Fifty years in Wall Street
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.
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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