One scarcely hears mentioned nowadays the name of that poor fellow whose fabulous fortune (on paper) finally proved too burdensome for his uneducated mind. Barney Barnato was in his way a picturesque character, and a most vivid illustration of the overthrow of mind by matter, when the former is not in control.
The sharp break in South African shares in the London market during October, of course exerted a sympathetic influence here; but worse things were yet in store for us. Our President’s famous Venezuela message to Congress in December, 1895, acted like an earthquake—which shook the markets to their very foundations and engulfed hundreds of millions of values before it subsided. The final outcome of the dispute between England and Venezuela has to a very great extent vindicated the former’s claims. Let us, however, look upon the whole matter as a step forward for civilization in the advancement of the principle of arbitration, the true solution of all international difficulties. In 1896, we did finally reach the end of our troubles, though not without much worriment. A further bond issue of $100,000,000 to meet deficits, brought that total up to $262,500,000 issued in two years. A rather expensive administration, but “troubles come not singly, but in battalions.”
The Presidential Campaign just past, with the same nominees at the head of the respective parties, recalls the wild free silver talk of four years ago. Panic and depression succeeding each other had left the people almost hysterical. After Bryan’s nomination in July, gold hoarding was the order of the day. Of course the effect of this on the money and security markets meant, under the circumstances, another downward plunge in prices. New York Central sold at 88, the lowest price in the past fifteen years, and C., B. & Q. at 53, the lowest price in nearly forty years, and all other stocks sold down in the same proportion.
[Illustration:
J. PIERPONT MORGAN. ]
I have said that we reached the end of our troubles in 1896, but the end did not come till the November election, which showed that William McKinley, “the advance agent of prosperity,” had been elected President. The nomination of William J. Bryan, hitherto a comparatively unknown man, but who electrified the Democratic National Convention by his specious eloquence, the eloquence of a political Belial, able, in the Miltonic phrase, “to make the worst appear the better reason,” whose famous phrase, “you shall not press down upon the brow of labor this crown of thorns, you shall not crucify labor upon a cross of gold,” swept the convention off its feet and made him the nominee for president, was a blow that for a time seriously disturbed Wall Street and commercial circles everywhere. Mr. Bryan called for the free coinage of silver at the ratio of 16 to 1, and by his tireless activity in stumping the country created a feeling of depression that reached the pitch of panic and left the people almost hysterical with fear. But as Martin Van Buren said on one occasion, “the sober second thought of the people is never wrong and is always efficient.” The sober second thought of the people carried the day. Crowds might flock to hear the orator, but they voted with the party of prosperity and honor. The carefully written speech of Mr. Bryan, a speech which, for once, he read from his manuscript in the great Madison Square Garden meeting, did not deceive the people; it fell flat.
With Bryan’s fiasco in this city, the clouds finally began to break. How plainly the record of these four years shows the absolute domination of the markets by Washington. And not of the financial markets alone by any means, but of the whole business interests of the country, which finally were well-nigh paralyzed by four years of increasing anxiety and wonder as to what might happen next.
It is gratifying to turn away from that period of distress to the succeeding years of prosperity. The vindication of the good sense of the people in the election of William McKinley did, at last, turn the tide; and for good and all, let us hope. With an unquestioned currency basis, improvement became possible. We were greatly favored too, in the first year of Mr. McKinley’s administration, by bountiful crops at a time of shortage in Russia, France, and the Danubian Provinces. It was a great year of prosperity for our farmers, who, through good prices, and the exportation of some 120,000,000 bushels of wheat, were enabled to pay off mortgages in wholesale fashion, and herein we see the beginning of present good times. Furthermore our export trade showed great increase. As was to be expected, there was a great rush of importations just prior to the passage of the Dingley Tariff Bill in July, and a consequent decline in revenues immediately thereafter; but the completed record of its operation up to the present time is a splendid tribute to the wisdom of its author. The Supreme Court decision in 1897 in what was known as the Trans-Missouri Case, declaring all railroad pooling illegal, proved somewhat of a shock to the market, but with improvement in business, our roads soon found enough traffic before them to more than go ‘round, without worrying about its division.
The year 1898 began very favorably with large gold imports and easy money. Cuban affairs, which had begun to threaten late in the previous year, finally culminated in the outbreak of war with Spain in April.
