Fifty years in Wall Street
however, to see that the prospect before us is one that should inspire
absolute confidence in the gradual return of prosperity in all
directions. Let us bear in mind that our agricultural products yielded
us last year, as the returns of the Department of Agriculture show,
$7,400,000,000.
Mining and manufacturing were the next largest sources of our national
wealth. The metals mined yielded $3,000,000,000, and this metal product
was converted by manufacturing into materials that had a market value of
fifteen thousand millions of dollars. Thus the agricultural products,
metals mined and metals manufactured, in the year, had a value of
$25,400,000,000. We may, therefore, well and honestly say that this is a
great country. “Long life to it!” as an enthusiastic Irishman was once
heard to exclaim. “By jabers, it can’t be beat!”
The market for raw cotton has, of course, been handicapped by the
depression in the cotton industry, and the efforts of the Southern
planters to advance the price of the staple very materially by holding
it back instead of marketing it, have failed, as they deserved to fail.
Cotton is now lower than it was during the crisis, and about as low as
at any time in this crop year, being 300 points, or 3 cents a pound,
below the season’s top notch. But cotton is still king in the factories.
This decline is equivalent to $15 per bale, or a hundred and eighty
million dollars on a crop of twelve million bales. So spinners and spot
buyers in general have not for two years had so good a chance to
purchase for summer and autumn delivery, and advantageously cover their
season’s requirements as they had last month and this. But spinners have
taken more than a million bales less of this season’s crop since the
first of September last than in the same time in the previous year.
The Census Bureau in its final report for the season tells us the total
crop ginned up to the first of March last was 11,261,163 bales,
including “linters”; and it estimates that 127,646 bales remained
unginned on March 1. Allowing for the usual under-estimating of the
cotton ginned in the reports to the Government, it follows, from the
figures, that the spinnable cotton from the last season’s crop will
aggregate no more than 11,500,000 bales. This is with the average net
weight of a bale, 501½ pounds.
The statistical or technical position of cotton is therefore bullish,
notwithstanding the very large falling off in consumption and the
requirements of spinners, this year, both here and in Europe, as the
indications are that there will not be a very heavy or unmanageable load
of cotton to be carried over into the new crop year, which begins on the
first of September.
One very hopeful sign of the times is the check that has been given to
radical state legislation concerning railway corporations by the Supreme
Court of the United States, declaring the rate laws of Minnesota and
North Carolina in certain respects unconstitutional. The decision
practically denies the right of a State to enact and enforce rate laws
against interstate railways. This takes the wind out of the sails of a
good many Western and Southern political agitators, and makes the State
courts more definitely than ever subservient to the Federal Courts. The
clash as to jurisdiction between the two courts which we witnessed in
the South last year is therefore not likely to recur.
The decision was based mainly upon the unreasonable penalties prescribed
by the North Carolina and Minnesota statutes, but it sustains beyond all
question the contention of the railway companies, which are now held to
be at liberty to refuse to obey any State law reducing rates upon their
making affidavit that it would reduce their earnings to an unreasonable
extent. Upon such an affidavit a judge of the United States Circuit
Court can order a suspension of the operation of the law until the law
can be shown in court to be reasonable.
This is a protecting bulwark against radical and confiscatory State
legislation, resulting from the inflammatory appeals of demagogues. By
protecting the railways it protects investors, and adds to the security
of railway property, which, in turn, strengthens confidence in that
property, and confidence is what is most necessary to recuperation. Let
us therefore help to increase it.
It is the desire to promote confidence, and clarify the business
situation, that has inspired the recent utterances of President
Roosevelt, and dictated the course of the Federal law department. This
is commendable and has had a good effect.
The most spectacular event of the crisis, and its most sensational
starting point, in New York, was the failure of the Knickerbocker Trust
Company under a wild rush to withdraw its deposits on the 22nd of
October, 1907, and the subsequent suicide of Charles T. Barney, its
president; and the most satisfactory event in its later career was its
resumption of business on the 26th of March, 1908, after many trials and
tribulations. On that day, too, it received $1,500,000 of deposits more
than it paid out, a remarkable contrast to the heavy run before the
suspension. This, and the almost simultaneous payment in full of the
depositors of the Oriental Bank, a New York State institution, were
reassuring influences that did much in helping to pave the way to
general recovery, and stimulate the rise in the stock market, which of
itself had a good moral, if not material, effect upon the business
situation.
It was not till the fourth day after the Knickerbocker’s suspension,
namely, on Saturday, the 26th of October, that the New York Clearing
House committee decided to issue Clearing House certificates to the
banks in the Association needing them to pay their Clearing House
balances. Then their issue against satisfactory collaterals deposited
with the Clearing House, began at once. This was the signal for every
other clearing house in the country to do likewise simultaneously.
