Prices on the Stock Exchange, and the rates
for money, both on call and time, were abnormally high, and still
tending upward, till both frequently exceeded six per cent. in August,
and, in some instances, jumped as high as thirty per cent. early in
September, the excess above six, in the case of time loans, being
represented by a commission. This, on the eve of the usual drain of
money westward and southward, to move the crop, caused much anxiety for
the future, as it was entirely without precedent in that month. But the
Secretary of the Treasury, through bank deposits and gold imports, was
relied upon to relieve the stringency when it became more acute later
on, under the actual drain of money West and South. He did so by
renewing his offer, made in April, to deposit gold with national banks
when secured by bonds, to the amount of any gold they wanted to import,
the deposits to be returned when the gold arrived. Thus they were saved
loss of interest in transit, and gold was imported largely.

The money market seemed to have no terrors for the great speculative
capitalists in control of the stock market. Prices were still bid up
boldly, and the Harriman and Hill stocks, in particular, were marked up
to figures never before quoted, just as Reading and the other anthracite
coal stocks had been long before and have been since.

The chief sensation of the year 1906 in the stock market was produced by
the Harriman announcement on Friday, August 17th, that the semi-annual
dividend on Union Pacific had been raised to five per cent., or from a
six-per-cent. per annum basis to ten per cent.; and that an initial
dividend of two and a half per cent., or at the rate of five per cent.
per annum, had been declared on Southern Pacific. These unexpectedly
large dividends and the delay in making them known, after they had been
acted upon by the directors on Wednesday, and finally on Thursday,
greatly excited and disturbed Wall Street. They were dividends that
staggered the bears and astonished the bulls, and caused an advance of
sixteen per cent. in Union Pacific and five per cent. in Southern
Pacific stock that day. They also made the whole market run into a wild
bull speculation, stimulated by a rush of “shorts” to cover their
contracts, and a sudden influx of fresh buyers from the outside public.
Reckless buying by these made it easy for the bull leaders to run prices
up sharply, especially as it was expected or feared by many that the
example set by Union Pacific in dividend raising would, or at least
might, be followed by certain other large companies, both railway and
industrial, whether the increase was justified by actual net earnings,
or only intended for stock-jobbing purposes.

The criticisms of President Harriman and his associates to which these
sensationally large and peculiarly announced dividends gave rise, were
too trenchant to bear quotation or description. But Mr. Harriman was
said to have added ten millions to his personal fortune by the rise in
Union Pacific and Southern Pacific stock, which preceded and followed
these very generous distributions to the stockholders.

The fact that Mr. Harriman, the son of a quiet country clergyman, should
have been able to come into Wall Street and climb the ladder to wealth
and power as he has done, and with such amazing celerity, shows the
unlimited possibilities of the Street as a gold mine, for the Union
Pacific Railway system, like the other great railway systems whose
stocks and bonds have always been dealt in here, was practically born
and financed in Wall Street. His rise to a position of such prominence
and vast power is far more wonderful even than the career of Russell
Sage as a Wall Street money maker; for Russell Sage never had any power
but his money, whereas Edward Henry Harriman represents and controls
thousands of millions’ worth of other people’s property, employing tens
of thousands of persons. He is a moving spirit in dozens of banks and
other corporations, including the Wells Fargo Express Company, outside
of the Union Pacific and Southern Pacific system of railways and
steamships. The great stock market struggle between Harriman and Hill
for the control of Northern Pacific in 1901 was a battle royal on a
grand yet disastrous scale, that will always be memorable in the history
of Wall Street.

When Russell Sage died in July, 1906, within a few days of his reaching
ninety years, leaving not far from a hundred millions of money, he left
a will which reflected his sagacity as a money saver, for he left all he
had, except a few unimportant bequests, to his wife. He did so, I infer,
instead of distributing his great wealth himself, because he knew that
the State inheritance tax would only be one per cent. on what he gave
her, while it would be five per cent. on what he left to such relatives
as he had surviving, as well as to all others.

It was, to a certain extent, “the ruling passion strong in death,” for,
of course, he knew that his wife had no use or desire for so much money.
Although his bequeathing it to her was a tribute to her goodness and a
symbol of their happy married life, she would probably have preferred to
shoulder a much lighter load of wealth. Its distribution will be no
ordinary task, although it will doubtless be a labor of love with Mrs.
Sage.

Russell Sage, in his manner of life, all now agree, set a good example
of frugality and industry in an extravagant and pleasure-loving age, and
hence he is held by many to have been a public benefactor. His unusually
economical and plain habits, together with his great wealth and great
age, naturally made him conspicuous and also a target for the wits, and
in this way he became better known through caricature than
matter-of-fact description. But that was one of the penalties of
publicity. He passed from poverty to great wealth entirely of his own
creation without being spoiled by it, and remained one of the plain,
unpretentious people till the end.

He owed all he had to Wall Street, and his career illustrated, more than
any other has ever done, how fertile a field for fortune making Wall
Street may prove to a sagacious man, of untiring industry, who knows how
to cultivate it, and can see and avail himself of its splendid
opportunities. His rise from extreme poverty to immense wealth, through
his own unaided exertions, shows how one man, single-handed, may do
wonders and turn all he touches to gold, and that, too, in Wall Street.
We are living in a stirring and rapidly progressive time, and the great
and growing importance of the New York Stock Exchange was reflected by
the rise in the price of a membership in it in 1906 to not very far from
a hundred thousand dollars.

The year 1906 was one of immense activity and prosperity in trade.
Prices were high and still advancing, and profits large, particularly
those of industrial corporations. At the same time a mammoth bull
movement was running its course on the Stock Exchange, and the grain
crop turned out larger than ever before in our history, while enormous
issues of new securities were announced by both railway and industrial
corporations. These new issues severely taxed the resources of the money
market, already being too heavily drawn upon by the “big men” of the
Street to promote their wild bull campaign in stocks, and spasms of
stringency were frequent. Indeed, the year 1906 from beginning to end
witnessed a continuation of those inordinately heavy demands for money
from Wall Street and corporations, and these led to the disturbed
monetary conditions which were first felt in September, 1905. It was an
eventful year, a year of immense activity on the Stock Exchange, in
which much that was unprecedented occurred. It was a year in which the
stock market, after touching high record prices and violent ups and
downs, went gradually, in an excited speculation, from bad to worse, in
a limited sense, or from one critical stage to another, till it reached
the year’s end. Then it averaged only nine per cent. below the highest
prices. But it became, in spite of the boldest bull manipulation,
gradually weaker and more demoralized. The bull movement at length met
its Waterloo in the spring of 1907, because the plunging millionaires
who had been bidding them up found no buyers for their stocks. So they
had to liquidate heavily, like the rest. It was another rich man’s
panic.

From a slow and irregular decline stocks good, bad, and indifferent
passed into the rapids of a bear market, with the bears, emboldened by
success, recklessly aggressive, and on March 14th prices broke from ten
to twenty-five per cent. under their fierce attacks, and relentless
hammering, supplemented by an avalanche of long stock forced for sale
under stop orders that had been reached, or through weakened and
exhausted margins, or by holders unwilling to take any further loss.

Yet enormous as was this paniclike fall in prices on that disastrous
day, many stocks went still lower in the breaks that followed the sharp
rally that succeeded it. So March, 1907, ended as it began, in gloom and
depression, which was followed by comparative dullness but little
recovery in April and May. In June, however, it became evident that
liquidation had exhausted itself, and all unfavorable factors had been
discounted by the decline. Hence, although the market was almost
entirely professional, with the outside public as apathetic as ever, it
began to develop an upward tendency, notwithstanding the sharp rise in
grain and cotton due to the extensive damage done by an unusually cold
spring, and the fact that we shipped $15,000,000 in gold to France in
June.

This vast and thorough liquidation had been mainly by the bull pools and
richest speculative capitalists in Wall Street, and involved tremendous
losses. These leaders of the bull movement had been caught overloaded
with stocks, carried over from the previous boom that they had
recklessly engineered. They were forced to sell because the banks were
either calling in their loans, which they were unable to replace, or
calling from time to time for more margin to offset the decline in
prices. Thus their cash resources were being constantly impaired.

Meanwhile, money loaned at abnormally high rates, and five times in the
spring, autumn, and winter of 1906 the New York banks showed a deficit
in their reserve. Money, therefore, was very hard to borrow, because
these giants of speculation had overtaxed the banks’ resources by
borrowing too much. Coincidently the outside public held aloof from the
stock market, owing to the great activity of trade and the wild
speculation in land, mines, building, and other new enterprises all over
the country.

This speculation from Maine to California absorbed an immense amount of
money, of which Wall Street saw nothing, and it left the large
speculative holders of stocks without any market for them, except among
the professional traders. No wonder they staggered, and finally, in the
spring of 1907, succumbed under the heavy loads they were carrying,
which they had mistakenly bid up to excessively high prices in a vain
attempt to bring in the public as buyers. Wall Street was then the only
blue spot on the map of the United States.

To relieve the pressure for money there, and so help to bull stocks, the
large interests in Wall Street, excepting J. P. Morgan & Co., imported
from Europe $40,000,000 of gold in the spring of 1906 and $45,000,000 in
the autumn.

This last great importation caused the Bank of England to raise its
minimum rate of discount from three to four, then to five, and then
again to six per cent., the highest since the Boer War. The rate, it was
intimated, would have been advanced to seven per cent. had we taken any
more of the yellow metal. The purchase of so much gold in England was
made possible only through the Secretary of the Treasury, Mr. Leslie M.
Shaw, practically advancing the means for importing it by lending gold
to the banks, secured by collaterals, the loaned gold to be returned
when the imported gold arrived.

The spring gold importations followed the great San Francisco earthquake
and fire, on April 18th, involving an estimated loss of $250,000,000.
Most of this, however, fell upon British, German, and other foreign
fire-insurance companies, which relieved this country financially to a
corresponding extent, although New York shipped more than $50,000,000 of
gold to San Francisco to fortify the banks in that city.

After the stock market had been sold to a standstill and its weak
timbers eliminated, by May, 1907, it was only natural, in view of its
previous drastic liquidation and heavy decline, that with good crop
weather following the backward spring, stocks should advance. The keel
of a future bull market of large dimensions had been laid by the
disastrous liquidation that had occurred, and we subsequently witnessed
its development on a rapidly ascending scale. It is a law of nature that
action follows reaction.

This reminds us that Wall Street easily passes from one extreme to
another, and that very often the dawn is nearest when the night is
darkest, in finance as well as nature. Moreover, Wall Street is always
with us, just as the poor are, and the stock market is a serial story
that never ends.

In July, the improvement in the stock market, and especially the
Harriman stocks, was very decided, with the indications favoring a wider
and more active speculation, for as yet it was almost entirely
professional. In this movement the Standard Oil and Harriman party were
the bull leaders, with Union Pacific the leading stock. Notwithstanding
their vigorous efforts, however, the outside public remained entirely
apathetic, and there was growing anxiety as to the future of the money
market. This was increased by our having, unexpectedly, to ship gold to
Europe, nearly all of it to the Bank of France, as well as by depressed
monetary conditions there, with much disturbance, under heavy
liquidations, in London and Berlin. Even British Consols declined from
week to week, till they touched 81, the lowest price recorded since
1848, the year of the Smith O’Brien rebellion in Ireland, when they sold
down to 80.

Then came an angry and threatening contest, and stormy litigation,
between the States of North Carolina and Alabama and the Southern
Railway Company, involving also other Southern States and railways. The
main conflict was between the States named and the United States Courts
on the 2¼ and 2½ cents a mile rate law. This went so far as to cause a
revocation of the license of the Southern Railway to operate its lines
in Alabama. The situation for a time was extremely critical, but a truce
was at length arrived at, the Southern Railway agreeing to obey the
State law, and leave the ultimate decision to the United States Supreme
Court.

While this disturbing controversy was at a white heat, the $29,240,000
fine inflicted by Judge Landis, of the United States District Court, at
Chicago, on the Standard Oil Company of Indiana, fell like a thunderbolt
upon not only Wall Street, but investors all over the country. This was
on Saturday, the 3d of August, and it looked so like confiscation, and
so alarmed the large speculative capitalists, who had been supporting
the stock market, that they at once withdrew their supporting orders
and, for self-protection, became heavy sellers themselves of the stocks
they held. They foresaw the effect of this disturbing decision, and the
course of the Southern States towards the railways, upon investors, in
causing liquidation. Simultaneously, a threatening report from the
Bureau of Corporations added fuel to the fire of distrust.

Day after day, for twelve business days, following the opening of the
stock market on Monday, the 5th, there was an almost uninterrupted and
very heavy decline in prices for both railway and industrial stocks, the
best and highest priced being the heaviest sufferers, and falling from
ten to twenty-five per cent. The scare among holders of stocks increased
as prices declined, and demoralization in the market carried these
generally below the lowest in the panic of March. It was very largely
another rich man’s panic, due to fears as to what might come next to
disturb confidence in the value and future dividends of both railway and
industrial stocks. The worst of it was, the innocent were, as usual,
made to suffer with the guilty. But after a storm there cometh a calm,
and so it was in this case, and perhaps all’s well that ends well. But
the ordeal was a very severe one, particularly for the large holders of
stocks, and made the year 1907 still more memorable than before.

Rumors of impending Wall Street and industrial corporation failures, as
usual in times of disturbance, filled the air, but only one important
industrial failure and one unimportant Wall Street suspension occurred
in August, and the gradual return of confidence caused a gradual
improvement on the Stock Exchange, although the semi-annual dividend on
Southern Railway preferred stock was reduced from 2½ to 1½ per cent.,
and the dividends on Erie’s first and second preferred stocks were
declared payable in four per cent. scrip warrants instead of cash.
Toward the end of the month the Secretary of the Treasury announced that
weekly deposits would be made in the national banks till October 15th,
and this at once began to ease the money market and further strengthen
confidence.

Early in September, however, there came a relapse in the stock market,
and another Stock Exchange failure. This recurrence of disturbance and
depression was partly due to stagnation, followed by demoralization in
the copper trade, both here and in Europe, which caused a reduction in
the price of copper by the selling agency of the Amalgamated Co. from 25
cents a pound to 18 cents, and not long afterwards to 15 cents.

Meanwhile the Calumet and Hecla, the Quincy, and other copper companies
had reduced their dividends, owing to the small demand for copper, and
Amalgamated copper stock declined rapidly to 57½, against 121 in
January. In Boston, also, the copper stocks broke in the same
demoralized way under heavy liquidation.

Railway shares sympathized with this extreme weakness of copper and the
copper stocks, but not as much as American Smelting, the U. S. Steels,
and other industrial stocks, and gradually the copper crisis ceased to
dominate them. At the same time the general market for both railroad
stocks and bonds was strengthened by the great success of the
$40,000,000 issue of 4½ per cent. bonds by the City of New York, the
loan being five times over-subscribed. This showed there was a large
amount of money in the country awaiting investment in good securities.
Yet, later, new low records were made for sundry railway and industrial
stocks, including Southern Railway common and preferred, and the stock
market, in its nervous and irregular fluctuations, told of the timidity
of the bulls and the boldness of the bears, consequent on shrinkage in
the iron trade, and uncertainty as to the business future.


------------------------------------------------------------------------




                             CHAPTER LXXI.

           THE GREAT CRISIS OF 1907.


The worst forebodings of September were far more than realized in
October, when the monetary disturbance, and distrust of credits, spread
from the Stock Exchange and Wall Street to the banking interests, and
involved the whole country in a panic that will always make the year
1907 memorable in our history.

Until the collapse in the “Curb” market of the stock of the United
Copper Co., followed, on the 17th of October, by the failure of the two
Stock Exchange firms that had been manipulating this Heinze specialty
for Heinze interests, the panicky conditions of the year had been
practically confined to the stock market and the interests directly
affected by it. But that collapse, involving those Heinze failures, fell
like a bombshell not only on the stock market, but on the banks of which
F. A. Heinze, the president of the United Copper Co., had, not long
before, purchased control. The fact that two of his brothers were
members of one of the failed firms—Otto Heinze & Co.—caused heavy
withdrawals of deposits from these banks, and particularly the
Mercantile National Bank, of which he had become the president.

The New York Clearing House Committee took alarm the same day and
examined the Mercantile. The result was that it demanded the resignation
of all its officers and directors that night, as a condition preparatory
to giving it any assistance. They complied, President Heinze among them,
and the bank was assisted to pay its clearing-house balances for several
days. But these were so large that further assistance was then refused.
Thereupon one of its old directors succeeded in bringing in new capital
and new directors on the day following, Sunday, so that the bank was
enabled to continue business without a break.

But meanwhile the contagion of distrust was spreading, and there was a
run on the deposits of not only the Heinze but the Thomas and the Morse
banks, the Thomases and the Heinzes having been equally prominent with
Morse in buying control of banks for speculative purposes. The Clearing
House Committee took them all in hand, and demanded the resignations of
their officers and directors. In this way they stamped these bank
promoters out of the banks they had managed to get control of. Then the
banks were assisted.

Suspicion soon fell upon certain trust companies with speculative
affiliations, more or less connected with the same promoters. Suddenly a
heavy and spectacular run upon the Knickerbocker Trust Company, the
second largest in New York, with more than sixty millions of deposits,
caused it to close its doors on the first day of the run. This was on
Tuesday, the 22d of October. The immediate cause of the run was the
resignation, on the previous day, of Charles T. Barney, its president,
coupled with the notification to the banks of the National Bank of
Commerce, on the same day, that it would not clear for the Knickerbocker
Trust Co. after the following day. So, this being published in the
newspapers, the depositors rushed to withdraw their deposits.

The Clearing House and Mr. J. P. Morgan, when appealed to, refused to
assist the Knickerbocker on the ground that they found it was not
solvent. The collapse of the Knickerbocker was immediately followed by
extensive runs on small banks and trust companies in New York and
Brooklyn, as well as on the savings banks, and about a dozen of the
former, including seven in Brooklyn, closed their doors. But the savings
banks took advantage of the sixty and ninety days’ time allowed them by
law for the payment of deposits after notice.

Following these minor banking suspensions there were long-continued runs
on the Trust Company of America and its Colonial Branch, and the Lincoln
Trust Company, with all-night lines of waiting depositors. But, finally,
after a hard struggle, these were examined by Morgan committee experts
and found solvent, whereupon, in the banking conferences held for a
number of days and nights at the residence of Mr. J. P. Morgan, it was
agreed to provide them with all the money necessary to meet the run. To
Mr. Morgan great credit is due for the arduous work he undertook to
better the banking situation in this critical period of storm and
stress.

New low records for stocks were made meanwhile under very heavy
liquidation, Union Pacific touching 100, and Amalgamated Copper 41¾, on
the 24th of October, and all others sinking to lower depths in about the
same proportion, while the abnormal scarcity and high rates for money
caused trading on margins to be generally suspended by brokers.
Transactions were, of course, largely curtailed by being placed on a
cash basis, but the buying of odd lots for investment was very heavy all
through the crisis. The decline in Amalgamated was accelerated by copper
selling down to 12 cents a pound. But much of the liquidation in the
stock market was caused by the banks and trust companies calling in
their loans on stock collaterals, and thus forcing the borrowers to
sell.

The hoarding of money, and the withdrawal of deposits from the banks and
trust companies, became so extensive that these institutions had little
or none to lend, and for several days call loans were made on the New
York Stock Exchange at rates ranging from 50 to 100 per cent per annum,
and in exceptional instances as high as 125.


[Illustration:

  _E. H. Harriman._
  _1906_
]


The United States Treasury came to the relief of the money market by
making—under the personal direction of Secretary Cortelyou—unusually
heavy deposits in the National banks of the City of New York, as well as
in other cities which were drawing heavily on their New York balances.
But still the banks and trust companies continued to lose their ordinary
deposits rapidly, and the money thus withdrawn by the timid and
distrustful was taken out of circulation by being placed in safe-deposit
boxes, tin boxes, wallets, and other receptacles. This hoarding was
foolish, as well as harmful and un-American.

New York had to deal with a banking crisis. So, on Saturday, the 26th of
October, the members of the New York Clearing House met, and resolved to
issue, on and after that date, Clearing House certificates—bearing six
per cent interest—to be used by the banks of the Association in paying
their daily balances at the Clearing House, instead of currency. These
the Clearing House at once began to issue, when called for by any bank,
to the amount of 75 per cent of the value of any acceptable assets it
might deposit with the Clearing House. This gave immediate relief to the
banks, and especially those whose reserves of currency were most largely
depleted, for they immediately availed themselves of their issue.

At the same time they saw that, in addition to the government deposits,
large importations of gold were necessary to replace, at least in part,
the hoarded money, and aid in restoring confidence. The Clearing House
certificates, by releasing much of their gold and legal tender notes,
enabled them, through “cable transfers,” to purchase gold in England for
shipment to New York, and by the end of the first week in November
$50,000,000 had been purchased by banks and bankers for shipment to the
United States, and nearly half that amount had already reached New York.
But some of the importing banks were in other cities, including Chicago,
Philadelphia, Boston, Pittsburg, and San Francisco.

These heavy importations, however, disturbed the London money market,
and on Thursday, the 31st of October, the Bank of England raised its
minimum rate of discount from 4½ to 5½ per cent, to check the outflow of
gold. This not proving sufficient, it raised it to 6 per cent on the
Monday following, and to 7 per cent on Thursday, the 7th of November, a
higher rate than had been reached since 1873, the year of the great
panic in this country and in Germany, when the Bank of England rate was
advanced to 9 per cent. But once, in 1866, it went up to 10 per cent.

The Bank of France also, on the 7th of November, 1907, raised its rate
from 3½ to 4 per cent, owing to the drain of gold to this country; and
such an advance is very rare in France. For seven years, up to the
spring of 1907, it had stood at 3 per cent. The Bank of Germany also
advanced its rate to 7½, and the Bank of Belgium to 6 per cent. These
rates showed how severely the loss of this gold was felt in Europe. By
November 16 our gold purchases aggregated $70,000,000.

In the interval the clearing houses in all the large cities of the
United States had, in self defence, followed the example of New York in
issuing clearing house certificates. Currency, too, had been selling at
a premium ranging from 2½ to 5 per cent for certified checks, owing to
its great scarcity. At Pittsburg the Stock Exchange was closed
immediately after the announcement of the failure of the three
Westinghouse companies there. Other failures were very numerous.

In Pittsburg, Chicago, New Orleans, and many other cities, the local
clearing houses printed clearing house checks of small denominations,
from 25 cents or one dollar up, to be taken out and paid out by the
banks instead of currency, when found necessary. Several of the Western
Boards of Trade closed, owing to the demoralization in the grain market,
caused by the heavy decline in prices under the rush to sell in order to
raise money, while many banks all over the country issued their own
cashiers’ checks for both small and large amounts, instead of currency
or clearing house certificates, in payment of depositors’ checks. The
banks were in a partial state of suspension from Maine to California.

The extent of the drain on bank reserves may be inferred from the fact
that the statement of totals for all the New York associated banks for
the week ending on Saturday, November 2, showed that they were
collectively $38,838,825 below the dead-line of 25 per cent reserve on
their deposits, without counting Government deposits, which had been
very large. The detailed statement of each bank’s condition was not
published on that date, and continued to be withheld till after the
crisis had passed into history.

This large deficit of the New York banks caused much uneasiness and a
further sharp decline in the stock market, but the frequent day and
night conferences of leading bank officers with Secretary Cortelyou and
Mr. J. P. Morgan, to devise ways and means of relieving the extreme
stringency and distrust of the monetary situation, were productive of
much good. This was especially the case in bringing the trust companies
together to act as a unit through a committee, of which Edward King,
President of the Union Trust Co., was made chairman. This committee was
organized in the office of J. P. Morgan & Co., which, indeed, was the
headquarters for all banking relief outside of the Clearing House.

Unfortunately for Europe, our purchases there of so many millions of
dollars’ worth of gold, within three weeks, seriously unsettled the
London, Paris, and Berlin stock exchanges, and a continuous decline in
stock and bond prices attended its export to this country. But,
notwithstanding the relief we obtained from this great source, the banks
here still continued under a heavy strain. An indication of this was
found in the statement of the New York Clearing House, giving the totals
for the week ending on Saturday, the 9th of November, the third week of
the acute stage of the crisis.

It showed that the deficit of the associated New York City banks, in
their legal reserve, had increased $13,085,800 over that of the week
before, making their total deficit $51,921,625. But as the Clearing
House statements are made up on averages for each week, and not on the
actual condition of the banks at the end of the week, the gold imported
was only credited from the dates on which it was received by the banks.
Moreover, this statement was made on rising averages, that of the week
before on falling averages.

A conspicuously important feature of the arrangements made at the Morgan
conferences for supplying the needs and taking care of the Trust Company
of America was the sale, at par—$100 a share—of the majority of the
stock of the Tennessee Coal, Iron and R.R. Co.—which had been largely
hypothecated with it—to the United States Steel Corporation, payment for
the stock to be made in its 5 per cent sinking fund bonds at 84. This
exchange of Tennessee stock for the Steel bonds was promptly made
through J. P. Morgan & Co., on and after November 7, thus adding another
large property to the many other subsidiary properties of the U. S.
Steel Corporation.

This transfer was one of the most notable events of the memorable panic
year—1907—the wreckage of which it will take a long time to clear away.
But meanwhile the country will have started on a new career of
prosperity, and with eighty-four millions of people to develop its
boundless resources, we need have no fear but that its recovery will be
rapid, and its future as great and grand as we could desire. Moreover,
it will be all the better and stronger, and all the higher in its
business standards, for the severe yet purifying ordeal through which it
has passed.


------------------------------------------------------------------------




                             CHAPTER LXXII.

     THE CAUSES OF THE CRISIS OF 1907.[2]


Footnote 2:

  An address by Henry Clews, LL.D., delivered at Cooper Institute, New
  York City, February, 1908.

The wiseacres in Wall Street and elsewhere had to take many sledgehammer
blows in this panic year. They had become like Tom Toddy—too big-headed
for their bodies. When a man knows it all, then his danger commences. My
advice is, never follow such a leader, but wait patiently and the time
will come when you can safely copper him.

In September, 1906, when stock and bond prices were advanced abnormally
to a 3½ to 4 per cent basis, while six months’ money was loaning at 6
per cent, it was evident that one or the other was too high; and
considering the growing demand for the use of money it was quite
apparent it was not money that was too dear, but securities. At that
time I persistently advised everyone to get out of stocks and out of
debt, and keep out for a prolonged period, only making quick turns
meanwhile.

Since then security values have gone down prodigiously—$3,500,000,000
will scarcely cover the depreciation of those dealt in on the New York
Stock Exchange alone; so those who took my advice and got out at top
prices can well afford now to buy back their stocks, if dividends are
not reduced. No one can foresee changes in these. But everything that is
good is fairly cheap and below intrinsic value, based upon present
returns. Our financial situation is vastly different to any previous one
after great panics, of which there have been many, since the one of 1857
brought on by the failure of the Ohio Life & Trust Co., at the time of
my advent in Wall Street: so I have been in all these panics.

The conditions now differ from those of all the other great financial
storms because the wealth of the nation has become so vast as to make it
the richest in actual wealth and productiveness, per capita, of all
nations. As a matter of fact, our wealth-making developments have been
so excessive as to have forged ahead of our banking facilities. This has
had much to do with our recent setback. Wise and sagacious capitalists
saw the handwriting on the wall in Wall Street and elsewhere, and those
who did unloaded their securities last year, dumping their stocks at
top-notch prices, amounting to at least $800,000,000, upon weaker-backed
people.

This unloading, together with the San Francisco earthquake disaster,
wiped out, in prices, $350,000,000 of property, and struck the
staggering blows which did more than anything else to pave the way to
the recent panic conditions. The selling out by big holders was followed
by all the large railroad systems in the country selling bonds, stocks
and notes. These, being offered to stockholders of record at apparently
tempting prices, were floated. This great mass of new securities coming
on the market was an indigestible one and absorbed the capital of a very
large number of the rich men of the country and put it in a fixed form:
and most of these heretofore very rich men have ever since been in the
position of a man who, having had a “Sherry dinner,” is urged to accept
the hospitality of a friend to take a “Delmonico dinner.”

What produced the panic was a number of adverse factors happening one
after another in rapid succession. The first was the unloading by
sagacious holders of securities at high prices; the second was the
immense creation and selling of new securities by the railroads for
improvements; the third, the revelation of scandals started by Mr.
Hughes, the investigator of the life insurance companies. We all know
what happened in that connection. Then came the Interstate Commerce
examination of Mr. Harriman as a witness and his revelations under oath;
then the $29,400,000 fine by Judge Landis on the Standard Oil Co. of
Indiana, and finally, the insistence by Governor Hughes, against
overwhelming opposition, of the passage of the Utilities Bill, under
which the investigation of the Metropolitan Surface Railroad was started
and which unearthed what really caused the shares of that great company
to fall from their high price of $127 per share to $20 a share—about the
present price. This was the straw that broke the camel’s back and caused
an entire breakdown of confidence; which is usually the major part of
the foundation of credit. The undermining of this caused the closing of
the doors of the Knickerbocker Trust Co. Then a state of chaos ensued
and bedlam broke loose, and almost everybody in Wall Street stood aghast
wondering what would happen next.

As I have faithfully presented my side of the case to you, in a crude
way, I ask you, as though you were impaneled on a jury, the question:
Why should all the blame of producing the recent panic be laid to
President Roosevelt? The real causes of all the trouble can be summed up
as follows: (1) The high finance manipulation in advancing stocks to a
3½ to 4 per cent basis, while money was loaning at 6 per cent and above,
on six and twelve months’ time on the best of collaterals; (2) capital
all over the nation having gone largely into real estate and other fixed
forms, thereby losing its liquid quality; (3) the making of injudicious
loans by the Knickerbocker Trust Co., hence suspension; (4) the
unloading by certain big operators of $800,000,000 of securities,
following which were the immense sales of new securities by the
railroads; (5) the California earthquake, with losses amounting to
$350,000,000; (6) the investigation of the life insurance companies; (7)
the Metropolitan Street Railroad investigation; (8) the absurd fine by
Judge Landis of $29,400,000 against a corporation with a capital of
$1,000,000; (9) the Interstate Commerce Commission’s examination into
the Chicago & Alton deal and the results thereof.

These were substantially the causes which led up to and really brought
about our present disastrous condition. Did President Roosevelt do any
of these things? Not one of them. But Governor Hughes was the brilliant
investigator of the life insurance companies, and also unearthed the
Metropolitan Railroad scandal through being the author of the Public
Utilities law. Yet Mr. Roosevelt is condemned by many, while Mr. Hughes
is praised by the people all over the country. I ask on this showing if
there is any justice in putting the entire blame for the present
disturbed state of financial affairs upon President Roosevelt’s
shoulders, without including Governor Hughes, as both have been equally
engaged in the same reform movement.

I am not willing to affirm that either is to blame, for both have simply
done their duly in enforcing the laws, and exposing wrongdoing. How in
my opinion the market will turn permanently when the big men of Wall
Street commence to take back what they sold, which they can already do
at a difference in prices of from 30 to 50 per cent. With the
$70,000,000 of imported gold here and on the way from Europe, together
with an increase in bank notes, there will soon be no lack of money in
this country. What is now wanted is more confidence to increase credits.
To import more gold will embarrass London and other foreign money
centers. This should be avoided by stopping further gold imports. Cheap
money alone will not of course put up stocks. The governing factors will
be the state of trade, and net earnings, and the “big men” will be
governed by these.


------------------------------------------------------------------------




                            CHAPTER LXXIII.

              RECENT MEN OF MARK.


                           CHARLES M. SCHWAB.

Born in Pennsylvania, May 30, 1851; rose, from the bottom, to be
President of the Carnegie Steel Company, then, on its incorporation,
became President of the United States Steel Corporation, but resigned,
and later became President of the Bethlehem Steel Company; has large
mining interests, especially in Nevada; he travels much, but resides on
Riverside Drive, New York, in one of the largest houses in the city,
built as an exact copy of a historical French château near Paris.

                           DANIEL GRAY REID.

Born in Richmond, Ind., August 1, 1858; became Vice-President of Second
National Bank there; then went into the tin plate industry, and in 1895
became one of the organizers of the American Tin Plate Company,
afterwards merged in the United States Steel Corporation; removed to
Chicago in 1897, and to New York in 1899, and was one of the Executive
Committee of the United States Steel Corporation when organized in 1901;
also became a director and leading spirit in the Rock Island Railway
Company in association with the two Moore brothers, William H. and James
Hobart, the Chicago reorganization lawyers. All three are now residents
of New York.

                          THOMAS FORTUNE RYAN.

Born in Virginia, October 17, 1851; came to Wall Street in 1870 from
Baltimore and the drygoods trade; became prominent in the consolidation
and extension of metropolitan street railroads, and also gas and
electric light systems here and in Chicago, and in the American Tobacco
Company, and later bought control of the stock of the Equitable and the
Washington Life Insurance companies; has been director of many other
corporations, and is also Vice-President of the Morton Trust Company.

                           JOHN WARNE GATES.

Born at West Chicago, Ill., 1855; kept a hardware store there; then
became salesman in Texas for barbed wire; later established the Southern
Wire Company in St. Louis and Braddock Wire Company near Pittsburg;
after absorbing two other companies, sold out to Federal Steel Company,
which was then absorbed by United States Steel Corporation. He thus
acquired great wealth, and became a large operator in Wall Street, and
organized the firm of C. G. Gates & Co., now dissolved. After buying
control in the open market of the Louisville & Nashville Railway, he
sold it to J. P. Morgan & Co.

                            AUGUST BELMONT.

Born February 18, 1853; son of the late August Belmont, and head of
August Belmont & Co., bankers, and New York representatives of the
Rothschilds; is President of the Interborough Rapid Transit Company and
other corporations; also of the Coney Island Jockey Club and other turf
organizations, and keeps up a large racing stable, is also a director in
a number of banks and railways and other companies, and politically,
like his father, a leading Democrat; is a member of many clubs and
associations; graduated at Harvard in 1875, and has a New York residence
at 44 East 34th Street, but lives much of the year at his country home
at Hempstead, Long Island. He is well known, too, as the financial
director of the Belmont Tunnel, across the East River, between New York
and Long Island City.

                           WILLIAM H. MOORE.

Born in Utica, N. Y., October 25, 1848; located in Chicago with his
younger brother, James Hobart Moore, in 1873, and both were admitted to
the Illinois bar, and practiced as W. H. & J. H. Moore, making a
specialty of reorganizing corporations; reorganized the Carnegie Steel
Company, and formed the four corporations in “the Moore group” that were
absorbed by the United States Steel Corporation; later controlled the
Rock Island and other railway and industrial corporations, partly in
conjunction with Daniel Gray Reid.

                        ANTHONY NICHOLAS BRADY.

Born at Lille, France, August 22, 1843; came to the United States with
his parents when a child; opened a tea store in Albany in 1864, and
afterwards other tea stores there and in Troy; became a promoter and
director of gas and electric light corporations in Albany, Troy,
Chicago, New York, and other cities, and, later, of street railway
companies in Brooklyn and elsewhere; acquired a controlling interest in
the People’s Gas Company of Chicago and a very large one in the Brooklyn
Rapid Transit Company, into which he merged his Brooklyn companies; is
also a large stockholder in the American Tobacco Company and many other
industrial companies; resides at 411 State Street, Albany, but his
office is at 54 Wall Street.

                            STUYVESANT FISH.

Son of the late Hon. Hamilton Fish, Governor of the State of New York
and Secretary of State in General Grant’s Cabinet. Born June 24, 1851,
at New York, N. Y. Educated at Columbia College, New York, graduated
1871. Entered railway service October 1, 1871, after which he, up to
June 20, 1872, became clerk in the Illinois Central Railroad, New York
office; June 20 to October, 1872, secretary to president of same
company; November 1, 1872 to December 31, 1874, clerk with Morton, Bliss
& Co. at New York, and Morton, Rose & Co. at London; January 1, 1875 to
March 15, 1877, managing clerk Morton, Bliss & Co., holding their power
of attorney; December 14, 1876 to March 6, 1879, member New York Stock
Exchange; March 16, 1876, elected Director Illinois Central Railroad,
and appointed treasurer and agent for purchasing committee New Orleans,
Jackson & Great Northern Railroad; November 8, 1877, elected secretary
Chicago, St. Louis & New. Orleans Railroad; and March, 1882,
vice-president Chicago, St. Louis & New Orleans Railroad; January 7,
1883 to April 2, 1884, second vice-president Illinois Central Railroad;
April 2, 1884 to May 14, 1887, vice-president; May 18, 1887 to November
7, 1906, president same road; President American Railway Association
April 27, 1904 to April 25, 1906; Chairman Seventh Session International
Railway Congress, Washington, D. C., May, 1905. Elected Director of the
National Park Bank, March, 1883, and so remains; elected a Trustee of
the Mutual Life Insurance Company of New York in the year 1888 and
continued as such until February 23, 1906, when he resigned. What Mr.
Fish did for the Illinois Central Railroad Company while its President,
is shown in the following extract from the London _Statist_, and also in
the Annual Reports of the Directors of the Company, which make a
marvellous exhibit of Mr. Fish’s able and sagacious management during
his long régime:

The Illinois Central is the most important of the systems running north
and south between Chicago and the Gulf of Mexico. At one time its
prosperity chiefly depended upon the cotton crop; but although this crop
still gives it a large traffic, its prosperity has been built up by the
acquisition of a large share of the grain and maize traffic. In the old
days corn, or maize, was sent through the Western States for shipment
_via_ Boston, New York, and Baltimore, but the Illinois Central has now
succeeded in diverting a vast portion of it to New Orleans. It now
derives its revenue from carrying a large traffic at low rates in
competition both with the Eastern lines and with the water transit of
the Mississippi; In recent years the Company has built extensions which
now enable it to participate in the coal and iron ore traffic required
by or originating in the Birmingham iron district. The Illinois Central
has always enjoyed good management. In its early days, when the accepted
principle of railway working was to charge high rates and to carry very
little traffic, its policy conformed to that of other well-managed
undertakings. For the past twenty years its policy has changed; it has
sought to render to the public the maximum of service for the lowest
possible rate. The success of this policy has exceeded all expectations.
In the twelve months to June 30th last the Company carried traffic at a
lower rate than ever before, and yet obtained a record profit, both
actually and relatively to its capital expenditure. This success has
resulted from good management, economy of operation, and economy of
capital expenditure.


                    GOVERNOR HUGHES AND WALL STREET.

In respect to the present agitation at Albany, as recommended by
Governor Hughes, to investigate Wall Street methods, I do not hesitate
to say that as the head of the firm of Henry Clews & Co. I am perfectly
willing at any time to allow a representative, appointed by either the
Federal or State authorities, to examine the books of my firm, as the
result of such an examination can reflect nothing but credit on our
business methods. I should, however, object and refuse to show, in any
instance, the names of our customers, as our relations with them are
confidential and will not be betrayed. Ever since our firm was
established we have made a practice of issuing notices of purchases or
sales to clients, giving in each case the name of the broker from whom
bought, or to whom sold. This is now, I believe, the custom in other
offices, and is a guarantee that brokers execute the orders on the floor
of the New York Stock Exchange.


------------------------------------------------------------------------




                             CHAPTER LXXIV.

 NEEDED PUBLICITY AND REFORM IN CORPORATIONS.


Years ago I saw the inevitable end of the methods of some of the
unscrupulous managers and manipulators of corporations, and began to
agitate the employment of certified public accountants to examine into,
and report to the stockholders, the true condition of the companies
involved. Had my suggestions been adopted there would have been little
cause for the recent investigation by the government officials, as the
reform now sought would have been accomplished long before the present
stringency of money became a disturbing element all over the world, and
would not have led to the semi-panicky conditions which prevailed so
disastrously in 1907. An address on “Publicity and Reform,” which I
delivered before the Wharton School of Finance, University of
Pennsylvania, in April, 1906, includes my urgent adoption of the policy
I have referred to, and reads as follows:

We live in a progressive age, and we are at present passing through a
period of salutary business reform. This reform means improvement, and
business men of all kinds should help and not retard it. The banking,
railway, and insurance communities should, in particular, do all they
can to promote it and invite the fullest publicity as to their
transactions and methods of doing business. In this connection the
opposition developed in the New York Legislature to the investigation of
the banks was a mistake of judgment, because it was calculated to excite
distrust, whereas willingness to submit to thorough investigation would
allay it.

This opposition drew more public attention to the agitation for a
general bank department examination than would otherwise have been
attracted to it, and the unwillingness to submit to it suggested that
there was a screw loose, or something to conceal in connection with some
of the State banks; and that they were therefore vulnerable to attack,
or at least open to criticism. This suspicion those concerned should
have avoided by not only boldly facing the legislative music, but
inviting it and leaving everything open and above board. Corporations
and banking and mercantile firms that become at all objects of suspicion
should, in their own interests, speedily clear themselves, by inviting
the fullest examination and publicity. Unsoundness and irregularity, if
such existed, would thus be exposed and weeded out, instead of being
nursed in secret, and so doing harm and impairing confidence in
corporations and firms perfectly sound and regular in their methods and
practices. The sound concerns would stand better than ever after passing
through this ordeal of publicity. The New York Legislature, as well as
the Legislatures of the other States, should respond to the popular
agitation for publicity by passing laws requiring all corporations,
including banks and trust companies, to make at least semi-annual
reports of their condition, certified to by registered public
accountants, with power invested in the State Superintendents to order
special examinations by such accountants, at any time, when deemed
necessary; that is, whenever they were suspected of being unsound or
irregular in their business methods. This should be done for the
protection of others as well as to clear them of suspicion and restore
their credit, if found to be sound and straight. Only the insolvent and
the crooked would have anything to fear from this wholesome publicity.