The condition of things in Cuba having become a reproach to the civilized world, this Government, acting for the conscience of Christendom, directed that the war which Spain was waging against the Cuban revolutionists should cease, with all its indescribable horrors, its barbarous cruelties to women and children, and as Spain did not heed the warning, our Government intervened in the interest of common humanity, an event which marked a distinct advance in the history of the human race, for history makes no mention of any war waged on such a scale in behalf of the cause of humanity. Certainly never was a war more clearly justified or one which showed greater courage on the part of the intervening nation, for there can be no doubt that more than one of the Continental powers of Europe would have been glad to side with Spain and would have done so, but for the emphatic negative of Great Britain.
Naturally there ensued a period of depression, but it was short-lived. The ensuing months of activity and buoyancy surpassed anything of the kind in our history. After the apprehension as to how the business world would adjust itself to war conditions had passed away, business began to boom all over the country. We were on our feet again with financial health restored. That wonderful boom in the stock market, begun in the summer of 1898 and lasting until the spring of 1899, will not soon be forgotten.
It seems more like a dream than a fact that trade and commerce and financial operations could swell to such well-nigh inconceivable figures, revealing a degree of prosperity almost past belief, like some marvelous good fortune of an individual in a Persian tale, favored by good Genii, actual fact rivalling fancy or throwing it far into the shade. In other words the oldest and most experienced merchants and financiers in this country were astounded at the degree of solid prosperity attained by the great Republic, the lion’s whelp, rivalling or surpassing the strength of the old lion, the mother country across the sea.
To the late Ex-Governor Flower belongs the credit of fearlessly taking the initiative in that marvelous rise in values to which I shall revert later on.
The formal close of the Spanish war gave fresh impetus to trading and prices kept soaring well on into the spring of 1899. The year 1898 has the distinction of marking the beginning of the greatest era of trade combinations, those gigantic commercial engines, that the world has ever seen. The capitalization of those inaugurated during 1898 and 1899 reached the fabulous aggregate of $3,500,000,000. The mind is staggered by the possibilities of enterprise which such a sum suggests.
The tendency towards centralization in the railroad world was first shown in the merger of the Lake Shore road with the New York Central.
The year 1899 was one of great prosperity, the greatest since we have been a nation, albeit its close was marked by one of the worst semi-panics the Street has ever experienced. In order to account for some of the most important features of the panic of December, 1899, it is necessary to take a glance backward at certain great financial events of the year even as early as April.
In that month was formed the famous Amalgamated Copper Corporation, a creation of the Standard Oil magnates.
The capital stock of the company was $75,000,000. The shares were said to be subscribed five times over. Owing to its parentage, the stock became popular, and was sustained at par for some time, but scarcely two months had elapsed before a break of 25 per cent. in the price occurred.
This break was regarded as a rather suspicious circumstance, and was supposed by the “knowing ones” to be a part of the deal. The Amalgamated Company was a mammoth combination, comprised of large share interests in over 30 companies, the famous Anaconda of Montana heading the list, and being the most prominent
The panic fell most severely upon the copper companies, the shrinkage on the share capital of which for the year is alone estimated at nearly $200,000,000.
Besides this, the currency movement to the South and West had been unusually large and prolonged, and finally tightness of money brought about an immense drop in the entire stock market. But with general conditions prosperous all over the country, such panics happily do not leave lasting scars.
The last year of the wonderful nineteenth century has been a remarkable one in our history. Since the first defeat of the silver agitators in 1896, our financial strides have been so rapid that it seems now a question of but a short time when New York will be the financial centre of the world. What a contrast between our position in 1900, and that in 1895, when we were knocking at the door of Europe with bonds for sale to provide running expenses for our Government. To-day England finds it to her interest to place $25,000,000 of her war loan with us, Germany asks for $20,000,000 of American gold, Russia is seeking to borrow from us and Sweden has not gone empty-handed away. And these accommodations have been accorded without causing so much as a ripple in our money markets. The source of such plenty is of course found in our wonderful increase of exports. For ten months of this present calendar year, the trade balance in our favor approximates $500,000,000, making, in the past three years, the vast total of fifteen hundred million dollars balance to our credit. There we see both the lever and the fulcrum with which to move the financial world.
A little over a year ago occurred the death of Cornelius Vanderbilt, the grandson and namesake of the Commodore. Here was a gentleman whose charities were almost boundless. His gifts to the people through art and in many other ways were princely, but perhaps his memory is greener in the minds of those who, through his great private charity, were lifted above want.
These great latter day fortunes have not often failed, in this country, in being administered by men whose conception of life, and of duty toward their fellow men has turned the duty into a pleasure. This is a very great tribute to American citizenship and should not be forgotten or lost sight of by our sometime critics.
