CHAPTER LXX.
Leading Wall Street Events up to the Fall of 1907 774
CHAPTER LXXI.
The Great Crisis of 1907 790
CHAPTER LXXII.
The Causes of the Crisis of 1907 797
CHAPTER LXXIII.
RECENT MEN OF MARK.
Charles M. Schwab.—Daniel Gray Reid.—Thomas Fortune 801 Ryan.—John Warne Gates.—August Belmont.—William H. Moore.—Anthony Nicholas Brady.—Stuyvesant Fish
CHAPTER LXXIV.
Needed Publicity and Reform in Corporations 807
CHAPTER LXXV.
The Monetary Situation and its Remedies 822
CHAPTER LXXVI.
Individuality versus Socialism 836
CHAPTER LXXVII.
Great Wealth and Social Unrest 855
CHAPTER LXXVIII.
The Financial Situation 879
CHAPTER LXXIX.
Table showing Dates of Admission of the Members of the 913 New York Stock Exchange
CHAPTER LXXX.
England and Russia in our Great Civil War and the War 917 between Russia and Japan
CHAPTER LXXXI.
The Crisis of 1907 and its Causes. Was President 927 Roosevelt to Blame?
CHAPTER LXXXII.
Our Great American Panics from First to Last 943
CHAPTER LXXXIII.
Wall Street as It Really Is. A Vindication 955
CHAPTER LXXXIV.
The Financial and Trade Situation, Past, Present and 964 Future, Reviewing the Crisis of 1907, with Causes and Remedies
CHAPTER LXXXV.
American Social Conditions 1001
CHAPTER LXXXVI.
Financial and Trade Situation and Prospects 1014
CHAPTER LXXXVII.
Peace Assurances from Japan 1033
CHAPTER LXXXVIII.
The Emperor of Japan 1037
CHAPTER LXXXIX.
The National Corporation Problem 1045
Conclusion 1063
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ILLUSTRATIONS.
PAGE.
Henry Clews Frontispiece
Mills Building 5
Parents of Henry Clews 7
Birthplace of Henry Clews 9
Map of U. S. by Henry Clews 11
Jacob Little 13
Salmon P. Chase 39
John Sherman 73
E. G. Spaulding 81
New York Stock Exchange 87 (exterior)
New York Stock Exchange 91 (interior)
Daniel Drew 117
George I. Seney 175
Henry Villard 209
Georgia State Bond 255
Samuel J. Tilden 337
Commodore Vanderbilt 345
W. H. Vanderbilt 355
Cornelius Vanderbilt 387
W. K. Vanderbilt 389
F. W. Vanderbilt 393
Three Rothschilds 397
Nathan Rothschild 401
W. R. Travers 407
C. P. Huntington 451
Leland Stanford 455
D. O. Mills 457
Charles Crocker 459
John W. Mackay 461
James C. Flood 463
James G. Fair 465
Robert Garrett 553
August Belmont 595
George J. Gould 607
Jay Gould 619
Cyrus W. Field 659
P. D. Armour 661
Levi P. Morton 663
J. A. Stewart 665
A. J. Drexel 667
Leonard W. Jerome 669
Addison Cammack 671
Russell Sage 673
Chauncey M. Depew 675
James M. Brown 677
E. C. Stedman 679
H. Victor Newcombe 681
Moses Taylor 683
Thomas L. James 685
John H. Clews 687
James B. Clews 689
Roswell P. Flower 691
J. Pierpont Morgan 693
John D. Rockefeller 701
William Rockefeller 713
Henry H. Rogers 729
John D. Archbold 735
Edward H. Harriman 793
Wm. H. Moore 821
Daniel G. Reid 843
Thomas F. Ryan 849
John W. Gates 853
Chas. M. Schwab 869
August Belmont 879
Anthony N. Brady 881
Stuyvesant Fish 903
William E. Gladstone 921
_Fac-simile_, Gladstone letter 923
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DEDICATION TO THE VETERANS OF WALL STREET,
MOST OF WHOM I HAVE KNOWN PERSONALLY.