In this way disaster might be averted and impaired confidence promptly
restored. I lay stress upon the employment of skilled accountants
because the certified results of their examinations would be accepted as
conclusive of the actual conditions being as they stated or described.
They would speak with authority. It should be made a felony for an
accountant to make a false or misleading report, and he should ever
after be disqualified from practising.

To meet the growing demand for them, every college and university should
have a department for the special training of accountants, who on
graduating should receive a diploma or degree, as in the medical or
legal profession. Already the position held by certified accountants is
high, but it should be raised still more by the action of the
universities and colleges. Some of these have established departments
for accountants, where the students undergo thorough training by men who
have had practical experience in the profession, but all institutions of
learning ought to have them and maintain them in a high state of
efficiency in view of their importance to the business community. The
opposition to publicity shown by the New York State banking interest, as
represented in the Legislature, where it has choked off probing, has
thereby aroused fresh suspicions and much adverse criticism. It is not
surprising that many are led to suspect that there is much concealed
that ought to be revealed.

The strong desire for secrecy in the management of corporations,
especially with life insurance companies, is obviously in defiance of
public sentiment, and the Legislature should now make the house-cleaning
thorough while it is about it. If it does less it will fail in its duty.

It is indeed very surprising, under the circumstances, that the officers
and trustees of the great life insurance companies should have supposed
that anything short of complete cleansing and purification would satisfy
their policyholders and the public.

The bankers of the country are, more or less, intimately concerned in
seeing this Augean insurance stable thoroughly cleaned out, for, unless
it is, distrust will linger, and the life insurance taint will, more or
less, continue to extend to the banks, bankers, bond dealers, and trust
companies, with which the life insurance companies necessarily have to
do business.

For the banking interests to virtually ignore the past, and say to the
life insurance companies, “Go, and sin no more,” would be
pusillanimously evading the requirements of the situation. The cloud
that drifted over Wall Street from the insurance investigation must be
entirely dispersed by the fullest investigation and publicity and the
establishment of a new regime in insurance management and its banking
methods and affiliations.

It is the duty of life insurance trustees to co-operate to this end, and
for them to refuse to do so is to imply consciousness of their own
inability to stand the searching ordeal. If such there be, owing to
their purchases or sales of securities, in connection with their
respective companies, or any other doings that cannot bear the light or
are open to criticism, they should be ventilated and exposed without
fear or favor.

The efforts to smother further life insurance investigation, which had
their counterpart in the opposition to the proposed banking department
investigation, should be frowned down by public opinion, both in the
interests of morality and good business practices. The banks and the
banker should, like Caesar’s wife, be above suspicion, and not less so
the life insurance manager and trustee.

Turning to the railways, we find the need of stricter laws in matters
that favor a few at the expense of the many, as, for instance, in the
giving of rebates. To prevent these, not a mere fine, which can be
easily paid, should be imposed, but the offence should be made a
misdemeanor, punishable with imprisonment. Railway officials would then,
with the danger of an indictment and a term in prison before them,
hesitate to violate the law. For their own reputation, as well as for
the sake of their families, they would be likely to avoid that secret
and unlawful rate-cutting, disguised by the payment of rebates, which
has done so much in the past to foster unholy monopolies and crush
competition to the ruin of thousands.

In the lime-light of publicity the irregular rebate practices of the
railways, for the benefit of large and favored shippers, would be
impossible; and equally so would have been the go-as-you-please and
extravagant management of the life insurance companies as revealed by
the insurance investigation. Under the new order of things, regulated by
stricter laws, it should be made impossible for these irregularities
ever to occur. The death-knell should also be sounded by these stricter
laws and reforms of much of the “graft” that has been epidemic in
political and business life. Publicity of accounts would be a protection
to all solvent concerns and expose and eliminate the unsound and the
fraudulent that would otherwise be a menace to them, and it should be
welcomed by all who have nothing to fear from such publicity.

We are passing through a reform—yea, a revolutionary period in business
affairs. But good will come out of it, for with our improved business
methods will come a higher sense of responsibility and a keener
perception of duty, which cannot fail to inspire correspondingly greater
confidence and produce more certain results. We shall thus have more
conservatism in business and fewer speculative hazards and crookedness
than before.

Therefore, let the march of reform be unimpeded, for it will lead us to
a higher financial and commercial eminence than even that on which we
already stand, and hasten the time when this country will be the world’s
greatest financial and commercial centre.

It would seem that many need more conservatism and prudence in their
business ventures, and they would be the better for having the
lime-light of publicity thrown on them. When the sky-rockets of the
business world fall they are not the only sufferers, for they injure
others who are perfectly sound and conservative by creating distrust of
all.

The accounting and publicity I advocate would expose, check, and prevent
the irregularities and the one-man power abuses that have ended in so
many collapses. The one-man control of large corporations must come to
an end. An ounce of prevention is better than a pound of cure.

Corporations, too, should show that they have souls by not neglecting
the welfare of their employes. They should promote their health by
giving them healthy surroundings where they work, and also by making
graduated provision for old age service, or pensions in case of
disability, after long service. This, or giving them a share in the
profits of the business, would do much to narrow the gulf between labor
and capital.

The one-man power in large corporations, with a lot of dummy directors
subservient to it, should also come to an end. Dummy directors are no
better than so many decoy ducks that mislead the public. They are
directors who do not direct, and are not expected to direct by those in
control who selected them for election. They are consequently a false
pretence. No man ought to accept a place as director or trustee of an
institution, or corporation, particularly in a banking, railway,
industrial or life insurance company, who does not fully appreciate the
responsibility of the position and the care and vigilance it demands,
and intend to faithfully and conscientiously perform its duties. To
intentionally become a dummy director is reprehensible, and directors in
dealing with the officers of their corporations should have opinions of
their own and not be afraid to express them. They are not alone
responsible for their own errors or wrongful acts, but for failure to
expose and put a stop to the wrongdoing of the officers or employees
under their control, and they should not assume such duties when they
cannot properly attend to them.

I once knew a man of very great business renown, who during the last
thirty years of his life was much sought after because he possessed the
qualifications necessary to make him a most satisfactory dummy or dumb
director. Hence he was connected with a very large number of companies.
He was a man of wealth, retired from business, and had great capacity,
but it was of the avoirdupois kind. His chief qualification consisted in
his always attending punctually all the meetings. He came early and
stayed till the end. He watched closely to determine which way the
majority vote was going and always went with it. He was never known to
open his mouth, except when the luncheon was served after the directors’
meeting had adjourned. He was much lamented by corporation managers when
he died. He was their favorite director, on the ground, as claimed, he
gave no trouble and was perfectly satisfied with the result of every
meeting. When he was handed his five-dollar gold piece for attendance it
caused him to go home rejoicing. I cite him as a specimen brick among
dumb and dummy directors.

Directors should make it their business to learn all that is going on in
the corporations and institutions that they direct, so that they may
qualify themselves to act intelligently, instead of in a blindfolded
way, as is too commonly the case. They should assert their rights, and
direct in fact as well as in name, but of course necessarily leaving all
the details to the officers. They, too, should avoid grinding axes of
their own at the expense of their companies, and co-operate with both
State and Federal officials in the strict observance and enforcement of
the laws, and never connive or wink at their evasion.

All these influences for the better would promote public confidence in
our ways of doing business, and indirectly also contribute to the
stability of our monetary position. What we greatly need is a more
stable money market in Wall Street. Such erratic changes in the rates
for Stock Exchange loans that we sometimes see would create a convulsion
in Europe if they were possible there. But as they are not possible
there, why should they be here? We are destined to ultimately become the
monetary centre of the world, but that cannot be till we acquire the
stability of the Old World in interest rates.

A freak money market, jumping up to absurdly high rates and then down
again, is as dangerous as it is intolerable. It is inimical to the
proper transaction of legitimate business, and a disturbing factor that
should be made as impossible in New York as it is in London, Paris, or
Berlin. What we need, among other things, to prevent it is more care and
conservatism in banking circles. In the European money centres the rates
for money rise and fall in response to supply and demand, just as they
do here, but within narrow limits beyond which they never pass. There is
no good reason why it should not be so with us.

It is to be hoped that the eminently well qualified members of the
committee appointed by the New York Chamber of Commerce—consisting of
Messrs. Vanderlip, Conant, Straus, Claflin, and Clarke—will reach a
solution of the problem of the money market and define how far its
vagaries and irregularities are owing to a want of sufficient currency,
capital, or credit, or sudden and excessive demands for loans,
consequent on excessive activity in speculation, or unwillingness to
lend in times of distrust and panic.

In European countries monetary stability can always be relied upon; and
that element of stability, which our money market now lacks, must exist
here before we can command the confidence of the world as the world’s
financial centre. But we are now rapidly taking steps in the right
direction, and the reform movement in business and legislation can come
none too soon for our national welfare. Let the good work of reform go
on and prosper, for from it we shall reap an abundant harvest in the
future.

There was no good and sufficiently sound reason why money, on call,
should have loaned in Wall Street at rates ranging from 100 to 125 per
cent. per annum—as it did in December last, when in other cities all
over the country it loaned no higher than six per cent. These money
spasms, while local in their actual effect, exert a disturbing and
demoralizing moral influence which is far-reaching. Such pernicious
activity in the money market is not natural. It is due to artificial
causes and ill-regulated methods affecting our local supply and demand.

For the rates of interest to be leaping wildly up and down, in the loan
crowd of the Stock Exchange, and changing violently every few moments,
according to the shifting bids and offers of the excited borrowers and
lenders, would seem to be absurd and laughable enough for opera bouffe.
But in the banking and Stock Exchange business it is a serious evil,
involving large results.

Such an abnormal money market is, of course, not very often seen, but it
occurs often enough to make it important for us to study its causes and
seek a remedy for such monetary excesses. It is indeed a topic so
serious as to call for the gravest consideration. Yet neither the
stringency nor these minute to minute, or hour to hour, fluctuations
were caused by any fluctuation going on in the volume of the currency or
any except local influences.

What we have to guard against and prevent is these occasional spasms.
Against the slow general rise and fall of interest rates for money of
from, say, 2 to 6 per cent per annum and vice versa, there is nothing to
be said, for the movement is a legitimate one, a natural result of the
varying supply and demand. We see it in the Old World, as well as the
New World, but such rocket-like soarings, and such eccentric ups and
downs as Wall Street has experienced from time to time, are peculiar to
itself. It must, however, outgrow them, and the sooner it does so the
better. It is not my purpose in this address to show how the end in view
may be best accomplished, but that it can and will be accomplished
within no long time is certain. The fault is not so much due to the want
of elasticity in our currency system as to our local methods of doing
business in stocks and lending and borrowing money to carry them.

The causes of general monetary stringency are always apparent, but the
cause of the local scarcity of cash that sends the money rate up 5, 10,
20 or even 50 per cent in an hour or so among a small group of borrowers
and lenders in the Stock Exchange, could evidently be avoided, as it is
in Europe, and it is the business and duty of both borrowers and lenders
here to avoid it.

One thing tending to produce occasional local stringency is that our
money market has to contend with the evil effects of the New York
Sub-Treasury, or rather the Sub-Treasury system, that locks money up
that ought to be kept in circulation. Every Sub-Treasury acts
practically as a Government bank, just as the old United States National
Bank in Philadelphia did, and takes in all the money it can get, but
pays out none, except on Government vouchers. So it does not perform all
the functions of a bank, and we should have a more elastic currency if
the Sub-Treasury system were abolished, which it doubtless will be in
time. Theoretically, we have no United States National Bank, yet
practically we have one in every Sub-Treasury. Until Congress amends the
Sub-Treasury and National Currency laws, the banks and trust companies
could by a united understanding prevent extreme money rates, by agreeing
not to charge in excess of 10 per cent interest; or, what would be
better still, 7 per cent, on call loans during periodical money strains.
While they would lose some immediate profits, they would be abundantly
compensated later on by making New York a greater, safer, and stronger
financial centre, which would materially increase their business.

In Germany, emergency currency may be issued by the banks in times of
stringency. This, in effect, releases them from the limit on reserves,
just as, in panics, a Government order in council releases the Bank of
England from the limit placed on its note issues, and allows it to issue
its notes to an unlimited extent. The consequent inflation of the
currency under both the German and English systems, and the revival of
confidence produced by it, brings relief in the money market.

But our only way of obtaining similar relief is for the Secretary of the
Treasury to order Treasury deposits to be made in National banks on the
security of United States bonds, or if he is willing to accept them,
first class State or city bonds. Assuming the banks to have the bonds,
the Treasury may not always have the money to spare for this purpose
beyond its proper working balance, and at the best it is a make-shift
expedient.

That we need a more elastic currency is indisputable, and also such
changes in our custom of borrowing and lending money on collaterals on
the Stock Exchange as will secure stability in rates of interest there,
even in times of stringency. The time will come when the circulation of
the National banks will be based on gold, instead of United States
bonds, and in that way our monetary system will more closely approach
that of the principal European nations. But we need not prepare to cross
the bridge until we come to it.

With regard to the other matters referred to, it is always well to
strike while the iron is hot, and at present the reform movement in
legislation affecting life insurance and banking concerns is at white
heat, not only in the State of New York, but elsewhere, and it should be
pressed forward until all the results aimed at are secured.

In the first place, to accomplish this the life insurance and bank
investigations already in progress, or proposed, should be carried out
to the fullest extent, and, through the employment of expert and
independent book-keepers and accountants, made so thorough as to leave
nothing hidden or in doubt. The results in detail should then be
promptly published, and in a form that all could understand, so that the
public would know the plain, unvarnished truth. In this way rumors and
suspicions of underhand doings, bribery and corruption, graft, fraud,
deficiencies in accounts, misappropriation of funds, and concealed
insolvency, would, if not confirmed, be contradicted and swept away,
thus leaving the concerns before under suspicion in all the better
credit and standing.

Not only should all this be done now, but the State Legislature should
be equally prompt in passing the laws necessary to maintain this high
standard of publicity in the future, and making it mandatory upon the
banking and insurance departments to order frequent examinations into
the condition of all State banks and banking and insurance concerns by
expert accountants, and publish their findings. All opposition to such
investigation and publicity is of itself calculated to excite suspicion,
whether it comes from banks, trust companies, life insurance officers,
and trustees, or other concerns, or parties in interest. Industrial and
other corporations of all kinds, including railways, ought also to be
made, by mandatory laws, subject to stricter supervision and periodical
examination as to their financial condition. Hence the Attorney-General
of this and other States should be invested with new powers to this end,
and the provisions of the laws should be made mandatory upon them. They
should call for verified statements of earnings, profits, expenses,
capitalization, indebtedness, dividends, property valuations,
liabilities and assets, so that large corporations would cease to be
blind pools, and fraud and misrepresentation would be checked by being
exposed; and it is exposure and publicity which is most dreaded by those
who prefer crooked ways to open and above board business methods and
integrity of purpose. But those who have nothing to hide have much to
gain from it, and should welcome the lime-light of this new era of
publicity. Secrecy is only the defence of the weak.

The recent decision of the Supreme Court of the United States in the
Tobacco and Paper Trust cases, that corporations cannot take refuge in
secrecy, but must give testimony as to all their transactions, when
required, even where it is self-incriminating, is a great victory of the
people. It marks the beginning of a new departure in corporate
management by enforcing existing laws, and requiring that publicity of
accounts, which large industrial, railway, and other corporations, and
most notably the large industrial trusts, have hitherto so strictly
guarded against and avoided, after the blind pool fashion.

The decision is that the law as it stands, giving a witness the
constitutional privilege of refusing to give testimony tending to
incriminate himself, does not extend to or cover his refusal to produce
books and papers that would incriminate his, or any other corporation,
the immunity being wholly personal. He cannot, therefore, assert it
either in behalf of a third person or a corporation, yet strange to say
this clear and convincing reasoning has never been put forward by
lawyers opposing the trusts. But it will make the way of the corporation
transgressor harder in the future.

It opens the door and clears the way for a thorough, complete, and
public examination of the affairs and accounts of the trusts. It removes
the first loophole for their escape from the consequences of their
unlawful acts, and from the exposure of their methods of opposing and
crushing competitors. They will, therefore, become liable to prosecution
under the Sherman Anti-Trust Law, and all unlawful combinations,
schemes, and conspiracies will be effectually and permanently broken up.

This decision is pf such vast and far-reaching importance, not only to
all directly concerned, but to the whole country, that its legal effect
and its moral influence can hardly be overestimated. It will probably
become as famous in the history of the Supreme Court as the Dred Scott
decision; and it will prevent in future the miscarriage of justice for
want of evidence against corporations, which has so frequently occurred
in the past. It will also raise the moral tone of corporate management
by enforcing publicity before refused, for the decision not only applies
to all railway and industrial corporations, but banks, trust companies,
and insurance companies of all kinds. It shows that a rigid enforcement
of existing laws is alone necessary to correct many abuses of long
standing.

The temptation that secret acts and secretive general management present
to those disposed to wrongdoing and chicanery, malfeasance,
misappropriation, and graft can easily be imagined; and it can also be
as easily inferred that such management is apt to give rise to
suspicions and rumors detrimental to the interest of the corporations
concerned, and indirectly injurious to others. Honesty is not only the
best polity, but a moral duty, and should be as much the watchword of
corporations as of individuals, and no man should betray his trust for
either love or money, whether acting in or out of a corporate capacity.

There is more permanent prosperity, as well as honor, to be secured by
honest than dishonest means, and to quote the Bible, “What does it
profit a man if he gain the whole world, and lose his own soul?” Yet
unscrupulousness in high places of trust is often forced upon public
attention. This should all be swept away as a debasing element in
business life, for dishonesty, like the upas tree, casts a blighting
influence wherever it is.

The corruption of judges and juries and the bribing of legislators
should be more abhorrent than larceny itself to every captain of
industry and all corporate officials, who should have equal respect for
the truth and their own honor. Great wrongdoers should be no more exempt
from punishment than small offenders and mere millions should furnish no
protection to them.

Great fortunes accumulated by monopoly and oppression, and other
dishonest means, are no credit to their possessors, but really a
reproach, and the abuse of power by them is a great national evil. Every
business man should take pride not only in his regard for honesty,
truth, and fair dealing, but in his own personal honor, whether he is
acting for a corporation or himself. We are now on the highroad to the
correction of a multitude of abuses and the country is to be
congratulated upon this salutary movement for improvement and reform in
our business methods. Our great remedy is PUBLICITY, and the enforcement
of the law.

The immensity and grandeur of our national progress and achievements
justify us in looking forward to a still greater and grander development
in the future and still more splendid triumphs of mind over matter than
we have already accomplished. I do not say with the spread-eagle Fourth
of July orator:

              “No pent up Utica controls our powers,
               But the whole boundless continent is ours.”

Yet it cannot be ignored that no other nation has such a magnificent
career of expansion, development, and progress before it as the United
States, united as it is by telegraph and telephone and our vast network
of railways, from the Atlantic to the Pacific, and Maine to Florida, in
unbroken continuity.


[Illustration:

  WILLIAM H. MOORE.
]


With the growth of our population, which even now exceeds eighty
millions, we shall grow more and more in national importance and wealth,
not only in material wealth but in the higher products of an advancing
civilization, in the arts and sciences and literature, and all that
embellishes and glorifies mankind. Therefore we should, as we go along,
constantly endeavor to correct errors, shortcomings, and abuses, and
prune away rotten and unsound timbers in our public and business life,
and make the whole machinery of business and activities of all
kinds—trade, banking, insurance, manufacturing, legislative, and the
various professions and mechanical industries, work as legitimately,
honestly, smoothly, and harmoniously as possible. The way to do this can
be best paved by promoting public spirit, and sweeping away the
opportunities for business wrongdoing in secret, such as rebating, by
wise laws properly enforced, and backed by public opinion, yet laws not
oppressive, unjust or too inquisitorial. This would compel the “crooks,”
“grafters,” “rebaters” and “competition crushers” of the business world,
who have schemed in darkness, and shunned the light, to come out into
the open view, and this publicity alone would be a perfect cure for many
great evils. So let us have more light—the light of PUBLICITY.


------------------------------------------------------------------------




                             CHAPTER LXXV.

  THE MONETARY SITUATION AND ITS REMEDIES.[3]


Footnote 3:

  An address to the West Virginia Banking Association at their 13th
  Anniversary Meeting, at Elkins, West Virginia, June 19, 1906, by Henry
  Clews.


The rapid growth of our population, the great activity of all our
industries, the general prosperity of the country, apart from the
terrible calamity at San Francisco, and the immense speculation going on
in land and mining ventures, especially in the West, are the underlying
causes of the severe monetary stringency that New York has lately
experienced. These influences have kept money to a much larger extent
than usual active in the interior and prevented its concentration not
only in New York and the other Eastern monetary centres, but at the
Western centres.

Chicago in particular found that money, instead of returning there from
the interior in good volume, as it usually does in January, February,
and March, continued this year to be sent to the interior by the banks
there at an average rate of $12,000,000 a month during these three
months. This movement was not so much owing to the land and mining boom
as to the immense absorption of money in the various manufacturing,
mercantile, and other expanding business interests all over the West and
South. So great was, and still is, the activity in these directions that
speculation in grain, provisions, and stocks has been more neglected in
the West than for several years, as the narrowness of the markets there
has shown.

To show more precisely the effect on the money markets of this unusually
great speculative and industrial activity it is only necessary to say
that, during this first quarter of the year 1906, the Chicago banks
steadily and heavily lost in deposits, while their loans kept
increasing. A comparison of the condition of the national banks in that
city on April 6th, as reported to the Comptroller of the Currency, with
their condition at the date of their previous report on January 29th,
showed an increase in their loans of $8,625,237 (or 4.11 per cent) and a
decrease in their deposits of $6,773,490 (or 2.11 per cent) and a
decrease in cash resources of $14,628,960, or 10.38 per cent. These
figures explain why money was so scarce in New York. The West had none
to send us, although there is more money in circulation than ever
before. If we go back to the condition of the same Chicago banks on
March 14th, 1905, and compare it with their report referred to, we still
find that their deposits decreased $8,687,117 and their cash resources
$7,970,318, while their loans increased $1,599,774; and in their reduced
cash resources the Chicago banks reflected the condition of the banks in
all the other large cities of the West, Northwest, and Southwest. There
has been a rapidly rising volume of trade and land and mining
speculation there for more than a year, and enormous activity in new
industrial enterprises. In the Southwest, particularly, the growth of
banking has been not only unprecedented but enormous. I include in this
designation the States of Missouri, Arkansas, Louisiana, Texas, and
Kansas and the Territories of Oklahoma, Indian, New Mexico, and Arizona.
The last decade has witnessed in this section of our country more
extensive and rapid material development than was ever before seen
anywhere, either in the United States or elsewhere, and this expansion
in banking was in response to that material development, and therefore
had a legitimate foundation in business requirements. American spirit
and enterprise, and Western push, overcame all obstacles in spreading
civilization and creating trade, especially in the new settlements.

In the five years ending with 1900, 101 new national and other banking
institutions were established in these nine States and Territories—with
a consequent increase of $94,500,000 in individual deposits and
$150,300,000 in aggregate resources, and in the next five years ending
with 1905 no fewer than 1,415 new banks and banking institutions were
added to the number—a resulting increase of $73,400,000 in capital and
surplus, $383,750,000 in individual deposits and $670,350,000 in
aggregate resources. Thus, in ten years, there was an increase of 1,516
in the number of banks, of $137,000,000 in capital and surplus, of which
$79,000,000 was surplus, of $478,000,000 in individual deposits, and of
$820,750,000 in aggregate resources.

This enormous banking development reflected and stimulated the enormous
development of the country, and aided trade fully as much as trade
helped the banks. The one kept pace with the other, and marvelous
progress in both was the result; and this progress continues, and will
continue indefinitely long under the stimulus of the rapidly increasing
population of that still sparsely settled section.

This banking development is of incalculable benefit, both locally and
generally, for its influence is far-reaching. The drain of money from
the outlying districts, including New York, to move the crops, is
reduced as banking facilities in the West and South increase.

In the South, during the same period, there has also been very great
commercial and banking development, with the banks and trade going hand
in hand to help each other, as in the Southwest. The South was never
before so active and prosperous; and, rapidly as it is progressing, it
will go on prospering with unabated vigor and enterprise, for it has
entered upon a new era of prosperity and immense development of its
material resources awaits it. In manufacturing and mining, as well as
agriculture, immense opportunities are open to it; and before long the
natural increase of its population will be largely added to by the white
immigration that it needs. So the South has a bright and magnificent
future.

This vast industrial and mercantile activity—this general business
enterprise, this land and mining speculation, or boom, has extended, in
various degrees, all over the United States, and the influence it has
had on the money market in large cities, and particularly in New York,
was only a natural and easily foreseen result. It has produced a
corresponding activity in money, because of the greater demand for its
use; and the real estate speculation, the vastest we have to deal with,
is still increasing.

The boom is almost entirely in land and mostly in vacant plots, or lots,
suitable for building purposes; but there is also a very active
speculation in improved property, and much speculative building. The
amount of money practically locked up in this land speculation is much
larger than is generally supposed.

Statistics of 29 of the largest cities of the United States show that in
the month of May they issued permits for the construction of 13,712 new
buildings, to cost $55,074,761, against only 12,036 in May, 1905, to
cost $50,791,738, an increase of 8 per cent, and a similar increase was
shown in each preceding month of 1906. The May increase was greatest in
cities remote from the Atlantic Coast; in Portland, Oregon, it was 309
per cent; in Tacoma, 111 per cent; in Seattle, 30 per cent. But the San
Francisco catastrophe was evidently the main cause of the large increase
in Portland and Tacoma. Yet the increase in Omaha was 75 per cent, in
St. Paul 49 per cent, in Duluth 110 per cent, in Louisville 50 per cent,
in New Orleans 47 per cent, and in Chicago 39 per cent. These figures,
dry as they may seem, are eloquent in their suggestiveness of the extent
of the demand for money from this one source, the land and building
boom.

Gold and silver mining speculation, too, last year began to assume the
dimensions of a boom in Nevada, and all the old metal and mineral mining
camps, and many new ones in other States, are, like the Lake Michigan
copper regions, scenes of active speculation in properties, as well as
busy with mining, and hosts of speculators are their own bankers,
carrying large amounts of currency in their pockets.

The money that usually returns to the money centers is thus widely
scattered and too busily employed to return. So we have to deal with a
period of prosperity and industrial activity that is something more than
normal. But—without referring to the heavy drain of cash for the relief
of San Francisco, which was offset by gold imports—although money was
scarce in New York, owing to this enormous activity and general
prosperity that kept it moving from hand to hand, it was not scarce
enough to justify the excessively high rates we often witness on the
Stock Exchange. These were serious and hurtful, and to guard against
such vicissitudes in our money market every member of the Stock Exchange
and every banker and bank officer should use his influence.

How far the Chamber of Commerce Committee on the Reform of the Currency
will succeed in providing remedies for the monetary situation remains to
be seen. But from the twenty-seven questions it has sent to bankers and
others it is apparent that it contemplates no fundamental change in our
currency system. Inferentially, it will not interfere with United States
legal tender notes, nor with United States bonds as a basis for the
circulation of the national banks. Yet both bases are indefensible on
sound economic principles. The issue of greenbacks was merely a war
measure, and intended to serve only a temporary purpose; instead of
which we have made it permanent, so keeping the Government in the
banking business with its war currency system.

There can be no question as to the false bottom on which the national
bank currency rests; for paper, that is, paper money, should not be
secured by, or redeemed in paper, even when that paper is as
indisputably good as United States bonds. All our paper money ought to
be based on readily convertible assets and redeemable in gold. Bonds,
even United States bonds, by which national bank notes are now secured,
are only evidences of debt, and the time will come when these will be
liquidated, and the sooner the better.

The committee probably thinks that the existing order of things,
notwithstanding its fundamental errors, is too deeply rooted and
strongly fortified to be materially changed without danger of the remedy
proving worse than the disease. It consequently favors more national
bank currency on the present basis. Branch banks and rediscounting for
small banks by large banks are also favored. The committee’s questions
indicate, however, that it favors the abolition of the Sub-Treasury
system, and to that result it should resolutely bend its energies. At
present the Sub-Treasuries are practically banks, like the old United
States Bank at Philadelphia, with the important difference against them
that all the money they take in remains locked up in their vaults till
paid out on Treasury drafts. The evil effect on the money market, and
particularly on Wall Street, of thus withholding money from circulation
in periods of stringency has been too often felt. It was more than
usually conspicuous and severe during the late tight money ordeal, owing
to the Treasury receipts very largely exceeding its disbursements. This
greatly aggravated the scarcity of money in New York, due to other
causes, and resulted, in Wall Street, in the rates for call loans
ranging at times, within the last six months, with rapid and eccentric
fluctuations, from 15 to 30 per cent, and on one occasion touching 125
per cent. We have here a phenomenon entirely distinct from ordinary
monetary conditions.

These extremely high and highly fluctuating rates are, it is true,
peculiar to the New York Stock Exchange, but they are none the less a
great evil, and they acquire national and even international importance
from the fact that New York is the financial center of the country and
the New York Stock Exchange the barometer of financial values for the
whole United States.

However much our commanding position may in other respects fit New York
to be the world’s financial center, it cannot aspire to and secure that
position of power so long as it is the scene of these violent
fluctuations in the rates of interest for call loans on the Stock
Exchange. Measures should therefore be taken not only to prevent them,
but to make their recurrence impossible; and how this can be best and
most efficiently accomplished is a matter for very serious
consideration.

That it can be accomplished is evident from the entire absence of any
such violent rate oscillations in the money markets of Europe. There the
rates of interest fluctuate slowly within a reasonably narrow range,
generally between 3 and 5 per cent, the extremes being 1 or 2 above, or
below, these figures. Such unreasonable eruptions in the money market as
we have sometimes seen in the loan crowd of the New York Stock Exchange
were never seen, and would be impossible, in London, Paris, Berlin, or
any other European capital. Why, then, should they ever occur, or be
possible here?

In response to questions propounded by the Chamber of Commerce Committee
I would say that, as the Sub-Treasury system is a disturbing factor in
the money market, provision should be made by Congress for the regular
deposit in national banks of surplus Government money above its regular
working balance of fifty millions, the banks to pay interest at 2 per
cent per annum thereon.

Bank notes, in my opinion, are a form of bank obligation the same in
principle as bank deposits, payable on demand, and these notes, as the
most convenient form of credit, should be released as much as possible
from restrictions not necessary to secure their safety, acceptability,
and redemption in gold, or United States legal tender notes, for so long
as the latter may be kept outstanding.

In seeking increased flexibility for our currency I would not suggest
anything that would impair the value of United States bonds as a basis
of circulation; but it deserves consideration whether new currency might
not be issued by moderately increasing, above the par of the bonds but
not above their average market value, the amount of notes to be secured
by them. Then, too, why should not national banks be authorized to issue
a fixed proportion of circulating notes upon their general resources,
these to be secured by a guaranty fund? To induce the retirement of
these notes when not needed, owing to money being superabundant at low
rates, this asset circulation could be made liable to a graduated tax.
The proportion of notes to capital that should be allowed, and the
amount of the tax, are matters upon which bankers differ, but I favor
strict moderation in both. This asset currency, under moderate
restrictions, for use under ordinary conditions, would be far preferable
to any emergency circulation, ISSUED UNDER A HIGH TAX, although
Secretary Shaw recommended it in his report for 1905.

As the taxes collected upon the circulation of national banks from 1864
to the end of June, 1905, amounted to $96,220,997, and the failed banks,
during that period, had outstanding only $17,295,748 of notes, and the
dividends paid on their claims averaged 77.95 per cent, it follows, at
the same ratable proportion of loss, that the deficiency on account of
their notes would have been only $3,813,712, or 22.05 per cent of their
total circulation. So in the light of this experience I see no great
risk in a guaranty fund, consisting of the taxes paid upon circulation,
nor do I see why it would not be sufficient to redeem all the notes of
failed banks.

I would make the asset currency a first lien upon the assets of the
issuing banks, and allow the banks to redeem their notes at appointed
redemption places in the large cities. This would save the trouble and
delay of sending them to Washington, and by facilitating redemptions
when money was easy, give more ebb and flow to the currency and tend to
prevent excessive speculation in times when there is a glut of money.
Under the Canadian banking system there are several central redemption
cities for bank notes; but I would not, as is the case in Canada, limit
the right to issue notes to banks of not less capital than $500,000.
There is safety in numbers, in regard to banks as well as other matters.
Then, too, it would be well to make all the Sub-Treasuries in the
country useful as national bank note redemption points, because it would
contribute to the elasticity of the currency in the same way that it
does in Canada, and doubtless Congress would favor such a measure.

The proposition to establish a new bank in Wall Street with $50,000,000,
or even more, capital, or to increase the capital of an existing bank to
that extent, to serve the purposes of Stock Exchange borrowers, and
regulate rates of interest, after the manner of the Bank of England, is
deserving of no consideration whatever. It would merely excite and
provoke the jealousy and opposition of other banking institutions, and
create a sort of monopoly with special privileges, without securing the
end in view. A Bank of Banks is not what we want, nor do we want a
revival of the old United States Bank.

Such a bank as the Bank of England, or the Bank of France, could not be
created here, either in a day or a generation, for those time-honored
institutions are the growth of ages. They are very much older than any
of the other banks there; and, under the control of their respective
governments, they have grown up with their countries and become
practically, although not by ownership, government institutions. Hence
their prestige and power, and the impossibility of other banks
superseding them.

It may, however, deserve consideration whether the New York Clearing
House might not exert power in regulating rates of interest similar to
that exercised by the Bank of England, providing the banks belonging to
it would unite to give it that power; and is there any reason why they
should not? Even without any formal or concentrated action in this
direction, outside of the Clearing House Committee, it could appoint a
committee to name every week, or oftener when necessary, as the Bank of
England does, a minimum rate of interest on call loans and discounts. It
could also fix a maximum rate for each. This need not be compulsory; but
even only as a recommendation it would have a powerful moral effect, and
the Wall Street banks, if they approved of the innovation, would conform
to it. The Clearing House could, indeed, after the formal approval of
this regulation by its members, enforce its observance under penalties,
if deemed necessary. In this alone, in my opinion, a practical remedy
would be found for the high rate evil on the Stock Exchange.

But, at the same time, greater elasticity could be given to our national
bank currency if Congress would amend the law so as to permit of
currency being issued against specified bank assets, subject to the
approval of the Comptroller of the Currency. This is a feature of the
banking system of other countries, which has always worked very well and
to the satisfaction of all interests; and what our currency urgently
needs is greater elasticity.

Strictly speaking, according to economic principles, we cannot expect a
perfect currency, with all the resiliency and elasticity possible in a
currency, so long as bonds instead of gold are used as the basis of our
bank circulation. Yet for security the bonds are, under present
conditions, just as good as gold; and there would be more elasticity in
the bank circulation based upon them if the restrictions imposed upon
their redemption by the Act of 1882, which are now unnecessary, were
removed. Indeed, the inability to promptly retire bank notes is one of
the worst faults of our system, and Congress should repeal the
restrictions without delay. If this obstacle in the way of resiliency
were removed, and the unlimited retirement of bank notes permitted, we
may rest assured that free expansion, when demanded, would quickly
follow curtailment, and this ebb and flow of the currency would
obviously be an elastic movement.

As it is, there is a great waste of banking power in our treatment of
national bank notes and reserves. We have $544,765,959 of national bank
notes, and only $337,130,321 of United States legal tender notes, and,
setting gold aside, the redemption of the former in the latter is
obviously absurd and inconsistent with sound finance and good banking.
We see in the present system this $544,765,959 of banking capital
absorbed and represented by non-reserve currency. The capital is
perfectly safe, but it is locked out of any other use, and rendered
inefficient for any other purpose. This calls for a remedy. The
percentage of reserves to loans in national banks has decreased from
more than 20 per cent in 1898 to less than 15 per cent. Hence the bank
reserves require to be increased.

The law relating to the redemption of national bank notes in United
States notes, or greenbacks, was passed when the greenbacks very largely
exceeded the bank notes in amount, but the reversal of these conditions
reminds us that the tail is now wagging the dog. This alone makes it
clear that the law should be amended.

But beyond all this we should open our money market more to the rest of
the world by establishing a new factor, which would always afford prompt
relief in times of stringency, by giving us cable transfers of gold,
instead of gold shipments, and of itself prevent abnormally high rates.
Through this medium we could, instantly, practically draw gold from
Europe whenever wanted, and Europe could do the same from us, when
needed there. I refer to the establishment of an International Gold
Transfer System, or Clearing House, to supersede and dispense with what
I may call the old-fashioned gold see-saw. Gold in circulation is doing
good work, but gold see-sawing across the ocean is going to waste. The
custom of shipping gold from one country to another, in response to the
ups and downs of the market rates for foreign exchange, not only reminds
me of the forward-and-back movement in a quadrille, but suggests that,
as the precious metal is rendered practically useless while in transit,
it should not be used in a dance of that kind across the ocean. The
subject may not seem to be very important, but it really is so, for
“tall oaks from little acorns grow”; and it is surprising that in the
march of modern improvement this method of settling international
balances has not been superseded by a shorter, quicker, and cheaper cut
to transatlantic adjustments. Bankers, in both hemispheres, are absurdly
behind this progressive and electric age, in transporting gold from the
New World to the Old, and vice versa, to adjust balances between them,
whenever the rates of exchange show a profit in the transaction. That
they could profitably dispense with it is obvious, as they could easily
establish this transfer system, this international clearing house for
gold, at very small expense. Thus the risk, and loss of time, involved
in the old-fashioned method would be eliminated, while the new
arrangement, being under their own control, would beyond peradventure
serve every necessary purpose of the shippers, combined with perfect
safety.

The disadvantage of shipping boxes or kegs of gold to and fro between
America and Europe is apparent when we consider that it is a
time-wasting see-saw performance, which involves the expense of packing,
cartage, freightage, insurance, and loss of interest while in transit,
and still greater loss due to abrasion consequent on sea transportation,
to say nothing of bankers’ commissions, and risk of partial or entire
loss by robbery, accident, or marine disaster; ignoring, moreover, the
restraints it imposes upon our foreign trade.

All these disadvantages could be obviated and this handicap upon our
commerce removed by a mutual-interest arrangement, between the leading
banks in the United States and Europe, to deposit a sufficiently large
amount of gold on each side of the Atlantic, and issue international
clearing-house certificates and draw bills of exchange against the
deposits. This gold could be counted as part of their reserve, if in
their own vaults; or the Bank of England, in London, and the United
States Sub-Treasury in Wall Street, could be used as the gold
depositaries. We have a clearing house for bank checks in each of the
large cities, and one also for the transactions of the New York Stock
Exchange. London, too, has its bank clearing house. Why, then, should
the clearing house system not be extended to international transfers of
gold, so as to make them possible at any moment by cable-telegraph
instead of the slow process of six-days transfers? In this way our
international dealings would be quickened and extended and our financial
and commercial relations become more intimate.

There is no good reason why we should unnecessarily treat gold as we do,
when we can save time, money, and risk by keeping the metal where it is,
and issuing certificates of deposit against it, and the use and transfer
of which would serve as well as gold shipments.

The present custom becomes a ridiculous “chasse” across the Atlantic,
when we see the same gold shipped to Europe, then shipped back to
America within a few days after reaching its destination, without being
unpacked, owing to sudden intervening changes in the rates of exchange,
making it profitable for the former gold exporting country to import the
metal. Such wasteful shilly-shally procedure would be likely to excite
mirth in opera bouffe, but bankers who ship gold are very serious about
it, and seem to be without enough perception of the ludicrous to see
anything funny in its coming and going, although they feel the shoe
pinch in its costliness in both time and money. As the world’s gold
production increases the urgent need of this over-sea change will become
more and more conspicuous, and its adoption will accord with the
generally progressive spirit and methods of our telegraphic and
telephonic age.

Had such an international gold clearing house existed the sagacious but
unprecedented action of the Secretary of the Treasury, to relieve the
money market by making deposits, as secured loans, in certain banks, to
encourage and cover their prospective gold importations from Europe, the
same to be returned on the arrival of the gold, would have been
unnecessary. While this expedient has well served a temporary purpose,
it is not to be relied upon as a permanent source of relief during
monetary stress, and it involves a stretch of authority under the law
that is open to grave objection. But, as it happened, the Secretary’s
action, which was taken just before the San Francisco disaster occurred,
proved particularly fortunate, and probably prevented a very serious
aggravation of the stringency in the money market, owing to the heavy
remittances to California. It was a piece of good luck that seemed
almost providential, and the end justified the means. But it should
always be regarded as only a fortuitous circumstance and temporary
expedient, not as a permanent source of relief; and it emphasizes our
need of a new international gold transfer system. Moreover, the benefit
Europe would derive from it would be equal to our own.

The Secretary, under the circumstances, acted wisely in also increasing
the Treasury deposits in the national banks, while the Government’s
receipts were largely in excess of its disbursements, so as to offset,
as far as possible, this preponderance of receipts, and lessen the drain
of money into the Sub-Treasuries. But this method of relief is, too,
only a temporary expedient, to remedy the evils of the Sub-Treasury
system. While the Sub-Treasury system lasts Congress should authorize
the Secretary to deposit customs, as well as internal revenue receipts,
in the national bank depositaries, in time of stringency, when the
Government’s receipts exceed its disbursements, and it has more than a
sufficient working balance. The Government should, as a compensation to
it, require the banks to pay interest at, say, two and one-half or three
per cent per annum on such deposits, these not to exceed, in amount, 25
per cent of their paid-up and unimpaired capital, and to be returnable
on demand, but without requiring these special deposits to be secured.
They should, however, be made a first lien upon the assets of the banks.

If the changes above suggested were made, I am sanguine that they would
prove to be remedies for the evils and disadvantages under which we now
labor, and so increase the stability of our money market and improve and
fortify the machinery of the whole monetary system, while giving more
elasticity to the currency.


