Fifty years in Wall Street
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