The passage of the Currency bill in March, 1900, undoubtedly did much to increase Europe’s faith in our monetary stability and, furthermore, the result of the Presidential election of 1900, the triumph of the party of sound money seems to preclude the recurrence of any attacks upon the financial honor of this country. There has been a campaign of education going on in this country ever since the advocate of the free and unlimited coinage of silver at the ratio of 16 to 1 first promulgated his doctrines. The benefit to the people of this knowledge of public affairs is clearly apparent. They will have none of false theories and suicidal experiments, they will not go after false financial gods, they will not bow the knee to the Baal of repudiation and confiscation.
While the modern method of commercial development is open to criticism in some respects, still I take it that the evils complained of are not those of very existence but are rather those of circumstance, and are open to correction by the will of the people. How often have we heard that these combinations stifle competition—but for how long? Does not their existence excite competition? Furthermore, their management calls for the very highest ability and creates a keen intellectual competition which cannot fail to be of educational value at large. It remains for ensuing years to provide correction for those defects which are bound to appear in any new and untried system.
We end the century that almost covers our national existence with a past record and prospects unparalleled. We enter the new century full of faith in our institutions, that have stood severe tests even in our short life, and full of hope for even greater national achievements. We are fast taking the lead in the affairs of nations as well as in the affairs of commerce and finance, and have need of great steadiness of character, and fixity of national honor, which now seems assured for all time. It augurs well that we begin the twentieth century, which displays such vistas of greatness, at peace with all the world.
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CHAPTER LXII.
BOOMS IN WALL STREET.
Wall Street has lately been enjoying quite a boom in some respects differing from any in its previous history. Probably the most interesting feature about this boom is that it is not in any sense spectacular. In that respect it is unique. Prices of many stocks are higher and intrinsic values greater than they have ever been before. The market has all the qualities that normally would cause intensest excitement and focus the attention of the entire country on the Stock Exchange. Yet in spite of these conditions, the Street is in a normal state of mind, and it is doubtful if the general mass of the people, who get their information from the newspapers are fully aware that there is even an ordinary boom in Wall Street. This unusual condition is due, I believe, to the fact that the boom we are enjoying is built on a foundation that reaches clear to the bowels of the earth. There is nothing unnatural or artificial about it. Wall Street is simply one of the centres that reflects the general prosperity throughout the country. Farmers, merchants, mechanics, mill workers, and miners are all so intent in keeping pace with the progress in their own pursuits that they have no time to cast eyes our way. The same conditions that are booming stocks, are booming everything else in the country at an equal rate, so that we are in nowise singular or deserving of special attention.
[Illustration:
Photograph from Underwood & Underwood, N. Y. JOHN D. ROCKEFELLER. ]
Another factor too, has developed in the Street that prevents the usual excitement and hurly burly incident to a rising market. This is the absence of a pronounced central figure, or controlling force. Usually a boom centres about some one man who stands boldly out in the open, or whose hand it is known is manipulating values. At present the manipulation is being carried on in a method that is as quiet as it is novel and unusual. That the market is being manipulated, is apparent enough even to the most casual observer. But the source of this manipulation is probably known only to a few; all others are but students in the Street. They know that a new order has come, and that this order is due to the most powerful and resistless influence that has ever manifested itself in Wall Street. This influence is very largely composed of the Standard Oil Combination, who have introduced in their Wall Street operations the same quiet, unostentatious, but resistless measures that they have always employed heretofore in the conduct of their corporate affairs. Beside this group, every other man or combination of men that has ever operated in the Street are materially belittled by comparison. The heretofore conspicuously big operators that have flashed up and across the horizon, appear comparatively small beside the men who are running things for us now.
At his best, Jay Gould was always compelled to face the chance of failure. Commodore Vanderbilt, though he often had the Street in the palm of his hand, was often driven into a corner where he had to do battle for his life, and so it has been with every great speculator, or combination of speculators, until the men who control the Standard Oil took hold. With them, manipulation has ceased to be speculation. Their resources are so vast that they need only concentrate on any given property in order to do with it what they please. And that they have so concentrated on a considerable number of properties outside of the stocks in which they are popularly credited with being exclusively interested is a fact well known to every one who has opportunities of getting beneath the surface. They are the greatest operators the world has ever seen, and the beauty of their method is the quiet and lack of ostentation with which they carry it on. There are no gallery plays, there are no scareheads in the newspapers, there is no wild scramble and excitement. With them the process is gradual, thorough and steady, with never a waver or break. How much money this group of men have made, it is impossible even to estimate. That it is a sum beside which the gains of the most daring speculator of the past were a mere flea bite, is putting the case mildly, and there is an utter absence of chance that is terrible to contemplate. This combination controls Wall Street almost absolutely. Many of the strongest financial institutions are at their service in supplying accommodations when needed. With such power and facilities it is scarcely conceivable what these men must be making, what they can do on either side of the market. So far, fortunately, their manipulations have all been one way, upwards, and in conjunction with the general prosperity it has resulted in making large sums of money for nearly everybody in the Street.