------------------------------------------------------------------------




                             CHAPTER LXXVI.

      INDIVIDUALISM VERSUS SOCIALISM.[4]


Footnote 4:

  An address delivered by Henry Clews on Sunday afternoon, May 12, 1907,
  at the Columbia Theatre, Brooklyn, in debate with Professor
  Kirkpatrick, graduate of Albion College, Michigan, and former
  professor in the University of Chicago.

In order that I may present a clear understanding of my view of the
subject, it is only fair, in the first place, to state that the system
of Individualism which I shall endeavor to uphold is worthy and
commendable. I hold it to be superior in every sense to any of the
various plans of Socialism offered by its advocates. By this I do not
mean Individualism in the extreme sense of the term, for, as we all
know, in no civilized country and under no form of government whatsoever
does, or can, extreme Individualism exist.

In the world of economics and politics Individualism has a distinct
meaning, as a name given to the theory of government which favors the
non-interference of the State in the affairs of individuals. It has also
been well defined, as the private ownership of the means of production
and distribution, where competition is possible; leaving to public
ownership those means of production and distribution in which
competition is practically impossible.

It will, then, be at once apparent that, in the consideration of the
forces helpful and necessary to society, the individualist believes that
competition which encourages merit and develops skill should remain
paramount. And right here the issue is made, between Individualism and
Socialism, the Socialist denying that competition is beneficial to
society, but contending rather that it is a deleterious and harmful
force.

Upon this issue, so joined, I stand firmly in favor of the principle of
competition, and that system of Individualism which guards, protects and
encourages competition. It is that system of government under which we
live to-day—a government of the people, by the people and for the
people—the United States of America—a free system of government, in the
best and broadest sense of the term.

Under this free system of government, whereby individuals are free to
get a living or to pursue wealth as each chooses, the usual result is
competition. Obviously, then, competition really means industrial
freedom. Thus, any one may choose his own trade or profession, or, if he
does not like it, he may change. He is free to work hard or not; he may
make his own bargains and set his price upon his labor or his products.
He is free to acquire property to any extent, or to part with it. By
dint of greater effort or superior skill, or by intelligence, if he can
make better wages, he is free to live better, just as his neighbor is
free to follow his example and to learn to excel him in turn. If any one
has a genius for making and managing money, he is free to exercise his
genius, just as another is free to handle his tools.

In this primary outline of the free system of Individualism, it is well
also to consider the good side of freedom or Individualism. It is an
axiom, well established, that the freer men are to choose their work and
to use and enjoy its results, the more work they are willing to do.
Their energy and enterprise are called out, their wits sharpened, their
hopes stirred. If any one wins unusual success, others are encouraged to
try better methods. If an individual enjoys his money, gained by energy
and successful effort, his neighbors are urged to work the harder, that
they and their children may have the same enjoyment.

Thus, every one accomplishes more in a condition of freedom or
Individualism, and the whole nation is richer, than if custom or a
Socialistic community fettered and restricted men, and compelled them to
work according to rule. With matured individuals, this is on the same
principle that children enjoy their sports better, when left to
themselves, than if a parent or teacher were to meddle and make rules
for them.

I believe that it can be stated, as an established fact, that whenever
men are, as individuals, free to work, to earn and to save and use their
earnings as they deem fit, the capable, the industrious, the temperate
and the intelligent everywhere tend to rise to prosperity. The skilful
are always in demand and at good wages. And remember, that a day’s wages
never purchased so much in supplies as it does in the United States,
where we use the individual or competitive system of work, because high
as prices are, wages are still higher.

As a further part of this summary of Individualism and competition, let
us also add the moral side, for it is a considerable and important item.
When men labor, earn or save with perfect freedom, they develop many
moral qualities, such as patience, self-reliance, self-sacrifice,
venturesomeness, integrity, generosity and respect for others’ rights.

If a Socialistic committee of the wisest men could manage and make rules
for the rest, and provide for every one’s necessities, men would not
acquire or exhibit these sterling qualities of manhood, as well as they
would by being thrown upon their own resources.

We know this, also, from the fact that the strongest characters have
been worked out in brave and patient competition and conflict, often
under difficult circumstances; whereas the men who have never been
thrown upon their own resources rarely amount to anything.

After this preliminary description of the worth and salient influence of
Individualism, under which our country has grown to be the greatest
nation of the world, let us now turn to Socialism—a system which, if
adopted, would call a halt to our progress, tear down our established
institutions, and turn our great prosperity into ruin and decay.

It is difficult to tell just what is meant by Socialism in the more
modern sense of the term.

It has appeared in the United States under five different and almost
totally disconnected forms. It has appeared as a movement towards the
establishment of Socialistic communities or communisms; it has appeared
as Fourierism, as German or International Socialism, as Nihilism and
Christian Socialism.

Professor Mallock, the eminent English writer, in his lectures in New
York, made a careful analysis of Socialism, and exposed its plausible
sophistries, some of which, Socialists boast, are grounded on our
defined principles of political economy, which the learned writer
asserts are rather incomplete. It may be admitted that this is so, and
that fuller and clearer distinctions could well be added to our text
books on the subject. But, joining the issue in a clean-cut way, between
Individualism and Socialism, obviates all necessity at this time of
further considering such distinctions, and clarifies our respective
positions in this debate.

It was noticeable that, during the delivery of these lectures, hints and
remonstrances were freely thrown out that the structure that Dr. Mallock
was attacking was not Socialism at all, in the modern acceptation of the
term, but something else that had long ago been abandoned.

Now, while I have no unfriendliness whatever with the honest Socialist
(mistaken, deluded and sadly out of place in this grand Republic, as he
may be), I do say, that this position is but too often the wily
subterfuge, sought to be taken advantage of by the insincere agitator or
pretended reformer, when he sees that he is beaten. His invariable
answer to an irrefutable argument is: “Oh, that which you talked about
is not modern Socialism!”

For the purpose of this discussion, however, we can agree that, as
contradistinguished from Individualism, Socialism opposes and denounces
competition as an injurious and unnecessary force in society, and
advocates the collective ownership, through the State, of all the means
of production and distribution.

Socialists would, in other words, fence up the great field of free
opportunity, deaden all incentive or inspiration for great achievement,
and not only curtail, but wholly remove, the right to compete and excel,
and make it impossible to write “success” as the result of individual
effort.

Just think of that! Why, the very thing that the Socialists attack, as
untenable and wrong in government—individual competition—has done more
than anything else to make us what we are as a nation to-day; has kept
alive the precious fires of liberty and freedom and has preserved the
institutions of our country. Take away the spirit of Individualism from
the people, and you at once eliminate the American Spirit—the love of
freedom—of free industry—free and unfettered opportunity—you take away
freedom itself!

And right here, I take the position and shall ever contend, that the
United States (of all countries in the world) is no place for Socialism.
Let us never forget that it was founded by the wisdom and patriotism of
the Fathers of the Revolution, and that it is blessed with a
Constitution, framed by men who loved individual freedom and national
liberty, and who risked their lives and sacrificed their property in the
struggle to overthrow injustice and oppression and achieve independence
and individual equality. Let us not forget its past one hundred and
thirty years of eventful history, replete as they are with many chapters
of severe trial, over all of which it has ever risen superior. This
splendid history has placed our system of government beyond the line of
experiment, and raised it to such an elevation of recognition and
respect, that it now ranks as the highest among all the nations of the
earth.

Born of the spirit of resistance to oppression, with the broadest and
freest constitution that the world has ever known—a land of freedom and
equality in the best and most liberal sense of the term—it would seem
that the sincere lover of liberty and equality could ask no better home
than this democracy of ours—whose glorious flag floats over eighty-four
millions of prosperous and enlightened people.

To further add, the term “contented people” might, perhaps, not be a
strictly true assertion, and neither would it, in my opinion, be a
desirable one to use; for to the spirit of discontent and ambition, so
predominant in the American character, are due largely the grand
achievements and the remarkable progress and advancement of our nation
in all things that make for greatness, strength, and public welfare.
However, we must be careful to draw a plain line of contradistinction
between that discontent which is really the mainspring of human
activity, and which, appreciating the solidity and soundness of our
foundation, aspires to build thereon to the highest ideals of perfection
and success—and that misguided or malicious discontent of Socialism
which arrays itself as an enemy of all civilized forms of government and
seeks their utter destruction.

We can well understand and appreciate, in a country ruled by a despot,
whose heel of oppression and tyranny is ever on the necks of the
down-trodden people, the feeling of the masses who, desiring some
measure of free action and equality, would revolt against such
conditions, and seek a reorganization of society. They would, naturally,
look as far away as they could from such a government of despotism—the
only one they had ever known—to the other extreme—a country where the
State should own all the land and capital, employ all the people, and
divide everything, share and share alike, among the community.

But the spirit of revolt, which in that case may be patriotism, becomes
ridiculous and open to the charge of insincerity when the tenets of its
doctrine are transplanted and cultivated upon American soil by our
foreign population.

With further reason, also, must we question the sincerity of the
Socialist, who, leaving oppression behind, emigrates to this country,
where tyranny and despotism are unknown, and yet who continues to echo
that war cry of destruction wrung from his heart by the cruelty of his
old-time oppressors.

He comes here from a land of want and thraldom to a land of plenty and
freedom. He may come without name, fame, or property, and he is received
with open arms. After a brief residence he is entitled to full
citizenship, and is then a part of the government, enjoying all the
rights and privileges of the native born. Besides the active or public
equality—the equality possessed by all, the right to share in the
government, such as the electoral franchise and eligibility to public
office—he has the rights of private equality. He is possessed of legal
equality—the equal possession of private civil rights enjoyed by all
citizens. Then there is the equality of material conditions—that is, the
right to acquire wealth and all that wealth implies.

Every opportunity to achieve success and happiness abounds on every
hand, and every incentive to industry and accomplishment awaits him; and
if he is energetic and skilful, there is nothing to hinder him from
becoming prosperous, or, in other words, successful in whatever vocation
in life he may pursue. With qualities that commend themselves to his
fellow men, there is no limit to the possibilities of his achievements,
and very soon (as has been very often the case) he may become a leader
of men. If, therefore, he is sincere, surely he must agree with me that,
in view of these conditions, this is no place for the Socialist. And
does it not sound like a paradox to hear this cry of Socialism still
rending the air—while every avenue of fortune lies open to every one?


[Illustration:

  _D G Reid_
]


Socialism is self-contradictory, and opposed to deep-rooted and
ineradicable human instincts. Its origin is, of course, purely selfish;
but there are two kinds of selfishness—the enlightened and
unenlightened. Unfortunately, Socialism belongs chiefly to the latter.
It is often overlooked that the identical love of gain which seeks to
equalize the distribution of wealth will not be satisfied with equality.
A desire for gain will still remain and seek to acquire. The most
commendable object in Socialism is the uplifting of the down-trodden and
poor. Yet that great commoner and tribune of the people, William
Jennings Bryan, tells us that under Individualism we have seen a
constant increase in altruism. That the fact that the individual can
select the object of his benevolence and devote his means to the causes
that appeal to him has given an additional stimulus to his endeavors.
And Mr. Bryan pointedly asks the question: “Would this stimulus be as
great under Socialism?” Let it not be forgotten that by means of present
tendencies and existing economic laws the poor are constantly growing
richer. They were never so prosperous as to-day. Labor has made great
strides, and the uplift in the lower walks of life in all Christendom
during the past twenty years has been beyond precedent. Give us wise and
just legislation, and complaints about the inequitable distribution of
wealth will quickly disappear.

The state of society that the Socialists seek to establish may be
beneficial to a class which, under any conditions, lacks frugality,
thrift, and self-reliance; but just where the general mass of humanity
is to be bettered or elevated, socially, morally, or politically, is a
point not satisfactorily explained. A society in which all human beings
do right, for the simple reason that it is right, cannot exist unless
human nature is recast and reconstructed. Human nature must be treated
as it is found in the general makeup of man, and, therefore, a society
in which all special desires, all ambition, and all self-esteem have
been eliminated, precludes development and progress. It reduces
everything to utter shiftlessness and stagnation. In such a Society
there can be no incentive to great achievements in art, literature,
mechanics, and invention. If all are to be placed on an equal footing,
the ignorant with the educated, the dullard with the genius, and the
profligate with the provident, what encouragement is there for special
effort?

If you render accessible to each and every member of the human family
the achievements and benefits of civilization, holding “property in
common,” why should a man rack his brain or strain his muscles in
producing something which he expects to prove remunerative to himself in
some way, but which, under the Socialistic state, would go to the equal
financial benefit of all?

Just for a moment, stop to think of the effect of bringing all men as
near to a dead level as possible, for I recognize that not even
Socialism would secure the equality which it seeks. If one physician is
more skilful than another, who could insist that he receive no better
reward than the less skilful, when many would be willing to offer it? Or
how else could he avoid having all the patients in the community upon
his hands except by charging more for his services than an inferior
physician? If one lawyer shows greater ability than another, is he not
entitled to a larger fee for his talent? And how else is he to protect
himself from taking all the business from the lawyer of less ability?
Again, if the skill of the cabinet maker is higher and rarer and worth
more than that of the carpenter, how can the latter expect the same
compensation as the former? To put both on the same plane would be
unjust, and would lead to one being compelled to work beyond his
strength, while the less skilful would probably be insufficiently
occupied. Socialism, you thus see, would often place a premium upon
laziness and inefficiency.

Socialism would benefit the shiftless and lazy at the expense of the
thrifty and industrious. Is that a good system to advocate and follow?
Which of you would be willing to share your hard-won provision for your
own family with another family, the head of which you knew to be lazy,
incapable, and dissipated? What incentive to struggle would remain if
the results of that struggle were to be taken away from you and given to
others who sat idly by? What would be the effect upon the United States
of throttling the ambition to achieve? Take the necessity of struggle
out of life, and we should quickly weaken human nature. Civilization
would decline and national decay quickly follow. True, the competitive
system works harshly upon the weak and incompetent. This, however, opens
a channel for development of benevolence, kindness, and patience,
without which human nature would be exceedingly one-sided and
forbidding. The indigent, unfortunate, and weak will always be a charge
upon the stronger, whether in the family, the municipality, or the
state. It is folly to think that life can be lived without struggle; and
that is one of the chief delusions of Socialism which would quickly
impair our national manhood and endurance. Trouble and pain have their
part in the plan of nature.

The Socialist is usually an unfortunate or misled individual. He has
probably suffered from reverses or unfortunate environment. He has
perhaps been roughly or cruelly handled. Perhaps he cannot get on
satisfactorily, or his ambitions have been disappointed. He is then in a
condition of discontent ready to swallow Socialistic—or any
other—sophistries which hold out the delusive promise of relief.

Socialism attaches too little importance to the fact that men are made
with an infinite variety of tastes, abilities, and capacities. No two
are precisely alike, and it is utter folly for poor, weak man to
undertake to equalize these differences. All progress in history has
been made through struggle and sacrifice; and Socialism, no matter how
beneficent its intentions, cannot change the inscrutable laws of nature
or humanity. All natural laws have their reverse side. Gravitation,
which keeps us firm on our feet so long as we are on solid ground,
knocks us to pieces if we attempt to walk off a housetop or over the
opening of a pit. It is not the natural law, but the attempt to ignore
it, that gives us trouble.

I most emphatically assert that we cannot get rid of competition, any
more than we can get rid of the law of gravitation.

The American inventor, mechanic, farmer, merchant, and financier, and
the worker in every profession, are, every one of them, proud,
respectively, of their skill, knowledge, and ability. Their ambition is
to excel—to produce the most and best. Experience, enterprise, and
courage create opportune conditions most favorable to the State and
Nation and to themselves. Each vies with his fellow man in producing the
best results, and is always willing to tackle any obstacle—no matter how
formidable—that stands in the way of success. In his whole compendium
and entire makeup, there is no such word as fail. He aids, by his
untiring and individual energy and effort, in making his country the
greatest in the whole agricultural, industrial, and financial world. He
reaps the reward of industry and accomplishment, and his home is blessed
with bounty; and he knows that his children have equal opportunity with
himself to learn and to achieve.

Shall he be asked to tolerate, or consider, the sacrifice of all these
things, so dear to him, for Socialism?

Shall he be led to believe in a foreign plan or system of government
that degrades skill, eliminates acquisition and thrift, and ignores
genius? I cannot think so!

These are the very qualities and attributes that he prizes so highly, as
essential to the prosperity of the home and nation. He knows (or should
know) that to do so would be to deaden and relinquish those God-given
qualities of heart and brain that have helped to make him and his
country what they are to-day.

He knows (what the nations of the world concede) that the American
people are the most prosperous of all on the face of the globe; and that
this high and commanding position has been attained under existing
conditions, and through the operation of our admirable system of
government.

Whatever, therefore, may be the pretexts used to make him dissatisfied
with his lot, his own experience tells him every day that the
Constitution under which he lives is a glorious one, and so implanted in
the hearts of the American people as to be impregnable against the
assaults of Socialism.

At the same time, he is appreciative of the fact that it is not in the
nature of things to expect in this world blessings pure and unmixed; but
he is thankful for the superior good that he enjoys under our beneficent
democratic form of government.

A state of Socialism in the United States would tend to drive all our
men of superior ability, skill, and power out of the country. The strong
would quickly seek other fields where the qualities which they possess
would have a free chance and an open field. They would promptly desert a
country that offered nothing better than a dismal dead level, with no
means of achievement in sight, and the nation would quickly fall into a
state of miserable inertia or decay. Our forefathers came to this
country to establish religious freedom; they next fought for political
freedom; afterwards they sacrificed a million lives for race freedom;
and now we, their successors, with such glorious traditions behind us,
must stand for industrial and social freedom. For, in the final
analysis, Socialism can stop at nothing short of industrial slavery and
political bondage. Great achievements would be impossible under it.

Having shown the force and importance of individual initiative and
independence and the necessity for the spur of competition to bring
about the best results in human welfare and achievement, I now turn to
the rather concrete branch of the subject, known as Municipal Ownership.

Naturally, a proposition involving the placing of the ownership and
operation of our railroads, telegraph lines, plants for supplying light
and surface transportation, and conducting manufactories and business,
is one of such vital concern to all of us as to arouse our keenest
interest.

It is a part and parcel of the Socialistic plan of government, and, to a
very great extent, the arguments and illustrations presented in my
treatment of Socialism, generally, are of direct application to
Municipal Ownership.

I would term it the entering wedge of Socialism, adroitly resorted to by
its advocates. These Socialists well know the temper of the American
people toward their propaganda and wild project, and at the same time
they recognize the peculiar trait of character disclosed by Americans in
their curiosity and liking for anything new. Hence, they grossly
exaggerate the shortcomings and ills that exist in our body politic as
constituted; and, at the same time, extol, in an extravagant manner, the
superior conditions that would follow the taking of a small portion of
the Socialist’s infallible cure.

Municipal Ownership, as far as I have been able to observe, is also a
pure and simple political move to secure votes for aspirants for office,
and it is used for this purpose, regardless of any other question. It is
one of those planks that we often see inserted by parties in their
platform, to stand upon, to attract and gather in the votes. So
Socialism has its uses—for them.

I will admit that there are many economists who have presented a
friendly side to the Socialistic theories involved, and have prepared
able and extended articles in their endeavor to support or uphold such
theories (either in whole or in part); and it would be unjust to include
them in the same category with politicians and Socialists. However, if
that statesman was only half right who, in speaking of the tariff, said
that the question was a business one, and that a condition and not a
theory confronted us, then I feel that I am right in saying that “Public
Ownership” is a practical business question entirely—and not a
theoretical one.

There are so many logical and unanswerable reasons against this
Socialistic proposition that I feel it incumbent upon me to enlarge only
upon the practical ones, that I know more about, than upon those of the
theoretical group.

The experience of years has demonstrated that at the present time all
business enterprises require rare ability and experience, if not genius,
to ensure success.

Great financiers and successful men have devoted their lives to the
study and practice of their trade and business.

How is it possible, then, for municipalities to expect such
qualifications from officers whose term of office is for one or two
years, or during the tenure in office of a political party?


[Illustration:

  From stereograph. Copyright, 1907, by Underwood & Underwood, N. Y.
  THOMAS F. RYAN.
]


In the economy of commerce and its daily conduct and operation, there
are numerous divisions or departments, each one of which can only be
understood, appreciated, and conducted by men of special training and
fitness—who have given years of application thereto—and it is only by
their watchful care and expert management of each of these divisions
that a possible success is derived or business made to pay.

The smallest neglect, the merest indifference to details, or the
inattention that always accompanies abstraction by something else—taking
one’s mind off his business—upsets the whole system, and means waste
instead of saving economy, loss in place of profit, and inevitable
failure as the result. That this is true there is not the slightest
doubt, and would be readily confirmed by the leaders of every industry.

Animated by a desire to make the best possible showing, for use at the
next election, a false economy would be exercised under Municipal
Ownership, and no attention would be paid to obtaining useful new
inventions; and needed improvements and extensions would, likewise, be
ignored.

On the other hand, under private ownership, the best professional talent
is employed, at salaries unheard of in public office; and all the latest
inventions and improvements are at once utilized, giving the public
up-to-date service.

The active, modern business man, keenly alive to the requirements
necessary to ensure profit and success, perceives at a glance the evils
and mischievous results that would infect everything carried on under
this Socialistic plan. And as John Stuart Mill well says: “The mischief
begins when, instead of calling forth the activity of individuals, the
municipality substitutes its own activity for theirs.”

No serious attempt has ever been made to show the possibility of
securing and retaining, under some rule of municipal civil service, or
otherwise, the best men to assume the burden of management and
responsibility. As already explained, it would be practically impossible
to secure the best men, and no system of civil service has yet been
formulated, intended and able to provide for their retention.

In this connection, a fitting illustration is the case of Colonel
Waring, who instituted and maintained the best street-cleaning system we
have ever seen. His work was simply marvelous, and he made New York City
a model of cleanliness.

No one ever questioned his ability or integrity; yet, while at the very
zenith of his success, he was asked to resign, and obliged to leave the
city employment to make room for the choice of a new city
administration.

The defects and fallacies of Municipal Ownership which I have described
permeate all government ownership. Official reports and statistics
furnish convincing proofs and conclusive evidence of the failure of this
system as conducted abroad, and more signal loss and damage—in an
incalculable degree—would surely follow its adoption here. Just in
proportion as our interests and enterprises are the greatest and most
successful, as compared with other nations, would be the immensity of
our depreciation and collapse.

The United States is so different from other nations in its political
system that this fact alone precludes serious consideration of our
adoption of this imported Socialistic hobby and political heresy. It is
also a country whose every chapter of growth, progress, and prosperity
is a continuous narrative of individual efforts of its citizens. They,
naturally, prize individuality as they do independence itself, and have
every reason to believe that the present system of government is the
best for them, and that this land of Individualism is no place for
Socialism.

Imagine New York under Municipal Ownership of our public utilities! We
should then have fastened upon us a more colossal and more corrupt
Tammany than even existed in Tweed’s times. Graft would thrive beyond
all dreams of avarice. Let us take a lesson from England in this
respect, where public ownership has been tried on a larger scale and
under more favorable conditions than elsewhere. In a few instances the
running of street railways or city lighting plants has been successful,
but exceptions do not always prove the rule, and the conditions under
which these enterprises have been operated there must be taken into
consideration. English cities are comparatively free of political
corruption, and are, moreover, often served by men of high character,
wealth, and ability—men having a strong sense of civic duty, who deem it
an honor to give their community efficient service. Unfortunately, we
have not yet developed a class of this sort in the United States;
perhaps in due time we shall; but, until then, the experiment of
Municipal Ownership had better be indefinitely postponed. A weak point
of Municipal Ownership has usually been the financial end of the
business concerning which the public has been poorly informed. Many of
these enterprises in English cities have proved unprofitable. The
accounts have been juggled, and expenses that should be charged against
the plant were often transferred to city accounts. Not a few of the
English cities have so run into debt as to injure their credit and
impair the sale of their securities. Already, the British taxpayer is
beginning to complain about the costliness of these Municipal Ownership
schemes, and a decided reaction against them is setting in. The London
County Council has launched heavily into these ventures, many of which
have proved losing ventures, and some prominent experts have gone so far
as to predict that London will be bankrupt before long, unless present
tendencies are reversed. If Municipal Ownership has failed under the
highly favorable conditions which exist in England, how can it succeed
here? Again, the English telegraph system operated by the British
Government does not compare with the private systems of the United
States, either in efficiency or cheapness, and England with its public
telephones is very far behind the United States in efficiency and cost.
London does not begin to have the number of telephones per capita that
New York can claim. American railroads under private ownership perform
the best and cheapest service in the world.

If any further argument were needed to convince you that the United
States is no place for Socialism, its root or branches, it may be found
in the radical and quite amusing change of front shown by Major
Dalrymple, of Glasgow, upon the occasion of his visit to this country.
He came here at the request of Major Dunne, of Chicago, and the
Municipal Ownership League of New York, to aid the forces of Socialism
in their efforts in behalf of Municipal Ownership. He was the great
Apostle of that doctrine in Glasgow, and the very man, in their opinion,
to convert our people to that system.

Upon his arrival here, he was greeted with great éclat by the League of
this city, and gave out an interview in which he spoke as follows:

“I see no reason why any city in this country should not be able to own
its street railways, and to run them with as much success as we have
achieved at Glasgow. I admit that the proposition is a much larger one
than the one we had to tackle, but at the bottom it is the same.”

This was before he knew our country and its institutions. After an
extended stay here, he prepared for his homeward journey, but before
sailing, he was again interviewed, and to the surprise and discomfiture
of the Socialists, he retracted all that he had said before in favor of
Municipal Ownership, in the following language:

“To put street railways, gasworks, telephone companies, etc., under
Municipal Ownership would be to create a political machine in every
large city that would be simply impregnable. These political machines
are already strong enough, with their control of policemen, firemen, and
other office holders.

“If, in addition to this, they could control the thousands of men
employed in the great public utility corporations, the political
machines would have a power that could not be overthrown. I came to this
country a believer in public ownership. What I have seen here, and I
have studied the situation carefully, makes me realize that private
ownership, under proper conditions, is far better for the citizens of
American cities.”


[Illustration:

  From stereograph. Copyright, 1906, by Underwood & Underwood, N. Y.
  JOHN W. GATES.
]


The New York papers aptly called this “The conversion of the Scot”; and
this blunt and honest admission coming from their own authority, that
Municipal Ownership in this country was wholly impracticable, stunned
and paralyzed its agitators, and caused many of its adherents to leave
the ranks of Socialism.

Mr. James Bryce, the worthy newly appointed English Ambassador to this
country, pointed out some twenty years ago, in his “American
Commonwealth,” how the then future of the United States sometimes
presented itself to the mind as a struggle between two forces—the one
beneficent, the other malign; the one striving to speed the nation to a
port of safety before the storm arrives, the other to retard its
progress, so that the tempest may be upon it before the port is reached.
He further expressed concern as to whether the progress then discernible
toward a wiser public opinion and a higher standard of public life would
succeed in bringing the mass of the people up to a high level, or
whether the masses would yield to the temptation to abuse their power
and seek violent and vain and useless remedies—like Socialism—for the
evils which would affect us.

This able statesman predicted that the question would be decided early
in the present century, and would be evidenced by the condition of
progress and prosperity brought about by the people in the meantime.

When the Ambassador was recently welcomed to our shores, the answer to
this question concerning us, asked by him so long ago, was found
awaiting him.

It was spoken clearly and loudly by our teeming products of agriculture
and mining, and echoed in thunder tones by our mammoth shops and
factories of industry, and it was seen shining in the happy faces of our
busy and prosperous people.

Upon the golden page of to-day in our splendid history will stand out
the assuring fact that this surpassingly successful state of things has
not blossomed and come forth under the blighting shade of the deadly
Upas tree of Socialism, but that it has all been developed by and
through Individualism.

In conclusion, let me impress upon you that Individualism in the United
States has stood all tests—especially the crucial tests of time and
experience—and it points with pride and satisfaction to the great
developments secured for the American people under the bright and
beneficent rays of our admirable Constitution and Republican form of
government.

And if the aim of all government is to ensure prosperity to the country,
and happiness to the people it controls, the unrivaled excellence of
Individualism may fairly be judged by its magnificent results.

                  *       *       *       *       *

Edwin Markham, Esq., the Author and Poet, being agreed upon by both
parties to the debate, presided at the meeting.

At the close of the above address the chairman addressed the 5,000
assemblage as follows:

    “LADIES AND GENTLEMEN: I hope you have enjoyed listening to Mr.
    Clews’s very able address as much as I have. He swept the entire
    horizon and has left nothing more to be said on his side.”

Mr. Markham then introduced Professor Kirkpatrick, to combat Mr. Clews’s
arguments.


------------------------------------------------------------------------




                            CHAPTER LXXVII.

      GREAT WEALTH AND SOCIAL UNREST.[5]


Footnote 5:

  An address delivered by Henry Clews at the Thirty-fourth Annual
  Assembly of the Chautauqua Institution at Chautauqua, N. Y., July 29,
  1907.

_Mr. Chairman, Ladies and Gentlemen_:

I think that you will agree with me when I say that there is nothing
more commendable and that augurs better for the future of the
institutions of our country—our great American Republic—than the
interest shown by all classes in the important sociological questions of
the day. The general willingness of our citizens to solve the serious
problems involved by rationally debating them, and allowing careful
consideration and calm judgment to lead the way to honest conviction, is
one of the good signs of the times.

We are progressive in spirit as well as in our practical achievements,
and, in many respects, we have set the pace for other nations.

At one time, we know, capitalists and leaders of industry too often
either wholly ignored the discontent or appeals of the laboring people
in their employ, or subject to their influence, or, if appreciating the
causes of their discontent, showed no disposition whatever to right
their wrongs, or even to define their own views and position, or make
any attempt to defend their own side of the case.

This was the attitude of Capital toward Labor in former times that I may
liken to the Dark Ages. It was, of course, radically wrong and unjust.
The refusal, or, at least, the unwillingness, of Capital to recognize
the fact that there are two sides to every case was not only oppressive,
but often led to costly and destructive strikes, and, doubtless, in a
measure, retarded development and progress in industrial and other human
affairs. But now Capital is showing more readiness to meet Labor on the
same platform of discussion; and in keeping with this opening of the
door to fair and full two-sided discussion is the general tendency of
legislation to improve the condition of the masses, and the Chautauqua
Institution in holding this Convention to consider the question of
Social Unrest is entitled to great credit for the performance of a most
laudable service in the interest of education and progress and the
uplifting of humanity. It is sowing the seeds of future advancement and
greatness in those directions.

The fact that Social Unrest exists, and moreover is very prevalent, not
only here but throughout the world, cannot be denied. Thus, in Russia,
just emerging from the throes of a deadly and costly war, the spirit of
discontent and Nihilism is rampant, and in France the Terrorists are
gaining in numbers and clamoring for their rights, while Austria and
Germany are greatly disturbed by the constant persistence of the violent
and revolutionary Socialists in railing against society and government
as they now exist. In Great Britain, too, the Socialists have stirred
the people to uneasiness by the loud threats, and rule or ruin alarms,
that they are sounding.

While this unrest and discontent are especially great in foreign
countries, we cannot shut our eyes to the fact that these exist in the
United States—though not in such large proportions as in Europe.
Moreover, they are largely of a different kind and quality.

But it is not well for us to give undue recognition to the Socialistic
outcries in this country, for by so doing we might encourage and
aggravate a condition that, to my mind, is an equal menace to both
Capital and Labor—the two great living forces of our national life. We
may increase an evil by magnifying it.

Too much appreciation and regard cannot, however, possibly be shown to
that spirit of unrest existing among us, which leads to individual
betterment and national development, and which is especially
characteristic of the American people.

Ever since the blazing torch of civilization threw its bright light upon
the world, it has been the paramount disposition of man to add to his
possessions and to aspire to higher and better conditions. In this he is
distinguished from savages and the lower orders of animal life, which
have no perception of what we call ambition and achievement.

Man being endowed with a mind, it is through the exercise of his mental
faculties that he is made restless under unsatisfactory conditions; and
civilized man is fired with a desire for improvement, and particularly
to improve his own fortunes and position by increasing his possessions,
and acquiring distinction, or reputation in his business. This is well,
so long as it does not degenerate into graft, or the misuse of other
people’s money.

It is this unrest and this aspiration that constitute the great
incentive to human progress, and that have given us our cultivated
fields and teeming harvests, endowed and multiplied our noble edifices
of learning and religion, built our large and splendid cities and homes,
our great bridges and other engineering works, and our vast factories
and other busy hives of industry. This is laudable ambition that
stimulates national development.

We must, however, be careful to draw a plain line of demarcation between
that unrest I have described, and which springs from an appreciation of
the solidity and soundness of our foundation and aspires to build
thereon so as to realize the highest ideals of perfection and
success—and that misguided or malicious unrest and discontent incited by
Socialism. This is really at enmity with all civilized forms of
government and all measures of advancement in the right direction, and
seeks their overthrow and utter destruction.

The spirit of unrest that I have commended, and which I have termed an
American type, is not noisy and clamorous in its nature, and it
manifests itself mostly through organizations of labor, in demands for
adequate or increased compensation, or the fixing of a stated reasonable
number of hours to constitute a day’s work. With these purposes, and the
aims of Labor-Unions generally, I want to state that I am in the fullest
accord. The laborer is worthy of his hire, as the Bible says.

But it is not from this source that the wail and cry of Social Unrest
comes. No, “The shallows murmur, while the depths are dumb,” and it is
from the other and Socialistic class that we hear the government and its
institutions decried, and capital and commerce attacked, and the spirit
of competition and achievement assailed. I say, Down with these
assassins of good government, these assailants of law and order!

True, we see Labor strikes in some places; but these are incidents that
have not been uncommon at any time in the past, and are not marked or
significant enough now to form a particular feature of the prevailing
Social Unrest. We have not yet reached the Millennium!

But whence comes the Socialist’s expression of unrest and discontent,
and what is it based on? It reminds me of Don Quixote, and the fight
against a windmill.

What is the sum and substance of the Socialists’ grievance? They see
only evil in what is really good government, and none are so blind as
those who will not see.

They claim to be dissatisfied with the existing order of things. But
what remedies that are not revolutionary do they prescribe for the cure
of existing social and political ills? The fact is that many Socialists
at heart are anarchists!

In almost every instance you will find among the rabble at a Socialist
meeting some honest but mistaken theorists, who plausibly find fault not
only with the conduct of our government, but with the very form of our
government itself, and picture, under the delusion they cherish, an
utterly impossible Utopia where—

                     “The people all are blessed
                      And the weary all have rest.”

These visionaries are reinforced by pretended reformers and professional
agitators, often of great persuasive powers, who appeal strongly to the
passions and prejudices of the ignorant people of various nationalities
who are made to imagine that they are still down-trodden. Here, in my
opinion, lies a real menace and danger—that of these people being
carried away by the power and passion of such appeals, the inflammatory
utterances of reckless demagogues and firebrands. They are the public
enemies we have most need to guard against.

The path of safety lies in standing ready to discuss every proposition
which they advance, and then refute, with cool reasoning and argument,
the fallacy and falsity of their position and the destructive doctrines
they teach.

It will also be very noticeable that the people comprising the
Socialistic audiences at such meetings are mostly foreigners who,
seeking better social and political environments, emigrated to America,
a large part of them within the past decade or two. As discontented
aliens they become as dangerous as the firebrands they listen to, but
there is no spirit of self-sacrifice among them. Moreover, they are
slaves to what is worst in Socialism and blind followers of a false god!

That this peculiar condition of things should exist in this country
seems almost paradoxical. It is something that a patriotic American
cannot tolerate, and mainly an outcome of Russian oppression, imported
by those who have fled from it, and who fail to understand or appreciate
the new conditions under which they live. We can well understand and
appreciate how, in a country ruled by a despot, whose heel of oppression
and tyranny is ever on the necks of the down-trodden people, the masses,
desiring some measure of free action and equality, would revolt against
these conditions, and seek a reorganization of society. They would,
naturally, look as far away as they could from such a government of
despotism—the only one they had ever known—to the other extreme—an
imaginary country where the State should own all the land and capital,
employ all the people and divide everything, share and share alike,
among the community. Such a government will, of course, never exist. It
is simply impossible.

But the spirit of revolt, which, in that case, may be patriotism,
becomes ridiculous, and open to the charge of insincerity, when its
worst doctrines are transplanted and cultivated upon American soil by
our foreign population. When it appears here it is really more like
Anarchism than Socialism, and I emphasize this.

Born of the spirit of resistance to oppression, with the broadest and
freest constitution that the world has ever known—a land of freedom and
equality in the best and most liberal sense of the term—it would seem
that the sincere lover of liberty and equality could ask no better home
than this democracy of ours—whose glorious flag floats over eighty-four
millions of prosperous and enlightened people.

With further reason, also, must we question the sincerity of the violent
type of Socialist, who, leaving oppression behind, emigrates to this
country, where tyranny and despotism are unknown, and yet continues to
echo Socialism’s war-cry of destruction, wrung from his heart by the
cruelty of his old-time oppressors. When he does this he becomes an
enemy of our Republic, unworthy of citizenship.

He comes here from a land of want and thraldom to a land of plenty and
freedom. He may come without name, fame, or property, and he is received
with open arms. After a brief residence, he is entitled to full
citizenship, and is then a part of the government, enjoying all the
rights and privileges of the native born. He is a sharer in the equality
possessed by all, the right to share in the government such as the
electoral franchise and eligibility to public office. He is possessed of
the civil rights enjoyed by all citizens in the equality of material
conditions—that is, the right to acquire wealth and all that wealth
implies.

Every opportunity for him to achieve success and happiness abounds on
every hand, and every incentive to industry and accomplishment awaits
him, and, if he is energetic and skilful, there is nothing to hinder him
from becoming prosperous, or, in other words, successful in whatever
vocation in life he may engage. With qualities that commend themselves
to his fellow men, there is no limit to the possibilities of his
achievements, and very soon, as has been very often the case, he may
become not only wealthy but a leader of men. If, therefore, he is
sincere, surely he must agree with me that in view of these conditions
this is no place for the Socialist. He must be an ingrate who would fail
to appreciate the splendid boon.

Does it not, indeed, sound like a paradox to hear this cry of Socialism
still rending the air while every avenue of fortune lies open to
everyone? It is a glaring anomaly of the times, an offence to American
institutions, a poor return for our national hospitality. Vague and
illogical as the theories advanced by the doctrinaires of Socialism are,
there runs throughout all their teachings and preachings bitter and
radical opposition to individual accumulation of wealth and individual
competition in industry.

Socialists would, in other words, fence up the great field of free
opportunity, deaden all incentive or inspiration for great achievement
and not only curtail, but wholly remove the right to compete and excel
and make it impossible to achieve success as the result of individual
effort. They would reduce us all to a barren uniformity.

Think of this monstrous proposition! Why, the very thing that the
Socialists attack as untenable and wrong in government, namely,
individual competition, has done more than anything else to make us what
we are as a nation; has kept alive the precious fires of liberty and
freedom, and preserved the institutions of our country. Take away the
progressive spirit of Individualism from the people, and you at once
eliminate the American spirit—the love of freedom—of free industry—and
free and unfettered opportunity—you take away indeed freedom itself!

The state of society the Socialists seek to establish might be
beneficial to a class which, under any conditions, lacks frugality,
thrift and self-reliance; but just where the general mass of humanity
would be bettered or elevated socially, morally or politically, is a
point not satisfactorily explained, and never will be.

If you render equally accessible to each and every member of the human
family the benefits of civilization, all holding “properly in common,”
why should a man rack his brain or strain his muscles in producing
something which he expects to prove remunerative or beneficial to
himself in some way, but which under the Socialistic state would
contribute to the equal financial benefit of all? The highway to
distinction and opulence would be closed.

As illustrating the inconsistency of some poor specimens of human
nature, when put to the test of Socialism, I will tell two stories:

Jerry Sullivan had proclaimed himself a Socialist, and was being
interviewed by his friend, Mike Casey.

“Jerry, do you believe in dividing up everything with your neighbor?”

“Indeed, and I do that.”

“If you had two horses (Jerry had none) would you give one to your
neighbor Flanagan?”

“I’d be only too glad to.”

“And if you had two automobiles, would you give him one?”

“Sure, Mike, I would. We should have share and share alike in this
world.”

“And if you had two Angora goats (which Jerry did have) would you give
one to Flanagan?”

“What, give him one of my goats! Not by a jugful! Let Barney Flanagan
buy his own goats.”

One of my millionaire clients, on his return from a trip abroad, called
upon me to pay his respects. In the course of our conversation he said
he had become a confirmed Socialist. I expressed surprise, and said,
“Then, of course, you are going to divide up all your properly with your
less fortunate associates?” He said, “Oh no, but I want all the other
fellows to do it.”

The most commendable object in Socialism is the uplifting of the
down-trodden and poor, yet that great Commoner and Tribune of the
People, William Jennings Bryan, tells us that under Individualism we
have seen a constant increase in altruism. That the fact that the
individual can select the object of his benevolence and devote his means
to the causes that appeal to him has given an additional stimulus to his
endeavors. And Mr. Bryan pointedly asks the question: “Would this
stimulus be as great under Socialism?” Let it not be forgotten that by
means of present tendencies and existing economic laws the poor are
constantly growing richer, that is, better off, particularly as
indicated by the savings bank deposits. The common people and the
savings banks were never before so prosperous as they are now. Labor has
made great strides, and the uplift in the lower walks of life in all
Christendom during this generation and particularly during the past
twenty years has been beyond precedent. Give us wise and just
legislation, and complaints of the inequitable distribution of wealth
will quickly disappear. Let us put down and keep down the revolutionary
Socialists and Anarchists.

