Fifty years in Wall Street
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.
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.