--------------
MY DEAR FRIENDS:
I have attempted, in the following pages, to relate in a simple and comprehensive manner, without any aim at elaboration, the leading features of the most prominent events that have come within the sphere of my personal knowledge and experience during the twenty-eight years of my busy life in Wall street. I have never kept a diary regularly, but have been occasionally in the habit of preserving certain memoranda in the form of letters, and a few scraps from the newspapers at various times. With these imperfect mementoes, I have revived my recollection to dictate to my stenographer the matter which these pages contain, in a somewhat crude form and unfinished style. In fact, I have not aimed at either finish or effect, not having time for it, but have simply made a collection of important facts in my own experience that may help the future historian of Wall Street to preserve for the use, knowledge and edification of posterity some of the most conspicuous features and events in the history of the place that is yet destined to be the great financial centre of the world.
If I can only succeed, out of all the poorly-arranged material I have gathered, in furnishing the historian of the future with a few facts for a portion of one of his chapters, I shall have some claim upon the gratitude of posterity.
In my description of Drew, Vanderbilt, Gould, Travers, Keene, Conkling and others, I have followed the advice which Oliver Cromwell gave his portrait painter: “Paint me as I am,” he said. “If you leave out a scar or a wrinkle, I shall not pay you a farthing.” I have given my opinion of men and things also without any superstitious regard for the proverb _de mortuis nil nisi bonum_.
I have also endeavored to refrain from setting down aught in malice. Many of those referred to are now dead.
When any of those gentlemen of whom I have had occasion to speak, who still survive, shall write a book, they can indulge in the same privilege with my name that I have done with theirs, whether I am living or dead at the time.
I shall ask no indulgence for myself that I don’t accord to others.
I have expressed my opinions freely from a Wall Street point of view, from the standpoint of the much-abused operator and broker, and “bloated bondholder.”
I have endeavored to enlighten the public on the true status of Wall Street, as the very backbone of the country’s progress and prosperity, instead of misrepresenting it as a den of gamblers, according to the ignorant and somewhat popular prejudice of the majority who have attempted to write or speak on the subject. This feeling has been largely fostered by clergymen, on hearsay evidence, as well as by the practices of professional swindlers, who have been smuggled into Wall Street from time to time, but who have no legitimate connection therewith any more than they have with the church, which repudiates them as soon as it discovers them.
In fact, the great aim of the book is to place Wall Street in its true light before the eyes of the world, and help to efface the many wrong impressions the community have received regarding the method of doing business in the great financial mart to which the settlement of accounts in all our industry, trade and commerce naturally converges.
I have endeavored to correct the utterly erroneous impression that prevails outside Wall Street, in regard to the nature of speculation, showing that it is virtually a great productive force in our political and social economy, and that without it railroad enterprise and other branches of industrial development which have so largely increased the wealth of the nation, would have made but slow progress.
To preserve and inculcate these ideas by putting them in what I hope may be a permanent form, is another object of publishing this volume. I know you can sympathize with me in this effort to set public opinion right, as many of you have long been making strenuous endeavors after success in the same direction.
To put the whole matter, then, into one short and comprehensive clause, my cardinal object in this book is to give the general public a clearer insight of the reputed mystery and true inwardness of Wall Street affairs.
In my relation of certain reminiscences of Wall Street, and in discussing the checkered career of certain brokers, operators and politicians, I have endeavored to be guided by a historic aphorism of Lord Macaulay:
“No past event has any intrinsic importance,” says the great essayist, litterateur, historian and statesman. “The knowledge of it is valuable,” he adds, “only as it leads us to form just calculations with respect to the future.”
In the samples of my experience which I have given in this book I have aimed, to some extent, at this rendition of the noble purposes of history and biography in their philosophic and scientific application of teaching by example. If I have fallen far short of this high ideal of the British Essayist, as I humbly feel that I have, I must throw myself on the kind indulgence of the readers, and ask them to take the will for the deed. For the presentation of the facts themselves I crave no indulgence. They are gems worthy of preservation in the light of the above definition. I only submit that the setting might be much better.
My chapters on politics may be considered foreign to the main issue, but as many of the events therein described were intimately connected with my business career, I think they are not much of a digression.