Of course, if the unrest of a people is prompted by a desire to promote
the good of the greatest number of their fellow beings it will be
productive of lasting benefit to all in the long run. But if any
combination of capitalists, laborers, politicians, or religious bodies,
has for its aim the particular good of only a certain class or party,
such action as they take will be prompted by selfish desire, and will
work for evil and injustice. The great mass of the people of this
country, outside of the big cities, are not allied with either the
members of labor unions or the very large capitalists, and the feeling
of discontent is largely bred in cities, where it is magnified by the
prominence given to it by agitators and the newspapers.

The wage earner in the cities is more or less disheartened by the high
prices of food supplies, the higher rents and the higher rates of
interest on mortgages, and he argues that his pay has not advanced in
the same proportion as the price of home necessaries. Mechanics and
other laboring men are receiving higher average wages than ever before,
but the display of wealth in modern palaces for the rich, and the
abundance of automobile and kindred luxuries among them, have kindled
envy and whetted their desire for things beyond their means or hopes of
attainment. While no law can change the nature of a man, and while we
cannot expect an ambitious man with an elastic conscience to always
become a benefactor, or a labor union leader, filled with hate, to
become a saint, I hope that the agitation now existing may lead in time
to a more general observance of the Golden Rule, to do unto others as we
would they should do unto us.

I may say here that I believe nine-tenths of the dissatisfaction of the
masses is based upon mistaken ideas. Few men are capable of judging
impartially of the rights or the motives which actuate those upon whom
Fortune has smiled: Success may be often a matter of luck and
opportunity; but it cannot be denied that judgment, mental force and
courage are the factors which are bound to insure success.

I now speak not only of success from a monetary standpoint—for many of
our most useful, intelligent and influential citizens are comparatively
poor—but of all success. Our larger cities are the hotbeds of unrest.
The older generation, being anxious that their sons shall have more, and
know more, than themselves, and enjoy the good things in life which they
have desired but have not been able to obtain, now try to give their
children a liberal education and fit them for what they consider more
congenial or higher-class occupations than their own.

The outcome of this is that the younger men, when their education is
completed, drift into the cities, where they think they have a better
chance of getting on in life. It is the same with farmers, laborers and
mechanics. Their children desire to rise above their early environments,
and wish to occupy positions where they can use their brains rather than
their hands. Hence the many deserted farms in New England and in the
State of New York, for poor soil is not sufficient cause for their
desertion. It can be made good by fertilizers, and where there’s a will
there’s a way.

This discontent is producing a superfluity of clerks and other brain
workers, who think work with the head more genteel than work with the
hands, and a great shortage of farm workers that are needed to develop
our agricultural resources. Even the children of the most ignorant
foreigners are imbued with this ambition before they are able to speak
our language. Too many despise honest labor and want to live by their
wits. So we have a vast host of surplus politicians, office-seekers,
promoters, brokers, lawyers, clerks, canvassers and drones.

In olden days the young were willing to follow in the footsteps of the
old, and begin life where their fathers began. Now they expect to begin
where their fathers leave off, and are dissatisfied and disappointed if
they find that they have to start from the foot of the ladder.

What we most need in this country to promote and popularize farm and
village life, and check the general tendency of both young men and young
women to drift to the large cities, is a change in our educational
system. We should establish trade schools everywhere to teach the trades
and practical sciences, and so make country-bred people proficient in
occupations that they could follow on the farm, and in village as well
as town life. This knowledge would induce them to stay where they were
born, instead of rushing off to make or mar their fortunes in the
overcrowded cities where many come to grief. Thus the congestion of
population in the cities would be relieved, and the country generally
would be able to retain the men and women it needs for its industries
that are now held in check by an insufficiency of labor. In this way we
might gain millions of good mechanics and other useful workmen where
they are most needed, and reduce the number of the inefficient and
unemployed in the cities, to say nothing of the chronic idlers and the
sporting, gambling and criminal classes. Men instructed for the
professions would of course still study in the colleges, but the masses
have no use to which they can put the higher education of even the high
schools.

There are a lot of well-meaning theorists engaged in so-called Social
reform who are largely responsible for many things that add to the
unrest in the poorer sections of our cities. Far be it from me to
criticize anyone who has the desire to better the condition of his less
fortunate brothers, but the work of many of these reformers reminds me
of the man who threw a panful of kerosene on a small fire with the idea
of putting out the flames. To be a true Social reformer a man must be
well informed on conditions which obtain on all sides of life. A rich
man may have acquired wealth by miserly habits, but if he has not been
dishonest he is entitled to his savings, and no law can compel him to
divide with the poor man who has been profligate in the use of his
earnings. The thousands of immigrants who arrive at our ports each week
are, for the most part, poor and ignorant. The greater number of them
remain in our cities and add to the congestion and widespread poverty of
the cities. But these same immigrants are willing to work, and in a year
or two, instead of being a charge upon the community, have savings bank
accounts of their own. However, they are ripe for the reception of the
gospel of unrest, as they have lived hitherto in places where the poor
are always poor, with no lookout for improvement, and willingly listen
to the agitator and prophet of discontent. Mr. Roosevelt has said and
done things in the last four years which have shaken our land. Many
investors have thought that he had gone too far in his insistence that
the law should be rigidly enforced, as they, innocent holders of
securities, had been made to suffer loss by the depression in prices.
While it is hard that such losses should have been incurred, it is no
fault of the President, and his action, in the long run, is to be of
untold value to our national and individual prosperity. If his actions
will insure the fulfillment of the law by the magnates in power in our
railroads and corporations, the little man will be on a par with the big
man, and all investments will be on a safer basis, and the dark secrets
of the manipulator will give place to the open publication of rates and
earnings so that a stockholder will know where he stands and what his
company is doing.

Daniel Webster, as far back as 1842, found that the spirit of unrest was
in the air as it is now. In an address in that year he said:

“There are persons who constantly clamor. They complain of oppression,
speculation and the pernicious influence of accumulated wealth. They cry
out loudly against all banks and corporations and all means by which
small capitals become united in order to produce important and
beneficial results. They carry on mad hostility against all established
institutions. They would choke the fountain of industry, and dry all the
streams. In a country of unbounded liberty they clamor against
oppression. In a country of perfect equality they would move heaven and
earth against privilege and monopoly. In a country where property is
more evenly divided than anywhere else they rend the air shouting
agrarian doctrines. In a country where the wages of labor are high
beyond parallel, they would teach the laborer that he is but an
oppressed slave.”

I will here deviate to another division of the subject.

Considerable uneasiness and unrest have been evinced not only by the
Socialists, but by many others, as to whether great individual or
corporate wealth—in other words, capital—is inimical and hostile to the
public welfare and a menace to our institutions.

I think that it can be clearly shown that this anxiety and unrest are
without any good foundation. There is nothing in fact to justify this
unrest.

In our own country especially, where individual opportunities are
practically limitless and where thought and effort are exerted to the
utmost straining point, most fruitful, indeed, has been the result. We
have seen that the making of large fortunes coincidently with great
general prosperity, that is, by those doing a profitable business on a
large scale, is an inevitable economic result.

The past forty-five years in the United States embrace a new era of
wealth—an era in which the accumulation of vast amounts of money, or its
equivalent, in individual and corporate hands, has accompanied the most
marvelous national growth and prosperity in all history.

New conditions have arisen, and new methods have had to be employed,
while new men, equipped with new ideas, have not been found wanting to
meet all requirements, and to keep step with the march of progress on
both land and sea. Unlike the people of some of the older countries,
where, as in Russia, they distrust their government, Americans do not
hoard their wealth. They employ it. They have nothing to hoard it for.
Their quickly acquired fortunes are generally lavishly disbursed, both
in their style of living and their investments. With much of the money
they put into circulation, railroads are built and extended, mammoth
factories are constructed, labor is employed on a larger scale than
before, more farms are cultivated, and more crops are moved and
exported. Through all the arteries of trade and commerce the wealth thus
employed flows and adds to the growth and prosperity of the country.

Keeping the wheels of commerce moving, by supplying the demands of the
financial, mercantile, manufacturing and agricultural world with the
“sinews of war,” in the up-to-date American way, instead of merely
gathering wealth and hiding it away, has been to my mind one great
secret of our unprecedented national advancement.


[Illustration:

  CHARLES M. SCHWAB.
]


Although it is impossible to demonstrate just how important an influence
this practice of keeping wealth actively in use has played in helping to
bring about and preserve the generally progressive and prosperous
condition of affairs, there is evidence enough to refute much that has
been said against the possession of great wealth, and also to show that
the hostile or critical attitude of the press and the people toward it
is unjust, and should be derided instead of being popular with the
masses, as it is. The assistance which Americans of great wealth have
given the nation, in the founding and preservation of institutions for
the public benefit and in many other ways, has never been sufficiently
appreciated or acknowledged.

Wealth in good hands serves good purposes. The richest men of the
Thirteen Colonies in the American Revolution were among the most active
and self-sacrificing of American patriots. They included George
Washington, John Adams, John Hancock, Thomas Jefferson, James Madison
and Robert Morris, whose names are imperishable on our national roll of
fame.

In that glorious struggle for freedom, these wealthy patriots performed
a leading and arduous part, and aided largely in effecting that grand
result—the establishment of this great republic, the United States of
America, under the best and freest Constitution in the world.

Passing onward from that memorable time, we come to that of the
Rebellion, when Secession reared its aggressive head, and the very life
of our institutions was in extreme jeopardy. In the early part of the
great Civil War—when the Government, friendless abroad, knew not which
way to turn for the financial aid that it so sorely needed to defend
itself and prosecute the war—history will recall that the great wealth
of private individuals proved not a menace, but a blessing and a godsend
to the Nation. These served their country well by coming forward with
their wealth and buying United States bonds in large amounts when the
risk was hazardous. By so doing they rendered patriotic public service
that should make even the Socialists hesitate before condemning great
individual wealth as dangerous to the national welfare.

I might in illustration of what I say enumerate instances almost without
number where, from the rock-ribbed coast of Maine to the Golden Gate of
California, under the beneficent rays of great gifts of the wealthy the
seeds of education have been sown broadcast and have grown into grand
and telling factors in shaping the character of the rising generation of
American manhood and the destiny of this great country.

In keeping with the hostility, or unrest, concerning great individual
wealth, and large corporate capital, we are at times confronted by the
bold assertion, made by extremists, that some limit should be set to the
amount of property an individual may own. The impracticability and
inadvisability of any such measure are at once apparent. You might as
well try to limit the capacity or energy of an individual. When you
prevent an individual from accumulating you at once discourage his
productiveness. This is an axiom beyond dispute.

As regards great corporate capital, I must admit that there has been in
many instances, in the past, good cause for much of the unrest and
dissatisfaction manifested by the people.

Toward competitors large corporations have too often been unscrupulous,
just as the railways were in giving rebates to control the heavy
traffic. These illegal and reprehensible methods were pursued far too
long, not only causing immense personal and commercial loss and injury,
but shaking the confidence of the public in the large corporations
called Trusts. These offences can, however, under our new laws, hardly
be repeated in the future.

Under the provisions of the Sherman Anti-Trust law, the Elkins
Anti-Rebate law and other and later restraining statutes, condign
punishment will, doubtless, be dealt out to offenders, and a rigid
enforcement of these laws, and their necessary amendments, will be
sufficient to regulate corporate bodies and stand as an ægis of
protection for the nation.

In this very active period of business reform overcapitalization is an
evil that must be classed with rebates, railroad discrimination, and
other corporate abuses. This also applies almost equally to both the
industrial and railroad systems. However much this evil may have been
regarded and thought inevitable in the past, owing to peculiar and lax
conditions in the pioneer days of railroads and industrial upbuilding,
it is intolerable now, and should be made impossible in the future.
There is not the slightest doubt that a great deal of the public unrest
has proceeded from this source. But, with the stoppage of the evil, it
ought to subside.

Overproduction of any kind is a detriment to trade and leads first to
extravagance and then to disaster; overfeeding produces disease;
overtraining of an athlete weakens him and causes his defeat; overstudy
racks the nerves of the student and unfits him for usefulness. Overwork
kills man and beast, and ruins even our locomotives and machinery. Too
much rain, too much wind, and too much sunshine spoil our crops; too
much confidence or too much caution prevents a business man from
achieving success. There is a happy medium in all things which produces
good results and promotes success. Under our modern system of financing
our railroads and industrial corporations overcapitalization has in many
instances run riot and produced an overplus of undigested securities.
This system of financing will surely lead to disaster if not curbed and
conducted in a rational manner. If a company needs additional funds for
legitimate purposes, such capital is a necessity which stockholders will
willingly provide; but the managers of corporations should be compelled
to state exactly and definitely for what purpose such funds are needed,
and should also be compelled to make a clear and definite report.

Centralization of power in the hands of an able executive is a good idea
if he prove worthy of the trust his colleagues confide in him, but, on
the other hand, makes him a master, and them slaves, if he be
unscrupulous and crafty.

Happily, the days of overcapitalization are seemingly over, and an
aroused public opinion will, no doubt, be expressed in whatever
prohibitive laws are necessary, if those already enacted prove
insufficient.

In, at least, some instances the existing laws seem inadequate. It is
likewise due to the sound corporations of the country, as well as to the
public, that something further should be provided to overcome the
feeling of suspicion toward them, and to keep the people informed as to
their existing methods and the true condition of their affairs.

The remedy for corporation wrongdoing is found in publicity! This
publicity is the great need of the present and the future, and the
public should demand it. It is a lamp that we should always keep
burning.

In a recent address delivered by me before the Wharton School of Finance
of the University of Pennsylvania, I urged that the New York
Legislature, as well as the Legislatures of the other States, should
respond to the popular agitation for this publicity by passing laws
requiring all corporations to make at least semi-annual reports of their
condition, certified to by registered public accountants, with power
invested in the State superintendents to order special examinations by
such accountants at any time when deemed necessary, that is, whenever
any of them were suspected of being unsound or irregular in their
business methods.

The question now to decide is what remedies can best be adopted to
prevent a repetition of stock-watering. My plan is for the Government to
appoint a salaried director in each of the interstate roads, this
director to be on the executive committee also. His duty should be to
act as a watchdog, and he should be required to report to the Interstate
Commerce Commission all crooked acts or suspicions of any; besides which
the interstate roads should be compelled by law to issue sworn
statements of their exact condition semi-annually. Officials of railroad
companies found guilty of any illegal acts whatsoever should be punished
by imprisonment. Money penalties are of no use in stopping wrongs of
wealthy corporations.

Railroad discriminations and other abuses were incident and owing to our
extraordinary development during the last half century, and especially
to the striking failure of our Legislatures to keep pace with national
progress.

Let us briefly look into a few of the causes which were responsible for
this railway abuse. Both before and after our recent Civil War this
country was greatly in need of more railway transportation than it had,
and national development was impossible without it. We had millions of
square miles of territory rich in natural resources, but totally
undeveloped and awaiting population, capital and transportation. Of
course transportation had to be provided before either population or
capital could venture with any freedom into the Great West. In those
days it was vastly more difficult to raise $1,000,000 for a new railroad
enterprise than it was to procure $100,000,000 in more recent times. The
public was not accustomed to such ventures, and the country did not then
contain the large number of wealthy men who must now be depended upon to
back such great enterprises.

In those days railroads required relatively large capital; the risks
were new and great, and some means of securing large profits had to be
devised in order to tempt men of means to venture into such enterprises,
which from their very nature involved a long wait for profit. Our
earliest railroad builders were men of unbounded faith in the future,
and they well knew that many years of patience and outlay would be
necessary before such enterprises could become profitable. It is almost
axiomatic to say that in this country our railroads have been the
principal factors in national progress. In the United States, railroads
were called upon to develop both population and traffic. In Europe,
population and traffic were already in existence and simply awaited the
railroad. When railroad building first began, England was already a
closely settled country; and it was only necessary to construct the
lines to obtain profitable traffic at once. No special inducements were
necessary for the attraction of capital, and no preliminary period of
waiting or loss was required to develop traffic. It was vastly different
here; railroads had to be built across thousands of miles of new
country, frequently over apparently insurmountable mountains where
neither traffic nor population existed; and their builders, men of
monumental ability and enterprise, knew full well that a generation must
pass before such enterprises could be considered profitable and solid
investments.

Under such conditions what inducements could be offered to overcome such
overwhelming obstacles? While government aid was eagerly sought, it was
restricted mainly to the Pacific roads where political reasons, such as
unification of new territory, justified government support. Another form
of national aid was the giving of large land grants to railroad
corporations as a stimulus to the settlement of new territory and the
building of roads adjacent thereto. Even those helps were insufficient.

Meanwhile, the treasures of the Great West offered irresistible
attractions to new enterprise and settlement. The demand for more
railroads was insistent; then came the devices of stock-watering and
overcapitalization as inducements to new capital. Roads were often built
entirely on bonds; and stock, having little or no value except for
voting, was given away as a bonus with the bonds, or used for various
purposes, often in speculation, and such stock frequently found its way
back to the original promoters at bargain if not waste-paper prices.
This era of speculative railroad building was naturally accompanied by
all sorts of illegitimate operations; overcapitalization bearing a
leading part. No one would now dare think of resorting to such practices
as were common in those pioneer days. They were utterly indefensible,
and yet as an expedient they served their purposes in raising much of
the capital with which to develop our early railroad systems.

Our great railroad builders were fully entitled to great profits, since
their boldness and skill developed the finest railroad systems the world
has ever seen, and without them the United States would never have
obtained its present magnificent position and prosperity. We must admit
their methods were open to serious criticism, and would not be tolerated
in these days of improved business standards. Nevertheless, they were
the methods of the day, and must be judged as such. I do not wish to be
understood as defending or apologizing for overcapitalization, for I
consider it an economic evil of the most dangerous character, and its
penalties—political as well as economic—cannot be averted.

It should not be forgotten that the great wave of grangerism and
anti-railroad agitation which swept this country in the ‘80s was a
direct revulsion of popular feeling against the burdens of
overcapitalization and their tax upon traffic. These were the political
results of such abuses. The economic consequences which
followed—somewhat late to be sure—were witnessed in the reconstruction
period that followed the panic of 1873, when vast millions of railroad
capital were literally wiped out by the reorganization of railway
corporations.

To-day most of our railroads are comparatively free of
overcapitalization, both because much of the water has been eliminated
by reorganizations, and because the increased value of terminals and
other properties, as well as the large improvements that were paid for
out of earnings, have increased the intrinsic value of shares which at
one time may have been practically valueless. This process of accretion
has been going on for many years, so that now there is comparatively
little difference between intrinsic and market values. Of course, some
recent striking departures from sound railroad financing can be cited;
but I am speaking in broad terms, and have no hesitation whatever in
asserting that American railroad investments are now sounder financially
than any similar class of securities in the world, and this
notwithstanding that railway companies are compelled to borrow enormous
sums in order to meet the demands of a wonderfully expanding traffic.

A comparison greatly in our favor could be made with British railroads
which have for years been inflating their shares by a policy of charging
improvements to capital account; the American system being to charge
such items against earnings. The result is that British railroad shares,
which were once held up to us as models of soundness and honest
capitalization, are now seriously threatened with an excess of water;
and unless the present policy is changed, English stockholders will soon
be discarding their home favorites for the bonds and stocks of more
soundly managed American railroads.

I have dwelt considerably upon the overcapitalization of our railroads.
Now a word about overcapitalization in another direction, where it is a
vastly more serious affair. While we now have little to fear from
overcapitalization of railroads, an inflation has taken place in our
industrials of the most extravagant character, and this is one of the
most serious menaces to our industrial and financial future. A feature
of our national development which has attracted world-wide attention
during the last ten years has been the consolidation of nearly all our
great industries into a few “Trusts.” This era of consolidation, or
“Trust-making,” must be classed as an industrial revolution of the
highest import, containing tremendous possibilities for both good and
evil. Within a few short years a large proportion of our industries were
combined or turned into Trusts, and securities issued in exchange
aggregating about $6,000,000,000.

Of course, many of the objects of these combinations were perfectly
legitimate. The seeking of better and more economic methods of
production and distribution was eminently proper, but the grasping for
monopoly was not legitimate, and has proved more largely responsible for
the political and social unrest of the times than any other single
cause. Nothing has done more to stimulate Socialism than this
unwholesome tendency toward monopoly and excessive centralization. On
this feature, however, it is not my intention to dwell further; I must
even entirely pass over the overcapitalization of public franchises as a
subject of sufficient importance to demand special treatment.

All things considered, however, I feel safe in saying that there is
practically no more reason for unrest on the part of the business
community or the people of the nation, on account of the large
aggregation of capital represented by Trusts, than from equally large
sums in the hands of individuals; for both are equally controlled by law
and influenced by public opinion, and public opinion is often more
powerful than law in righting wrong. Moreover, public opinion makes the
laws. As the Latin aphorism says, The People’s voice is the Voice of
God!

I take decided issue with a certain distinguished gentleman from
Maryland, that the existing unrest has been brought about by the
national administration at Washington, and by the Chief Executive of our
country, and challenge the truth of this assertion. It is both a
surprising and ridiculous accusation. The leading men of thought—not
only in the United States, but all over the world—agree that if, after
the startling exposures of the life insurance and railroad abuses,
President Roosevelt had not taken the sturdy and bold stand that he did,
the confidence of the public would not only have been severely shaken,
but would have been well-nigh uprooted; and such a general spirit of
unrest would have followed as to be truly alarming in its nature.

As it was, his level-headed and courageous course was timely and almost
providential, and instead of being the subject of adverse criticism, he
is entitled to the highest praise from all. Apart from some politicians
and a few others, we are indeed all paying him this deserved tribute. He
has often shown us that he possesses the courage of his convictions. In
conclusion, while we doubtless all agree that the existing social
unrest, anxiety and prejudice are to be deplored, may we not also unite
in the hope that, under the educating influence of a full discussion of
the economic questions of the hour, and with the enforcement of the laws
in the hands of an honest and courageous executive, the way to
betterment will be thoroughly paved? It is a patriotic duty to endeavor
to lessen popular discontent and promote social and political peace and
harmony, and substitute public confidence for unrest and the violent
agitation of Socialism, and so enhance the manifold blessings we enjoy
as American citizens, yes, as citizens of the foremost nation of the
world, with a future even grander than its past, a country where Nature
is everywhere lavish of her abundance, and freedom and independence are
our birthright. Beholding then, my friends, this grand spectacle of
national progress and achievement even as it appears to us at this day,
it certainly needs no prophetic tongue to foretell with confidence and
absolute verity that to the true and ardent patriot and ambitious
American, in fact, to every man inspired with lofty ideals and imbued
with a spirit and desire for improvement and the perfection of
democratic government, the social and political vista of our country’s
future will disclose a picture of prosperity and contentment that will
prove a glorious inheritance to the coming generations of the American
people.


[Illustration:

  From stereograph. Copyright, 1906, by Underwood & Underwood, N. Y.
  AUGUST BELMONT.
]


------------------------------------------------------------------------




                            CHAPTER LXXVIII.

          THE FINANCIAL SITUATION.[6]

Footnote 6:

  An address delivered by Henry Clews at the Fifteenth Annual Convention
  of the Kentucky Bankers’ Association in the Auditorium, Seelbach
  Hotel, Louisville, Kentucky, September 18, 1907.

_Mr. President, Members of the Kentucky Bankers’ Association_:

As all know, we have recently passed through a crisis of distrust in
Wall Street—distrust of corporate credit, and railway and other
corporate stocks. This was reflected in what I may call a slow panic, a
heavy and prolonged decline on the Stock Exchange under a continuous
flood of liquidation by both investors and speculators.

This crisis had been brewing for a long time, and we had a violent
intimation of the dangerous and disturbing elements in the financial
situation last spring, culminating in the collapse of the stock market
in March. But it was not until a United States Court at Chicago
inflicted a fine of $29,240,000 on the Standard Oil Company, of Indiana,
that investors, and the large capitalists of Wall Street, including
Standard Oilers, took alarm. Then the trouble became acute.

The Wall Street speculative multi-millionaires in particular felt the
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.

But, now that Mr. Roosevelt has substantially achieved his purpose, he
can well afford to rest satisfied that his work will continue to bear
good fruit without any further public addresses on the subject.

The people are already familiar with his views, and their continued
reiteration by him in his speeches, especially during this period of
financial and industrial distrust, depression and unsettlement, would
tend to inspire fresh uneasiness as to the situation and the value of
corporate stocks and bonds. It would do this, owing to the extreme
nervousness and timidity of capital that prevails.

It is this abnormally sensitive and apprehensive condition of public
feeling that led to the recent senseless run upon certain New York trust
companies, and in a minor degree upon banks and savings banks, and that
caused very many of the depositors, after withdrawing their money, to
hoard it in safe deposit vaults, and various less safe receptacles,
instead of depositing it in other institutions.

Their hoarding it, naturally made conditions all the worse, through very
seriously increasing the stringency of the money market. So great became
the scarcity of loanable funds that from the 23d to the 31st of October,
call loans were made daily on the New York Stock Exchange at rates
averaging 50 per cent per annum, with some ranging from 75 to 100 per
cent. Such hoarding, on a large scale, is fraught with great danger, as
it involves a sudden contraction of the circulation and drain upon bank
reserves. In this instance it caused renewed panic and fresh breaks in
stocks, and it alone compelled the New York Bank Clearing House members
to vote unanimously to issue Clearing House Certificates—nothing else
would have offset the run on deposit institutions.

It would be very far from President Roosevelt’s wish to say or do
anything that would cause people to hoard money instead of employing it
in customary channels; for hoarding is a public injury and contrary to
good citizenship. Furthermore, it is entirely un-American. But the
public mind has been wrought up to such a pitch of distrust and
semi-hysteria, through the disclosures of corporate dishonesty, and
other disturbing causes, that a false, or at least exaggerated,
impression exists among many that all corporations are, or may be, in
the same boat. This want of confidence in the situation is very largely
what has caused the heavy and prolonged liquidation in stocks, and led
to the bank and trust company runs and great monetary and industrial
disturbance we have witnessed in this great and far-reaching crisis.

Mr. Roosevelt will, therefore, see, now that he is becoming more and
more cognizant of the situation, that what the public, and particularly
the investing class, needs in this period of stress and storm and
anxiety, is to be calmed and reassured and made aware that there is a
silver lining to the cloud, and no good reason for their loss of
confidence; for the country is still as great and grand, and prolific in
its resources, as ever, with its future no less promising and
magnificent than it was before this crisis darkened the sky.

It is known that he takes this view of the situation, and is earnestly
co-operating with the Secretary of the Treasury to ease the money market
and restore confidence.

------------------------------------------------------------------------




                            CHAPTER LXXXII.

 OUR GREAT AMERICAN PANICS FROM FIRST TO LAST.


The panic of 1907 naturally revived public interest in all our previous
panics, and therefore a brief historical review of these is timely. The
small one that followed the throwing overboard of the historic tea in
Boston harbor in George the Third’s time, and which was the prelude to
the War of Independence—the victorious struggle of the old Thirteen
Colonies to throw off the British yoke—was of no importance, owing to
the country’s scanty trade and banking development, and the
corresponding scarcity of credits. It was a tempest in a teapot, this
sequel to the Boston tea party.

The panic of 1812 was the first of much magnitude in the history of the
United States, and it resulted from over-trading and undue expansion in
all directions, but was precipitated by our war with England in that
year. The banking capital of the country was then only seventy millions
of dollars, yet more than ninety banks failed in the run upon their
deposits that ensued, and the Government found great difficulty in
raising a war loan. Meanwhile, trade and manufactures, which had been
very active and prosperous before the declaration of war, suddenly
became almost paralyzed.

The change from undue inflation to the undue contraction born of fear
was disastrous in its wholesale destruction of market values and
credits. But the Government war expenditures, after it had succeeded in
disposing of its securities, gradually stimulated recovery from the
worst effects of the panic, and industries that had been suspended were
resumed, thus re-employing labor that had been left idle.

Not much has been recorded of the panic of 1823, which caused trade
depression till 1825, so it was evidently much milder and less
disastrous than that of 1812. It was another instance of the reaction
that follows over-trading and an over-extension of credits, without any
war or other great event to precipitate it.

The panic of 1837 was, however, much more serious and disastrous,
because it involved far greater results owing to the growth of the
United States in extent, population, and wealth in the interval. like
its predecessor, and indeed all other panics, it was due to the
over-extension of trade, speculation and credits, but it was
precipitated by the troubles of the United States Bank, and President
Jackson’s hostility to that institution.

Speculation had been running wild, particularly in land and new railway
projects, which were then in their infancy in England. The achievements
of George Stephenson, the builder of the first locomotive engine there,
had quickly kindled the fire of railway enterprise in this country, and
promoters busied themselves in raising capital for building and
equipping railways here; and incidentally it gave a strong impulse to
the widely prevailing speculation in land.

The panic of 1857 was, of course, infinitely greater in its extent and
consequences than that of 1837, owing to the same causes that made the
latter greater than that of 1812, namely, the growth of the territory,
population, and wealth of the United States. Its main cause can be
traced to the enormous increase of speculative enterprise in this
country, especially in railway building, following the great gold
discoveries of 1849 in California. But its immediate cause was the
general alarm produced by the failure of the Ohio Life and Trust
Company, which had its principal agency in Wall Street.

There, at the corner of Nassau Street, it had long been regarded as a
pillar of financial strength, and no institution in the United States
stood in higher credit or commanded greater confidence, although without
any good reason. When it suspended payment, the news came upon the
public with the suddenness of a thunderbolt from a clear sky. The
unexpected shock filled the financial and mercantile community with
dismay, and from one end of the country to the other credit was
destroyed.

This, indeed, was panic. Bank-notes were everywhere distrusted, and
presented for redemption; whereupon the banks everywhere suspended
specie payment, except that the Chemical Bank of New York redeemed its
own notes. Business depression and thousands of failures from Maine to
California followed, and nearly three fourths of the railways, and other
large corporations, defaulted in their interest and other payments, and
went into the hands of receivers. The depression grew deeper from month
to month for more than a year after the panic, and some of the best
railway stocks declined to $3 to $5 a share, including Michigan Southern
and Harlem. Meanwhile corporate foreclosure sales and reorganizations
told the story of the financial wreckage of the time.

The country had not long recovered from the effects of this great panic
when, on the 4th of March, 1861, Lincoln was inaugurated President, and
the Civil War broke out. There was severe depression—a war crisis—then,
but it was so slow, insidious, and prolonged that it was never called a
panic. It may be said to have commenced—in anticipation of the
threatened war of the South against the North—with Lincoln’s election in
November, 1860, and to have continued till the Government began to issue
the paper money of the war era in 1861, after the suspension of specie
payments.

One feature of the panic of 1857, and the prolonged depression that
followed it, duplicated the experience of 1837, and that was the almost
universal prevalence of what were called “shinplasters.” These were
practically I O Us given as change by anyone who had received a
bank-note or check for more than the amount due him in payment for
anything. In New York the notes of solvent New York banks were never
refused in payment, while those of banks elsewhere were tabooed; but in
making change, no specie was given, the banks having suspended specie
payments. So, unless the exact amount was tendered, shinplasters were
given for the balance.

The city was flooded with these personal evidences of debt for small
amounts, issued by storekeepers, hotels, restaurants, saloons, barbers,
and the rest of mankind, and many of these were passed from hand to hand
till they became too dirty and dilapidated to be handled. They were the
worst kind of filthy lucre, and understood to be only redeemable on a
return to cash payments by the banks. But of course many of them never
were redeemed. They ranged in amount from one cent to several dollars,
and this sort of scrip was more or less extensively issued from Maine to
Texas.

The Black Friday Gold Panic was a Wall Street convulsion, and not far
reaching, like the others. It occurred on Friday, September 24, 1869,
and was the result of a conspiracy, headed by Jay Gould, to corner gold,
and force the “shorts” and importers to buy at a high premium. The Tenth
National Bank, in Nassau Street, which he, and those associated with
him, managed to control, became conspicuously involved in the corner
through over-certifying their checks to the amount of about $7,500,000
on that day, and, as a result, it was closed by the Government bank
examiner. Several scandals cropped out in connection with this
conspiracy to corner gold, one of which involved the resignation of the
New York Assistant Treasurer, and another two brokerage firms employed
by the gold cornerers to buy and receive their gold. Gold, after being
bid up by the conspirators day by day from 119½ to 162¼, broke thirty
per cent on the announcement that the Government would sell five
millions of gold. This was followed by the suspension of the Gold
Clearing House Bank, and the Stock Exchange was also closed to check the
panic in stocks that ensued. While not a commercial panic, Black Friday
was very disastrous to many in Wall Street.

Next came the tremendous panic of 1873, which, commencing in Wall
Street, on September 13, with the failure of several prominent banking
and brokerage firms, including Howes & Macy, Kenyon Cox & Co. (in which
Daniel Drew was a special partner), Fisk & Hatch, and then Jay Cooke &
Co., rapidly spread, and soon covered the entire country. Many other
failures followed these from day to day, and crowds of sightseers
besieged Wall Street from morning till night, while the Stock Exchange
was closed, and remained closed for ten days to prevent the sacrifice of
stocks.

The severity of the distress that prevailed may be inferred from the
fact that on the 19th of September twenty-two Stock Exchange firms
suspended payment. Rumors of bank and trust company troubles flew thick
and fast, and there was a heavy run on their deposits, while the Union
Trust Company was temporarily forced to close in order to raise money on
its assets to meet the run upon it. Several banks were known to be
unable to stand the general run any longer, when, on the evening of
September 20th, the New York Clearing House resolved to issue
$10,000,000 of Clearing House loan certificates, in accordance with the
resolution adopted to meet the crisis of 1860-61. It was on the same
date that the Stock Exchange was closed by its governing committee.

On the 24th of September an additional issue of $10,000,000 of
certificates was authorized, and on the 27th, so great and widespread
had the panic become that all restrictions upon their issue were
removed. The banks, instead of paying checks in cash, except for small
sums, to depositors, certified them, payable through the Clearing House,
and the weekly bank statement of the Association was suspended on
September 27th, and not resumed till December 28th. The amount of
Clearing House loan certificates attained its maximum—$22,400,000—on
October 20th. In the interval business was resumed on the New York Stock
Exchange on September 30th, after its ten days of suspension. While it
remained closed there was a curb market on Broad Street for stocks and
bonds, but sales for cash there could only be made at panic prices. The
crisis of 1873 was far more severe than that of 1907, and recovery from
it was very slow. The panic of 1884 extended far beyond Wall Street, but
was most severely felt there.

There was a stock market panic in 1890, due to the failure of Baring
Bros. & Co., in London, and heavy gold exports from this side to allay
the panic there, but it did not spread much beyond Wall Street, and was
soon over. The panic of 1893 was, however, severe and extensive, and
15,000 failures were attributed to it throughout the country. As usual,
it resulted from undue speculation and expansion in trade, stocks, and
new enterprises. But it was more immediately caused by the agitation of
the 16-to-1 silver heresy, which led to a run on the gold in the United
States Treasury till the amount of free gold held by it, at all points,
was less than twenty millions, while the amount in the Sub-Treasury in
New York was reduced to only about $8,700,000. It was then, in February,
1893, that President Cleveland made his famous gold purchase for United
States bonds from the Morgan-Belmont syndicate, namely 3,500,000 ounces
of gold for $62,312,500 of four per cent bonds. This, aided by the
syndicate’s efforts, stopped gold exports and replenished the supply of
gold in the Treasury, and so restored confidence. Therefore the run
ceased; and after that the largely increased customs duties gradually
swelled the gold belonging to the Government to a far larger amount than
it had ever held before.

Coming down to the panic of 1907, we are confronted by its causes. These
were cumulative, but, as in every preceding crisis, the main cause was
far too large a mass of credits—that is, of debts—for the amount of cash
in which they were redeemable. Trade and speculation had been long so
active, and too often recklessly expanded, that this disproportion had
become dangerous, and a menace to our safety, as I pointed out several
times months before the crisis actually came. I said that a serious
reaction, a serious revulsion, was inevitable unless we moderated our
pace and mended our ways in the matters that I have elsewhere referred
to and criticised.

From my knowledge of banking, and my personal experience of our previous
panics, dating from that of 1857, I could foresee that this vast and
growing disproportion between the volume of credits and cash would
finally lead to collapse. This disproportion is always large, and always
becomes larger in periods of activity in trade and speculation. But in
this country, and particularly among our speculative Wall Street
millionaires and promoters, it had become unwieldy, while, very largely,
liquid capital had been converted into fixed forms that were unavailable
in raising cash.

Yet the people generally did not see the danger and take alarm till, on
October 21, the New York Clearing House was notified by the Bank of
Commerce that it would not clear for the Knickerbocker Trust Company
after the following day; and simultaneously the Clearing House made an
examination of the Mercantile National Bank, and ordered all its
officers and directors to resign at once, preparatory to assisting it.

Then the public suddenly took fright, and the run upon the deposits of
the Knickerbocker Trust Company caused it to close its doors about two
hours after it had opened them the next day. This added fuel to the fire
of distrust, and the run on the Trust Company of America and its
Colonial Branch, and also on the Lincoln Trust Company, began; and six
banks and a trust company suspended in Brooklyn, and the Hamilton Bank
in Harlem, on the day following.

At the same time there was a heavy withdrawal of deposits from all the
banks and trust companies, and the money thus withdrawn was not
deposited in other institutions, but hoarded. Hence the severe monetary
stringency that ensued, which caused call loans on the Stock Exchange to
command as much as forty to fifty per cent per annum at one time, and
from fifteen to twenty-five till the end of the year.

The New York Clearing House saw the urgent need of promptly fortifying
the banks in the Association against the drain on their deposits, and,
on October 26, resolved to issue Clearing House certificates against
such satisfactory assets as they might deposit, these certificates to be
used by them instead of cash, in paying their daily balances at the
Clearing House. This gave immediate relief to the banks, and was the
signal for every other bank clearing house in the large cities to do
likewise, besides which many of the country banks issued checks of their
own, from one dollar up, in payment of checks against deposits.

The other principal features and details of the crisis I have given
elsewhere. But it must not be overlooked that, severe as it was in its
actual effects, it was very largely sentimental in the sense that it was
precipitated by fear—fear born of distrust. That is the immediate cause
of all panics, but without the superinducing causes this fear would not
exist. In our case it was the very seriously impaired credit situation,
arising from a multiplicity of contributory causes, which inspired the
fear that caused the runs on the banks and trust companies, and the
hoarding of the money withdrawn, as well as the withholding of other
money which, in the absence of distrust, would have been deposited. To
fill the vacuum caused by hoarding, we outdid all our previous efforts
by importing about a hundred millions of gold.

This hoarding, and consequent stringency, apart from the issue, in all,
of $81,000,000 of Clearing House loan certificates, was responsible for
the premium on currency, which at one time was quoted at four to five
per cent, for it practically forced the banks to a partial suspension of
payments involved in requiring checks to be made payable through the
Clearing House, except in cases where they were willing to accommodate
depositors with small amounts of currency. But fortunately the premium,
which had dwindled to ¼ @ ⅜ on the 31st of December, disappeared at the
beginning of 1908. Meanwhile, all through the crisis, large employers of
labor had found great difficulty, and incurred much expense, in
obtaining currency enough to pay wages; and in Pittsburg and other
labor-employing centers, wages were paid largely in scrip issued by the
banks or employing corporations. This scrip was so generally issued that
in Pittsburg all the street car lines accepted it for fares.

No wonder that these conditions seriously checked buying of all kinds,
and caused demoralization and semi-paralysis in industrial corporations,
and that hundreds of thousands of operatives were thrown out of
employment by the stoppage or curtailment of work in mills and other
manufacturing establishments. But the storm being over, and the money
market again easy, there is every prospect of gradual, if not rapid,
recovery to a normal standard of prosperity in our trade and
manufacturing industries. It was not till January 11, 1908, that the
Clearing House reported the deficit in the bank reserves wiped out, and
a surplus of $6,084,050 accumulated against a deficit of $11,509,550 on
January 3d, and at one time of $81,000,000.

It should not be thought, because we imported a hundred millions of gold
from Europe to relieve the monetary stress produced by the crisis, that
we thereby placed this country under obligations to any other country.
The gold we imported we bought and paid for from our own resources,
equivalent to cash, in the shape of exports of cotton, grain, petroleum,
copper, and other American produce.

These commodities were even more necessary to Europe than the gold we
purchased there was to us. So the transactions on both sides were mere
matters of bargain and sale, no favor being shown on either side.
Indeed, both England and France did all they could to restrict our
importations of gold. The extraordinary advance of the Bank of England
rate to seven per cent, and its retention there till we discontinued our
purchases of gold, furnished practical proof of this. This was
justifiable, of course, as a defensive and protective measure for the
bank, but none the less it was an obstacle placed in our path.

Its proclaimed purpose was to prevent our taking gold from Europe as
much as possible, yet in the face of this heavy handicap we bought and
paid for and imported all the gold we wanted, and it was not till after
we had stopped buying that the Bank of England lowered its rate to six
per cent. This showed that we controlled the Bank of England more than
the Bank of England controlled us. We were not assisted; we assisted
ourselves, and neither asked nor received favors.

This important fact testified to the strength and wide sweep of our
resources, both financial and commercial, and also to the solidity and
soundness of our business position, and the foundation on which it
rested. The firmness, too, with which we bore the enormous strain of the
crisis, and the good order and condition in which we emerged from it,
were equally eloquent in testifying to the same effect, and showing that
ours is indeed a great country—the greatest of all nations in its
material resources and acquired wealth.

The advantage of this is largely shared by us with the rest of the
world, both in our enormous foreign trade and the vast amount of money
spent every year by American tourists in Europe. If the hundred and
fifty millions of dollars spent by them there in 1907 had been kept at
home, it might have obviated the necessity of our importing gold to
relieve the crisis. Europe has good reason to return thanks for all it
gets from us; and what would the trade and commerce of Europe be, in
this progressive age, without the United States of America?