Here and there we have heard of losses, some of them fairly large, but in comparison with the general money making these are hardly to be taken into consideration.
The last preceding boom that Wall Street enjoyed was as different from the present as it is possible to imagine. It had all the elements which this one has not. It centred about one man who stood out in the lime-light clear and distinct. It kept the Stock Exchange in a constant state of ferment. It filled the newspapers with column upon column of sensational stories. It made millions for an army of retainers, on paper, and it kept the market jerking up and down for months. Roswell P. Flower, ex-governor of the State of New York, was the leader of the boom, and a more picturesque figure has never been seen in Wall Street, which is saying a great deal. Mr. Flower was an individual of very plain exterior. He often used language that was noticeable more for its force and directness and emphasis, than it was for polish. He had an ambling gait and looked like a well-fed farmer. He was rarely seen without a huge quid of tobacco that almost filled the left side of his mouth. Spittoons were an essential part of the furnishings of his office. His clothing hung on his person not unlike meal sacks. His hat was rarely brushed, and for days at a time, apparently, he forgot to shave. Altogether he was the last person, in appearance, who might be expected to lead in a district that is famous for its well groomed men. His education was certainly not collegiate; doubtless all his peculiar traits the ordinary man would have judged a handicap, still they were Mr. Flower’s strongest aids. The lack of artificial polish gave people confidence in his statements. His limited education enabled him to think clearly along certain lines without being hampered with mental digressions, which would probably have come with a higher original mental culture.
As the administrator and manager of the estate of his brother-in-law, Henry Keep, he came into the Street twenty or twenty-five years ago. He in that way controlled a large amount of funds, which by conservative direction he increased very substantially. He scarcely ever figured in the speculative field to any great extent, until after he had completed his term as Governor of New York State. When he returned to the Street from Albany, he naturally came with a considerable prestige. Ex-governors of the Empire State are not very plentiful in and about the Stock Exchange. He also brought with him a large political following. In both of the great parties in New York State there are many men of standing and influence who like to take a flyer in Wall Street. Almost to a man they associated themselves with Mr. Flower, who, during his term at the capital had made hosts of friends with Republicans and Democrats alike, and this, though his party loyalty had never been questioned. He also had close associations with most of the big capitalists. After he had settled down to business, on leaving politics behind, Mr. Flower picked out several stocks as his specialties, Chicago Gas, Federal Steel and Rock Island being some of these. Under his manipulation all these properties went up and soon began to show a big advance, unusual strength and great activity. The bears made frequent assaults on his position and now and then pushed him towards the wall, but he always fought his way to the front again, and came out master in every encounter. When he had himself pretty well entrenched in the specialties he was handling, he suddenly plunged into Brooklyn Rapid Transit, and for months he kept things stirred up in a way that even Wall Street has not seen very often., He picked up the stock commencing at six dollars a share, and in an incredibly short time ran it up to over 138. Almost every politician in the State made a fortune on paper. Mr. Flower was immensely popular with the Wall Street news reporters, who helped his boom along through the glowing accounts they wrote from day to day.
Under the impetus of the swirl in Rapid Transit, practically every property in the Street went flying upward, until the end did not seem to be in sight. The bears were beaten to a standstill every time they showed their heads, the only result of their attacks being that Flower stocks would jump up a notch higher. The ex-governor preached Americanism and confidence, until everybody believed that if a stock was only grounded, and the property located in America, you could buy it at any price and still be on the safe side.
That a terrible panic did not grow out of this boom was due only to one fact: Mr. Flower’s sudden death. Had he lived thirty days longer, the bubble must have been pricked, and the result would have been disastrous. Mr. Flower went to the country for a day’s rest, ate freely of ham and radishes and washed his frugal meal down with a copious supply of ice water; he naturally, in consequence, died in a few hours afterwards of an attack of acute indigestion; his death alone saved the Street.