HENRY CLEWS.
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INTRODUCTORY.
MY PART IN MARKETING THE UNITED STATES CIVIL WAR LOANS.
BY HENRY CLEWS, LL.D.
To a very large majority of Americans now living the great Civil War—waged from 1861 to 1865—between the North and the South is only known as a matter of history. But it was the greatest war the world ever witnessed, involving the loss of nearly a million of men, and I have a vivid recollection of it, for I was an actor in it, from its beginning to its end, to the extent of providing some of the sinews of war for the United States Government, without which it could not have defeated the armies of secession, and preserved the Union.
From the time that Abraham Lincoln was elected to the Presidency of the United States, in November, 1860, the South began to prepare for secession from the North, peaceably if the North consented, but by war if it resisted. It was bent on this course because it foresaw in a Republican administration at Washington its practical loss of control of Congress and the spoils of office—in fact, of the Government itself—that it had so long enjoyed under Democratic administrations. James Buchanan’s term as President having expired on March 4, 1861, Abraham Lincoln was then inaugurated as his successor. It angered the South to see a Republican succeed a Democrat in the White House, and it precipitated the tremendous conflict that followed, by seizing Fort Moultrie, in Charleston Harbor, and firing on Fort Sumter. Fort Moultrie’s guns awoke the North to action, and made it a determined unit in defense of the flag that had been fired upon, and its cry was, “The Union must and shall be preserved!”
As this was the most eventful and critical period in our national history since 1776, and so many know it only by what they have read of it, I will give a general idea of its salient features bearing upon the Government finances and the war loans.
When, after the bombardment of Fort Sumter by Fort Moultrie, on April 14, 1861, Major Robert Anderson, the Union commander, accepted, under the stern necessities of the situation, General Beauregard’s terms of evacuation, the die was cast.
The North picked up the gauntlet of war with patriotic enthusiasm, and the great conflict had begun. But when our troops marched out of that dismantled stronghold of the Union, with drums beating and colors flying, it is safe to say that few or none, either in the North or the South, foresaw the long and mighty struggle that would, for four eventful years, follow the bombardment of Fort Sumter, during which gold would become demonetized before the end of the year. It did so on December 30, 1861, and in the darkest days of the conflict commanded a premium as high as one hundred and eighty-five per cent. over United States legal tender notes, making these worth only 54 1/20 cents in gold, while United States bonds were selling for about 60 cents on the dollar in gold.
When the New York Clearing House agreed, on the date named, to suspend specie payments, the example was at once followed by all the banks in the country, and gold immediately began to command a small premium. None supposed then that the suspension would continue for eighteen years.
In England, during the long suspension from 1797 to 1821—through the Napoleonic wars—the premium on gold never rose above forty-one per cent., and that was in 1814, the year before the end of hostilities. This was owing to the policy of William Pitt and his successors in the management of the British finances. They raised all the money needed for war purposes by taxation and loans, thus restricting the paper money issues, so as to prevent currency inflation, whereas we pursued the opposite course.
When Fort Sumter was fired upon, my firm—Livermore, Clews & Co.—was already prominent in Wall Street, and I immediately began to devise ways and means to help the Government to raise the money that I saw would be necessary to prosecute the war for the Union which this bombardment made inevitable. Fort Moultrie’s guns had united the North in a call to arms, and men by tens of thousands left the farm, the loom, the office, and the store, from Maine to Indiana, to join the Union army.
Money, therefore, was needed by the United States Government, and very large amounts of it, to equip troops and purchase munitions of war.
As James Buchanan was then President, and, like a long line of his predecessors, a Democrat, he had several Southerners in his Cabinet. These promptly resigned their places and went South, including the Secretary of the Treasury, Howell Cobb, who left with surprising suddenness, and the office was filled for a brief period by General John A. Dix, as acting Secretary.
But before leaving, Howell Cobb had offered and sold to Wall Street bankers $20,000,000 of United States five per cent. bonds at 105, authorized, of course, by an old law. Owing, however, to the heavy decline in securities, and general depression following the outbreak of the war, only about one-quarter of these bonds were taken and paid for by those who had subscribed for them; and nothing was done by the Government to enforce the completion of the purchase by those who had defaulted under the severe stress of the times.