The strength, the resolution, and the courage with which the country, as
a whole, bore the brunt of the crisis of 1907 augurs well for a rapid
recovery from its effects, and paves the way to renewed prosperity and
progress; and there is every probability that it will recuperate more
swiftly from the great and trying ordeal than it did from the memorable
panics of 1812, 1837, 1857, 1873, 1884, and 1893, for its wealth,
population, and general resources are now so vastly greater than they
were at any of those periods that comparisons are out of the question.

The growth of our banking system alone since 1873 is indicated by the
fact that in the very severe panic of that year the New York Clearing
House issued only $16,000,000 of Clearing House certificates to the
banks belonging to it, whereas in the panic of 1884 it issued
$21,000,000, in the panic of 1893 $41,000,000, and in this last panic of
1907 no less than $81,000,000. The crisis was severe but it was
purifying, and eliminated a vast amount of unwholesome and dangerous, if
not dishonest, speculative elements from the management of many of our
banks and large railway and industrial corporations, and left in its
place the legacy of a higher standard of business morality than we had
before. Hence, perhaps we may say, with Shakespeare, all’s well that
ends well, and, with the Bible, out of evil cometh good. At least we
have plucked the flower Safety from the nettle Danger.

This view of our country, and the situation, is shared by the banking
community of the Old World, who also absolve President Roosevelt from
blame or responsibility for the crisis. In this connection a leading
London banker, Mr. H. H. Raphael, a member of Parliament and one of the
most influential and popular financial men in Great Britain, said, in
December:

“We regard President Roosevelt as not only one of the most courageous,
but one of the ablest of all your long line of distinguished Presidents.
We admire him for his courage and independence. No wonder the heart of
the American people is with him; he is giving you a good housecleaning,
and you well need it; and although you are passing through financial
storm and stress now, we know something of the wonderful recuperative
power of the United States, and it will not be long before America will
be forging ahead on the highway of economical progress, cleaner and
stronger than ever.”

This opinion is well worth quoting because of its evident sincerity.
There is no suspicion of politics or office-seeking about the allusion
to President Roosevelt, and if one man more than any other in this great
country of ours deserves the resounding applause of a national “Hip!
Hip! Hurrah!” for his public services, it is President Roosevelt.


------------------------------------------------------------------------




                            CHAPTER LXXXIII.

              WALL STREET AS IT REALLY IS. A VINDICATION.


Many people, and some newspapers, have a false impression that Wall
Street is a gambling arena that does a great deal of harm and no good,
and that it ought to be, as far as possible, abolished, while Wall
Street speculators have been recklessly and unjustly denounced as
gamblers.

But those who know Wall Street well have no such impressions of it, or
its speculators, or of the Wall Street community of bankers and brokers.
They can, on the contrary, testify that there is no more honorable and
responsible body of men in the world than its bankers and the members of
the New York Stock Exchange, and that nowhere is honesty, integrity, and
good faith more resolutely exacted than on that Exchange, as its
constitution, by-laws, and rules clearly show; and nowhere is a black
sheep, when discovered, more quickly and severely punished than there.
The penalties involve expulsion from membership, or suspension for any
length of time the Governors may think proper for violations of its
rules, and they are rigorously enforced in all cases. The same remarks,
I am glad to say, apply substantially to the stock exchanges in Boston,
Philadelphia, Baltimore, and other cities.

During the crisis of 1907, and the exposures of corporate irregularities
that preceded it, no members of the Stock Exchange were implicated in
the wrongdoing that surprised and shocked the public. The men in control
of the life insurance companies that were examined and held up to scorn,
for their misuse and misappropriation of other people’s money, were not
members of the Stock Exchange, nor were they Wall Street men.

The men who wrecked the Metropolitan Street Railway System were not
members of the Stock Exchange, nor were those apostles of unsound
banking, the speculative bank promoters who gained control of the three
chains of New York City banks to promote their own speculative purposes,
and inadvertently paved the way to the panic; nor was a member of the
Stock Exchange responsible for the failure of the Knickerbocker Trust
Company, or at all involved in that leading event of the panic; nor was
a member of the Stock Exchange responsible for any bank, trust company,
or corporation failure, or run that occurred anywhere during the crisis,
or at any time in the panic year.

Of course there may possibly be undiscovered black sheep in Wall Street
as well as elsewhere, for we find them in church pews, and occasionally
even in church pulpits; but we should not heap wholesale condemnation
upon either Wall Street or the churches on that account.

To call the buying and selling of stocks or bonds, on the Stock
Exchange, gambling, is a misnomer, a misuse of the word, due either to
ignorance of the transactions there, or malice. It is so whether the
purchases or sales are by investors or speculators, for speculation on
the Stock Exchange is not gambling. Whether stocks, or bonds, are
bought, or sold, by investors or speculators is immaterial between the
contracting brokers on the floor of the Exchange. They know no
difference whatever. Delivery of the stocks or bonds is made by the one,
and received by the other, in every case, and payments made accordingly,
at the sale and purchase prices, investment and speculative transactions
being treated exactly alike.

A sale and purchase is the work of a moment in the Board Rooms, and no
voucher is exchanged to prove it till comparisons are made at the
brokers’ offices, usually after the Exchange closes. But no contract
thus made in an instant of time is ever repudiated, no matter how heavy
a loss it may involve to buyer or seller, for the penalty of such a
repudiation would be immediate suspension from the Stock Exchange,
followed by expulsion when proved.

Members of the Stock Exchange are not only men of assured solvency and
respectability but of good social position, and generally of large means
and more than ordinary education and culture. Most of them, too, belong
to our best clubs. Any conduct of theirs that was considered prejudicial
to the interests of the Exchange would render them amenable to
discipline, and be promptly investigated by the Governing Committee,
whose duty it is to inflict the prescribed penalties, in such cases,
without fear or favor. The fact that a membership has a market value
varying from $50,000 to $90,000 is a certain guarantee of solvency and
fair dealing under ordinary circumstances. A Stock Exchange membership
thus carries with it a large property qualification, and its owner is a
substantial citizen, who is, as we know, often one of “the Four
Hundred,” or to be seen in our best society, and whose wealth, in many
instances, amounts to millions. Preliminary to admission also he has to
submit to a searching examination by the Committee on Admissions.

Recent attacks upon the character of the New York Stock Exchange are
entirely unjustified and have been prompted by either ignorance or
prejudice. If the Stock Exchange were abolished great enterprises would
soon be paralyzed. Without its medium it would be impossible to raise
the capital for conducting our great railroad and industrial
corporations; investors would be deprived of the means of finding
profitable employment for their capital, and there would be no free
market for the many millions of securities there dealt in. Abolish the
Stock Exchange and the free play of market forces which best develop
real values; then investors would be kept in the dark and their
properties would be exposed to grosser manipulations than ever thought
of by stock market operators. The New York Stock Exchange, it should be
remembered, is nothing more than a well-systematized market place for
the exchange of or trading in securities. From the very nature of its
purpose and its organization it cannot exercise any direct control over
the management of the corporations whose securities are dealt in by its
members. It may establish certain rules as to the conduct of business by
its members, and may insist that only securities of certain standards
shall be dealt in on its floor. Beyond that it cannot go; and buyers and
sellers alike, as in all matters of business, are expected to exercise
their own intelligence as to the merits of investments. One thing is
certain, that whatever its shortcomings there is no organized body of
business men where the standards of integrity are higher and more fixed
than on the New York Stock Exchange. Its transactions are carried on
chiefly by word of mouth; the spoken word being as sacredly kept as
signed contracts. Further, there is a Board of Governors to whom any
complaint can be carried, whose purpose is to prevent all abuses within
its power and to maintain the highest possible standards of business.
All infractions of the rules are promptly punished. Certainly, whoever
begins throwing stones at the New York Stock Exchange should first look
and see if his own window-panes are not in danger.

A great deal of nonsense is also heard about speculation. Now,
speculation, like many other good things, may be carried to excess, and
is then injurious and open to the severest criticism. But speculation
within reasonable limits is most beneficial. It is one of the main
incentives to enterprise. Crush this disposition to venture, or the
willingness to accept a risk, and enterprise would languish, trade and
industry would decline, and we should gradually settle down to certain
industrial and commercial decay. In the present highly developed state
of modern civilization speculation is a motive power of the first
importance, and being a part of human nature itself cannot be
eradicated. In the course of ordinary business, speculation is the
natural balance wheel of trade, furnishing a class of operators who are
willing to buy or sell when others for various reasons are disinclined.
Moreover, by keeping up the conflict between a large body of buyers and
sellers the true value of securities or commodities is more safely
determined than when speculation is entirely absent. The short seller is
always a buyer at a lower price, and therefore a supporter in case of
decline. Conversely, the long buyer restrains undue advances by selling
to secure his profits. Again, the banker is better able to judge the
value of collateral in a free and active market, a factor which is much
to the advantage of both legitimate borrowers and lenders who may not
have the remotest interest in speculative movements. The giving of
credit and the making of loans is very largely dependent upon a thorough
test of values such as speculation only often determines. Of course
speculation is sometimes carried to excess, and much injury results in
consequence. Such excesses which are the consequence of defects in human
nature must always be expected and are better corrected by experience
and public opinion than by any artificial regulation. Who has not the
right to profit from good business judgment, especially if that judgment
incurs the risk of the future; and who should complain if his own
judgment leads him into losing transactions? Concerning speculation
there is also another foolish misconception. Speculation is frequently
confounded with gambling, although the two are radically different.
Speculation is based upon knowledge and facts, whereas gambling deals
solely with chance. It is a fallacy to suppose that any but a small
percentage of transactions on the New York Stock Exchange come under the
head of gambling. What difference is there between buying stocks and
bonds on part payment, or margin as it is often called, and buying land
or houses or other property with only one-fifth in cash and carrying the
balance on mortgage? Such transactions are speculative, are strictly
moral, and entirely a matter of business judgment. All operations
entering into the future are necessarily speculative. So far as the New
York Stock Exchange is concerned its rules are drawn for the strict
purpose of protecting legitimate trading, and an actual transfer of
property is required for every transaction. Of course, abuses exist in
all trades and will continue to exist, rendering it the more necessary
to use a little intelligent discrimination before condescending to loose
denunciation, which may easily do much harm and no good.

The President’s attack on options in his recent message to Congress
certainly cannot apply to any business transacted on the New York Stock
Exchange, as options are not dealt in there. Options of from three to
sixty days were dealt in a great many years ago, but were abandoned long
since. Every purchase and sale now made on the floor of the New York
Stock Exchange provides for a delivery on the day of purchase, or the
following day, and payment made therefor upon delivery of the security,
and no law can possibly be passed by Congress, or the State Legislature,
to prevent a broker thus buying securities for a customer on part
payment on terms satisfactory to himself, any more than a law could be
enacted to prevent a dry goods, hardware, grocer, or merchant in any
other line from extending credit to his customers. Nearly all the
business of the world is thus transacted, and could not be done on a
large scale otherwise. In London, however, most of the business is
virtually on an option basis, as it provides for fortnightly
settlements, there being two settlement periods each month, which can be
extended from time to time indefinitely at the option of the parties
connected therewith.

The method of doing business in “futures” prevails on the Cotton and
Produce Exchanges, and could not well be transacted, to the extent of
making an active market for the benefit of the producers, on any other
basis, in my opinion. To do away with dealings in futures would simply
do away with the exchanges, which would be to the disadvantage of the
farmers. A farmer, as soon as he ascertains that his crop is secure,
makes a calculation of how long it will take to put it in his barn,
thrash it out, and transmit it to Chicago, and he sells it to deliver
during that month or a later one, thus ridding himself of any further
risk of fluctuation in the price, and is made happy thereby. If he is
deprived of such a market, it puts him back to the old way of doing
business, when the large dealers from Liverpool, Chicago, and other
quarters sent their agents direct to the farmers at harvest time, and by
bringing all kinds of discouraging influences to bear upon them made
them sell at a fraction above the cost of production; as against this
they are at present able to hold their crop back and get the highest
price. In having the ready market which now exists the farmers have all
become rich. Why, therefore, change the present plan, which has given so
much prosperity to the producers of cotton and other products, to what
might be likely to reverse their present satisfactory condition?

Members of the New York Stock Exchange, in cases of insolvency, are
required, by the rules, to immediately notify the Stock Exchange of
their inability to meet their contracts, and the selling or buying in
“under the rule,” to close defaulted contracts, if there are any,
usually follows the announcement of a failure and failure carries with
it suspension. But failures in the Stock Exchange are very few and far
between, considering that there are eleven hundred members. They are
indeed far below the average of failures in mercantile business, and
they are generally followed by satisfactory settlements and readmission
to membership, and a resumption of business.

This speaks well for both the integrity and the conservatism of Stock
Exchange houses. It is very seldom that what would be called a bad
failure occurs among them. There are, in fact, no abuses on the Stock
Exchange, for trickery and unfair dealing is impossible, owing to the
strictness of the surveillance and discipline constantly maintained over
the members, who are also themselves punctilious in keeping their
contracts and observing the rules, and doing only what is fair and
square in business. This is essential to their own interests and
success, as bankers and brokers, without regard to the penalty of
suspension, or expulsion, for any irregularity. That penalty they
approve of, for it is a protection for all of them, except an occasional
black sheep that they are glad to see weeded out of the Exchange.

How necessary the Stock Exchange is to the banks was shown during the
recent crisis, as in preceding panics, when to protect themselves they
were forced to call in their loans by wholesale, and where necessary to
at once liquidate the collaterals. It was the Stock Exchange that made
this liquidation possible, and saved many of the banks and trust
companies from suspension, as well as many bankers and brokers, who were
enabled by it to pass through the trying ordeal, instead of going to the
wall in Wall Street.

The Stock Exchange therefore obviously performs a great and very useful
and important function in monetary affairs, besides being the barometer
of values for stocks and bonds, as measured by prices, while the cotton
and the grain exchanges perform a similar service with regard to those
speculative commodities.

Yet one effect of the crisis of 1907 has been to give a new impulse to
Wall Street detraction, and sharpen the teeth and claws of the
detractors. While many are mistaken enough to hold Wall Street
responsible for the past year’s financial disaster, many more are
equally mistaken in declaring that President Roosevelt caused them by
his speeches and the Government prosecutions of law-breaking railway and
Industrial Corporations. Both charges are unreasonable and false, but
this consideration is a small matter to those who have no hesitation in
making reckless assertions which they are unable to prove, and who are
as ready to vent their spite as they are their prejudices.

Many indeed without knowing anything about Wall Street speculation, and
who have never speculated anywhere, blame speculation for a host of
evils that are in no way due to it. Some of them would even close the
Stock Exchange to stop speculation there, forgetting apparently that
this would deprive investors and banking institutions as well as
speculators of a market for securities, and make all the stocks and
bonds now listed and dealt in there practically unmarketable. In such an
event there would most certainly be a fall in their prices greater than
any we witnessed in 1907.

It is true that in the manipulation of stocks matched orders may have
been occasionally resorted to, despite the rule against it on the Stock
Exchange, but it is only because of the difficulty, or impossibility, of
discovering or proving it, for there is no body of men subject to
stricter discipline, or more amenable to it, than the members of the New
York Stock Exchange, nor any more patriotic, as their generous acts
during the Civil War, and at other times, have abundantly shown.

Neither should it be forgotten that they pay the State of New York a tax
of two dollars on every hundred shares of stock they sell, which is an
important source of revenue to the commonwealth. That the Stock
Exchange, as a free market for securities, is indispensable to the
country is beyond question. It is necessary to our national needs, and I
am proud of being one of the oldest of its members, my membership dating
from 1864; and I am able from long personal experience and observation
to testify to the integrity, soundness, and general good character of my
fellow members and the banking community of Wall Street.

Therefore take my word for it that Wall Street is not as black as it is
painted, and that anyone’s money is as safe there as anywhere in
business, if properly placed, and handled with good judgment. If any of
it is lost it is by its owner, and he has only himself to blame for his
ill luck. But it is always to the interest of his banker and broker to
have him make money, for when a customer loses his money his broker in
some degree shares the loss by losing him as a customer.

In conclusion, I hope that if any of you ever take a flyer in Wall
Street, you will come out of it, with flying colors, on the winning
side, and with a good opinion of the Street proportioned to the
magnificence of your success!

------------------------------------------------------------------------




                            CHAPTER LXXXIV.

       THE FINANCIAL AND TRADE SITUATION, PAST,
                             PRESENT


AND FUTURE, REVIEWING THE CRISIS OF 1907, WITH CAUSES AND REMEDIES.[10]

Footnote 10:

  An address delivered by Henry Clews at the annual meeting of the
  Pittsburg Chapter, American Institute of Banking, at Pittsburg, Pa.,
  on Tuesday evening, February 25, 1908.

It gives me no ordinary pleasure to address an audience of Pittsburg
bankers, for Pittsburg is the hub of our iron and steel industry, and as
it has no rival in the manufacture of iron and steel, it may well feel
proud of its supremacy. It is no exaggeration to say that the rise and
progress of that industry in Pittsburg is one of the marvels of the age.
A few years ago Pittsburg was known in New York as the Smoky City. A
little later she became known as the City of Steel and Coal. Now,
through the alchemy of the brains of your wise men, she is known as the
place where smoke and coal and steel are in some mysterious way mixed up
in such a form that they fill your pockets with pure gold. To the
millionaire of to-day we bow in deference to his wealth. But to the
grimy sons of toil, who planted the seed and bore the burdens of the
earlier days, we take off our hats with reverence. The founders of your
city chose wisely in selecting this spot for settlement, at the river’s
junction, in the midst of rich deposits of coal and iron. It seems
rather odd that your two greatest products should be glass, which is
brittle, and steel, which is tough. You also excel in producing cork,
which is light, and iron, which is heavy. Surely extremes meet in your
city as well as rivers. Down our way we wonder what you do not produce
when we learn of the diversity of your wares. It certainly seems to me
that a man could learn a whole lot if allowed to visit all your various
foundries, factories and mills, but it would take him nearly as long as
to go through college, as their name is legion. The welcome which you
have given me touches me deeply, and I assure you that in future I shall
preach the doctrine that there are others in Pittsburg whose mission it
is to dispense happiness besides Mr. Carnegie.

If we glance at the history of steel manufacturing in the United States,
we find it centered in and very largely confined to Pittsburg, and if we
recall the enormous fortunes made in that industry by Mr. Carnegie and
many others, under the protection of high tariff, we see one of the
greatest wonders of trade development and modern enterprise.

Yet it was not until after the beginning of the war between the North
and the South—the great conflict waged from 1861 to 1865—that any large
or even considerable amount of steel was manufactured in the United
States. But now we lead the world in making it, and Pittsburg is our
great source of supply. At the same time, we can justly say that the
march of invention and modern improvement in other directions has kept
pace with the growth of Pittsburg and our marvelous progress in iron and
steel-making.

This reflection is particularly gratifying in view of our recent
financial crisis, in which New York was the storm-center, and Pittsburg
almost as stormy for a time. But both cities, like the country at large,
stood up bravely and made the best of the situation by all the means at
their command. Both fortified themselves by a good emergency measure and
issued Clearing House Certificates, according to their needs. Pittsburg,
however, went one or two better than New York, and, like many other
cities, issued scrip; and better still no one in Pittsburg refused it,
not even a car conductor for fares. Here was public spirit rising almost
to the height of patriotism.

Now, Pittsburg in common with the rest of the country is again about on
an even keel financially, with its banks on a cash basis, its cashiers’
certificates and scrip redeemed, and its Stock Exchange reopened. But
unfortunately the crisis gave industry a blow from which it has not yet
recovered, although conditions are steadily improving all over the
United States. The iron and steel industry received the hardest blow of
all, and from a feast you quickly passed to a famine, which is a way the
iron trade always had. It is proverbially, however, as quick to recover
as to collapse; so all we have to do is to keep up our courage and wait,
and we may feel assured there is a good time coming. But whether it will
come soon, or later, is a question about which iron-masters, financiers,
and trade doctors generally are much divided in opinion at present. It
is a good sign, however, that work has been resumed in fully
three-fourths of the entire Duquesne works of the United States Steel
Corporation in Pittsburg, although it is admitted that only 46 per cent
of all the Corporation’s works are running.

In September, 1906, when stock and bond prices were manipulated
abnormally to a 3½ per cent basis, while six months’ money was loaning
at 6 per cent, it was evident that one or the other was too high; and
considering the growing demand for the use of money it became quite
apparent it was not money that was too dear, but securities. At that
time I persistently advised every one to get out of stocks and out of
debt, and keep out for a prolonged period.

Since then security values went down prodigiously—$3,500,000,000 would
scarcely cover the depreciation at its lowest point of those dealt in on
the New York Stock Exchange alone. Our financial situation is vastly
different, however, from what it was in any of our previous great
panics, of which there have been a number, since that of 1857, which
began with the failure of the Ohio Life & Trust Co. at the time of my
advent in Wall Street. I have been in all the subsequent panics, and the
present conditions differ from those of all the other great financial
storms because the wealth of the nation has become so vast as to make it
the richest in actual wealth and productiveness of all nations. As a
matter of fact, our wealth-making developments have been so extensive
and excessive as to have forged ahead of our banking facilities. This
has had much to do with our recent setback. Wise and sagacious
capitalists saw the handwriting on the wall in Wall Street and
elsewhere, and those who did unloaded their securities in 1906, dumping
their stocks at top-notch prices, amounting to at least $1,000,000,000,
upon weaker-backed people.

This unloading, together with the San Francisco earthquake disaster,
which wiped out $350,000,000 of property, struck the staggering blows
which did more than anything else to pave the way to the recent panic
conditions. The selling out by big holders was followed by all the large
railroad systems in the country selling huge amounts of bonds, stocks
and short-term notes. These being offered to stockholders of record at
apparently tempting prices, were floated. But this great mass of new
securities coming on the market was an indigestible one, and absorbed
the capital of a very large number of the rich men of the country and
put it in fixed form; and most of these heretofore very rich men have
ever since been in the position of a man who, having had a “Sherry
dinner,” is urged to accept another dinner at Delmonico’s immediately
afterwards—his wish strong but his capacity lacking.

What produced the panic was a number of adverse factors happening one
after another in rapid succession.

I summarize, briefly, the causes as follows:


                                 FIRST.

The Boer war which left England in almost as bad a financial strait as
we were in through the culmination of a similar period of overdoing in
trade and speculation in new industrial ventures, together with an
excess of new issues of British Consols during the war period resulting
in a recent decline in the price of these prime securities to 81—about
the lowest price on record.


                                SECOND.

Germany was in fully as bad a condition owing to extravagant industrial
enterprises, rivalling our own, and which required the most careful
nursing to avoid a collapse.


                                 THIRD.

France acted alone in financing Russian loans, and in the crisis of the
Japanese-Russian war was compelled unwillingly to supply new funds in
order to protect the French loans already outstanding. Hence France had
little or no money to lend except to the French.


                                FOURTH.

The Japanese-Russian war brought both of these countries forward for the
first time as prominent and important factors in the world’s money
market, and both are still, like Oliver Twist, crying for “more.” This
conflict and the Boer war combined wasted over $2,000,000,000 of
capital.


                                 FIFTH.

Funds were almost unobtainable except at prohibitive rates at the time
of our recent crop-moving period, and for causes already mentioned we
could not look to Europe for help. Usually Europe discounts New York
securities bills for about $300,000,000 at this period, but last year
Europe said: “No; we have troubles of our own.”


                                 SIXTH.

The California earthquake with losses of $350,000,000, and the Chili and
other earthquakes of less importance and severity in various parts of
the world were heavy blows at prosperity.


                                SEVENTH.

The compulsory unloading of very many millions of dollars of stocks and
bonds by large capitalists and operators, together with immense sales of
new securities by corporations and railroads, and the manipulation of
prices and stocks up to a 3½ per cent interest basis while time money
was loaning at 6 per cent, and above, on the best of collateral. Besides
which heavy, excessive and reckless operations in real estate and mining
enterprises having been made all over the nation, caused large amounts
of capital to lose its liquid quality and become fixed.


                                EIGHTH.

The investigation of the great life insurance companies and the
Metropolitan railroad, and the sad disclosures, followed by the absurd
fine of $29,400,000 by Judge Landis against a corporation with a capital
of only $1,000,000, had a demoralizing effect upon the public mind. This
preposterous fine savored of confiscation and alarmed investors.


                                 NINTH.

The Interstate Commerce Commission’s examination of the Chicago & Alton
deal and the consequent developments further undermined the confidence
of investors.


                                 TENTH.

The making of injudicious loans by the Knickerbocker Trust Co. and the
chains of banks, both in Manhattan and Brooklyn, which caused the
suspension of the institutions and arrest of officials on criminal
charges intensified public distrust, while the collapse of the Copper
market unsettled the metal markets all over the world and resulted in a
reduction of dividends on copper shares, and a serious break in the
price of all that class of securities.


                                LASTLY.

A gross abuse of our credit system and the consequent inflation of all
values, stimulated by loose banking and promoting methods, proved the
climax in a series of events which culminated in the sharpest though not
the severest panic the present generation has experienced. The main
cause of the panic was that of general overdoing. Credit was
over-extended; speculation was reckless and ill-advised; expansion of
every sort was being carried to excess by over-confidence, until finally
the country’s floating capital was practically exhausted through being
turned too rapidly from liquid to fixed forms. We have only to glance at
the demands upon new capital during the last year or two to realize this
fact.

Some idea of the congested state of the stock market may be obtained
from the fact that during the last five years the total amount of new
securities authorized was $6,800,000,000; the eleven months of 1907
alone accounting for $2,000,000,000 of this total.

During the latter period our railroads authorized $1,400,000,000
securities, of which they were able to issue only one-half, owing to
money market conditions. Of industrial securities less than $500,000,000
were authorized, but nearly $400,000,000 of these appear to have been
issued.

These figures take no account of the issues of municipal securities, and
those of many other business concerns of a minor character, but they are
quite sufficient to indicate the extraordinary demands upon the money
market during the last two years, demands which in connection with huge
speculative borrowings imposed an unbearable strain upon the banks and
precipitated the March, August and October collapses in the stock
market. Other influences have undoubtedly been at work to cause the
breakdown, but no single factor compares in importance with that of the
excessive issues of new securities and obligations during the past two
years which the country was utterly unable to assimilate.

In discussing the cause of the recent 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.

As I have said, there were many other things that contributed to bring
about last year’s depression and disturbance, and to cast over the
bright sky of business prosperity the heavy clouds of distrust, reaction
and panic.

The recent 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.

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.
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 railroad 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; President
Roosevelt can no more be blamed for the recent 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 wrongdoing on the part of
many of the great railroad and industrial corporations disturbed the
confidence of the public to the core, and paved the way to it.

Being now myself optimistic, I look on the sunny side and hope for the
best. It is, however, a time for conservatism, and while trusting in
Providence, it is well to keep our powder dry. It is a good time to
cultivate the virtue of patience, and make haste slowly until all the
aftermath of the panic, in the way of liquidation and the elimination of
unsound timber from business structures, is completed.

This will leave everything in the financial and industrial world
stronger than before. It will also leave us with a higher standard of
business morality resulting from the exposure of looting and other
illegal practices and abuses of power in the management of large
corporations. The stoppage of the evil of rebating by the railroads is
of itself a great gain in this respect, and for this we have to thank
President Roosevelt.

As to the future, Pittsburg and the iron and steel trade should be the
first to feel improvement in the general business of the country, for
iron is still the best barometer of the times, as it leads all other
industries in both depression and recovery, and what an eventful history
Pittsburg can point to, the world knows.

It was at Pittsburg that the Bessemer process was first applied to steel
making in America, and the giant strides in the industry that followed
its supersedure of the open-hearth process not only astonished ourselves
but all Europe. It was a new departure on a grand scale, this
application of science to mechanical methods, a revelation that was
marvellous in the trade expansion and wealth it produced.

Yet it is not improbable that before long, if not immediately, the
Bessemer process by which this immense development was achieved will be
very generally superseded by the open-hearth process of steel making,
which originated and had its early development in this country. Thus in
the whirligig of time it will displace the Bessemer process, by which it
was itself displaced. This, as you are of course aware, is owing to
improvements, chiefly by Talbott, an American engineer, in the
open-hearth process, which for a long time has been considered almost
out of the race in competition with the Bessemer process. This reminds
us that history repeats itself.

The open-hearth process has now been brought to such perfection that its
superiority over the Bessemer process is declared by many in the trade
to be established. Thus practice makes perfect, and time works wonders.
Its superiority over the Bessemer process is said to have been
particularly demonstrated in dealing with ores of any but a very low
phosphorus grade. This American improvement in the open-hearth process
has been already widely recognized and adopted in England, and we are in
this way repaying the debt we owed to that country for the Bessemer
process.

The steel manufactured in the United States last year aggregated
23,246,000 tons, of which 12,275,000 tons were by the Bessemer process
and 10,971,000 tons by the open-hearth process. There were also some
other varieties of production, copied from processes in use on the
European Continent, but the general drift, I am informed, is now towards
the open-hearth process.

Out of Pittsburg, of course, I should not talk so much about steel, but
iron and steel are Pittsburg’s bread and butter. This reminds me that
apart from agriculture the principal sources of our national wealth are
minerals and manufacturing. Mining and manufacturing are primary and
fundamental industries. Our agricultural income last year, according to
the United States census estimates, was about seven thousand millions of
dollars, while the metals mined were valued at about two thousand
millions, against $1,902,517,565 in 1906.

This metallic product for the year, it is estimated, was turned by
manufacturing it into materials having a market value of fifteen
thousand millions of dollars. If we add that of agriculture, the
metallic products, and manufacturing, together, we have a total
valuation for the year of twenty-four thousand millions of dollars. The
fertility of our natural resources is here shown by their rapid rate of
development. But this, while contributing so largely to our present
national wealth, is not an unmixed good. We should always bear in mind
that the more we take out of the earth, and the more we strip our
forests of timber, the less we have remaining. In forestry, however, we
are now preparing for the future by replanting, but we cannot replant
minerals.

The mineral products of this country have more than trebled since 1890;
more than doubled since 1899; and are more than five fold what they were
in 1880. From 1900 to 1906 our mineral product increased at a rate
representing a hundred and ninety millions a year.

I am quoting these statistics as a reminder of the vastness of our
natural resources, and the recuperative power of the nation, which is
one of the most encouraging features of the national situation. These
resources are the backbone of the country’s greatness; and those who can
see nothing cheerful in the outlook and to whom everything at times
looks as blue as indigo, will do well to think of them, for they are
Nature’s national banks, that can never fail, and unfailing sources of
our national prosperity.

It was these resources, in the form of exports to foreign countries,
that enabled us to purchase and pay for—without borrowing or asking
favors—the one hundred millions of gold that we imported to relieve the
crisis. Here was indisputable evidence of the large international trade
balance in our favor, and of our monetary and commercial independence of
the rest of the world; and this gold we still hold, although in the
ordinary course of commerce we may reasonably export some of it before
long, for we have plenty to spare and money is superabundant at two per
cent on call in Wall Street. Meanwhile our exports of produce and other
merchandise continue extremely heavy, and they were never heavier than
during the crisis, that is, in the last three months of 1907, while in
January, 1908, they rose to a total value of one hundred and
twenty-eight millions, or $17,742,352 more than in January, 1907. This
is all the more favorable because our imports since the crisis have very
largely decreased. In our January exports, cotton alone represented
$76,687,508 of the total, and breadstuffs $24,463,503.

As to our national finances and the defects of our currency system,
there is much that calls for reform, but there seems to be little or no
prospect at this session of Congress of the passage of a comprehensive
financial measure, although it is a remedy we need. We shall therefore
have to rest content for the time being with the much amended emergency
currency measure, familiar to us as the Aldrich Bill. This provides only
for the issue of a maximum of five hundred millions of currency by the
Government to the national banks, to ward off a panic or mitigate its
effects, the banks to pay six per cent interest per annum for whatever
they take of this emergency currency, and give security in acceptable
railway, municipal and other bonds for it to the Treasury.

So far, so good. I am, therefore, strongly in favor of the Aldrich
measure as a panic remedy, naturally so as I originated the fundamental
part of it. It will do much to prevent panics, and will effectually stop
the hoarding of currency that accompanies them, for what inducement
would there be to hoard it when a supply of five hundred millions of new
currency would be open to the banks? There could be no extreme scarcity
of money then; nothing in any way approaching the stringency that not
only New York but the whole United States suffered under in the last
three months of 1907.

Yet the great remedy, the comprehensive financial reform measure we need
will be ultimately passed by Congress, and its provisions will include
the modification of the Sub-Treasury system, which has always been a
source of much mischief through locking up Government money received for
Customs duties and internal revenue taxes, that ought to be kept in
circulation. The proposition, however, to establish a central national
bank in New York, or anywhere else, as a substitute for it, is to be
strongly deprecated. It would be a rich plum for those who controlled
it, but would excite the jealousy and hostility of all the other banks.
Moreover, such a bank would in effect be a revival of the old United
States Bank, against which, and the scandals and corruption connected
with it, President Jackson made war so vigorously as to force it into
liquidation. The second experiment of a United States bank was no less
involved in scandal and no less a failure than the first, and in each
case there was the same inglorious end, compulsory liquidation. Both,
too, were used as political machines, and guilty of favoritism and many
abuses of power, and a new central bank would give us another big
political and speculative machine, liable to the same evils and
objections. Therefore all bankers should resolutely oppose a central
bank. It would not be a remedy for any of the evils complained of, but,
instead, furnish us with a new complication.

While we can hardly expect any fundamental changes in our currency
system at present, one improvement might easily be made in it by
Congress at once, and that is by the removal of restrictions on the
amount of national bank notes taken out or canceled per month, as well
as by establishing a bank-note redemption bureau at every United States
Sub-Treasury, so as to save the delay and expense of sending to and from
the Redemption Bureau at Washington, that all the national banks are now
subjected to. As a minor remedy this should be urged upon Congress.

Turning to the United States bonds pledged with the Treasury to secure
the national bank notes, we all know that they are as good as gold, if
not better, but still they are evidences of debt, and it is a false
economic principle to issue currency on such a basis. Moreover, it is
costly for the Government, for it practically and permanently prevents
it, in the interest of the national banks, from redeeming the bonds
deposited to secure national bank notes, out of its surplus income.
Still it has great merit in giving us a safe and sound bank currency.
Ultimately this system, born of the civil war, will be superseded by a
better one, but this will doubtless be done in a manner which will not
interfere with or impair vested interests.

Owing to the short time now left of this session of Congress, nothing
more than the “Aldrich” bill can possibly be enacted at this time. Its
simplicity is a recommendation to Congress. But, nevertheless, Congress
should later pass a permanent currency bill, a bill which will settle
every question as to the finances of the nation, at once and for a
century to come. Such a bill is possible, and in fact it would be the
simplest kind of measure for the Government to adopt—one to provide for
just the kind of currency, and the amount of currency the business of
the nation, the banks, and the people should have; one to provide for a
perfectly elastic currency without creating the slightest depreciation
of money or danger of loss to banks or Government. It should provide a
perfect way of obtaining money to move the crops, and furnish an
all-sufficient means of preventing or breaking panics. It should make
the money of the United States still more current and acceptable in all
parts of the world. This would make the nation greater in the eyes of
other nations, and give the United States Treasury a proper command of
the commerce and finances of the world, within ten years after being put
into operation.

All the Government need do to effect such change in the finances of the
country, and to acquire all such advantages for the Government and the
people, in my opinion, is to wipe out the whole system of National Bank
Currency, and give such banks, or any banks, Government currency direct,
upon the same securities and such other kinds of securities as the
Government is willing to accept, and permit the banks to increase or
diminish the amount it obtains whenever the business of the banks
requires it; every bank to do no more than give sufficient security for
the money. The Government need do no more than to take the security and
hand the bank the money. The Government should be paid for the use of
the money a low rate of interest, say one per cent. No bank should be
required to pay more.

The credit of the Government will be all sufficient for the credit of
the currency, and every dollar of it would be perfectly secured by the
security given the Government for it by the banks. The issuing of the
money by the Government under this system would not injure the credit of
the Government in the slightest degree. Banks should be allowed to
increase or diminish the amount of money they obtain in amounts which
can be decided by the law. Such a system would be satisfactory to all
the people, except the national banks. These banks have been given the
privilege of having their names on the money they issue long enough. The
money of the banks has ever been Government money. The Government has
promised to pay it if the banks did not, and has had the means of
paying. Let the Government do as it should: issue all the money. Let it
be circulated by banks which give proper security for it. Enlarge the
means of securing the Government, by accepting State and Municipal
bonds, or even Railroad bonds, to the extent of say 50 per cent, and
Government bonds for the other 50 per cent.

The amount of additional business this change in the finances of the
country would make the Government, would be no greater than any other
change would make, and would be much less than what will be necessary if
the present bill before the Senate is passed. All the great work and
expense of settling up the affairs of broken national banks and paying
off their notes will be stopped.

There would be no such things then for the Government to settle. The
Treasury can be required by the law to keep all the currency issued for
the purpose, that may be taken up, distinct and separate from all
Treasury receipts from other sources.

The severity of the panic ordeal of 1907 that the New York banks passed
through was reflected in the issue to them by the New York Clearing
House, on and after October 22d, of, in all, a hundred millions of loan
certificates, although the largest amount of these outstanding at any
one time was eighty-four millions. This form of banking relief is purely
American and has never been adopted in Europe. The maximum issue of
Clearing House loan certificates in the panic of 1893 was $41,690,000,
and in the panic of 1873 $26,565,000. But in 1893 New York bank deposits
were only $400,000,000; in 1907 they were $1,050,000,000, exclusive of
Trust Companies. The maximum of certificates in 1907 was reached in the
third week of November, but the Clearing House banks showed their
largest deficit in reserve—$54,100,000—in the first week in November.
Simultaneously the loan certificates issued by the Boston Clearing House
reached their largest aggregate, $11,995,000. It is noteworthy also that
three powerful New York banks then held one-third of all the loan
certificates issued by the New York Clearing House. One of these held
$13,500,000; another $10,000,000; and the third $7,500,000. The obvious
object of this was to enable the strong banks to loan a part of their
cash reserves to weak associates.

The Clearing House Committee and the New York banks individually and
collectively did splendid work in mitigating as far as possible the
effects of the panic, while the Secretary of the Treasury, Mr.
Cortelyou, rendered very valuable service by co-operating with the
national banks to reduce the monetary stringency through large Treasury
deposits and facilitating the importation of gold.

Mr. Morgan and several other private bankers also rendered praiseworthy
service during the panic, and my firm did its part by loaning to the
members of the Stock Exchange, at the most critical period, three
million dollars at moderate rates of interest.

The New York Clearing House is a non-incorporated association, but its
reserve is the foundation for an enormous amount of the country’s
commercial credit. Of course, the banks and others holding practically
unsalable collateral for loans, that the borrowers were unable to repay,
were forced to help the borrowers and save themselves from loss by
continuing to hold them through the crisis for a better market. There
were many cases of this kind, particularly among the Trust Companies,
and there has been much slow and careful after-panic liquidation of such
collateral, and much of it has still to be done. It is, however, being
facilitated by the decided improvement that has taken place in the
market for first-class bonds.

Capitalists who for the past two or three years had been dissatisfied
with the returns of ordinary investments and who had gone into hazardous
speculations and extensive underwriting of new bond issues in the hope
of large and quick profits, have been sobered by their heavy losses and
are now seeking safety in prime investment bonds.

Had the market for bonds not improved as it has, it would have been
practically impossible for the New York Central and other Railway
Companies to have marketed the large amount of notes they have succeeded
in selling since the beginning of this year. The after effects of the
panic, as well as the panic itself, would also have been far worse than
anything we have witnessed had it not been for the previous heavy
stock-market liquidation, a liquidation that in many cases had been
practically continuous from the end of 1906, and that was most drastic
and disastrous in August, 1907.

That the banking situation has become normal is indicated by the
elimination of loan certificates and the resumption of normal methods by
all the Clearing Houses in the United States, and particularly by the
resumption of the weekly detailed bank statements by the New York
Clearing House. This occurred on February 8th for the first time after
their suspension on October 26, 1907, and was supplemented by statements
of the non-Clearing House banks and Trust Companies, including actual as
well as average conditions. This last is a new and commendable feature,
which every Saturday will enable us to learn how all the banking
institutions in New York City and its several boroughs stand, both
individually and collectively, in their average and their actual
condition.

That we are assured of a superabundance of money at low rates of
interest is evident from the large and growing accumulations of surplus
funds in the banks from Maine to California, and the light demand. All
the indications favor a protracted period of extreme ease in the money
market, modified only by gold exports and the withdrawal by the
Government, from time to time, of some and probably a large part of its
deposits in national banks. This again reminds us that the Sub-Treasury
system makes the Government an unlimited hoarder of money, with only
evil results. This, alone, calls for its modification.

But while the large aggregate of the surplus funds of the banks
testifies to the return of confidence, and with it the return to banking
channels of hoarded money, it also reflects the dullness of trade and
much idle machinery and unemployed labor. Hence the bank clearings of
the United States in January were twenty-five per cent less than in
January, 1907. This condition of affairs has been and still is severely
felt by the Railways, whose largely reduced gross and net earnings and
long lines of empty cars tell why a number of them, like many industrial
corporations, have reduced or passed their dividends, or paid them in
scrip. More railway and industrial corporations will probably have to
accommodate themselves to circumstances and do likewise in consequence
of reduced earnings. That we expect, and are prepared for, while the
trade depression lasts, and hence we all hope and trust it will be
short.