On the same day the detailed weekly bank statements were suspended, and
these were not resumed till the 8th of February, 1908. Meanwhile a
hundred and one millions of the Clearing House certificates had been
issued and redeemed, except some that were held by the National Bank of
North America, the Mechanics and Traders Bank, the Bank of New
Amsterdam, and the Oriental Bank, which had all failed. But these were
all redeemed before the end of March.
It was in the third week of November that the issue of Clearing House
certificates reached its maximum. But the banks had reached their
largest deficit in reserve in the first week of November, when it rose
to $54,100,000, a prodigious amount of which the public was in
ignorance.
In Boston at the same time your banks had taken out $11,995,000 of their
own Clearing House certificates, but this total was never increased.
After that the banking situation all over the country was slowly on the
mend. But, owing to the partial suspension of currency payments by the
banks, caused by runs and hoarding inspired by the use of clearing house
certificates, currency and gold commanded a premium in New York ranging
from 1 to 5 per cent. This premium was current from the time the
certificates were first issued till the end of December, 1907. The
hoarding of money was, meanwhile, enormous. After that the premium
became suddenly a thing of the past, and hoarded money was rapidly
deposited with the banks.
It is noteworthy that in the panic of 1873 the New York Clearing House
issued only $26,565,000 of certificates, and in the panic of 1893 only
$41,690,000. But these figures merely show how very much smaller New
York’s banking capital, deposits, and loans were in those years than
they are now.
The throwing out of employment through the effects of the panic of large
numbers of men, most of them of foreign birth, resulted in a larger
exodus of steerage passengers to Europe than was ever before known,
these aggregating 114,078 in the first two months of 1908, while only
50,601 immigrants arrived here during those months. The outward rush
commenced in November and it still continues with little abatement. But
as a safety valve for unemployed labor it is perhaps to be welcomed for
the time being, as it reduces the ranks of the unemployed, and when the
labor of these aliens is again in demand they will return as fast as
they went. They know on which side their bread is buttered.
Immigration is, however, no longer as necessary to this country as it
was in pioneer times. Our aim now should be to keep out undesirable
immigrants, particularly anarchists, Black Hand Italians and Armenians,
and rabid socialists who come here to make trouble, and preach doctrines
of equality and confiscation, entirely inimical to American institutions
and national as well as individual progress.
I now come to the markets for stocks, bonds, and speculative
commodities, and the recent indiscriminate attacks upon them by Mr.
Bryan and others both in and out of Congress, as hotbeds of what they
call gambling.
As one of the oldest members of the New York Stock Exchange I can, from
my long experience, testify to the integrity and high character of its
membership, and the strict discipline of that Association over those
composing it. Any breach of its rules, any deviation from the line of
fair dealing, or anything prejudicial to its interests, is promptly
investigated and as promptly punished, when proved to the satisfaction
of the Governing Committee, by fine, suspension, or expulsion. But it is
very rare for a member to be either charged with or found guilty of
chicanery of any kind.
It is therefore unjust and outrageous for Mr. Bryan and others who have
denounced the New York Stock Exchange to call it a gambling arena and
its members gamblers. They are brokers in a free market, a market open
to all the world, and they are ready to receive and execute orders from
all the world, and whether or not these orders are for investment or
speculative account, it is not for them to inquire. Still less is it for
them to discriminate against speculation, when speculative far more than
investment dealings are the life of every stock exchange in the world. A
stock exchange to have any value must be a free market.
Speculation in stocks is no more gambling than speculation in real
estate, or merchandise, although different in degree, but there may be
excesses in speculation as in everything else. The stock exchange as a
body should not, however, be held responsible for the excesses of
individual speculators, or for the dishonesty of men who embezzle in
order to get money for the purpose of speculating. Gas should not be
blamed for causing the death of a man who deliberately locks his room
door, shuts his windows tight, and turns on the gas to die.
Those who know Wall Street well, as I do, know how false a view of it
Mr. Bryan and others, including certain members of Congress, have given
to the public. If they really had known Wall Street well, and had any
conscience, they would not have said what they did say. They have
misrepresented it grossly and unjustifiably, and in their moralizings
upon it they have not reasoned, but ranted.
Some of them have even advocated the entire elimination of the Stock
Exchange. They would thus invite financial chaos and leave investors,
the banks, insurance companies, and all other corporate holders of
stocks and bonds practically without a market for their securities in
which to either buy or sell. This would be putting back the hands of the
clock of progress with a vengeance. It would be going back to the wigwam
and the canal boat, but of course it would never be tolerated and
therefore be impossible.
Yet this slandering and mudslinging campaign by representatives of both