Fifty years in Wall Street
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.
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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.
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