Meanwhile we cannot ignore the political situation in this Presidential
year, and the disturbing and depressing effect of the recent message of
President Roosevelt to Congress, with its onslaught on Wall Street,
followed by the unjust bitter attack of Mr. Bryan on Stock Exchange
speculation, which he denounced as gambling. Wall Street was thus ground
between the upper and nether millstones of the Republican and the
Democratic parties; it was fired on from both sides with hot shot, grape
and canister, without any good reason.

Speculation in stocks, as conducted through Stock Exchange brokers, is
no more gambling than speculation in real estate or ordinary
merchandise. All trade is more or less speculative because it involves
risks. If it did not involve risk there would not be so many mercantile
failures as there are every year, yet no one calls trade gambling. Every
time a merchant buys a line of goods, he makes a venture, not knowing
whether they will rise or depreciate in market value on his hands. He
buys also on credit, just as he gives credit to his customers; and what
is the difference in principle between this form of credit and the
credit a stock broker gives his customers who pay ten per cent on the
par value of their purchases while the broker provides the balance and
holds the stocks as security? This is the margin, which is a credit in
the account of each of them; and I call it a credit instead of a margin,
which is a better word for brokers to use.

The present anti-speculation crusade is accompanied by many delusions
and very imperfect ideas concerning the conditions and equities of
business operations. Who is to decide which are speculative transactions
and which are not? Business cannot be conducted without making contracts
entering into the future, and that is speculation. The builder who
contracts to build you a home is a speculator; the manufacturer who
agrees to deliver a thousand cases of cotton goods sixty days hence is
dealing in futures, and all operations extending into the future are
unavoidably of a speculative character. Even marriage is often called a
lottery. It is quite impossible and thoroughly stupid to try to
eliminate speculation, for it is an essential element in all business
transactions, except those for cash. If business were reduced to the
latter basis, it would soon become injuriously restricted and more
exposed to corners and violent fluctuations than ever.

As to legitimate or illegitimate speculation, who is to decide between
the two, and where is the line to be drawn? If the investor buys
securities in advance of his income, expecting to complete the purchase
later on, is that legitimate? Suppose circumstances compel him to change
his mind and sell before his original purchase is completed, is that
legitimate? And in what respect does such a transaction differ from the
ordinary marginal contract? It may, perhaps, differ in intent; for the
speculator usually buys with a view to taking advantage of temporary
fluctuations. Yet, who would be bold enough to investigate the
intentions of buyers or sellers? Only the most drastic kind of force
could compel divulgence of such secrets, and is it possible to establish
any such system of espionage in this country? Speculation, as often
stated in these advices, when confined to reasonable limits is
beneficial. It is the natural balance wheel of commerce and finance. By
its means and through the conflict of opinion between buyers and sellers
real values are established by simpler and more reliable means than by
any other known methods. No Government investigation will ever ascertain
the real value of our railroads so well as the higgling and bargaining
between buyers and sellers, which is alike the moving spirit of commerce
and the arbiter of values on all Stock Exchanges the world over.
Speculation is liable to be carried to excess, and abuses in speculative
methods undoubtedly exist; but these are better corrected by a strong
and elevated public opinion than through any legal measures based upon
political claptrap. There is a flood of nonsense in this campaign
against speculation, anti-option, etc., which does not find believers
here but may in other parts of the country. It consists very largely of
political humbug, and is nothing more than one of the usual methods by
which crafty politicians play upon the ignorance and prejudice of the
masses for their own advantage. After the elections this mania will
probably pass away, to be then recognised as one of the psychological
features usually following a panic. Previous instances of this sort of
agitation were the granger and populist movement, which exhibited many
of the present symptoms of political insanity. Nevertheless, such
agitation may do serious harm, and its fallacies should be fearlessly
exposed in order to prevent the people from being deceived and misled.
Even now this agitation, especially us manifested in hostile State
Legislatures, is seriously interfering with that restoration of
confidence that is absolutely necessary to business recovery. It is
keeping both capital and labor idle. Capital is proverbially timid, and
until such attacks cease enterprise is sure to be more or less
repressed. Of course there are abuses that need rectifying, but it is
folly to carry restraint to the point of extinction. Because a few
individuals play golf to harmful excess, would any sane person suppress
so wholesome a sport? Yet that is precisely the policy of many of the
reformers of the present day. Too frequently these reform movements
savor of ignorance. Their purpose is frequently admirable; but the
country sadly needs more sanity in their application.

President Roosevelt condemns “options” very vigorously, as if they were
now dealt in on the Stock Exchange, as they once were, ranging from
three to sixty days; but they have not been traded in there for many
years, all purchases and sales of stock being deliverable and receivable
on the day following the transactions on the floor of the Exchange,
except those specifically for “cash,” which means, to be delivered and
received the same day. But on the Cotton, Produce and Coffee Exchanges,
and Chicago Board of Trade, nearly all the transactions are in
“futures”—and these are a boon to cotton and grain growers and coffee
importers, who, through them, can sell their growing crops and
importations months before they actually possess and are ready to
deliver them, so in advance making sure of the prices they will get for
their farm products and importations.

This is speculation, yet perfectly legitimate, and I think that if
President Roosevelt and Mr. Bryan knew more about these markets and the
N. Y. Stock Exchange from actual experience, they would see the
injustice of much that they have said in decrying the evils of
speculation. Black sheep and exceptional wrongdoing should not be held
up as examples of all and everything in Wall Street; and because
unscrupulous men sometimes embezzle in order to get money to speculate
with, Wall Street should not be held responsible for their crime, any
more than a river should be blamed for a man’s suicide because he jumps
into it to end his troubles. There is nothing illegal or against public
welfare in a broker buying and selling stocks and bonds for his
customers in conformity with the rules of the N. Y. Stock Exchange, nor
can there ever be; and I know that such business is just as honorable
and legitimate as the buying and selling of iron, dry goods or real
estate on credit. It is credit that keeps alive the business world.

The attacks on the financial center of this country are indiscriminate,
and I am sorry that President Roosevelt, who has done so much good in
other respects, should have nipped the bud of reviving confidence in the
stock market in the way he did, for his denunciation of Wall Street,
coupled with Mr. Bryan’s wholesale and wild condemnation of the Stock
Exchange, led to a renewal of liquidation in the stock market, and a
fresh decline in prices through creating fresh distrust of their
holdings among investors.

The New York Stock Exchange is a great national and international
market, and its 1100 members compose a very honorable and wealthy body
of men, whose integrity in all their business transactions is
unquestioned. They are bound not only by the rules of the Stock Exchange
to be absolutely honorable and strictly honest in their dealings, but
their own interests and their relations with their fellow members and
their customers compel them to be so, and to be also above suspicion.
Summary punishment, even to expulsion from membership, would follow any
dishonorable or dishonest act on the part of any of them, and such
instances are of extremely rare occurrence. It is therefore unjust to
stigmatize these men, these bankers and brokers of good business
standing and good social position, in the manner they have been
stigmatized recently by Mr. Bryan; and again I think that if he knew
Wall Street better than he does he would have been more discriminating,
and would have confined his severest criticism to the speculative
capitalists who have probably at times abused the Stock Exchange by the
manipulation of stocks.

The so-called practice of “washing” is strictly prohibited by the rules
of the Stock Exchange, but as it is very hard to detect and prove, in
some instances, doubtless it may possibly have gone unpunished. The
Stock Exchange, however, earnestly endeavors to ferret out and prevent
and severely punish all violations of its rules.

After every great panic, the Stock Exchange has been made a scape-goat,
and unjustly assailed as the main cause of the trouble. The fact however
that the two great opposing forces in national politics are now united
in their attacks upon Wall Street is unusual, and foreshadows more
attacks of the same disturbing character during the presidential
campaign. This is a depressing factor in both the financial and trade
situation, and we see evidence of it in all directions. It is, of
course, a factor that retards recovery from the crisis by retarding the
growth of confidence, and how far its influence will extend we have yet
to see. But of one thing we may be sure, and that is, we shall be
reminded of it very forcibly from time to time from the batteries on
both sides of the political battle ground until after the November
election; then the guns will cease to belch their thunder. Hence we must
be prepared for it in the interval and make the best of it, remembering
the old adage-“Forewarned, Forearmed.” But never before has politics
hurled its javelins so fiercely against Wall Street, and that
practically means all the Stock Exchanges in the country. The joint
attack is against stock speculation, and no Stock Exchange in the world
ever was or ever can be free from that. It would obviously be absolutely
impossible to distinguish investment from speculative transactions on
the floor of the Stock Exchange, or tell whether long or short stock was
being bought and sold. Because speculative capitalists in control of
large corporations have managed them dishonestly for their own benefit,
and in furthering their schemes and speculations employed stock brokers
and used the Stock Exchange, it and its members should not be held
responsible for the wrongdoing of these men, as it is a market open to
all the world, just as is the London Stock Exchange or any Bourse in
Continental Europe. To restrict its scope and operations by law would be
to lessen its usefulness to investors and corporations issuing
securities, and destroy its utility as a free market for all.

Wall Street being not only a local but a national and international
financial center, the whole world, not only the whole country, is
tributary to it, and it is indispensable to the whole country. Yet it is
made the target at present for all sorts of political abuse, and various
schemes have been urged for suppressing trading in stocks, all of which
are of course chimerical, for as long as we have securities, there must,
in justice to the millions of holders, be a market for them. Without it
there would be a sort of chaos of confusion and abnormal prices, for it
is the speculator who is often the most keen and discriminating in
judging the true value of securities. The much maligned “bear” is the
safety valve of the market. He often prevents the manipulation of the
price of a stock to an unfairly high figure by exposing the weak points
in the situation, which is a protection to a prospective buyer.

A great deal of shallow abuse is still being showered on the Stock
Exchange from all parts of the country. This always follows a panic. It
pleases a certain class of ignorant and misguided people to hear Wall
Street denounced and maligned on every opportunity. It matters little
whether the accusations are right or wrong. So pessimistic is public
opinion that the worse the charges the more numerous the believers. No
one looks on the other side; no one is told of the manifold services and
advantages of Wall Street as a financial center. No one is taught that
Wall Street is merely a central market for capital, just as Chicago is
for wheat, Boston for wool, New Orleans for cotton, etc. How many
appreciate the fact that Wall Street is as essential to the business
life of the country as is the Legislature at Washington to our political
life? How many realize that Wall Street is the primary nerve center of
the American business world; that a blow struck there is an injury to
the whole financial and business fabric of the nation? How many forget
that in Wall Street the investor can deal with greater advantage to
himself, as a rule, than in any other financial market? How many
understand that there the country can best settle its accounts; send its
savings, and make its investments more readily and on better terms than
anywhere else? The very individuals who most violently abuse Wall Street
are often among the first to go there for financing new enterprises or
to pick up cheap investments. Thither, also, these same grumblers hasten
in order to “get rich quickly.” When they succeed nothing is heard about
the “wickedness” of Wall Street, and they flatter themselves as to their
own superior shrewdness. But when these same individuals lose, then Wall
Street is nothing but a “gambling hell and a cesspool of iniquity.” They
fail to recognize that their losses are the result of their own
cupidity, or inability to discriminate between sound and unsound
investments. They usually lose because of their own bad judgment; but
nevertheless, there is no end to their objurgations.

Now Wall Street after all is little different from any other department
of business and industry. Its makeup naturally includes men with similar
failings and similar impulses to good and evil that exist everywhere;
men who are better than the politicians who make capital by abusing Wall
Street; men who are better than some of the trusts or the unions which
aim to selfishly and often relentlessly grasp all within their power. It
may also include a very few who unscrupulously manipulate property for
their own advantage and at every opportunity. But it also includes a
vast majority of men of high principles, of great foresight and of
enlightened self-interest; men who recognize that their own welfare is
dependent upon their regard for the welfare of others. Most of such men
are rarely heard of, and their good deeds and honorable achievements are
not exploited in the daily press, which is naturally interested in the
search for the abnormal. Wall Street probably contains a much larger
percentage of strong brainy men than any other community, because right
there centers the management of large affairs and great organizations
which demand the highest ability. True, Wall Street attracts some men of
unscrupulous and predatory instincts because of the great opportunities
for accumulating wealth by devious and often improper methods. The
occasional flotation of questionable schemes and the improper use of
funds held in trust undoubtedly are sometimes among the greatest evils
connected with Wall Street. They are evils that its best men are most
anxious to see eliminated, and it is satisfactory to know that strong
efforts are being made in this direction. It cannot be too strongly
stated that many of the abuses which aggravated the late panic could not
be repeated, and have been stopped forever. Whatever defects remain, the
business standards of Wall Street are upon a distinctly higher plane
than existed some time ago. In spite of troubles and pessimism the world
is growing better and better. But so long as fools with money are to be
found, just so long will there be sharpers ready to take the one and
leave the other. It is useless to expect the millennium. Human nature
changes slowly, and the only means of checking abuses is to establish
rules and standards of a high order, and to keep alive a public opinion
that will insist upon their enforcement. An alert and vigorous public
opinion is often more effective in preventing evil than the punitive
measures which are applied after the wrong has been done.

No king, on being crowned, was ever prouder or happier than I, when I
first stepped on the floor of the New York Stock Exchange as a newly
elected member. The pride that I felt at that time has grown and
increased every year since that day, so long ago, as I have seen the
Exchange grow in influence and moral power. There is no body of men in
the world superior to the members of our Exchange in honor, integrity
and truthfulness. Every transaction on the floor is done on word of
mouth. Sales involving millions of dollars are consummated without a
scrap of writing, and it is a rare occurrence that even a dispute arises
over a transaction, and even then, unless a witness can be found to the
transaction, the matter is settled usually by each party assuming
one-half the loss, as both the buyer and the seller know that the other
is just as square and honest as he is, and that the dispute is over a
misunderstanding and not a misrepresentation. Many people are wont to
worry over the nervous strain under which their friends in the Stock
Exchange are laboring in busy times. Their worry is unnecessary, as the
busy time on the “Street” is the happy time. Many people pretend to be
shocked at the want of dignity which prompts the members to skylark and
act like boys. Don’t be shocked. This is the recreation which offsets
the strain and keeps the members young. One of the most impressive
scenes that can be witnessed is viewed from the gallery on the morning
of a very busy day. At five minutes to 10 the members are seen quietly
gathering in little groups around the different “posts,” chatting and
smiling—at 10 o’clock exactly a gong sounds which announces that
business can begin. Every man on the floor commences to yell and paw the
air, and one who did not understand would think that he was watching the
working room of bedlam. But if he watches closely he will see that order
reigns in seeming chaos. Automatic signals on the walls, quickly moving
pages and telephone clerks in the booths at the side of the Exchange
room, all work in harmony, and the great machinery “moves in a
mysterious way its wonders to perform.” Almost everything in the
country, yes in the world, has its influence in this great market. The
grains of wheat, the kernels of corn, the bolls of cotton, the chinch
bug and the boll weevil: each has a vote. The miner deep in the bowels
of the earth and the crew on a swiftly moving railroad train, the track
walker and the laborer are all exercising indirectly an influence. All
the great railroads and industrial corporations come to Wall Street in
their time of need, and if their object is worthy they do not leave with
their wants unsupplied. Wall Street proper, as represented through the
New York Stock Exchange, is the barometer of the country. Every man,
woman or child who has a dollar invested or deposited in a savings bank
is interested in the good or bad times which prevail in the Street. In
times of great disaster or need, the members of the Exchange are the
leaders in contributing to the relief of the afflicted. There is a lot
of good in Wall Street that outsiders know nothing of; if you are one of
them, find out the truth. Be sure to hear witnesses on both sides. Honor
and truthfulness are the cornerstones on which the whole fabric of
business in Wall Street is built, and confidence is the keystone of the
arch that covers all transactions. The fact that a weak spot is
occasionally uncovered proves the strength of the general structure.
There is no place in the world where the measure of confidence between
employer and employee is so large and where loyally to each other is so
marked. In whatever business a young man intends to embark, a year or
two in Wall Street is a good training, as he will learn much that will
benefit him in after life. He would realize the necessity of close
attention to work and the true application of the principles of the
Golden Rule. In these times of reckless denunciation of Wall Street a
general application of this rule by those who attack by innuendo and
without a scintilla of truth would help to restore confidence and give
evidence of fair-mindedness on their part. Men in high places prefer
charges and the very wording of their complaint proves that they are
beyond the depth of their knowledge. Wall Street will survive all
attacks, and the refutation of these attacks by well-meaning but
mistaken men will in the long ran redound to its lasting good. This is a
time of trial by fire in both business and private life, and those who
have nothing to fear will come out of it unscathed, and the New York
Stock Exchange will be in the front rank of those declared guiltless and
worthy.

Possibly there are a few abuses undiscovered on the Stock Exchange that
should be remedied. Nevertheless, I affirm without fear of contradiction
that there is no business institution in the United States where
standards are as high or where the integrity of its members is equal to
that prevailing on the Stock Exchange. Therefore, let the people and our
Legislatures come to their senses, and awake to the fact that in
striking at the financial district they are hurting themselves quite as
much as those whom they seek to destroy, and that the evil transactions
are small in comparison with the good. Let them understand that in
fomenting discontent of this sort they are intensifying the general
depression, adding to the number of unemployed, driving capital into
hiding and generally interfering with that recovery in commerce and
industry which is now so earnestly desired. The present antipathy to
Wall Street savors largely of public hysteria, bogyphobia and political
dementia. Apparently, it is a disease which must run its course; if so,
the best cure will be a period of reflection in which to cultivate
calmer and more rational views.

At the same time that Wall Street is being riddled with hot shot, the
railways are being harassed by State legislation, involving low rates,
and projects are on foot that in effect would prevent their development
to meet the wants of the people. All this is oppressive and inimical to
the national welfare, and I advocate as a remedy removing the interstate
railways from the control of the States, and placing them entirely under
the control of the United States Government. This Congress can and
should do promptly.

Another great difficulty the railways and other large employers of labor
now have to contend with is the refusal or unwillingness of the Labor
Unions to consent to a reduction of wages to meet reduced earnings. A
lowering of wages has become absolutely necessary, for they are still at
the high figures to which they were pushed during the long period of
prosperity. They are at a boom level that railway and manufacturing
corporations cannot afford to pay in these altered times. The Labor
Unions should recognize this at once, and reduce their wage scales, and
not wait until they are forced to yield. Moreover, they should see that
with reduced wages a larger number of men could be profitably employed
than is possible with wages as they are, and in this way the ranks of
the unemployed would be reduced. This of itself would be of great
benefit to both the working men and their employers, as well as to the
country at large. It is a time when common sense should be brought into
play in the adjustment of means to ends in wages as well as other
matters, for the more it is the quicker will be recovery from the
effects of the panic, and the less will be the suffering from industrial
depression by labor as well as capital. This in the concrete means that
it would result in there being fewer workmen in actual want, and fewer
corporations going to the wall. It is one of the great remedies that the
situation now calls for.

A general reduction of wages would to almost a certainty cause some
mills that have closed to reopen, and cause others that are running on
part time to run on full time. The advent of Spring will of course tend
to stimulate recovery, so we shall have the help of Nature to repair
damages. With Nature as an ally, we ought to rapidly overcome all
obstacles in the way of complete recuperation.

Readjustment of existing conditions is the order of the day, and where
there’s a will there’s a way, as we all know. The general reduction that
has taken place in the price of commodities, and to some extent in
rents, furnishes a very good reason of itself why wages should be
reduced from the high points to which they climbed to meet high prices.
As it is, the inequality between wages and prices is very conspicuous,
and equality should be restored as quickly as possible. Equality is
another name for justice. It is also the touchstone of taxation. Workmen
should not forget that even half a loaf is better than no bread, and
that by accepting reduced wages they are paving the way to better times
for themselves as well as for the country. Then, too, they owe a duty to
society at large. No one should be governed by the narrow, selfish
policy of living for himself alone. This is a world in which we must
give and take, and labor and capital have mutual interests.

The decline in commodity prices, that were before excessive, has been
salutary and of vast benefit in bringing the necessaries of life within
easier reach of the wage-earning masses, and in preventing many
industries from going from bad to worse, through cheapening their
supplies of raw material. The people generally, as consumers, benefit by
this reduction in the cost of production, and in turn it tends to
increase consumption and quicken trade and manufacturing enterprise. All
these influences, too, toad to strengthen confidence in the situation
and hope for the future. But the over-trading, extravagance and
excessive speculation that primarily led to the panic should be
carefully guarded against in the future.

The very severe and extensive liquidation that we have witnessed, not
only in Wall Street but all over the country, has made the financial
situation sounder and therefore safer than it has been for several
years, for it must be confessed that many of our speculative captains of
industry and finance passed far beyond the bounds of conservatism in
their operations, and invited the crisis we experienced by their
reckless assumption of inordinate risks and liabilities.

It was a fitting retribution when some of them were engulfed by it.
Especially culpable and dangerous to the public were those speculative
capitalists who sought and gained control of chains of important
national banks, and then used their resources to extend their own
hazardous speculative schemes. These men were really the immediate cause
of the crisis, and they are now deservedly paying the penalty for it.
But this is a small consideration in comparison with the enormous amount
of havoc they created. One good thing, however, has come out of so much
evil, and that is improvement in our banking condition, by the exposure
and eradication of this unsound banking that prevailed in New York, and
to some extent elsewhere.

We shall, in this generation at least, have no more such speculators
stepping into control of large New York banks and using them pretty much
as if they, their assets and deposits, were their own property. Those
responsible for this unsound banking were public enemies, and we are
still feeling the effects of their reckless and illegal proceedings. The
fact that several of them are now under indictment for their offences is
a reminder that the way of the transgressor is hard. Their elimination
from the banking world removed a source of great danger, which might, if
allowed to continue longer, have resulted in a far worse state of things
than they actually created before their career was brought to a close.

A salutary effect of the panic is the check it has given to extravagance
and waste in living expenses, and the practical lesson in economy that
it has taught very many, for economy is wealth. To reduce expenses after
business reverses is the best way to recuperate, and a little adversity
is not without its uses among us, for we are beyond question the most
extravagant people in the world. This extravagance in living has been
the prime cause of much of the “graft” evil that has lowered the tone of
our business and political life, to say nothing of abuses of power,
embezzlements, corporation-looting, and other forms of dishonesty.

President Roosevelt in his war against illegal and dishonest corporate
practices has certainly worked for the good of the country and to raise
the standard of business morality; and the life insurance, railway and
other corporate scandals that we are all familiar with have shown how
much reform and purification were needed even in high places. Let us
never forget, as the Bible tells us, that “Righteousness exalteth a
nation” however great may be its material prosperity.

That there is a very large amount of money lying idle and available for
investment in first-class bonds was conspicuously shown by the result of
the sale by the City of New York on February 14th of fifty millions of
four and a half per cent bonds, when three hundred millions were bid
for, at an average price of about 104¾. This oversubscription of six
times the amount offered came from people who would not have touched any
but gilt-edge securities.

Of course, the present cheapness of money accounts for much of this
large New York subscription, as apart from investors, banks and bankers
are seeking safe employment for their surplus, in securities that can be
promptly marketed on the Stock Exchange whenever necessary. The latter
is an indispensable condition with them, particularly now in view of the
national banks being enormously indebted to the Government in the shape
of Treasury deposits, and also in view of the future needs of the
Government calling for their return. This is already giving a hardening
tendency to time money.

Although trade is largely prostrated through inactivity, it is safe to
say, notwithstanding what is bad in the situation, that fundamental
conditions are generally sound, and therefore recovery while gradual
will be the easier for it. Meanwhile with inactivity forced upon us, let
us be masterly in our inactivity, and make a virtue of necessity. There
is much in knowing when to stop and when to go ahead; when to ’bout ship
and when to take in sail, and double reef the mainsail and the topsails,
or heave to, and when to sail under bare poles or a full spread of
canvas. Skillful navigation is necessary to success.

With regard to bank reserves, it is especially important during this
period of depression that they should be kept exceptionally strong and
as much as possible, within reasonable limits, above the required
percentage. Twenty-five per cent of reserve against deposits in the
central reserve cities, and especially in New York, is not always
sufficient, as we have seen, from time to time, to enable the banks
there to weather a storm.

The Bank of England maintains an average reserve of nearly twenty-five
per cent larger than that; and it is guarded from suspension in times of
panic by a suspension of the bank act by the Government, which allows it
to issue its notes ad libitum without any compulsory reserve. Here are
two elements of safety. The stronger in reserve the banks keep
themselves, the more confidence in them and in the situation will be
strengthened, and the stronger confidence becomes, the more enterprise
can build upon it. So the banks by their conservatism should do all they
can to encourage confidence as the prime requisite in recuperation.

The New York banks, holding as they do largely the reserves of other
banks throughout the country, should hold a reserve nearer to that of
the Bank of England, which is also the depository of the reserve of
other banks, but in a much larger proportion. If the New York banks had
held thirty per cent reserve last October, when the Knickerbocker Trust
Company failed, there might have been no necessity for issuing Clearing
House certificates, and in that case there would have been no hoarding
of money and little or no panic. But the banks are naturally desirous of
making money by keeping their loans and discounts at high figures, so
they are apt to look upon reserves above the legal limit as money
wasted. The legal limit, however, is too low in the central reserve
cities. My remedy is to raise it. It ought, in my opinion, to be at
least thirty per cent instead of twenty-five per cent, and apart from
any legal requirement, the New York Clearing House should adopt a rule
requiring the banks in the Association to keep a reserve of thirty per
cent. The banks would lose a little in profits by this change, but they
would gain in safety, and reduce our liability to panics. Their
experience during the crisis, when for ten weeks, until the end of
December, currency loaned at a premium ranging from two per cent to five
per cent, should make them anxious to avoid another such ordeal, and an
ounce of prevention is better than a pound of cure.

One unpleasant part of the aftermath of the panic in New York was the
failure in one week, at the end of January, notwithstanding that they
held five millions of loan certificates, of four banks belonging to the
Clearing House, because of runs on their deposits, and the refusal of
the Clearing House to give them further assistance. Whether or not any
of these will be able to resume is still undetermined. Yet, in sharp
contrast with the excitement and alarm that prevailed for weeks after
the Knickerbocker Trust Company failed, the public regarded these
failures with apathy, and the recovery in the stock market which was
then in progress, chiefly under the covering of short contracts, was not
even checked by it, so much had sentiment changed in the interval. These
failures had been practically discounted, large as they were, by what
had gone before, including the decline in stocks. Yet collectively they
had more than twenty-one thousand depositors. These may eventually be
paid in full, but it is very uncertain when that will be, for the law is
a slow coach, especially when a permanent receivership is fastened upon
a bank, largely owing to the long wait usually necessary for the
conversion of slow assets into cash. Moreover, the expenses of
liquidation eat up a large part of the assets under the system of fees
for receivers and their counsel, which have always been much too large
for the work done, and consequently they involve injustice to the
creditors. Laws should therefore be passed substituting for fees fixed
rates of compensation, per diem, for both of these, that is salaries;
and meanwhile the courts should, under the existing laws, reduce their
fees to reasonable amounts, and so correct this evil of extravagance in
the cost of liquidation, which in some instances has been so excessive
as to practically amount to robbery of the victims. This is a needed
remedy that should be urged upon State legislatures.

Two of these failed banks are expected to resume within six months,
while the other two will be wound up, and probably pay depositors forty
per cent or fifty per cent of their claims within about that length of
time.

Very fortunately, however, the crisis of 1907 was much less prolific of
bank failures than that of either 1873 or 1893. In 1893 no fewer than
one hundred and fifty-eight banks suspended, and of these sixty-five
went into permanent receiverships, while eighty-six resumed within the
year, and seven later. But few of these banks had a capital of half a
million or more, their average capitalization being only $169,000. The
banks generally in the fourteen years interval had gained immensely in
strength as well as in number, and their power of resistance to the
effects of the crisis, when it came, had been correspondingly increased.

While the profits of trade and manufacturing have been dwindling,
prophets as to the future of business and prices have increased
enormously, and they were never more numerous or more divided in opinion
than they are now. Some of them point to the fact that with the single
exception of steel, in the hands of the United States Steel Corporation,
prices have declined, and they argue that unless demand increases they
will, like stocks and wages, naturally go lower, and that the Steel
Corporation will be forced, by the reductions already being made by the
independent steel makers as well as by the heavy decline in iron, to
follow suit. These also look for somewhat prolonged depression. But many
other prophets are sanguine that we are already seeing the worst of it,
and that commodity prices are about as low as they are likely to go. The
true prophets are probably the conservatives who steer between these
conflicting opinions and avoid both extremes. But whatever may come, on
the ebbing or rising tide, of our business life, we should, as
Longfellow says, “Learn to labor and to wait, with a heart for any
fate,” and at the same time hold ourselves always ready to make the best
of our opportunities as they arise, and, as America is pre-eminently
rich in opportunities, we shall not find them waiting long. In any
event, the wants of eighty-four millions of our people must be supplied,
and we are the most progressive nation in the world. I therefore
ask—Who’s afraid?

I am quite of the opinion that the time has arrived for calamity howling
to cease; there is now no occasion for undue anxiety. Caution, however,
may be necessary, especially in commercial operations. The worst of the
financial depression has been seen, and the long-distance view is
certainly more encouraging than at any time during the last six months.
Business men have now no reason to feel otherwise than confident. I
firmly believe that recuperation will be quicker after the recent panic
than was experienced after any of the previous great panics since the
one of 1857.

Now is the time for the timid to develop bravery, for the strong to aid
the weak, for the ignorant to be willing to learn from the wise. Let us
all work together for the common good, and the upward tide will bear us
all along towards better times and lasting prosperity. Panics come in
cycles and it will be years before another one can strike us. Let the
worker give his best services to his employer. Let the employer grant
justice and fair pay to the worker and to all, and the nightmares and
storms of the past year will be forgotten or remembered only as a lesson
taught by experience, which will serve to teach us not to overdo in the
future but to temper enterprise with conservatism.

------------------------------------------------------------------------




                             CHAPTER LXXXV.

        AMERICAN SOCIAL CONDITIONS.[11]


Footnote 11:

  An address by Henry Clews, LL.D., to the students of Yale University,
  New Haven, Conn., November 1, 1907.

_Mr. Chairman and Students of Yale University_:

As you gentlemen of good old Yale are studying American social
conditions, I am glad to have the opportunity of addressing you, and I
congratulate you on the prestige you will derive from graduating at so
great and famous a university. You are now on the threshold of American
citizenship and have good reason to be proud of the prospect before you,
with its unlimited possibilities.

Surely it is a privilege that you all value, and can hardly overvalue,
that of becoming American citizens, and thus forming a part of this free
and glorious Republic, where the gates of opportunity are thrown wide
open to you, and the golden harvest of success stands ready to be reaped
by the worthy and deserving, who are able and willing to do good work,
and work hard in their chosen calling. I may reasonably predict that
some of you will become leaders of thought, trade, science, literature
or art, and that will be your ample reward. I base my prediction on the
fact that you are not here because you are compelled to be, but because
you have a thirst for knowledge, for information, or suggestions that
may be of use to you in this connection, and are willing and anxious to
work hard to attain what you desire. The first requisite to attain
success in any form is this willingness to study and work for what you
want, so, being equipped with this necessary quality at the start, you
are prepared to make headway in the battle of life.

The pessimist is abroad in this fair land of ours, in these days,
preaching the gospel of discontent, and a favorite text is that the
young man has now no show, or little chance to get on in life. Do not be
misled or discouraged by such a false doctrine. There never was a time
when brains were at a greater premium than at present, nor courage,
education, industry, and energy more requisite or in greater demand. The
harder you have to struggle to complete your education, the better
fitted you will be for that battle of life, for in your youth you will
have attained victory over the obstacles which lie in the path of
success. Disappointments may embarrass you, but you must conquer them,
instead of allowing them to conquer you. Every victory, thus won, will
be an incentive to further efforts and achievements, and will provide a
stepping stone to success.

Right here, let me impress upon you that the foundation stones of real
success in life are industry, honesty, and truthfulness. These are
jewels which every man can possess, if he cares to. Do not be honest
because it pays, or as a matter of policy. Be honest because you are
conscientious, and it is right to be honest and a reproach to be
dishonest. A man who is honest and truthful in all things is the highest
type of manhood, and commands respect in every walk of life.

While you are still young, I advise you to have an ideal. Make up your
mind what you are best suited for, and strive with all that is in you to
perfect yourself for the work of such a position or profession. While it
is the almost universal desire to become rich, remember that there are
other things in life more to be desired than great wealth. Whether
amassed in Wall Street or elsewhere. Few of the great authors,
scientists, professors, or inventors have been wealthy men, yet they
were great public benefactors, and their names will live in the pages of
history long after the very rich men of the world have been forgotten.

Learn well the history of your country. Study the science of Federal,
State, and Municipal government. Study also finance and banking. Whether
you go into Wall Street or not, it will be useful to you. Before you
leave Yale, try to inform yourselves on all the subjects that will make
you useful citizens, as well as competent, practical workers. School
yourselves to be polite and courteous under trying circumstances.
Politeness is one of the strongest allies one can have in his dealings
with his fellow-men. It is not only so in my field of activity—Wall
Street—but everywhere.

Read only good books. Libraries are now so plentiful that—even if you
have not one of your own—good books are within the reach of all, and
here at Yale you, of course, have an embarrassment of riches from the
Greek and Latin classics to modern literature.

While you are improving your minds, take good care of your bodies. You
are not yet too old for me to give you points. Exercise all you can in
the open air. Cleanliness of body, and neatness of dress, even if you
are not millionaires and your clothes are threadbare, will often be
taken as a guarantee of good character. Be thrifty and economical, even
if you cannot equal Russell Sage, and never get into debt, if you can
help it.

Strive to learn to do some one thing, in the line of your studies,
better than anyone else can do it, and you will have a specialty to
recommend you to a chosen career. Whatever you attempt to do, do it with
your whole soul—as Mr. Roosevelt, our strenuous and gifted President,
says: “Buck hard and hit the center of the line.”

I have been much impressed with the manual training schools, which have
recently been established in New York City. I wish that manual training
could be added to the course in every school and college. Mr. Booker
Washington has ably presented the plan in his Tuskegee Institution,
where every man to get an education must learn a trade, and every man
who learns a trade gets an education. It is a substantial personal asset
for rich or poor.

Because you live in a city, do not think that the country is less
attractive, and has no chance to grow like a town. The State of Texas
alone could give to every man, woman, and child in the United States a
full-sized building lot 20 × 100, and then, allowing for public
highways, have over one-third of the area of the State left for the
production of food supplies. The West, the Southwest, and the South, are
yearning for newcomers. Horace Greeley used to say: “Go West, young
man!” The emigrants from foreign shores will some day realize that there
is a welcome ready for them outside of cities. Colonies will be formed
and men of intelligence will be needed to rule and advise the newcomers;
and those of you who can speak a foreign language will be well fitted
for such a position. But you may aspire to the United States Senate, or
to become Wall Street millionaires.

The natural resources of our country are constantly being developed, and
men of brains and courage will be sought to lead the armies of workmen.
Every man cannot be a captain of industry, but a man of pluck and
education need not remain a private in the ranks very long. Still, avoid
that vaulting ambition that overleaps itself and falls on the other
side.

Whatever your calling may be, try to become your own master in your
younger days. Nothing will give you so much self-reliance as the habit
of relying on yourself. You may possibly fail at first, but great
successes are often built on failures, if the one who fails will profit
by the lesson. Bulwer Lytton tells us that in the bright lexicon of
Youth, there is no such word as Fail.

When you graduate, do not imagine that your education is completed.
Consider that you are just beginning to be able to learn, and that your
College life has simply been a period of training to put you in
condition for the real struggle for knowledge. Practice makes perfect in
all the professions.

See to it that you acquire some new point in knowledge every day that
will be of future value to you. This will mean 365 good ideas acquired
in a year, and every one of these ideas will be like money out at
interest, or like seeds planted in good soil. They will blossom and bear
fruit.

Do not believe that all men in politics are rascals, or weaklings, who
can be bought for a price. If you have the inclination, get into
political life and be a factor in the affairs of your district. Honest
and truthful men will be most welcome in this field, and may be of great
public service.

Do not be worried by the statements made by so many pessimists that
society, and the country at large, are on the verge of moral bankruptcy.
I tell you that the world is growing better every day, and good men are
held in higher respect than ever. Of course there are more rascals, and
more thieves, than there were fifty years ago, but that is because there
are far more people. The percentage of bad to good is relatively
smaller. Men who do wrong are found out oftener and sooner than they
were in the olden days, and the news of wrongdoing is carried all over
the land by telegraph and telephone and published broadcast in the daily
papers. A hundred years ago a man might commit a crime a thousand miles
from New York and we could not get the news of it in a month, even if it
was sent at all.

Use all your endeavors to suppress the use of profanity or obscenity in
public places or elsewhere. This is one of the crying evils of the day
and our women are never safe from the insults of having to listen to
talk that would not be tolerated in a first-class barroom. But of course
the present company is excepted. You are all gentlemen and scholars.

Be cheerful under adverse circumstances. Ella Wheeler Wilcox expresses
what I mean when she says:

                   “It’s easy enough to be pleasant,
                    When life goes by like a song;
                      But the man worth while
                      Is the one who will smile
                    When everything goes dead wrong.”

Whenever you see a chance to help a fellow-man who is not as well
equipped as you are, give him a lift up. If you do so, _you_ may forget
it, but _he_ never will, and you will secure a friend who will be
looking for a chance to do you a good turn.

An old clergyman used to preach that true religion consisted in doing
something good each day, so that when one went to bed at night, he could
feel that the world was a little better, or some one a little happier,
because he had lived that day.

Chemistry is going to play the important part in the next twenty-five
years that electricity has in the past quarter of a century. Fortune
awaits any man who can make use of waste material. Millions of dollars’
worth of this is thrown away every year because the mind of man has not,
as yet, been able to solve the problem of utilizing it. Students are now
at work to this end and who can tell but one of you may be the man who
will play an important part in this great work of discovering new
sources of wealth and progress. If so, he will find a bigger gold mine
than Wall Street.

Railroad magnates are on the watch for improvements and devices of any
kind that will tend toward saving time, increasing facilities, lessening
liability of accident, or saving in cost of construction or equipment.
Here is a broad field for action and for fertile minds to work in.

Copper metal is in such demand that the price has recently been higher
than in a generation, namely, twenty-six cents a pound, and some cheaper
metal may be found to possess qualities that will allow it to take the
place of copper in a degree.

Surgeons and physicians now perform operations and effect cures that
would have been considered miracles in my younger days, and still we
find each year that they have much to learn. It is possible that I am
now addressing some youthful savant, who will startle the world in the
distant future by still more miraculous skill.

Wherever you go, whatever you do, keep your eye on the star of Hope.
Every man has his place in the world if he can only find it. Opportunity
knocks at every man’s door at some time during his early life. Look
sharp and secure it when it knocks at yours, and grab it before it
flies.

But, to all I would advise that when you have found occupation, whether
it is in the professions, or not, strive to please. Don’t expect to sit
in high places at once. Remember that most of you are in the junior
class and can only graduate to a higher class by merit. Study well your
surroundings and what is ahead of you. Carefully consider what may await
you. If you see no evidence of a position worthy of your hopes, do not
hesitate to make a change. It is better to change several times while
you are young than to waste your time by remaining where you cannot
expect to achieve success.

One of the fundamental principles of business is that civility costs
nothing and always pays good dividends, both in and out of Wall Street.
Very often the temptation will come to you in dealing with a nervous or
cranky customer or client, to give vent to your wrath or impatience. My
advice is don’t. That is also _Punch’s_ advice to those about to marry.
To succeed in holding and pleasing such a customer is a high
accomplishment, and sure to attract attention.

The Almighty has endowed every man with two important allies, namely,
courage and conscience. The latter can be blunted if not heeded and an
elastic conscience is worse than a wooden leg. Be cautious not to enter
into any deal or occupation when your conscience warns you that you are
treading on dangerous ground; but, having made up your mind that you are
in the right, press forward with all the energy that is in you. If you
do not succeed, have the courage to rise and try again and renew the
struggle. Nearly every man who has made a great success in business life
has, in his earlier years, suffered reverses. These failures have been
lessons that have taught him the way to win. You may often be
temporarily discouraged by seeing success come to the dishonest and
unworthy, but remember that such cannot command the respect of their
fellows. There is more in life than “filthy lucre,” although Wall Street
prizes it immensely. A contented mind is more to be desired than great
riches, and, if you are poor, be independently poor. Andrew Carnegie
says that to die rich is to die disgraced, so guard against that.

You are really now on the threshold of a new school—the school of Life.
As the old forest guides were taught their wood wisdom by the rocks, the
streams, the grass, the leaves, and kindred objects, so you will learn
by actual contact with all the customs, rules, and complex situations of
the business world, what to do and what to avoid.

Many young men are disheartened before they start in business by the
fact that so many lines of manufacture are controlled by big
corporations and trusts. As I have already shown, they hear the talk of
the agitator and discontented that a poor man has no chance in life. Let
me repeat that brains will always command a premium and that young men
who have brains, backed by energy, will always be in demand. You must
prove that you have these requisites, by good work, and you will find
capital will seek to combine with such qualities. You may start in
business, or the professions, with your feet on the bottom rung of the
ladder; it rests with you to acquire the strength to climb to the top.
You can do so if you have the will and the force to back you. There is
always plenty of room at the top. The men now at the top have their
minds and hands full, and are eager to delegate to smart assistants some
of their work so as to ease the burden they bear. Success comes to the
man who tries to compel success to yield to him. Cassius spoke well to
Brutus when he said: “The fault is not in our stars, dear Brutus, that
we are underlings, but in our natures.”

Form the habit as soon as you become a money earner, or money maker, of
saving a part of your salary, or profits. Put away one dollar out of
every ten you earn. The time will come in your lives, when, if you have
a little money, you can control circumstances; otherwise circumstances
will control you. You may often have to practice self-denial to save ten
per cent. of your earnings; but compel yourselves to do so and you will
never regret it. Most of the leading men in business life to-day started
out less well equipped with worldly goods or education than any of you.
What they have done at least some of you can do.

