Fifty years in Wall Street
steadier charges, and we should have been saved the social and
political excrescence of an aristocracy based upon ill-gotten
wealth. After our bitter experience of the dangerous results of
neglecting to guard the railroad interest by some such
restraints as the foregoing it surely is not too early now to
apply these safer methods to all future enterprises of this
character. Not only is such legislation due as a measure
necessary for the protection of our commerce and investors, but
it would go very far towards remedying the evils that have grown
up under the old and badly regulated system. To a man of
business it is hardly necessary to point out what would be the
competitive advantages of roads constructed under the proposed
regulations. As a rule, their capitalization would not exceed 50
to 60 per cent. of that of the older companies, and they could,
therefore, be run upon a much lower rate of charges.
The thoroughly conservative nature of their organization would
bespeak fer them a degree of public confidence which would
enable them to get all the capital needed for really legitimate
undertakings, whilst purely speculative ventures would be put
under conservative check. Under these circumstances new roads
could do a profitable business, and yet compete disastrously
with the old excessively capitalized companies. The ultimate
result of this competition from the new order of roads would
inevitably be to reduce the earnings of the older class to a
point which would admit of interest and dividends being earned
_only on the same rate of capitalization as existed among the
new-system companies_. In other words, the effect of the honest
method of capitalization here suggested would be to squeeze all
the “water” out of the old companies, and to bring them in
effect, though possibly not in form, to the same financial level
as the new.
If my reasoning here is correct, there is cause for our great
railroad capitalists to look out for the security of their
investments. The basis for their wealth may prove far less
certain than they have imagined it to be. With the prevailing
and steadily increasing public feeling against the methods of
railroad capitalists and the working of our railroad system,
what assurance can there be that, when a remedy for these
corporate wrongs comes to be clearly propounded, it will not be
eagerly urged upon the attention of the Legislatures and adopted
without much ceremony? The dash of a Governor’s pen is,
therefore, all that stands between the railroad millionaire and
the sudden extinction of a large portion of his inflated paper
wealth. Is this a chimerical conclusion? The question, it seems
to me, deserves a far more serious consideration than those most
vitally concerned have yet bestowed upon it. No man can
confidently deny the possibility of such a result as is here
indicated. No one familiar with the present public temper on the
subject of railroad monopoly can reasonably question _the
probability even_ of a settlement of this kind being ere long
resorted to. Under these circumstances, it is a question very
pertinent to the times, whether the foundation of our railroad
aristocracy is as broad or as firm as it has been supposed to
be, and whether a healthy solution of the great railroad problem
is as difficult and as remote as some despondent people have
represented it to be.
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CHAPTER XXVII.
GEORGIA REPUDIATION BONDS.
HOW A SOVEREIGN SOUTHERN STATE CHEATED THE NORTHERN MEN WHO HELPED HER
IN DISTRESS.—A NEW WAY TO PAY OLD DEBTS.—CANCELLATION BY REPUDIATION
OF JUST CLAIMS FOR CASH LOANED TO SUSTAIN THE STATE GOVERNMENT,
BUILD PUBLIC SCHOOLS AND MAKE NEEDED IMPROVEMENTS.—BOTTOM FACTS OF
THE OUTRAGE.—THE RECENT ATTEMPT TO PLACE A NEW ISSUE OF GEORGIA
BONDS ON THE MARKET, WHILE THE OLD ONES REMAIN UNPAID.—THE CASE
BEFORE THE ATTORNEY-GENERAL OF THE STATE OF NEW YORK.—HE EXAMINES
THE LEGAL STATUS OF THE BONDS IN CONNECTION WITH THE SAVINGS
BANKS.—HIS DECISION PROHIBITS THESE INSTITUTIONS FROM INVESTING THE
HARD EARNINGS OF THE WORKING PEOPLE IN THESE DOUBTFUL AND DANGEROUS
SECURITIES.—A BOLD EFFORT TO HAVE THE FRESH ISSUE OF GEORGIA PAPER
PUT UPON THE LIST OF LEGITIMATE SECURITIES OF THE NEW YORK STOCK
EXCHANGE FIRMLY OPPOSED AND EVENTUALLY FRUSTRATED.—REFLECTIONS ON
THE BAD POLICY WHICH ADVOCATED REPUDIATION AND HAS INJURED GEORGIA
CREDIT IN THE EYES OF THE WORLD.—GENERAL OBSERVATIONS UPON THE
NATURE OF REPUDIATION OF STATES’ DEBTS, AND THE MORAL INFLUENCE ON
THE GENERAL CREDIT OF THE UNITED STATES.—SUCCESSFUL APPEAL OF
BONDHOLDERS OF THE REPUDIATED BONDS TO THE STOCK EXCHANGE.
One of the saddest events of my business experience arose from the
purest motives on my part, to aid the South in the work of
reconstruction, in the way of which, as I have stated in the previous
chapter, President Johnson threw the greatest obstacles.