Their default was a serious matter for the Government at that time, as it left the funds in the Treasury in a very depleted condition, and interest payments on the public debt were about to fall due, which it had no money in its vaults to provide for. At this crisis John J. Cisco, the United States Sub-treasurer in New York, was instructed, from Washington, to call a meeting of the principal Wall Street bankers at the Sub-treasury, and after stating the situation to them, to ask for an emergency loan on one-year United States notes, and let them fix the rate of interest themselves to correspond with the state of the money market.
Money was then loaning at about twelve per cent. per annum in Wall Street. So when the bankers who responded to Mr. Cisco’s call, myself among the number, assembled at the Sub-treasury, they, after full discussion, agreed to take the amount of notes offered, and at this rate of interest. It was a very high rate for the Government to pay, too high under ordinary circumstances, but the emergency justified it; and Mr. Cisco approved of it, in view of the market rate and the notes running for one year only. My firm took a considerable amount of them and induced others to do so also, and we did so, presumably like the rest of the buyers, not merely because the rate agreed upon was so high, but because we felt it a duty to help the Government; and at all times thereafter during that critical period we worked no less diligently to uphold the public credit.
The Government recognized that a default in its interest payments would have been disastrous to the public credit, and a stumbling block in the way of raising money to prosecute the war, besides causing general depression of business. It therefore had to be prevented at all hazards.
Had these notes not been taken, the Treasury would undoubtedly have been left without the means of paying this interest when due. Consequently, it gratified me to feel that I had been instrumental in inducing others to subscribe for a part of this urgently needed loan.
Soon afterwards Mr. Salmon P. Chase was appointed Secretary of the Treasury by President Lincoln.
Not long afterwards Secretary Chase came to the Sub-treasury and invited bids for $20,000,000 of six per cent. United States bonds maturing in 1884. These were authorized by an old law. He accepted all bids at 94 and over, but rejected all under 94, the result of which was that considerably more than a third of the 1884’s remained unsold. This was to be regretted, because the Treasury was in great need of money. I therefore quickly bestirred myself to form a combination to purchase the unsold bonds of 1884 at 94, my firm being willing to take a liberal share of them, and I succeeded in getting subscriptions from banks and capitalists who had not bought any of those sold, for the unsold amount, subject to my own discretion as to the advisability of taking the bonds, after going to Washington and conferring with Secretary Chase.
So I immediately went there by night train and saw the Secretary early in the morning at the Treasury, and told him I had come on behalf of the combination I had formed, to make him a direct offer at his own price—94—for the unsold 1884 bonds. He was evidently pleased and surprised by the apparent improvement in the demand for them. He said, however, with a fine sense of probity, and consideration for the rights of others, that while he was glad I had come to Washington, and made the proposition to take the balance, he did not think it would be fair to those who had bid and whose bids were thrown out, to sell the rest of the issue without first notifying them of the new offer, and giving them the option of taking what they wanted at the price I offered—94.
He asked me to call again the next morning, after he had given the matter further consideration, and I did so. But meanwhile I had talked with many Southern politicians and office-holders, Peter G. Washington, one of the Virginia Washingtons, among them, and seen so much of the extensive war preparations which were being made in and about Washington, that I came to the conclusion that a long and very bitter war lay before us, notwithstanding that Mr. Chase had the day previously assured me that it would all blow over, with peace restored, within sixty days, a prediction that was echoed by Secretary of State Seward a little later. I was particularly impressed by what Mr. Washington, himself a prominent Government official, had told me of Southern sentiment and Southern determination to fight till all was lost or gained, and by his and other Southerners’ absolute but mistaken confidence that the South would establish its own Confederacy, however long a war it might take to do it. The South in seceding from the Union expected to be able to establish a slave oligarchy, for in Lincoln’s election it foresaw the doom of slavery, as both he and the Republican party were pledged to work for its abolition. Yancey and the other leading Southern “fire eaters” were responsible for this false view.