See that the money you spend is well spent. By careful judgment in this
respect, you will acquire a habit which will cling to you in after life.
Many a man makes bad investments because he did not learn to be cautious
in the beginning of his business career.

The improvements in the past quarter of a century have been marvelous
and the end is not yet. There are many new ideas being formulated, and
some of you may bear an important part in solving problems which will
revolutionize the world. Electricity and chemistry are perhaps still in
their infancy, and latent forces are floating around unknown to men. The
next fifty years may indeed witness changes just as great and startling
as we have seen during the last fifty.

I once advised young men to go as soon as possible into business. I have
changed my opinion somewhat and think that it is well to get a technical
training in a business at college where special courses are taught. I
still consider, however, that if a young man is to enter Wall Street he
will learn just as much by going into the Street as soon as he
graduates, and I consider a large office just as good as any business
college, where a pupil can learn by actual experience as well as he
could by a theoretical course in a business college. Almost every man in
a leading position in a banking house has started as a junior clerk and
gradually worked his way up.

The term “Get the habit” has become quite a metropolitan by-word and
brings me to speak on this subject, for the habits we acquire have much
to do with our progress, and as Lamartine has truly said:

                    “Habit with its iron sinews
                     Clasps and holds us day by day.”

In the various matters of detail that make up the sum and substance of
business—considered as trifles by the foolish, but by the wise as
important and vital—such as our methods of occupation, our time, and our
manners, great care should be taken to acquire the sterling habits of
industry, punctuality, and sobriety. The most watchful and jealous care
should ever be exercised by you all in this regard. A single deviation
from the straight path may mean much, for habit is not of sudden
acquirement, but is formed (and also lost) act by act, thread by thread,
as we progress in the journey of life.

If you hold a fiduciary position in a Wall Street banking house, or
bank, remember that the information you acquire regarding the secrets
and inside facts of the business of your employers belongs to them alone
and must not be divulged or spoken of to anyone. Very often you will
hear of “tips” being circulated there as inside information. Never put
faith in such tips, as an employee who would give away the secrets of
the firm he works for would be unscrupulous enough to lie to you, and I
warn you not to make a close friend of such a person. Do not think that
I look upon you as boys in tendering this piece of advice, but rather as
a veteran addressing new recruits.

The trait of tenacity of purpose is very often a natural gift; but if
you have not this persistence by nature you must cultivate it. For, with
it, you can succeed, you can make difficulties bend, you can make
opposition give way, and doubt and hesitancy yield to confidence and
success. Without it, the more shining qualities of our nature will not
insure your success, nor avert failure and disaster.

At the time the Suspension Bridge over the Niagara River was to be
erected the great question was how to get the cable over. A kite was
elevated, which, with a favoring wind, alighted on the opposite shore.
To its insignificant little string a cord was attached which was drawn
over, then a rope, then a larger one, and then a cable; until the great
bridge between the United States and Canada was completed.


                First across the gulf we cast
                Kite-borne threads till lines are passed,
                And habit builds the bridge at last.


In like manner, my friends, our whole character is made up of little
things, of threads and strands and ropes of habit. Let us be sure that
they are always good and sound.

Next to the unwisdom of selecting and following bad or incompetent
advisers in matters of business, there are also certain persons whom, if
you wish to do well and make a fortune honestly, you should be careful
to avoid. You will not always know them by their appearance; in fact,
that is often the worst rule to go by, for they are generally well
disguised. It is in their manner and conversation that you will find
them out, and, that this be the easier, I have made a collection of
their characteristics, as follows:

        Avoid a man
    Who vilifies his benefactor;
    Who unjustly accuses others of bad deeds;
    Who never has a good word for anybody;
    Who, when he drinks, habitually drinks alone;
    Who boasts of the superiority of his family;
    Who talks religion downtown in connection with his daily business
       affairs;
    Who talks recklessly against the virtue of respectable women;
    Who runs in debt with no apparent intention of paying;
    Who borrows small sums on his note or check dated ahead;
    Who will not work for an honest living;
    Who looks down upon those who do;
    Who is always prating about his own virtues;
    Who imputes bad motives to those trying to do good;
    Who betrays confidence;
    Who lies;
    Who is honest only for policy’s sake;
    Who deceives his wife and boasts of it to others;
    Who chews tobacco in a public conveyance;
    Who gets intoxicated in public places;
    Who partakes of hospitality and talks behind his entertainer’s back;
    Who borrows money from a friend and then blackguards the lender.

With a population of 85,000,000 people, which this country now has, it
is easy to find associates in life without selecting men possessed of
any of these characteristics, and life is the better worth living
without them.

You will both save and make money by strict observance of this short
catalogue of men to avoid. You are not called upon to do anything or to
risk any money in the exercise of this discretion. It simply consists in
letting such people severely alone, and if you have been in the habit of
being imposed upon by such characters, you will find your happiness, as
well as your cash, greatly increased by prudently avoiding them.

There is another subject of signal importance, to which I invite your
earnest attention.

You must ever bear in mind that while, when you become citizens, you
will possess certain rights and privileges—such as the elective
franchise and equality before the law—there are, as well, sacred
obligations and duties imposed upon you, as citizens, that should be
faithfully regarded and performed.

To properly understand and appreciate these duties, you should, I
reiterate, make a careful study of our system of government, and
acquaint yourselves with the manner in which municipalities, states, and
the nation are governed.

As you mature, attend political meetings and read and discuss economic
questions of the day; for public discussion is one of the best
quickeners of individual thought and expression. Be prepared, when the
time comes, to actively participate in the affairs of your city and
state as well as the nation, and stand always ready and willing to lend
your aid to the uplifting of the government to the highest ideals of
Democracy, or Republicanism, as you see them.

If I should add a further word of advice it would be an appeal to you to
ever cherish, deep in your hearts, undying love of country.

Not only be ready to defend it with your lives; but constantly cultivate
and encourage the inspiring qualities of civic pride and virtue, so that
your whole future career will reflect a sincere and patriotic affection
for and just appreciation of the noble institutions of our great
republic. As, however, you are doubtless all true patriots this advice
may be uncalled for.

Leaving, these few precepts with you, I wish to assure you that in
whatever you may undertake, in banking, trade, or the professions, you
will have my good wishes for your success, and if I have planted in your
minds seed that will bear good fruit, it will add to the pleasure I have
enjoyed in addressing you and giving you incidentally, as students of
American social conditions, my experience of human nature, for, in your
case particularly, the proper study of mankind is Man.

------------------------------------------------------------------------




                            CHAPTER LXXXVI.

        THE FINANCIAL AND TRADE SITUATION AND
                         PROSPECTS.[12]


Footnote 12:

  An address delivered at the Annual Banquet of the National Association
  of Cotton Manufacturers, at the Hotel Brunswick, Boston, on Thursday
  evening, April 16, 1908, by Henry Clews, LL.D.

In familiarizing myself with the history, scope, and objects of the
distinguished organization I have the honor to address—The National
Association of Cotton Manufacturers—I was impressed by the vast extent
and importance of the interests it represents through its membership,
which covers not only New England but the whole manufacturing world of
the United States, to say nothing of foreign countries in which it has a
notable representation.

Such an organization is obviously capable of exerting great and lasting
power for good in the improvement and development of the cotton
manufacturing industry in this country, and incidentally it cannot fail
to benefit all our manufacturing interests, for there are ties, visible
and invisible, that bind them all together in a bond of mutual sympathy.

How immense these interests are is almost beyond computation; but we may
form some idea of them from the fact that the capital stock of the
textile mills, print works and bleacheries represented by your
Association’s own members alone, aggregates no less than $334,500,000,
without counting their surplus.

Your statistics further tell us that in these mills are 17,157,637
spindles, 1,472 sets of woolen and worsted cards, 5,849 knitting
machines, and 67 printing machines. These figures are eloquently
suggestive of the country’s manufacturing enterprise and skill, which
have kept pace with its rapid growth, and the progress of mechanical
science.

Beyond all this, you have $400,075,000 more capital in the affiliated
manufacturing industries of cotton cloth, cotton, textile machinery,
mill supplies and the like, represented by your associate members. This,
indeed, is a grand exhibit.

So your association is the representative of $734,586,000 of capital, a
large item in the national wealth of the United States. But, great as it
is, it will continue to grow with this great and ever-growing nation,
and with it will come still further improvements in mechanical
processes, methods and machinery, and a far wider foreign market for our
manufactures, especially in the Orient and South America, where the
British and the Germans have dominated trade in the past.

This association in its work for the advancement of cotton manufacturing
interests, and particularly in the promotion of their commercial
relations, and whatever relates to improvements in manufacture, is a
valuable ally of the motive power that turns the wheels and runs the
machinery of the mills; and I congratulate you on being united for a
purpose so conducive to both the prosperity of a great manufacturing
interest and the national welfare.

I will now turn to the main subject, the financial and trade situation,
present and prospective, in which I find much that is encouraging and
favorable to a general betterment of conditions from this time forward.

With regard to business conditions and prospects, the general sentiment
of both Wall Street and the rest of the country is optimistic, and to
this may be attributed the extensive recovery of the stock market that
has already taken place since the crisis that began in October. Although
the dealings in stocks have been very largely professional, the
improvement reflects the confidence in the situation of the rich Wall
Street men who have led the movement, and confidence, like distrust, is
contagious.

The absence of any considerable buying by the outside public has been
conspicuous, but so also, since the end of 1907, has been forced or
voluntary liquidation. Hence, there being no pressure to sell actual
stock, it was easy for the powerful bull party at work to advance prices
against the short interest, which was very large; and the bears were
driven to cover their contracts at a heavy sacrifice of their previous
paper profits. But, like the poor, the bears are always with us, and
their expressed views as to trade conditions and prospects are, of
course, as pessimistic as those of the majority are the reverse. But the
majority rule, and Wall Street never fails to discount the future. It is
the great financial barometer of the United States.

Leaving sentiment aside, there is ample scope for differences of opinion
as to the exact situation and the future, so conflicting are the reports
that come to us. In some sections, and some industries, very different
conditions are reported than those that prevail elsewhere, and bankers,
merchants and manufacturers in the same towns disagree as to things as
they are.

This shows that we are in that uncertain transition period which always
follows panic; and how long it will last, is the problem that business
men all over the country are now trying to solve. Meanwhile the rise in
stocks, which has been encouraged by the banking interest largely for
the sake of its influence in promoting confidence among the people of
all classes, may fairly be looked upon as the precursor of substantial
improvement in general business.

Yet, however much we may hope for quick recovery from the effects of the
crisis, we should always look unfavorable facts squarely in the face,
for self-deception is the worst kind of folly. We must consider the
worst, as well as the best, features of the situation, in order to gauge
it correctly; and the reduction of ten per cent. in the wages of cotton
mill operatives in New England, and the working of many cotton, woolen
and other mills on part time only, and the shutting down of others,
shows how much manufacturing industry there, as well as elsewhere, has
been affected by the severe ordeal we have passed through.

But, so far as the banking institutions were concerned, Boston enjoyed a
larger degree of immunity from trouble during the crisis than any other
city, a fact that bears testimony to their soundness and conservatism.
Boston may, therefore, well pride herself on this memorable
circumstance, the result of good banking and good business methods. She
had, fortunately, no speculative capitalists with chains of important
banks under their control, as New York had.

The crisis accomplished one good thing, and that was the sweeping away
of this unsound banking, which had become a menace not only to New York,
but to the whole country.

The best banking authorities believe that actual business improvement is
already making headway, although there is no uniformity in it, the
recovery in some places, and some lines of business, being decided,
while in others it is barely visible. Thus the Southwest, and its great
distributing center, St. Louis, report a larger degree of betterment
than any other section, while Chicago, like the Eastern and Middle
States, reports comparatively little.

In the present stage of recuperation, the wage problem is forcing itself
more and more upon public attention, and especially upon that of mill
owners and the railway companies. The urgent necessity the railways are
under of reducing them, to offset reduced earnings, is met by the
unwillingness, or refusal, of the men to have them reduced. They have
been encouraged in this attitude by President Roosevelt’s action, and
now the labor leaders are urging Congress to legislate in support of
their position. But Capital has its rights as well as Labor.

The railway companies, as an alternative to reducing wages, have
proposed an increase in freight rates, but shippers are up in arms
against this, particularly manufacturers; and the authorities of the
States, as well as the Interstate Commerce Commission, signified their
opposition to it. The railways, meanwhile, have kept pace, as far as
practicable, with the contraction of traffic, by discharging large
numbers of their men. In this way they have materially reduced their
expenses, while they report increased efficiency by the labor still
employed, every man in these times being anxious to hold his place by
doing good work.

That is to say, jobs being now scarce, men want to keep their jobs
instead of being “laid off,” as the phrase is. This of itself is a
wholesome effect of hard times.

The labor problem is one of peculiar difficulty, and substantial,
permanent improvement in trade and securities will not be seen until
there has been a complete readjustment of commodities, prices and wages
in accordance with the altered conditions. To insure steady work for
labor, and a fair profit for employers, why would it not be wisdom for
the labor union leaders to agree to a contract to last for the coming
four months only, consenting to a reduction of 20 per cent. in wages?

Readjustment is a harmonizing process, and harmony promotes recovery and
the full development of our powers and resources. This is what the
business situation imperatively calls for now, and all business men
should do their best to foster it, and so work together as a unit, for
in unity there is strength. We have an example of it in our United
States.

The cotton goods industry in New England has, I know, been much more
severely depressed by the crisis than was at first thought possible;
but, fortunately, the losses sustained will be the more easily borne
because of the large profits of previous years. Notwithstanding the cuts
made in standard goods, the demand for them is still abnormally light,
and hence stocks are accumulating in the face of the heavy decrease in
production.

No wonder, therefore, that those most intimately concerned are more or
less at sea as to how long this depression will continue, and what the
results will be. They see certain grades of goods that were selling at
8⅜ cents a yard just before the panic now being offered at 5½ cents, and
this is an object lesson that tends to make even the most optimistic of
them a trifle blue for the time being. But this is precisely the time
when courage and confidence in the situation are most needed. I give you
all credit, however, for being equal to the occasion.

With eighty-five millions of our own people to clothe—to say nothing of
the rest of mankind—manufactured cotton products will before long be in
demand again at rising prices, for civilization demands clothes in hot
weather as well as cold.

Meanwhile, endurance is called for, and will doubtless not be found
wanting, except where special circumstances impose limits to it, and we
all know that patience is a virtue.

Recovery to normal conditions will, of course, be gradual, and it is
better that it should be so, to ensure permanence. In the meantime, it
will be a relief to the dry goods trade when sales are no longer
extensively made by cutting under quoted prices more or less sharply.

The bold, and even aggressive, action of the American Federation of
Labor in going to Washington and making demands upon Congress, and
criticizing not only the laws but the decisions of the Supreme Court of
the United States, puts a new and serious face on the old contest
between Labor and Capital. It arouses some apprehension as to the
lengths to which Labor will go, and how far its political influence may
enable it to accomplish its purposes. Politicians are ever ready to show
subserviency to Labor, merely for the purpose of gaining votes for
themselves.

We all want to see justice done to Labor, but we also want to guard
against injustice being done to Capital by Labor, and Labor’s resistance
to a reduction of wages to correspond in some degree with the decline in
the earnings and profits of those employing it, is a practical injustice
to all those outside the ranks of organized labor.

The readjustment of wages to existing conditions is, therefore, of the
first importance and should be first to receive serious consideration,
with a view to harmonizing both sides, and a prompt settlement. Half a
loaf is better than no bread, for both Labor and Capital, and it is not
to the interest of either to kill the goose that lays the golden egg.
Their interests are mutual, but Labor is posing as if they were
antagonistic. It has often done this before, but never more
conspicuously than now.

With respect to our foreign market for cotton goods, there is plenty of
room to widen it, but our exports of these, in competition with England,
Germany and other countries, are more or less checked by the high price
of labor here, and its comparatively low price there. Hence we should
constantly endeavor to overcome this disadvantage by keeping ahead of
the rest of the world in labor-saving devices, and improvements in
machinery and manufactures. We should try to surpass all Europe in the
quality, as well as the cheapness of our goods.

As we are the most inventive of all nations, and the quickest to adapt
ourselves to new or altered conditions, we shall doubtless find this
feasible, if not an easy task, whereas England, our greatest competitor
in manufacturing, is proverbially slow in changing machinery.

I once asked Mr. Andrew Carnegie what was the mainspring of his
phenomenal success as a manufacturer of iron and steel, and he replied:

“I always kept foremost in making improvements in my machinery and
methods of manufacture. Whenever a new invention that I could use was
patented, I secured it at any cost, and so kept in advance of all my
competitors.

“At one time I had two million dollars’ worth of new machinery that I
was about to install, but a man came to me with an improvement in it
that he had just patented, and I bought his patent and adopted it. In
doing this, I had to cast aside, as old material, the two millions’
worth of new machinery. But the improvement recompensed me many times
over for what I had sacrificed to make the change.”

It is in promoting improvements in manufacturing processes and machinery
that this Association, apart from its general utility, can be of great
and permanent value to the cotton mill industry and kindred
manufacturing enterprises. Ready adaptability of means to ends is as
important in manufacturing cotton sheetings, and the other products of
the loom, as in every other business and everything else.

I remember that in conversation with Admiral Sir Charles Beresford, of
the British navy, when he was visiting New York, he told me of an
instance of American adaptability to circumstances, that he noticed
while in China. The Chinese had been long complaining of the want of
sufficient width in a certain grade of British cotton fabrics that they
were using and they had asked the English agents from time to time if
they would increase the width. But nothing came of their expostulations
and requests, as the agents, after writing home, told them the
Manchester manufacturers said they would have to alter their machinery
in order to give them the desired width, and this could not be done.

But the agent of a large American dry goods house, with extensive cotton
mill interests, arrived at Shanghai, and hearing the complaint of the
Chinese, he said: “Give me your order and you can have whatever width
you want,” and he got the order. Sir Charles added: “So, you see, you
people are smart and give them what they want; besides, you make your
cotton goods heavier than we do and the Chinese like them better because
they wear longer, for when the Chinese put on such clothes they never
come off until they rot off.” Here was an instance of ready adaptability
to the occasion and market needs by an American, which the English
lacked.

An illustration of the importance of scientific investigation with a
view to the discovery of new elements and processes in manufacturing, is
found in silkine, a fabric closely resembling silk, which has come into
popular use. It resulted from the discovery that the mulberry and other
trees on which silk worms feed possess properties that could be
extracted and utilized, to a certain extent, in the production of a
silky fibrous material which in combination with fine Egyptian cotton,
made a cloth so closely resembling silk as to be possibly mistaken,
except by experts, for the silk of the silk worm. Here theoretical and
practical science were happily combined with mechanical skill to produce
an entirely new material, and doubtless there are many similar
opportunities awaiting discovery. This Association by stimulating such
investigation in mechanical science may achieve even greater results
than it anticipates.

The world’s markets offer a most magnificent opportunity for the
enterprise of American cotton manufacturers. We grow four-sixths of the
world’s crop of cotton but manufacture only one-sixth. That is to say,
we export three-fourths of the cotton we grow, leaving England and
Germany to turn the fibre into yarns and fabrics for other countries in
all parts of the world. A much larger share of this foreign trade ought
by right to come to the United States, for the foreign market offers a
field vastly larger and quite as profitable as the domestic field, if
the extraordinary profits of Lancashire spinners during the past few
years are to be taken as an index.

Last year Great Britain exported cotton goods valued at $500,000,000,
while our exports of cotton manufactures were valued at only
$26,000,000. During this same period Great Britain exported
6,298,000,000 yards of piece goods valued at $400,000,000; our exports
meanwhile being only 216,000,000 yards at $15,000,000. Here, then, is a
field for our best ambitions and skill. We cannot forever endure the
sight of seeing other nations manipulating our raw product at enormous
profits, a goodly portion of which should remain for distribution on
this side of the Atlantic.

There is one respect in which the New England cotton industry much
impresses an outsider. Your industry, I am glad to say, is, and always
has been, remarkably free from the evils of promotion and speculative
enterprise. Furthermore, it has most fortunately not been inoculated
with the fever for trusts and consolidations; although I happen to know
that such projects have from time to time been presented to your
consideration. Perhaps your refusals to entertain such propositions thus
far have been due to conditions peculiar to the industry; yet I venture
to hope that it has been not a little due to the strong spirit of
individualism which is one of the best characteristics of the New
Englander; a characteristic which I trust will be cherished for
generations to come, because it is a most wholesome and necessary check
upon the paternalistic tendencies of the day. One beneficial result of
this policy is that the cotton industry is adapting itself to the new
conditions following the panic with much less friction than in other
industries. You have lowered prices, curtailed production and diminished
costs in order to stimulate a revival of consumption in a manner that
promises to make you among the first in completing the process of
readjustment. When recovery begins the cotton trade ought to be among
the first to feel reviving influences. While other industries have been
using or misusing their newly acquired powers of combination to resist
natural tendencies, or to squeeze out dividends upon grossly watered
stocks, you have squarely faced the new conditions and trimmed your
sails accordingly. I have no doubt, therefore, that, with your mills
honestly capitalized, you will soon be going along safely and
comfortably in smoother waters when the trusts will still be struggling
against adverse conditions simply made worse by foolish resistance to
economic laws.

The most encouraging feature of our business situation now is the
prospect of an unusually large wheat crop, winter wheat being in extra
fine condition, and spring wheat having been planted under the most
favorable conditions, owing to the season for farm work being three
weeks earlier this year than last. The planting of other crops has also
been facilitated by good weather, and altogether the agricultural
outlook, at this date, has very rarely been so promising of bountiful
results.

This is a great national blessing, for the foundation of our national
wealth is our crops. Agriculture is indeed the great source of both our
national and international strength. It was almost entirely from this
source that we were enabled, from a merely nominal sum last August, to
build up a foreign trade balance of 521 millions of dollars in the first
eight months of this fiscal year, and the large preponderance of our
exports over our imports still continues, and will make the balance in
our favor at the end of the year one of unexampled magnitude.

This curtailment of our imports, especially of luxuries, has made the
shoe pinch in Europe, for we had been Europe’s best foreign customers.
But, naturally extravagant as we are as a people, we can economize with
as much ease, celerity and determination as we can spend, when the
necessity to do so arises. So we are at present economizing on a grand
scale and with great success.

We have only to consider our unlimited sources of national wealth,
however, to see that the prospect before us is one that should inspire
absolute confidence in the gradual return of prosperity in all
directions. Let us bear in mind that our agricultural products yielded
us last year, as the returns of the Department of Agriculture show,
$7,400,000,000.

Mining and manufacturing were the next largest sources of our national
wealth. The metals mined yielded $3,000,000,000, and this metal product
was converted by manufacturing into materials that had a market value of
fifteen thousand millions of dollars. Thus the agricultural products,
metals mined and metals manufactured, in the year, had a value of
$25,400,000,000. We may, therefore, well and honestly say that this is a
great country. “Long life to it!” as an enthusiastic Irishman was once
heard to exclaim. “By jabers, it can’t be beat!”

The market for raw cotton has, of course, been handicapped by the
depression in the cotton industry, and the efforts of the Southern
planters to advance the price of the staple very materially by holding
it back instead of marketing it, have failed, as they deserved to fail.
Cotton is now lower than it was during the crisis, and about as low as
at any time in this crop year, being 300 points, or 3 cents a pound,
below the season’s top notch. But cotton is still king in the factories.

This decline is equivalent to $15 per bale, or a hundred and eighty
million dollars on a crop of twelve million bales. So spinners and spot
buyers in general have not for two years had so good a chance to
purchase for summer and autumn delivery, and advantageously cover their
season’s requirements as they had last month and this. But spinners have
taken more than a million bales less of this season’s crop since the
first of September last than in the same time in the previous year.

The Census Bureau in its final report for the season tells us the total
crop ginned up to the first of March last was 11,261,163 bales,
including “linters”; and it estimates that 127,646 bales remained
unginned on March 1. Allowing for the usual under-estimating of the
cotton ginned in the reports to the Government, it follows, from the
figures, that the spinnable cotton from the last season’s crop will
aggregate no more than 11,500,000 bales. This is with the average net
weight of a bale, 501½ pounds.

The statistical or technical position of cotton is therefore bullish,
notwithstanding the very large falling off in consumption and the
requirements of spinners, this year, both here and in Europe, as the
indications are that there will not be a very heavy or unmanageable load
of cotton to be carried over into the new crop year, which begins on the
first of September.

One very hopeful sign of the times is the check that has been given to
radical state legislation concerning railway corporations by the Supreme
Court of the United States, declaring the rate laws of Minnesota and
North Carolina in certain respects unconstitutional. The decision
practically denies the right of a State to enact and enforce rate laws
against interstate railways. This takes the wind out of the sails of a
good many Western and Southern political agitators, and makes the State
courts more definitely than ever subservient to the Federal Courts. The
clash as to jurisdiction between the two courts which we witnessed in
the South last year is therefore not likely to recur.

The decision was based mainly upon the unreasonable penalties prescribed
by the North Carolina and Minnesota statutes, but it sustains beyond all
question the contention of the railway companies, which are now held to
be at liberty to refuse to obey any State law reducing rates upon their
making affidavit that it would reduce their earnings to an unreasonable
extent. Upon such an affidavit a judge of the United States Circuit
Court can order a suspension of the operation of the law until the law
can be shown in court to be reasonable.

This is a protecting bulwark against radical and confiscatory State
legislation, resulting from the inflammatory appeals of demagogues. By
protecting the railways it protects investors, and adds to the security
of railway property, which, in turn, strengthens confidence in that
property, and confidence is what is most necessary to recuperation. Let
us therefore help to increase it.

It is the desire to promote confidence, and clarify the business
situation, that has inspired the recent utterances of President
Roosevelt, and dictated the course of the Federal law department. This
is commendable and has had a good effect.

The most spectacular event of the crisis, and its most sensational
starting point, in New York, was the failure of the Knickerbocker Trust
Company under a wild rush to withdraw its deposits on the 22nd of
October, 1907, and the subsequent suicide of Charles T. Barney, its
president; and the most satisfactory event in its later career was its
resumption of business on the 26th of March, 1908, after many trials and
tribulations. On that day, too, it received $1,500,000 of deposits more
than it paid out, a remarkable contrast to the heavy run before the
suspension. This, and the almost simultaneous payment in full of the
depositors of the Oriental Bank, a New York State institution, were
reassuring influences that did much in helping to pave the way to
general recovery, and stimulate the rise in the stock market, which of
itself had a good moral, if not material, effect upon the business
situation.

It was not till the fourth day after the Knickerbocker’s suspension,
namely, on Saturday, the 26th of October, that the New York Clearing
House committee decided to issue Clearing House certificates to the
banks in the Association needing them to pay their Clearing House
balances. Then their issue against satisfactory collaterals deposited
with the Clearing House, began at once. This was the signal for every
other clearing house in the country to do likewise simultaneously.

On the same day the detailed weekly bank statements were suspended, and
these were not resumed till the 8th of February, 1908. Meanwhile a
hundred and one millions of the Clearing House certificates had been
issued and redeemed, except some that were held by the National Bank of
North America, the Mechanics and Traders Bank, the Bank of New
Amsterdam, and the Oriental Bank, which had all failed. But these were
all redeemed before the end of March.

It was in the third week of November that the issue of Clearing House
certificates reached its maximum. But the banks had reached their
largest deficit in reserve in the first week of November, when it rose
to $54,100,000, a prodigious amount of which the public was in
ignorance.

In Boston at the same time your banks had taken out $11,995,000 of their
own Clearing House certificates, but this total was never increased.
After that the banking situation all over the country was slowly on the
mend. But, owing to the partial suspension of currency payments by the
banks, caused by runs and hoarding inspired by the use of clearing house
certificates, currency and gold commanded a premium in New York ranging
from 1 to 5 per cent. This premium was current from the time the
certificates were first issued till the end of December, 1907. The
hoarding of money was, meanwhile, enormous. After that the premium
became suddenly a thing of the past, and hoarded money was rapidly
deposited with the banks.

It is noteworthy that in the panic of 1873 the New York Clearing House
issued only $26,565,000 of certificates, and in the panic of 1893 only
$41,690,000. But these figures merely show how very much smaller New
York’s banking capital, deposits, and loans were in those years than
they are now.

The throwing out of employment through the effects of the panic of large
numbers of men, most of them of foreign birth, resulted in a larger
exodus of steerage passengers to Europe than was ever before known,
these aggregating 114,078 in the first two months of 1908, while only
50,601 immigrants arrived here during those months. The outward rush
commenced in November and it still continues with little abatement. But
as a safety valve for unemployed labor it is perhaps to be welcomed for
the time being, as it reduces the ranks of the unemployed, and when the
labor of these aliens is again in demand they will return as fast as
they went. They know on which side their bread is buttered.

Immigration is, however, no longer as necessary to this country as it
was in pioneer times. Our aim now should be to keep out undesirable
immigrants, particularly anarchists, Black Hand Italians and Armenians,
and rabid socialists who come here to make trouble, and preach doctrines
of equality and confiscation, entirely inimical to American institutions
and national as well as individual progress.

I now come to the markets for stocks, bonds, and speculative
commodities, and the recent indiscriminate attacks upon them by Mr.
Bryan and others both in and out of Congress, as hotbeds of what they
call gambling.

As one of the oldest members of the New York Stock Exchange I can, from
my long experience, testify to the integrity and high character of its
membership, and the strict discipline of that Association over those
composing it. Any breach of its rules, any deviation from the line of
fair dealing, or anything prejudicial to its interests, is promptly
investigated and as promptly punished, when proved to the satisfaction
of the Governing Committee, by fine, suspension, or expulsion. But it is
very rare for a member to be either charged with or found guilty of
chicanery of any kind.

It is therefore unjust and outrageous for Mr. Bryan and others who have
denounced the New York Stock Exchange to call it a gambling arena and
its members gamblers. They are brokers in a free market, a market open
to all the world, and they are ready to receive and execute orders from
all the world, and whether or not these orders are for investment or
speculative account, it is not for them to inquire. Still less is it for
them to discriminate against speculation, when speculative far more than
investment dealings are the life of every stock exchange in the world. A
stock exchange to have any value must be a free market.

Speculation in stocks is no more gambling than speculation in real
estate, or merchandise, although different in degree, but there may be
excesses in speculation as in everything else. The stock exchange as a
body should not, however, be held responsible for the excesses of
individual speculators, or for the dishonesty of men who embezzle in
order to get money for the purpose of speculating. Gas should not be
blamed for causing the death of a man who deliberately locks his room
door, shuts his windows tight, and turns on the gas to die.

Those who know Wall Street well, as I do, know how false a view of it
Mr. Bryan and others, including certain members of Congress, have given
to the public. If they really had known Wall Street well, and had any
conscience, they would not have said what they did say. They have
misrepresented it grossly and unjustifiably, and in their moralizings
upon it they have not reasoned, but ranted.

Some of them have even advocated the entire elimination of the Stock
Exchange. They would thus invite financial chaos and leave investors,
the banks, insurance companies, and all other corporate holders of
stocks and bonds practically without a market for their securities in
which to either buy or sell. This would be putting back the hands of the
clock of progress with a vengeance. It would be going back to the wigwam
and the canal boat, but of course it would never be tolerated and
therefore be impossible.

Yet this slandering and mudslinging campaign by representatives of both
the great political parties for political effect is none the less
injurious and reprehensible because it can never have any substantial
result, much less the destruction of Wall Street. It is scandalous abuse
of which we may have more before the November election, but it is
already high time that it should stop in the interest of truth and
justice and the public welfare.

These assailants of the New York Stock Exchange would also abolish all
other stock exchanges, and the Chicago Board of Trade, as well as all
the other grain and provision exchanges, and all the cotton exchanges in
the country that deal in futures. Perhaps they are not aware that the
farmers and planters of the West and South derive, or can derive, great
benefit from having a free market for “futures” open to them, for it
enables them to sell their crops before they are harvested, if the
prices are satisfactory and they want to make sure of them. This applies
also to the Coffee Exchange and importers of coffee.

To drive dealings in time options from the Produce and other exchanges
would be to drive them to Canada, Liverpool, and London, and let the
markets there make prices for us, instead of making them for ourselves,
all of which shows the absurdity of this clamor against speculation in
stocks and speculative commodities. Speculation is thus stigmatized as
gambling with no more reason or justice than the inevitable risks of
ordinary mercantile trade could be called gambling, for no one can
engage in trade of any kind without taking risks.

Now that the storm of the crisis has passed away, and the investigation
and prosecutions that have taken place have laid bare the corporate
evils that were rife among us, including railway rate rebating and
various forms of looting and wholesale graft by controlling capitalists,
we have come into a purer business atmosphere. Corrupt, plundering, and
law-breaking officers of banks, and railway, insurance, and other large
corporations have, in many cases, been exposed and shown the error of
their ways, and we have in consequence a higher business morality than
we had before we passed through this ordeal of purification. In other
words, the house cleaning we have had has done us good, and this of
itself is a compensation that can hardly be overrated in its future
influence. Banks and trust companies and railways, insurance, and other
corporations have been freed from much unsound and dishonest management,
and also loose, grafting and speculative practices, and we have in their
place that higher moral tone which is safeguarded by greater publicity
of accounts and more rigid official examinations under new and stricter
laws than ever before.

Thus temptation to chicanery and other corporate wrongdoing, and abuses,
by those in control of corporations, is largely reduced, and this is
important, for an old proverb tells us that opportunity makes the thief.

Good grounds for an optimistic view of the situation and the future, you
will all acknowledge, can be found in our unequaled and immense natural
resources and their uninterrupted development. These and the enterprise
of our people and our free institutions and popular government, which
makes us all sovereigns in our own right, are national blessings. They
fortify our national life, and leave our splendid growth and powers of
achievement unchecked; and our wonderful progress in the past will no
doubt be eclipsed by our still greater and grander future, with the
United States of America the foremost nation in the world.

In all this progressive movement the cotton and other mill industries of
New England, and the rest of the country, will share; and in this
natural and legitimate expansion, gentlemen, you and your successors may
look forward to, and find, the potentiality of wealth beyond the dreams
of avarice, as Andrew Carnegie did in Pittsburg. From such a great
American object lesson for manufacturers as Carnegie, you should all
derive a vast amount of encouragement, and that hope that springs
eternal in the human breast.


------------------------------------------------------------------------




                            CHAPTER LXXXVII.

         PEACE ASSURANCES FROM JAPAN.


                  *       *       *       *       *

          ASSURANCE FROM VISCOUNT KENTARO KANEKO, THE EMINENT
                  STATESMAN OF JAPAN, THAT BELLIGERENT
                        REPORTS ARE GROUNDLESS.

                  *       *       *       *       *

           FABRICATIONS, HE SAYS, OF SENSATIONAL NEWSPAPERS.

                  *       *       *       *       *

   NO APPREHENSION IN EMPIRE OF ANY DISRUPTION OF FRIENDSHIP EXISTING
                        BETWEEN THE TWO NATIONS.

                  *       *       *       *       *

Declaring that all talk of trouble between this country and Japan is the
outgrowth of “pernicious fabrication on the part of sensational
newspapers,” Viscount Kentaro Kaneko, who was special Ambassador to the
United States from Japan during the Russian-Japanese war, has written a
reply to a letter addressed him by me, in which the latter, under date
of December 5th, last, expressed the hope that no difficulties might
arise between the two countries which could not be readily and amicably
adjusted.

Viscount Kaneko, whose elevation to his present title and whose
appointment as adviser to the Emperor on all things American, came close
upon the heels of the close of the struggle with Russia, besides is one
of the present eminent Statesmen of the Empire. During General Grant’s
first term, he was a member of a commission sent here to study American
finance. Prince Ito was the head of this commission and I acted as
friendly adviser, at the request of General Grant, then President. This
commission afterwards went to London, Paris, and Berlin, and made a
similar investigation of the financial systems of each of those nations,
and on their return home, via the Suez Canal, they made a full report of
their mission and in it strongly recommended their government to adopt
the American system, which was promptly done, and I was appointed by the
Japanese Government special agent to aid in carrying out their new
financial system. I awarded the contract for the engraving to the
Continental Bank Note Co., of New York, on their successful competitive
bid, and after all the work of establishing their new financial system
was accomplished I received a flattering commendation from the Secretary
of the Japanese Treasury for my services in the matter and a very
handsome pair of Japanese silver vases as a souvenir accompanied same.

My letter, which was sent when reports of impending trouble with Japan
were numerous, is as follows:

                                                   December 5, 1907.

    MY DEAR VISCOUNT:

    It gives me infinite pleasure to congratulate you on the
    bestowal of your present very great title by the Emperor,
    knowing as I do that it is so richly deserved. No one in this
    country can bear stronger testimony of your untiring vigilance
    and masterly efforts in the work you had on hand in this country
    during your war with Russia, and the marvelous success which
    crowned your exertions. No one of your nation who has visited
    this country made more or stronger friends than you did amongst
    our people, and we are all hoping that the time will come when
    you will return as Ambassador. It would indeed be an appointment
    for the benefit of both nations, and would do more than anything
    I can think of to strengthen the long-existing friendly
    relations between the two peoples. There are occasional rumors
    of our relations being strained, but they originate, I am quite
    sure, in either Russia or Germany, owing to a desire in some
    quarters to disrupt the friendship. You can rely upon one fact,
    however, that if there is ever a severance, which God forbid, it
    will not emanate from this side.

                                  Faithfully yours, HENRY CLEWS.

                       VISCOUNT KANEKO’S ANSWER.

    MY DEAR MR. CLEWS:

    Your kind letter of December 5th reached me a few days ago and I
    am infinitely obliged to you for your hearty congratulation on
    my recent advancement to a higher rank for a modest service
    which I was able to render my Emperor and country during the
    late war. In performing the duties which were entrusted to me
    during my sojourn in your country, what little I was able to
    accomplish was due to the kind encouragement and assistance
    which the friends in America so unsparingly gave me. and in this
    connection I assure you that you share the largest part of it.

    You mentioned about the so-called strained relations between
    America and Japan. It is really a pernicious fabrication of
    sensational newspapers, and I am glad that you seem to believe
    it to be so too. So far as I am aware there is nothing of a
    serious nature diplomatically pending between the two countries.
    It is absolutely groundless, therefore, even to imagine, as some
    alarmists would have us believe, that there may be a possible
    disruption of the friendship which has been cemented so firmly
    ever since this country was introduced by America to the family
    of civilized nations in the world. I assure you that every one
    of our people on this side of the Pacific is keenly alive to the
    gratitude we owe you, and I think it most remarkable that nobody
    in this empire seems to entertain, even to the slightest degree,
    any apprehension of a breach of the friendship. Such a thing
    never comes into our head. Again thanking you for your courtesy,

                                  Sincerely yours,

                                       (Signed) KENTARO KANEKO.

    TOKYO, JAPAN, January 21, 1908.

I have kept up a correspondence with Prince Ito and other Japanese
Statesmen ever since I was first associated with them thirty-seven years
ago. The letter from the Viscount spoke for itself and showed the utter
nonsense of sensational reports.

I also wrote to Marquis Ito about the war rumors as follows:

                                                   December 5, 1907.

    MY DEAR MARQUIS:

    Notwithstanding the frequent rumors that have of late sprung up,
    both in this country and Europe, to the effect that the
    long-existing friendly relations between Japan and America are
    becoming strained, I think I am in a position to know that there
    is not the slightest foundation therefor, so far as we are
    concerned. There has been, however, a vicious motive in their
    circulation, and it is quite dear to my mind that they have had
    their origin in, and are disseminated by people in Russia and
    Germany, the wish being father to the thought. For some reason
    or other they seem particularly anxious that the pleasant
    relations existing between our two countries should be weakened,
    and finally severed, hence the strenuous efforts in that
    direction. I feel quite sure, however, that there is not the
    slightest possibility of such a contingency.

    To show how false these rumors are, as well as to cement the
    friendship which now exists between our countries (which you and
    I know to be real and lasting) and to put an end to the jingo
    talk of the press both here and in Japan, would it not be an
    excellent idea for the Emperor to formally invite the Admiral
    and Commanders of our fleet, which is to cruise in the Pacific
    waters, to meet him at some convenient seaport in your country?
    I know that the American people would appreciate such an honor
    and that the greeting they would receive from your countrymen
    would banish all thought of a disruption of our pleasant
    relations. The Yankees of the West respect and admire the
    Yankees of the East, and every effort should be made to increase
    the harmony which now prevails.

    Hoping, my dear Prince, that you are enjoying good health and
    happiness, I remain

                                  Faithfully yours,

                                                        HENRY CLEWS.

    MARQUIS ITO, TOKYO, JAPAN.

                  *       *       *       *       *

                         FLEET TO VISIT JAPAN.

                          INVITATION ACCEPTED.

            NEW PROOF OF FRIENDSHIP BETWEEN THE TWO NATIONS.

_Official Statement from Washington, March 20._

The American battleship fleet is to visit Japan. The desire of the
Emperor to play host to the “Big Sixteen” was expressed to Secretary
Root yesterday by Baron Takahira, the Japanese Ambassador. The
invitation, which was in the most cordial terms, was considered by
President Roosevelt and the Cabinet to-day. Secretary Root was directed
to accept the invitation, and the acceptance was communicated to Baron
Takahira this afternoon.


------------------------------------------------------------------------




                           CHAPTER LXXXVIII.

             THE EMPEROR OF JAPAN.

                  *       *       *       *       *

           DECORATES HENRY CLEWS WITH THE ORDER OF COMMANDEUR
                   OF THE MOST DISTINGUISHED ORDER OF
               THE RISING SUN—ON THE INSIGNIA IN JAPANESE
                   LETTERS IS “KUN-KO-SEI-SHO”—WHICH
                     MEANS “EXALTED MARK OF MERITS
                             AND SERVICES.”

