Fifty years in Wall Street
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