When I made my second call upon Mr. Chase, I said: “Since I saw you yesterday, Mr. Secretary, I have heard so much in conversation with Southern politicians and office-holders at the hotels, and seen and heard so much of the extensive war preparations on both sides, that I am convinced the war will be a long one, and I fear we shall see much lower prices for Government bonds and securities of all kinds. Feeling as I do, therefore, in justice to those I represent and who have given me full power to use my own discretion in the matter, I must withdraw the offer I made you yesterday. Had you accepted my offer at the time, of course I would have considered the transaction closed, and taken the bonds without question, but as it is, you will admit I am under no obligation, and free to retire.”
“Oh, certainly,” said Mr. Chase, “but I think you are making a mistake, for the war will be over in sixty days and these bonds will go to par!”
But my sober second thought and foresight, based upon what I had seen and heard, and the information I had gleaned in Washington, served me well, and my associates in the combination had reason to thank me for my sagacious action, as the bonds soon afterwards declined to 84; and the Union disaster at the battle of Bull Run, fought at Manassas on July 21, 1861, aroused the North to a realization of the gravity and vastness of the conflict far more than any of the warfare that had preceded it had done; at the same time it made it more determined than before to prosecute the war till the South was conquered into submission to the Union forces.
Mr. Chase’s second act, in replenishing the Treasury’s funds, was to offer for subscription six per cent. United States notes, receivable for all payments, including customs duties, authority to issue which already existed. He found difficulties in the way, however, and, after conferring with the Sub-treasurer, Mr. John J. Cisco, who recommended the appointment of three Wall Street banking houses to act as Government agents for their sale, on commission, namely, Morris Ketchum & Co., Read, Drexel & Van Vleck, and Livermore, Clews & Co., he appointed them. These were the first and sole Government agents for the sale of its securities that had been thus far selected, and they all appreciated the compliment, and did their work well, for they promptly sold all the notes, of this issue, the Secretary had offered.
Mr. Chase throughout made strenuous efforts to supply the Government with the means for carrying on the war, and he was loyally aided by the banking interests of New York, a fact which he recognized and acknowledged to me and others in appreciative terms.
On a subsequent memorable occasion, in the summer of 1861, Secretary Chase appeared at the Sub-treasury after Sub-treasurer John J. Cisco had called, at his request, a number of leading bankers and capitalists to meet and confer with him. When we assembled there he said to us, in his stately and impressive manner, “Gentlemen, the Government needs and must have fifty millions of dollars, and it wants it at once to meet war expenses. For this I am prepared to issue that amount of Treasury notes of the two hundred and fifty million issue just authorized by Congress—by the act of July 17, 1861—bearing interest at 7 3/10 per cent. I am no financier, so I cannot tell you how to raise the money, but you distinguished leaders in the world of finance well know what means to adopt to get it. So I leave it in your hands entirely. All I need say further is to repeat that the Government must have fifty millions of dollars, and I leave it to you to find the way to procure it.”
Then Mr. Chase sat down, and all of us who were present compared notes with each other in conversation about the room; that is, we talked the matter over for nearly twenty minutes. The result of the conference was then announced by our spokesman, Moses Taylor, who said, addressing Mr. Chase:
“Mr. Secretary, we have decided to subscribe for the fifty millions of United States Government securities that you offer, and to place that amount at your disposal immediately! So you can begin to draw against it to-morrow!”
A general clapping of hands followed this prompt announcement, and Mr. Chase responded by saying:
“Gentlemen, I thank you on behalf of the Government for your public spirit in helping it so generously and so promptly in this emergency.”
The whole scene was of rare and stirring interest, and momentous consequences hinged upon its result. As a drama drawn from real life it would have been effective if represented on the stage, with the large and portly form and massive head of Secretary Chase as its leading feature.
This was the first lot, or installment, of the $250,000,000 issue of 7-30 Treasury notes put on the market.
Of these, the Secretary had the privilege of issuing $50,000,000, payable in coin at the Sub-treasuries in New York, Boston, and Philadelphia, without interest, to be used as currency.