I ventured my money and offered my friendship at a time when that
section of the country stood in need of both money and friendship, and
used my best efforts to bring about the return of such feelings of
fraternal harmony as should exist among all the citizens of this great
country. For these kindly offices I was treated with the basest
ingratitude by some of the Southern States.
I held a large amount of Southern securities, all issued for full value
received, which went into the internal improvements of that section,
enhancing the taxable value of its property. These securities bore the
great seals of the Sovereign States of Georgia and Alabama.
The dishonor attaching to repudiation in these instances has been
brought out in more glaring colors, from the fact that these States have
long since become abundantly able to liquidate their obligations, and to
erase the black spot from the escutcheons of their chivalrous people.
The people themselves are not so much to blame as the disreputable
politicians into whose hands the management of their affairs had fallen.
It is of the sovereign and high-toned State of Georgia that I have most
occasion to complain. On account of the bad faith of that State, through
her political managers, I suffered a terrible reverse in my fortune,
which came near crushing out my financial existence.
It is not, therefore, surprising, I think, that having placed my faith
in the integrity of that State and the promises of its officials and
governing power, and having been so basely deceived, that I should now
be aroused to act in self defence, fight for my rights and do all in my
power to cause the bonds or securities for which I paid good money to be
redeemed, and to have my just claims satisfied. It has therefore, been
incumbent upon me to leave no stone unturned in fighting this battle,
with the hope of recovering the money, or a part of it, that was filched
from me through the ostensible defalcations of these sovereign and
chivalrous States.
About thirteen years ago the repudiation which has reflected such
disgrace upon the South became prevalent in that section, and took the
character, for a time, of a severe financial epidemic.
It was for this reason that the Legislature of the State of New York, as
well as the legislatures of several other States, considered it
necessary for the protection of the savings banks, which are the
custodians of many hundreds of millions, chiefly of the hard earnings of
the working people, to prohibit these institutions from investing in, or
loaning upon, the securities of any State in the Union that had within
ten years previously repudiated any of its lawful obligations.
The laws of the State of New York, in chapter 409, section 260, of the
laws of 1882, provides that savings banks shall be prohibited from
investing money in stocks or bonds of any State which, in the language
of the statute, “has within ten years previous to making such investment
by such corporation defaulted in the payment of any part of either
principal or interest of any debt authorized by any legislature of such
State to be contracted.”
It was for this reason that the newly issued securities of some of the
Southern States have been unable to find a resting place in the monied
institutions of the North.
The State of Georgia, recently finding that she had some obligations
becoming due, and seeing that money was cheap in the North, and that
more than ten years had expired since she repudiated her former
obligations, thought there was a good opportunity of issuing a fresh
batch of these so-called securities, similar to those that had been
dishonored in 1873.
The politicians of Georgia thought there was a good opening in the State
of New York to remove the restriction placed upon the savings banks in
1882. They saw that the Governor and the Legislature were both
Democratic, with a Democratic Attorney-General also, and therefore
determined to take advantage of this political condition, which they
supposed was highly favorable to their scheme of stealing a march upon
the holders of the old repudiated bonds of Georgia, who had been chiefly
instrumental in getting the act passed for the safety of savings banks’
depositors in the State of New York.
The Georgia politicians aimed at having the restriction of the savings
banks removed, so far as it related to their State, in order to afford
them an opportunity of issuing several millions of 4½ per cent. bonds
for the purpose of taking up an old issue of the 7 per cent. bonds, thus
effecting a considerable saving to the taxpayers of their State in this
reduction of interest.
With the purpose of having this matter arranged as quietly as possible,
two of the ablest lawyers of the State of Georgia were surreptitiously
sent to Albany to make argument before the Attorney-General, Mr. Denis
O’Brien, and to attempt to convince that official, in a very plausible
manner, why the restriction should be removed from the savings banks in
the case of Georgia. No opposition was expected, and the enthusiastic
hope was indulged by those who were engineering the scheme that upon
this _ex-parte_ statement of these astute Georgia lawyers a favorable
opinion would be elicited from the Attorney-General of this State, which
would justify the Superintendent of the Bank Department in issuing an
order to remove the restriction which precluded the savings banks of New
York from investing in Georgia bonds, on the ground that the State had
not repudiated within ten years. The repudiation could be traced back
thirteen years, instead of ten.
Pursuant to this application, a small item of a few lines appeared in
one of the Atlanta papers, which stated that Mr. Calhoun had just
returned from Albany, having made a very strong and forcible appeal to
the Attorney-General there, urging him that the restriction on the part
of the savings banks be removed so far as Georgia was concerned.
This item was telegraphed to me, and on receiving the despatch I
notified the holders of the repudiated bonds, and wired the
Attorney-General asking him when a hearing of the other side could be
had.
When the day arrived for the hearing before the Attorney-General, Mr.
Calhoun was surprised to find that there was any opposition to his
application, as the business had been so quietly managed that it was
supposed by the Georgia members of the Bar that the bondholders would