The Rockefellers, the Vanderbilts and his other wealthy friends rushed into the market with millions and sustained values. They were in a position to attribute the threatened reaction to his death and pointed out the absurdity of letting such an incident affect the value of stocks. They discounted the break that must have come in the natural course of events under the forcing process that was going on. Reasoning such as this spread broadcast through the papers stopped the break. Where the bottom would have fallen out entirely there was only virtually a moderate break all along the line; why it was not worse was due to the market being bolstered up by the Standard Oil Combination and others with them coming to the rescue just in time to prevent a big smash. The small speculators operating on moderate margins were of course all wiped out almost to a man, but many of the big fellows were saved. It is probably the only instance on record where the death of a big operator saved a general smash. Those hurt were numerous politicians and small fry operators who instead of getting away with snug fortunes in the shape of profits, lost their all.
An interesting circumstance of the Flower boom was developed involuntarily by young Joe Leiter. Leiter himself, although he had gone to the wall some time previously, indirectly had brought about certain conditions that served Mr. Flower’s purpose admirably. These conditions were the general release of hundreds of millions of dollars on mortgages on farm lands. When Leiter began to corner wheat, it was ruling down in the neighborhood of sixty cents a bushel. He lifted it to considerably over a dollar before he went broke. This enabled thousands of farmers to realize on their crops at the dollar figure and above, which brought prosperity almost over night to the wheat growing belt. With the money realized from their wheat the farmers paid off their mortgages to the extent of two or three hundred million dollars. These mortgages were generally held in the East. This released that much Eastern capital, causing that vast volume of money to seek investment. The men controlling this money were overjoyed when Mr. Flower made an opening for them through the Wall Street boom, and hence it was a comparatively easy matter for a time to push up values.
J. Pierpont Morgan, now a noted character, was trained as a clerk in the one-time famous banking house of Duncan, Sherman & Co. Later he made a connection with Anthony J. Drexel, probably the wealthiest banker in his time in America. Out of this grew the house of Drexel, Morgan & Co., with Mr. Morgan as the managing partner in New York. When Mr. Drexel died, Mr. Morgan absorbed the entire business, and a few years later when his father died, Mr. Morgan became the head of the London house of J. S. Morgan & Co. as well. This put him in a very prominent position. He soon thereafter demonstrated his influence by reorganizing the bankrupt Richmond & West Point Terminal Railway & Warehouse Co., changing its name to the Southern Railway Co. A number of small roads were added to it, many of which were in financial straits, and practically all of them had been badly managed. He combined them into one system under the one head. This railroad combination is now one of the great properties of this country. Mr. Morgan next turned his attention to the reorganization of the Reading and the Erie roads, which were in a bad way. He soon produced order out of chaos there, and that resulted in a boom in railroad stocks all along the line. He had several sharp tussles, however, with some of the big stock holders, who tried to stand out against him on account, as they thought, of his plans being too drastic; and during these tussles he not infrequently resorted to the usual methods to break values, buying at the reduced prices so as to strengthen his control.
The people who followed Mr. Morgan’s lead in these transactions generally made money.
A different sort of deal was engineered a few years before by S. V. White, popularly known as Deacon White, because of his position as deacon in Plymouth Church. Mr. White is one of the oldest operators in the Street, and one of the most striking figures. He has made half a dozen great fortunes in speculation and lost them, but he is as undaunted as ever, and in spite of the fact that he is now over seventy years old, he is still active daily in the market.
Probably one of the most unique stock deals ever carried out in the Street resulted from the transaction of Joseph Bannigan when President of the Rubber Trust. The history of this deal which for a time resulted in a great boom in industrials, has never been told, and is known to but very few persons, most of whom, by the way, were its victims.
Bannigan was an uneducated Irishman who could hardly read and write. He commenced life in a New England rubber factory and worked for $1.50 per day and died worth five million dollars. He was shrewd and bright and knew the value of money. He saved to such good purpose that when the Rubber Trust was formed he was at the head of one of the biggest factories in the country, located in Providence. His knowledge of the trade was so thorough that despite the fact that he almost invariably used small i’s in writing a letter, he was made President of the Trust, his holdings amounting to about forty thousand shares. When matters had been moving along for some time, Bannigan made up his mind that the other men in the trust, the big fellows, were not treating him right, and that the best thing he could do was to get out. So he packed his stock certificates in a grip sack, left Providence on the night boat, landed in New York bright and early, had his breakfast and then made a bee line for a stock brokers’ office. He had assured himself in advance that this stock broker was to be relied on and told him frankly what he intended to do.