After disposing of the first 50,000,000 of 7-30 notes, as I have described, Secretary Chase communicated with the banks concerning the sale of the remainder, with the view chiefly of saving the payment of commission to the agents. But he was unable in that way to make sales on satisfactory terms to them. So he added to the three Government agents originally appointed for the sale of its securities, Fisk & Hatch, and Vermilye & Co., of New York, and Jay Cooke & Co., of Philadelphia, and told them the “7-30” notes would be delivered to them as fast as called for at the New York Sub-treasury.
Thereupon the New York agents held a meeting, at which it was agreed that Jay Cooke, of Philadelphia, should be at the head of the agency system and take charge of the advertising of the 7-30 loan, or, in other words, that Jay Cooke should act as Chairman of the agency system. The agreement also specified the commission rates and other details for the purpose of avoiding cutting, or clashing, between the agents. To this organization and agreement Mr. Chase assented; and all the agents made strenuous efforts to make sales from the word go.
Jay Cooke & Co. had no office in New York at that time, nor did they establish one till after the end of the war. This really led to their designation as the head of the agency system, as the selection of a New York firm would have created jealousy among the New York firms.
After all the 7-30s authorized to be issued were sold, came the 5-20 loans, which were sold through the same Government agency system, and the 5-20s were as successful as the 7-30s had been.
Mr. Munson B. Field, Assistant Secretary of the Treasury under Salmon P. Chase, had an examination made of the books at Washington, at my request, to see which individual firm of the Government agents sold the most United States 7-30s and 5-20s, and he reported that Livermore, Clews & Co. had the highest record. But I am willing that the credit should be shared equally by the four United States war loan banking firms, viz.: Jay Cooke & Co.; Livermore, Clews & Co.; Vermilye & Co., and Fisk & Hatch, as all did equally good and earnest work in financing the Government during the Civil War. Certainly the four firms are entitled to equal credit, and no one to a greater extent than the others. There was sufficient glory achieved by the magnificently patriotic work done by these four firms to admit of dividing the honors, so that I do not hesitate to say that they did immensely valuable service to the Nation, and made for themselves a proud National record, which should be always greatly appreciated by the American people, as it was at the time by the Government authorities in Washington. The Government was thus enabled to clothe and feed a million of soldiers in arms on the battlefield, fighting for the salvation of the Nation, and these finally brought the war to a victorious end, thus perpetuating the best form of government known to man.
I may here mention that Secretary Chase said:
“If it had not been for Jay Cooke and Henry Clews, I should never have been able to sell enough of the 7-30 notes and 5-20 bonds to carry on the war.”
This remark of his was generally published at the time in the newspapers.
The Government had sold through its agents $150,000,000 of the 7-30 notes before the suspension of specie payments, an event that was hastened by the Secretary’s withdrawal from the banks into the Sub-treasuries of most of the proceeds of the sales, his call for payment from the agents to the Treasury being in three installments: on August 19th, October 1st, and November 2d. Moreover, the hoarding and exportation of gold were largely stimulated by the anticipation of specie suspension, and, after it occurred, gold suddenly disappeared from circulation.
This obviously involved a corresponding contraction of the circulating medium, and Mr. Chase, to neutralize it, and supply the place of the demonetized coin, issued the $50,000,000 of non-interest-bearing notes, which were called United States Demand Notes. He did this also to obviate the necessity of the State Banks issuing more of their own notes, as well as to raise money to meet the rapidly increasing demands of the Treasury.
Congress, seeing that this contraction tended to produce stringency in the money market, and handicapped the Government’s agents in the sale of its securities, had, on August 5, 1861, suspended the act of August 6, 1846, “providing for the better organization of the Treasury, and for the collection, safe-keeping, and disbursement of the public revenue.” It did this so as to permit the Secretary of the Treasury to deposit any of the money obtained on authorized loans in such solvent specie-paying banks as he might select, and, in addition, it expressed this in a resolution. The resolution was promptly acted upon by Secretary Chase, and this, and a later law, governed the policy of the Treasury ever afterwards. Monetary stringency was thus avoided by the Treasury keeping as much of its money in the banks as it could, and so locking up as little as possible in the Treasury and Sub-treasuries. The evil effects of the Sub-treasuries system in locking money out of circulation was thus practically acknowledged and guarded against.