                  *       *       *       *       *

                      LETTER FROM VISCOUNT KANEKO.

    _New York Tribune_, March 21, 1908.

                                              TOKYO, March 23, 1908.

    MY DEAR MR. CLEWS:

    Please accept my heartiest congratulation on the new honor which
    has been added to your already distinguished life by His
    Imperial Majesty, the Emperor, who was pleased to confer upon
    you the Imperial Decoration, in recognition of your valuable
    service to this country. In due time, I know, Ambassador
    Takahira in Washington will officially present it to you. I
    hardly need say how gratefully I am appreciating your kind
    friendship which enabled me to perform whatever was entrusted to
    me, though to a very modest extent, during my sojourn in your
    land in 1904-1905. And in this connection, I assure you that I
    now look back, with much feeling, to those pleasant times I had
    with you in America. I sincerely hope that our next meeting will
    soon be in this country where your special interest in us is
    already so greatly appreciated, as is shown in the recognition
    which has been given you by the Emperor this time.

    With my renewed assurance of the warmest regards to yourself,
    and hoping that this will find you well, I remain,

                                  Very sincerely yours,

                                       (Signed) KENTARO KANEKO.

    MR. HENRY CLEWS,

         NEW YORK CITY.


               COPY OF LETTER TO VISCOUNT KENTARO KANEKO.

                                                     April 25, 1908.

    MY DEAR VISCOUNT:

    I am in receipt of your most highly appreciated letter of March
    23d, for which I cordially thank you; and I am daily expecting
    to be honored by receiving the Imperial Decoration which you
    state is to be conveyed by Ambassador Takahira. Upon its receipt
    I will formally express my gratification to his Imperial
    Majesty, the Emperor, for the great honor conferred.

    If Japan were nearer to New York I might be able to promise that
    our next meeting would be in your own country—the Land of the
    Rising Sun—but as you have achieved so much good for Japan, in
    the United States, I doubt not that business, or international
    diplomacy, of which you are one of the masters, will bring you
    here again, when, I assure you, you will be received with the
    honor and respect which your distinguished services and your
    high personal character entitle you to expect.

    With assurances of the highest regard and friendship for you and
    your countrymen, I have the honor to remain,

                                  Very sincerely yours,

                                       HENRY CLEWS.

    VISCOUNT KENTARO KANEKO,

                                  TOKYO, JAPAN.

                      CONSULATE GENERAL OF JAPAN.

                                      60 WALL STREET, NEW YORK CITY,
                                                     April 27, 1908.

    ESTEEMED SIR:

    Referring to the official dispatch of even date, I take liberty
    to ask you to appoint some afternoon in the near future which
    will be convenient for you to receive me at your home or
    elsewhere when I will have the honor and pleasure of carrying
    out the important mission of presenting you with the
    distinguished mark of honor. With kind regards,

                                  Yours very respectfully,

                                       (Signed) K. MIDZUNO.

    MR. HENRY CLEWS,

         630 FIFTH AVENUE, NEW YORK CITY.

I named Sunday, May 3d, at half-past one o’clock, at my residence, 630
Fifth Avenue, and invited a large number of friends to luncheon, which
made the occasion a most enthusiastic and enjoyable one.

    The Honorable Kokichi Midzuno, said: Mr. Clews, acting under the
    instructions of His Excellency Count Tadasu Hayashi, Minister of
    Foreign Affairs, I have the honor to inform you that His
    Imperial Majesty, the Tenno of Japan, my August Sovereign, as a
    special token of Imperial good will, has graciously been pleased
    to confer upon you the decoration of Commandeur of the most
    distinguished order of the Rising Sun, and I have the honor to
    present to you the said decoration. In performing this most
    pleasant duty, I deem it my privilege to avail myself of this
    occasion to tender my hearty congratulations and to convey to
    you, Esteemed Sir, the assurance of my highest consideration.

Which was replied to by me as follows:

    MR. MIDZUNO:

    In receiving at your hands under the instructions of His
    Excellency Count Tadasu Hayashi, Minister of Foreign Affairs for
    the Empire of Japan, the decoration of Commandeur of the most
    distinguished order of the Rising Sun, bestowed upon me by His
    Imperial Majesty, the Emperor of Japan, as a special token of
    his good will, I respectfully acknowledge my high appreciation
    of the honor, and shall always value the distinction as one of
    the greatest that could be conferred upon me. I shall ever
    regard it not alone as a flattering compliment to myself, and a
    recognition of such services as I have been able to render, but
    as an emblem of the friendly relations that bind Japan and the
    United States together in a bond of sympathy; and I trust that
    this tie of friendship will never be weakened. I at least will
    always endeavor to strengthen it.

    I have long been intimately conversant with the affairs of
    Japan, and been deeply and sympathetically interested in the
    rapid and wonderful development of the Empire, and all the more
    so in consequence of my good fortune in having had the personal
    acquaintance, while they were in New York, of those two
    distinguished Japanese Statesmen, who are now Prince Ito and
    Viscount Kentaro Kaneko. Moreover, the correspondence that has
    passed between us since their return to Japan has only quickened
    my regard, and heightened my admiration for them and their
    Country. Both have proved themselves great in peace as well as
    war, and may the light of the Land of the Rising Sun never grow
    dim, and America and Japan be joined by their mutual interests
    in unbroken peace and concord forever.

    With many thanks to His Imperial Majesty, the Emperor, for this
    great honor, and to His Excellency Count Tadasu Hayashi, as well
    as yourself, for your courtesy in the fulfilment of your duties,
    and for the evidences of your personal friendship for me, which
    touches me deeply, I assure you that my appreciation cannot be
    expressed in words.

    This symbol of the Rising Sun indicates the coming of the day of
    greatness of your nation, and my fervent hope is that darkness
    may be unknown in your land.

    In the midst of our festivities to-day there is a cloud, and I
    desire to express my deepest sympathy to the people of Japan in
    the loss of so many young lives in the disaster which visited
    them during the past week. Though dead, these young men still
    live as an example to others that a life given to country in
    time of peace deserves the same lasting glory as though given in
    battle.

I then requested the ladies and gentlemen to fill their glasses and rise
and drink to the health of His Imperial Majesty, the Emperor of Japan.

The Consul General of Japan answered the toast as follows:

    MR. CLEWS, LADIES AND GENTLEMEN:

    As the local representative of Japan, I have the pleasure and
    honor to thank you for the toast to His Imperial Majesty,
    proposed by our esteemed Host and so heartily joined in by you
    all. It is high honor as well as great pleasure that I was in a
    position to personally present that high mark of honor to Mr.
    Henry Clews. But what makes me most happy is that this came in
    most opportune time, when the international horizon which was
    said to be more or less clouded for some time has become
    clear—so clear that even the yellowest journals of this country
    which are sparing no efforts to stir up anti-Japanese feeling
    among American people, can no more find any meteorological item
    for a pessimistic weather forecast. Now that all transient and
    incidental questions between your country and ours have been
    settled in an amicable way, now that your government, on behalf
    of your people, have gladly accepted our invitation to
    participate in the Grand Exposition to be held in Japan in 1912,
    and now that my fellow countrymen in Japan have most pleasant
    anticipation to welcome the officers and men of your mighty
    fleet of battleships in our beautiful ports, I hope and trust
    that the most friendly relations between two nations, which have
    existed and are happily existing, will be an everlasting one.

    In conferring upon you, Mr. Clews, that high mark of honor which
    I have just had the pleasure to present, His Majesty is
    reflecting the friendly feeling and unfeigned affection that
    fifty millions of His faithful subjects entertain toward the
    people of this great Republic for their kind guidance and
    unshaken sympathy shown to Japan and her people from the time
    when your great Commodore knocked at the door of our Island
    Empire to invite its secluded people to the comity of nations
    down to the present day, not to speak of the most trying time
    Japan passed through a few years ago, and their gratitude for
    the most valuable service rendered by American people to effect
    the termination of hostilities and restoration of peace through
    the far-sighted, active, and able good offices of your great
    President, whose toast I beg to propose.

My acknowledgment by letter of the honor conferred upon me:

                                                        May 2, 1908.

    DEAR SIR:

    Please convey to his Imperial Majesty, the Emperor of Japan, my
    sincere thanks for bestowing upon me, as a token of his good
    will, the Imperial decoration of Commandeur of the most
    distinguished order of the Rising Sun. No words of mine can
    fitly express my high appreciation of this honor, and I shall
    always value the distinction as one of the greatest that it has
    been my good fortune to achieve. I consider it a symbol of the
    friendly relations existing between Japan and the United
    States—a friendship which, I assure you, I shall endeavor to
    foster and promote to the best of my ability.

    With many thanks to his Imperial Majesty for the honor conferred
    upon me, of which I am justly proud, and to your Excellency for
    your kind offices in my behalf, I have the honor to remain,

                                  Most sincerely yours,

                                       (Signed) HENRY CLEWS.

    HIS EXCELLENCY COUNT TADASU HAYASHI, MINISTER OF FOREIGN AFFAIRS
    OF THE EMPIRE OF JAPAN.

The following letter from Prince, then Marquis, Ito is interesting as a
part of the world’s history, and shows the feeling and friendship of
that great statesman:

                                              TOKYO, April 14, 1904.

    DEAR SIR:

    In answer to your letter of February 17th, let me first of all
    thank you most sincerely for the constant sympathy you have
    shown to our country’s cause. Your friendly efforts on the
    occasion of the Chino-Japanese war are still fresh in my memory
    and in the memory of all those who have heard of them. And, in
    general, the sympathetic attitude of public opinion of your
    country is a great encouragement to us in our faith that in
    fighting for our own future security and undisturbed enjoyment
    of the fruits of civilization, we are to a certain extent
    fighting also for the common cause of all. Just as you say, the
    supremacy of Russia in Corea would mean not only a constant
    menace to the very existence of our island empire, but would
    also mean the wholesale destruction of our commercial and
    industrial interests already legitimately vested there in the
    past, not to mention the loss of natural outlet for our
    expanding people. The constant policy of Russia in this part of
    the globe has steadily inclined toward monopolization of natural
    resources of the country she conquers and annexes. Her
    Manchurian policy is the irrefutable evidence of the above
    statement. So that in fighting for our own interests we are at
    the same time fighting for the principle of “fair competition
    all around” in these new markets of the world. I am indeed very
    sorry that the negotiations carried on on our side, with sincere
    “bona-fide,” were not crowned with success so earnestly desired.
    If the Russian Government were a little more inspired by the
    spirit of moderation and of toleration for the legitimate
    interests of others things would not have come to this pass. As
    it was, there remained no other way for us but to try to enforce
    by arms what we could not do by reason. And we had to do so ere
    it would have become too late, for Russia was steadily and
    rapidly augmenting her fighting forces available in this part of
    her empire, so that before long the sheer mass of her fighting
    power would have made it a folly for us to attempt to resist the
    unscrupulous march onward. It has been nothing but a coolly
    thought-out step in the cause of State necessity. And I am much
    gratified to see that you as well as the general public opinion
    of your country, have understood our motives in their true
    light.

    Hoping that you are enjoying as robust a health as when I saw
    you last in New York, and also hoping to be able to see you
    again in no distant future,

                                  I remain, yours sincerely,

                                       (Signed) MARQUIS H. ITO.

    HENRY CLEWS, ESQ.,

        New York City, U. S. A.

The following article, which I wrote at the time for one of our leading
magazines, contains matter which may be instructive to my readers:

                                                       May 24, 1904.

    The success of the Japanese in the present war with Russia is
    due to their great zeal. What they undertake to do, they
    generally do with great earnestness of purpose, which calls
    forth sacrifice, energy, courage, and determination. The
    concentration of all these qualities is the basis of success in
    all undertakings whether large or small. The success of the
    Japanese is easily accounted for also by the fact that they love
    their Emperor as a people—they are willing to fight for him and
    to die for him, added to which, they are fatalists and are not
    afraid to face death on the battle-field, because they firmly
    believe that the next world is better than this, and therefore
    to die in a good cause, especially in fighting for the salvation
    of their country, secures a high and honorable position there.
    Against these characteristics, which back the Japanese in the
    present war, their antagonists, the Russians, fear their
    Emperor, and under the autocratic rule of the nation soldiers
    are very often put into the army through force and kept there.
    There is a vast difference, therefore, on the battlefield, in
    the fighting qualities of soldiers who are backed by love of
    their Emperor and soldiers who are backed by fear of their
    Emperor. Then again, the discipline of the Japanese soldiers is
    of a more intelligent and up-to-date order than that of the
    Russians. Each regiment in Japan is composed of 400 men with a
    captain in command who carries a sword. Their training provides
    that if anything should happen to the captain, and his sword
    should fall to the ground, it must be taken up on the instant by
    the next in rank, and if anything should happen to him, the next
    in rotation takes his place, and so on all the way through to
    the last man; and each man to the end of the 400 is capable of
    picking up the sword and commanding with it, which also means to
    continue the fight until the last man in each regiment is killed
    or disabled; in other words, the fight is never to be given up
    except by total extinction. As an evidence of the interest and
    earnestness of the Japanese people, it is customary, amongst the
    trades-people, whenever a family that they have been supplying
    with the necessaries of life is deprived of the father of the
    family, in consequence of his going to the war, to continue to
    supply all their needs the same as before and without sending
    any bill therefor. It is pretty difficult, therefore, for the
    Russians, notwithstanding that they so largely outnumber the
    Japanese, to whip such a determined, forceful people either on
    land or sea.

    There is scarcely an important college anywhere in the world in
    which Japanese students are not to be found studying for all
    vocations, and they are bent upon acquiring the best and most
    up-to-date methods in all walks of life. Admiral Togo was
    educated at Annapolis, and the American, English, and
    Continental colleges have educated many of Japan’s best army and
    navy officers now engaged in the war.

    The Japanese are not given much to invention, but they possess
    great discernment and discrimination; they know a good thing
    when they see it, and are very skilful in imitation. Fifty years
    ago, when Commodore Perry successfully negotiated for the
    opening of the Japanese ports, that nation’s intercourse with
    the outside world commenced. A few years thereafter a commission
    was appointed to frame a constitution. This commission visited
    all the great nations in pursuit of information. They
    familiarized themselves with the American constitution and the
    basis of the government of other nations; they culled the best
    from all and put it into their constitution. It took them seven
    years to accomplish it. When they made their report to the
    Emperor he accepted it without any modifications whatsoever, and
    notwithstanding the great changes that have taken place in that
    country in consequence of its growth and development, there has
    been no occasion up to this date to in any way change that
    document.

    They also appointed thirty-five years ago a commission, with the
    present great statesman, Marquis of Ito, at its head, to visit
    the various nations with a view of obtaining the best
    information possible in order to establish a financial system.
    On their trip around the world to study the various foreign
    financial systems with a view of adopting one up to date for
    Japan, they first came to this country and brought official
    letters to General Grant, then President. General Grant turned
    them over to me to teach them our financial system. I posted
    them up thoroughly on our financial methods. They then went to
    England, France, and Germany, and returned to Japan via the Suez
    Canal. On their return, their report strongly favored the
    adoption of the American system. It was accepted by the
    Government, and their Secretary of the Treasury appointed me
    their agent to get up the engraving of their new currency and
    bonds, similar to those of the United States Government. I sent
    the phraseology and denominations of all our different demand
    notes and various bonds to them, and they transferred the same
    into their own hieroglyphics and sent them to me. I had the same
    beautifully steel engraved through the Continental Bank Note
    Company, who were the lowest bidders, in competition for the
    work. Since that time I have kept up a most interesting and
    exceedingly friendly acquaintance and correspondence with
    Marquis Ito, and his recent letter to me contained much of
    interest, as it gave most excellent reasons for Japan being
    involved in the present war, which he said was not from his
    country’s desire, but through necessity, as a matter of defense.


------------------------------------------------------------------------




                            CHAPTER LXXXIX.

     THE NATIONAL CORPORATION PROBLEM.[13]


Footnote 13:

  An address by Henry Clews, LL.D., delivered at the First Annual
  Banquet of the Economic Club of Manchester, New Hampshire, May 20,
  1908.

_Mr. President and Members of the Economic Club_:

The political and popular clamor against the industrial Trusts, with
which we have been long familiar, was due primarily to the anti-monopoly
sentiment of the people, but in a far greater degree to the crushing of
competitors, through unlawful and unjust methods, by some of the
conspicuously large corporations, as Government prosecutions have shown.

Hence public hostility to the Trusts increased, and remedial legislation
was called for. The general feeling was that as a Trust had neither a
body to be kicked nor a soul to be damned it should be handled by the
law without gloves, and with the utmost rigor.

The exposure of the railway rebating evil by which competition had been
destroyed, and great monopolies built up resulting in colossal fortunes
for their principal owners, added fuel to the fire of this indignation;
and similar abuses and unlawful practices by certain Trusts showed how
strong combinations of capital had preyed upon, and killed off, weaker
ones, and individual traders, to an extent that made the injustice of it
a national scandal.

Owing to the inflamed state of the public mind, some of the laws enacted
to remedy the evils complained of may have been too drastic for the
purpose. But excesses of this kind correct themselves. Such laws are
either not enforced, or repealed after being enforced. As General Grant
once said to me,-“The surest way to repeal a bad law is to enforce it.”
We have fortunately always a safety valve in public opinion, which never
errs in the long run, and the public opinion of a nation is reflected in
its laws.

The immensity of corporate interests in the United States is suggested
by the fact that, including prominent city banks and Trust companies,
there are more than 20,000 corporations reported in the manuals devoted
to them. Of these 1,512 are active, operating railway companies, 1,129
electric traction companies, 1,158 gas, electric light and electric
power companies, 267 water companies, 259 telephone, telegraph and cable
companies, 1,510 active, operating and producing industrial and
miscellaneous companies, 880 active or operating mining companies, and
13,500 banking, insurance and other financial companies.

The railway companies cover 222,013 miles, and they had a capitalization
and bonded debt, on the 1st of January, 1908, of $13,908,456,846, at
par.

The industrial and miscellaneous companies had at the same date a
capitalization of $9,849,833,000, and the stocks of all the corporations
in the United States aggregated more than $33,600,000,000 at par,
exclusive of banks, Trust companies and other financial institutions.

In connection with the present enormous railway mileage of the country,
it is interesting to note that as recently as 1865 there were only 3,085
miles in operation; and in 1879—the year of specie resumption, after the
long civil war suspension from 1861—this total had only increased to
86,556 miles.

These figures remind us of the great rapidity with which new railway
corporations were subsequently organized, and laid their tracks, while
old ones extended their lines from Maine to California, and the St.
Lawrence to the Gulf of Mexico.

We can also remember the nation’s phenomenal progress simultaneously in
all other directions, and that, before 1880, Trust companies and
industrial corporations were few and far between in comparison with the
great multitude of those with which we have now to deal. The modern era
of these striking features of our business life, and the development of
the industrial Trusts which now cover the country, East, West, North and
South, had then hardly commenced.

Yet our great corporations, and our great railway systems are still
growing and multiplying, and will continue to grow and multiply to meet
the wants of our rapidly increasing population for generations to come,
till every part of our vast territory is thickly settled. Railways and
manufactories represent our largest corporations, and are next in
importance to our unlimited agricultural resources and mining interests.

They remind us too, that while these and all other corporations need
regulation by law, this regulation should never hamper, or interfere
with, their legitimate activities and expansion, however strict and
severe it may be in prohibiting and punishing wilful violations of law
and other abuses of power.

It is significant of the power and extent of our railway systems that
these—fifty-seven of them in all—operate, or control, six hundred and
eighty-eight subsidiaries, or jointly controlled railway companies,
embracing 196,425 miles of road, with an aggregate of outstanding stock
of $4,750,325,000, and $8,180,780,000 of bonds, a total for both, at
par, of $12,931,154,000. These figures are exclusive of stocks and bonds
held in the treasuries of the companies.

Thus nearly ninety per cent of the steam railway mileage of the United
States is operated, or controlled, by the fifty-seven systems. The
remaining ten per cent of the country’s railway mileage is composed
mainly of short, independent and disconnected lines, some of which are
run at a loss, and many without reporting any considerable profit.

Railway corporations in this country are therefore, except as to this
unimportant ten per cent, a great consolidated force, for the
fifty-seven systems that control ninety per cent of the mileage, are
equivalent to so many Trusts, and these can join hands in a solid
phalanx at any time for any lawful purpose, and practically form one
great railway Trust spanning the continent, a gigantic power that but
for law would be a monopoly.

So the National corporation problem is largely one of the railways, and
it involves the best way for the Federal Government to regulate these,
and all the corporations, in the interest of trade, commerce and the
people, and to do this without imposing unnecessary restrictions upon
their legitimate operations and development.

The corporation problem in this country is still new and unsolved, but
it has assumed immense national importance through the growth of the
large industrial Trusts during the last twenty years. Before that they
were unknown, and they have to a large extent revolutionized business
and business methods in the United States.

They resulted from the enormous and rapid increase of our population,
industrial activity, industrial development and wealth, and the
consequent increase of competition in all branches of trade.
Corporations, good, bad and indifferent, sprang up like mushrooms, and
then combinations of corporations into larger ones took place, and we
had Trusts.

These were organized ostensibly to secure economies in management which,
in conjunction with their large capital, would enable them to compete
advantageously with smaller concerns in the same lines of business, and
give them more or less control of their markets.

But in doing this they of course threw many out of employment, and
forced many of their smaller competitors out of business. Consequently
the popular sentiment against them at first was very strong and the cry
of “Monopoly” was often heard.

It was found however that the rise in prices that had been generally
apprehended as a result of the formation of Trusts did not occur, at
least not to any disturbing extent. So public hostility to them quieted
down, although their struggling and ruined competitors still felt sore
over their rivals’ success, all the more so when it was discovered that
most of them were making far larger profits than had ever before been
made in the same industries. If this had always been done honestly there
would have been no reason to complain.

The great industries dominated by Trusts included, besides petroleum and
sugar refining, iron and steel working, copper and other metal and
mineral mining, India rubber and tobacco manufacturing, distilling, and
also many miscellaneous manufactures, in addition to those in other
lines than manufacturing. The traders who had occupied these fields of
industry before them looked small indeed beside these new corporation
giants.

Discrimination in favor of one and against another by railway
corporations was an iniquity that built up large fortunes for a few and
starved and ruined many. But that, let us hope, has been effectually
stopped forever by its exposure and denunciation by President Roosevelt
and the Federal legislation which it provoked; and any revival of it
should be punished with the utmost rigor of the law, not by fines but by
imprisonment of both the giver and receiver of rebates.

Fines can be easily paid by large corporations, however much their
stockholders may suffer, but being placed behind iron bars is always
distasteful, if not terrible, to their officers; and it leaves a stigma
that they are anxious to avoid.

Their aversion to being disgraced in the eyes of their families and
friends by imprisonment as criminals will always tend to make them
extremely cautious not to incur this risk, however willing through lack
of moral scruples, some of them might be to violate the anti-rebate laws
if they could do so with impunity, and however much they might be aware
that lawlessness, apart from the question of dishonesty, is anarchy, and
therefore unpatriotic.

Corporation looting in its various forms, and political contributions of
corporation money, are, like rebating, equally wrong in principle, and
should be punished with equal severity and involve compulsory
restitution. That is really the only way to prevent the recurrence of
such wrongs by the unprincipled.

Judge Anderson, in charging the jury at the trial of John R. Walsh in
Chicago for bank frauds, said: “The law presumes that every man
understands and foresees the natural, legitimate and inevitable
consequences of his acts. The color of the act determines the complexion
of the intent. The intent to injure or defraud may be presumed when the
unlawful act which results in loss or injury is proved to have been
knowingly committed.”

Many of the irregularities, abuses and questionable methods of large
corporations resulted no doubt from the haphazard speculative manner in
which they were organized. Their promoters and organizers had always, or
nearly always, speculative objects in view in forming the combinations
we call Trusts. They looked for their first profit in the stock deals
involved in them, and were generally willing to give extravagant prices,
payable in stock, for properties that they wished to control and bring
into these new Trusts.

This, of course, caused overcapitalization, and in many cases this
overcapitalization was equivalent to several times the actual value of
the properties embraced in the Trusts created, and in some instances to
many times their value. Then too extravagantly high salaries were given
to the men in control of such organizations for their services as
officers. They were generally “on the make,” working for Number One—that
is for themselves—as well as the Trusts.

It often followed that, in their efforts to float their stock and pay
dividends, loose and none too scrupulous practices were resorted to, and
more or less false and exaggerated representations were made as to
actual values and conditions. So greed and graft dominated not a few of
them more than the interests of their outside stockholders.

They were in a position where they could help themselves to the cream,
and leave the skim milk for the investors, and not many of them
neglected their opportunity to skim the cream, and to feather their
nests more or less, in the last few years, before stricter laws were
passed by Congress and the States for the management of corporations.

The laxity of both the State and Federal laws with regard to
corporations, till recently, permitted much to be done in the dark,
which is now rendered impossible by the light of publicity that is
required by the new enactments, as well as by various prohibitions of
dishonest practices, besides that crowning evil, railway rebating, that
were before prevalent.

Campaign contributions by corporations were wrong, morally and legally,
not because political contributions are wrong, but because they were a
wrongful and illegal use of corporate money. But the controlling
officers of many large corporations, particularly the New York City
Railways and large life insurance companies, were woefully blind to
this, so accustomed had they been to handling corporate funds in their
charge as if they owned them, and could do as they pleased.

These transactions were almost on a par with some of those connected
with the purchase at a fictitious price of a certain Street Railway—a
practically non-existent line—in which large capitalists were concerned.
Here was a flagrant instance—involving a diversion of half a million
dollars—of the doings of men controlling a great street railway system,
at the expense of the stockholders whom it was their duty to faithfully
serve and protect.

That many dishonest acts by men controlling corporations have gone
unpunished is greatly to be regretted, and looks very much like a
miscarriage of justice. But let us believe that dishonesty was
exceptional and honesty the rule in corporate management.

Where punishment is inflicted for infractions of the law involving
larceny, it should be the same as for giving or receiving railway
rebates. Fines have no terrors for wealthy evildoers who violate the law
for their own sinister ends at the expense of others.

The popular hostility to the Trusts however, was often too
indiscriminate. It made little or no distinction between the good and
the bad. The Trusts were, as enlarged corporations with large capital, a
national trade development of our time.

Aiming at greater production, economy and efficiency, through their
large means and modern improvements, than had been possible with small
concerns, they marked a forward step in that progressive industrial,
commercial and financial march which has created our vast national
wealth and made this country the Wonder of the World.

But of course it was inevitable that these Trusts, with their large
capital, and new and improved methods and machinery, should supersede to
a great extent the old order of things, and take away from them the
business of others that they competed with. It is only natural that the
stronger competitors should more or less dominate or destroy the weaker,
and the success of the Trusts was merely another illustration of the
survival of the fittest. This is a law of Nature which it is useless to
resist.

It is therefore not against the creation of Trusts, but against
injustice, lawlessness, misrepresentation, looting and other evil
practices in the management of Trusts that we have a good right to
complain, and against which the strong arm of the law should be always
raised. A well and honestly managed Trust can do business as
legitimately, and with as much or more, advantage to the public, as any
individual, any firm, or any small corporation can.

But there is constantly greater temptation to wrongdoing by those in
control of large corporations than is the case in small ones. We have
seen many instances of the abuse of power in these, not only in forcing
the allowance of rebates from the railways, but in other unjustifiable
ways calculated to get the upper hand of competitors, or kill them off
entirely, as well as in the misuse of corporate funds for speculative
purposes, to say nothing of appropriations through that too common form
of dishonesty called graft.

Men in high positions in corporations have often done in secret, in the
way of chicanery what they would have been both ashamed and afraid to do
openly. But now that the old practices have been exposed and the new
laws require publicity of accounts, and have closed the door to the many
opportunities for fraud and graft that were before open, through severe
penalties, we have a purer business atmosphere and a higher moral tone
in our business life. So some good has come out of our corporation
scandals, and public sentiment has been aroused against corporate
corruption and all abuses of power.

Corporations no less than individuals of course have rights which should
be scrupulously respected by both our Federal and State legislators. But
one defect in corporation legislation by Congress, as well as the
States, has often been that it failed to make a sufficient distinction
between what may be called private and public corporations. It stands to
reason that railway and industrial corporations, and all public utility
companies, that have sold their stocks and bonds to the public, and had
them admitted to dealings on the stock exchanges should have their
condition subjected to stated periodical examinations and publicity
which would be uncalled for in the case of smaller corporations that had
not marketed any of their securities, and whose earnings and affairs had
no interest for the general public.

The railway companies are now required by law to keep their books and
accounts in a certain prescribed form under the supervision of the
Interstate Commerce Commissioners, and this is the right kind of
publicity, for it permits of no cheating, nor of any neglect to comply
with the law. The record of each day’s business tells the story and
these books and accounts are all the time open to Government inspection.
But such regulations would be unreasonable if applied to the small
private industrial corporations.

Honestly managed and solvent corporations have nothing to fear from
publicity as to their financial condition, although they have a perfect
right to guard their trade secrets from publicity, provided they are
free from any dishonest or illegal taint. Well and honestly managed
public utility corporations are our best protection against municipal
ownership, which in this country would be sure to involve political
corruption, and probably poor service.

It would be a step towards socialism, and socialism in this country
would be antagonistic to our government, our institutions and our
national progress, and should be resolutely resisted and frowned upon by
all Americans. It is a weed transplanted from the hotbeds of European
despotism that can never flourish here, for our soil is entirely
unsuited to it.

Publicity at regular intervals of earnings and conditions by railway,
industrial and other corporations creates confidence where confidence is
merited, while exposing weakness where weakness exists. By eliminating
that which is unsound and dangerous, it benefits the sound and the safe,
and removes grounds of suspicion injurious to all.

Secrecy is the defense of the weak, and they naturally shirk the light;
but the public interests demand that all the large corporations submit
to it, and stand or fall according to their merits. This applies to
banking and insurance as well as manufacturing, trading and
transportation corporations, all, in this respect being in the same
class.

To facilitate this publicity and ensure simplicity and accuracy the
books and statistics of corporations should be kept in a clear and
systematic manner that any examiner could easily understand. I say this
because in some large corporation failures that have occurred much
irregularity and confusion of accounts was found.

This not only delayed the receivers in ascertaining the amount of the
assets and liabilities, but showed that the officers of the failed
concerns could not have been very closely conversant with their precise
condition when they suspended. Bad, or careless book keeping, accounting
and office management has led to many important corporation failures
that good work in that department might have averted.

Corporations should therefore, be careful to supervise their clerical
forces closely, and also employ accountants to make periodical
examinations and audits of their books, for accounting and statistics in
these days have been raised to the importance of a science.

Old fogyism, wherever it still exists, should be made to give place to
improved and time saving modern methods. These may be small matters to
dwell upon, but a close observance of them is necessary to good
corporate management in this age of close competition and aggressive
enterprise. All that is out of date, or needless, or a drag upon
progress, or which handicaps business development should be promptly
discarded.

The political influence of large corporations has so far not received as
much consideration as it deserves. But it is a factor in our State and
national business life that is more and more making itself felt in an
unobtrusive but none the less effective way.

We have seen this manifested in the strong and numerous protests,
emanating from this source, against the national government and the
interstate commerce commission consenting to the general rise of freight
rates conditionally agreed upon by the Eastern and other railways. In
making these protests to President Roosevelt the corporations are well
aware that he can control the action of the interstate commissioners in
the matter, and by a word cause them to either give or refuse permission
to raise railway rates. They know too that his keen political
observation and insight will cause him to weigh and consider with the
greatest care the effect of the administration’s course in consenting,
or refusing to consent, to this inconsistent proposal to raise railway
freight rates in such a period of trade depression as this, when more
than 413,000 cars are idle. In view of the Presidential Campaign, and
the issue to be decided at the polls next November, not merely by the
politicians, but by the people, he will not underrate the importance of
the railway corporation question as a political factor.

We saw that the President’s communication to the interstate
commissioners a short time ago directing an investigation by them in
relation to the need of the proposal of the Southern railways to reduce
wages, resulted in an immediate abandonment of their announced plan to
reduce them, and in fact all the railways were similarly influenced by
that act of his. He knew that the reduction in one section would be the
entering wedge for a general reduction, and perhaps a strike.

So the railways switched off the reduced wages line to the increased
freight line, thinking that the President, from what he had said, as he
surveyed the situation from his political observatory, would prefer the
alternative of higher freight rates to lower wages. Here comes the rub.
It is a two-edged political sword that President Roosevelt, above all
others, will see requires to be very cautiously handled.

Without great care in this difficulty the administration might find
itself between the upper and the nether millstone of a very ugly
question, and in active antagonism with either the large corporations
and the whole mercantile community, on the one hand, or the railways, on
the other, with both sides bringing all their political influence and
artillery into play.

Here would be an acrimonious contest that could not fail to affect
political results in November. The President would very naturally be
anxious to avert it, but how to reconcile the two opposite courses of
saying yea or nay to the railways, and secure harmony between them and
Labor, is a problem hard to solve.

In connection with the proposition agreed to by the officers of the
Eastern trunk railways to advance freight rates from ten to fourteen per
cent, it is well to consider that the gross earnings of all reporting
lines in February showed a decrease of twelve and one half per cent from
those of last year, and that in March the decrease was 14⅜ per cent, the
result of the prevailing industrial depression, particularly in the
iron, steel and coal trade and the New England cotton and woolen milling
industry.

The proposed increase would, of course, have to be added to the cost of
the commodities carried, and saddled upon the consumers. It was
therefore to be expected that a flood of indignant protests would come
from these, as well as from large shippers and the rank and file of the
mercantile community. They have urged the injustice of such an advance
in these hard times, and in the teeth of an average contraction of fully
twenty-five per cent in the demand for goods. But the railways in reply
point to the refusal of the U. S. Steel Corporation and other large
trade combinations to lower their prices for railway materials, as well
as to the political and other work of the Labor Unions, at Washington
and elsewhere, in support of their determination to keep wages up to the
highest figures of prosperous times, refusing meanwhile to listen to any
terms of wage readjustment to the situation as it is. These are
extenuating circumstances, but two wrongs do not make a right; and the
best way of adjusting these differences is a difficult corporation and
labor problem of itself.

It may surprise some to learn that the great power concentrated in the
President’s hands by Congress has made the great corporations, including
the railway companies and banking institutions, ambitious and eager to
control the Federal Government itself, and they are resolutely working
to control it as far as they can by the force of capital, but as
unobtrusively as possible. They know that their designs to make the
money power supreme would arouse popular indignation, so they are
engaged in a still hunt, and Samuel J. Tilden used to say that this is
what wins in politics and a political campaign.

The Government control of the Trusts, the railways and other
corporations has become so great that it is hardly to be wondered at
that the great object that they have now in view should be to control
the government’s policy, and already they are _sub rosa_ powerful
political machines. In this connection it is significant that some large
railway and banking interests have identified themselves with the
Presidential movement. Every fresh extension by Congress of the
President’s power over corporate interests has made the large
corporations—industrial, railway and financial—with their enormous
capital and resources, more and more bold and determined in their
efforts to control the Presidency, if indeed that is possible; and this
motive underlies a great and growing amount of corruption in our
National politics.

We can therefore see in the attitude and views of the great
corporations, with their wealth and political influence, a possible
menace to our Republic and its free institutions.

This is a matter of vast and vital concern to our citizens, and it is
high time that their serious attention should be called to the fact that
the powers with which the President is invested over the business of all
classes of corporations have become so extended and far reaching that
the Trusts and their railway and financial allies, are ready to
sacrifice any moral principle, and pay any price within their power, to
control the policy of the Federal Government.

So the greatest of all the National corporation problems we have now to
deal with is how to curb and regulate, without injustice, the increasing
political power and pernicious political activity of these and other
corporations, and prevent them from accomplishing their great object,
Government control, for this indeed would be a National calamity.

To President Roosevelt we are almost entirely indebted for the
development we have witnessed in the National control of corporations
under the authority of that provision of the Constitution which invests
Congress with the power to regulate commerce between the States. This
was a great task well performed, and only second to it in importance has
been his activity in promoting Congressional legislation for the
investigation, conservation and increase of the country’s National
resources, including the irrigation of arid regions, the establishment
in the public domain of forest reserves, which had been too long
neglected, and the extension and increased efficiency of the geological
survey.

Closely allied to those National interests and the Federal management
and control of corporations has been the President’s direction of the
work of the Department of Commerce and Labor, the act creating which
provides that it shall be its duty “to foster, promote and develop the
foreign and domestic commerce, the mining, manufacturing and fishing
industries, the labor interests and the transportation interests of the
United States.”

As all the business of the country outside of banking and finance, is
practically covered by this Department, its importance can hardly be
overestimated, especially in relation to the great corporations; and it
is in co-operation between these and the commercial organizations of the
United States, in common with all the other designated business
interests of the country, and this branch of the Federal Government,
that harmony and good corporate management can be best promoted, and the
political power and aspirations of the Trusts, the railways and the
other corporations be effectually regulated and permanently curbed. To
this result that Department’s energies should steadily tend, for the
political domination of this country by Trusts and the money power would
be an intolerable evil, however much it might be hidden and disguised.
It would be inimical to our form of government, and the spirit of all
American institutions, and to ward off this threatened danger, by
nipping it in the bud, is a public duty that the government owes to the
people.

It is indeed likely to become our great National corporation problem;
all the other problems relating to the Trusts, the banks and the
railways being subordinate to this in importance, for it aims at
political power for Capital, which would undermine the very foundations
of our great and glorious republic—the government for which the patriots
of the American Revolution fought so bravely at Bunker Hill, and then,
crowned with victory, made 1776 glorious with the Declaration of
Independence.

But forewarned, forearmed, and public opinion the great court of appeal,
will always govern and keep the Trusts as well as all our other great
business interests in line for the advancement of our National welfare
and the prosperity of the people.


------------------------------------------------------------------------




                              CHAPTER XC.

             WHY I AM AN AMERICAN.


I came to this country from England over fifty years ago, expecting to
stay for merely a short visit. I had barely learned the localities of
the public buildings and the principal streets, when I began to perceive
the possibilities that presented themselves to a young man, who had the
courage to push, to compete for a place in the race for wealth and
position. I liked the hustle and the bustle that contrasted so vividly
with the slow and easy style which prevailed in my native country. I
could not escape being drawn into the spirit which surrounded me, and I
made up my mind that I would make my stand in life in New York, and I
sought and found employment. Fortunately I had letters of introduction
to people of culture and refinement, so my social surroundings were both
attractive and beneficial. In a few years the Civil War broke out and
the leaven was thereby added to the liking I had for the flag which
floats for freedom, and I became a more ardent American than though this
had been my native soil. I had the good fortune to meet the great men of
those days and they whetted my appetite to rise to their level, and much
of my success is due to the quiet influence they exerted upon my young
mind. When I landed in New York, most o what is now the great West, was
boundless prairie or dense forest, but even then the indomitable spirit
of people around me yearned to subdue this wilderness and make it
blossom and bear fruit. Millionaires were few in those days and
truthfulness and honesty, combined with a willingness to work, were the
necessary requisites to enable a young fellow to succeed. The fact that
this was a government for the people, and by the people, did much to
determine me that here I had found the promised land. No aristocracy to
contend with but the aristocracy of brains and courage; no traditions of
centuries to hang between you and your right to toe the scratch with any
man. The country was growing beyond its population and immigration was
invited in such an attractive way that the desirable classes from all
over Europe were drawn to our shores. The fact that men born in humble
life had become some of the world’s leaders proved the possibilities
that might come to any one who cared to try and who had the courage not
to know when he was beaten. In this country Congress has always made,
and is still making, laws that benefit all kinds and conditions of men
who behave themselves. Before the law neither blue blood nor family tree
protects any man who violates the statutes, for all are free and equal.
This nation has never fought for conquest of territory and wherever our
flag floats it has a moral and undisputed right to do so.

The foregoing is but a summary of the volumes I might add to the reasons
why I am an American. One more is that I cannot help being an American
and I don’t want to.

                                                            HENRY CLEWS.


------------------------------------------------------------------------




                 CONCLUSION.


In conclusion I wish to ask public indulgence on account of omissions.

There are many brilliant financiers and skillful operators of the
younger generation in Wall Street who have thus far shown that they are
probably destined to a prosperous, and in some instances, an illustrious
career.

Again, there are others of various ages and long experience, whose
achievements have been of a quiet, unostentatious character and whose
business lives and operations have been conducted with great reserve,
yet with marked success.

Although these two classes have not yet done much to make their
existence conspicuous in the public eye, while some of them, through
excess of modesty, perhaps, have even shunned publicity, yet their lives
have been replete with noteworthy events and the acquisition of very
useful knowledge which, if preserved and recorded, would be highly
interesting in the present, and probably not unworthy of being
transmitted to the future.

I have a considerable number of these clever and worthy gentlemen in
“the volume of my brain,” for whom I have no space in this book, as it
has already exceeded the dimensions which I had originally designed, but
in an additional volume I intend that they shall be duly remembered
according to the best of my humble ability and my opportunities of
forming a just estimate of their deserts.


------------------------------------------------------------------------




 ● Transcriber’s Notes:
    ○ The page number of final chapter ("CONCLUSION") was added to the
      Table of Contents.
    ○ A few illustrations were moved to be closer to the appropriate
      text.
    ○ Missing or obscured punctuation was silently corrected.
    ○ Typographical errors were silently corrected.
    ○ Inconsistent spelling and hyphenation were made consistent only
      when a predominant form was found in this book.
    ○ Text that:
      was in italics is enclosed by underscores (_italics_);
      was in bold by is enclosed by “equal” signs (=bold=).