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.
“I want to sell out bag and baggage,” he said. “I want to get rid of
every one of my forty thousand shares. Here they are, put them on the
market and sell them.” The stock broker told him that that would never
do. If he wanted to realize full value for his holdings he would have to
go about it in a different way, for if he threw his forty thousand
shares into the market it would knock the bottom out and he would get
little or nothing for his stock. Mr. Bannigan saw the point, and asked
what he was to do.
“Buy,” said the broker.
“But I don’t want to buy; I have got more now than I want.”
“That is all right; buy anyway, that will make a market for the stock,
and then you can unload when the time comes.”
“How much must I buy?”
“Oh, about $250,000 worth.”
“But I have not got $250,000 in cash to go and buy Rubber stock.”
“Well, you can borrow it; a man in your position, Mr. Bannigan, would
have no difficulty in borrowing $250,000.”
Much against his will the old man was finally persuaded to do as he was
told. About two weeks later the broker wrote to him that he must buy
some more, this time, $200,000 worth. Mr. Bannigan used rather strong
language, but finally yielded as he had before. He borrowed $200,000,
and turned it over. With this additional capital to work on, the brokers
continued to manipulate the market. The insiders soon discovered that
some strong party was buying; but they did not know who, Bannigan having
carefully kept himself in the background. His brokers operated skilfully
in the stock, one day buying, the next, selling to keep the stock
active. The brokers after awhile commenced to borrow large amounts of
the stock. This convinced the insiders that there was a big short
interest somewhere, and they got together in order to squeeze the
shorts. The inside holders who held most of the stock, who had combined
to squeeze the shorts out, as they thought, put the price up to 61, and
at about that figure Bannigan’s was all unloaded. Bannigan now found
himself full of money and the other fellows had his stock. They never
awakened to the fact that the President had sold out on them until his
shares were delivered against their purchases, as they thought, of short
stock. Rubber soon thereafter did not stop tumbling until it had gone
from 61 to 16. This deal had all the elements of a comedy-drama and the
playwright who can do it justice will find material there which will
make him an everlasting fortune and reputation. I have touched but
lightly on a few of the important incidents. It is not often, however,
that newcomers in the Street fare as well as this in the end. For a time
they will go on merrily enough, and send things booming; but in the end
many get the worst of it. A. B. Stockwell is a good illustration of the
truth of this. He is still around the Street somewhere, but is one of
the “has beens,” like numerous other former conspicuously large and
supposed to be brilliant operators. At one time he was worth many
millions of dollars. To-day, he is upside down. His start in life was as
purser on a Lake Erie steamboat; his father, it is said, kept a livery
stable in Cleveland. On one of his trips, Stockwell was in a position to
show considerable attention to Elias Howe, the inventor of the eye at
the upper end of the sewing machine needle. Mr. Howe was accompanied by
his daughter. Stockwell made himself agreeable to Miss Howe also, and
with such good effect that he managed to win her affections and soon
thereafter married the young lady. When Mr. Howe died, Mrs. Stockwell
came into possession of her father’s millions. With this nest egg
Stockwell started in Wall Street, and before anyone realized what had
happened he was the most talked of man in the district. He put all his
wife’s millions into Pacific Mail stock, and secured entire control of
the Company. He came into the Street as plain Stockwell, then as the
news of his liberality and good fellowship spread, he became Mr.
Stockwell; after he got hold of Pacific Mail he was Commodore Stockwell,
by common consent. Everybody bowed and scraped to him and no man was so
high and mighty that he was not proud to shake his hand. Stockwell took
hold of Pacific Mail at about 40 and sent it up to 107. It was at this
period that he was worth over fifteen million dollars; but he found,
unfortunately, when it was too late to retreat, that while Pacific Mail
was up to 107, it was not worth that figure when the unloading
commenced. He was landed high and dry with it all and the Street told
him he was welcome to it. He tried to sell, and found that there was no
market. Then came violent demands on him to pay up his numerous call
loans, and in order to respond thereto, he had to sell regardless of
price and thus created a whirlpool, which finally sent the stock down to
the price at which he commenced his original purchase at 40. In this one
upset, he lost all his paper profits and his wife’s millions besides.
This catastrophe not only stripped him of all his worldly possessions,
but reduced him to the position of being plain Stockwell again, and
there are many also who even go so far as to call him “that little
red-headed cuss.” That was the most famous boom in the history of
Pacific Mail, notwithstanding Leonard Jerome’s previous brilliant ups
and downs in that former erratic property.
Leonard and Addison Jerome had a good time with Pacific Mail for a
while. They ran it up to high figures several times; but finally meeting
with the same experience that Stockwell did. The two Jeromes from being
among the wealthiest and most dazzling operators in the Street, were in
the end practically wiped out. Leonard Jerome, who was the father of
Lady Randolph Churchill, had nothing left to bequeath his daughter
except an equity in the house now occupied by The Manhattan Club on
Madison Avenue, which yields an income of about $15,000 a year, of which
Lady Churchill gets $10,000.
[Illustration:
WILLIAM ROCKEFELLER.
]
These are a few of the booms that have stirred up things in Wall Street
at one time or another, as did the Keene booms, of which there were
several, the Gould booms, and the Vanderbilt booms, all of which have
been referred to in previous chapters in this book.
The question of trusts or trade combinations has, in recent years,
excited a good deal of interest. One of the most interesting figures in
this connection is John D. Rockefeller, who will undoubtedly be regarded
by the future historian as a striking character in the business history
of the nineteenth century. And be it remembered that history now
concerns itself, not so much with the doings of governments; not so much
with the personalities of emperors, kings, presidents or even with
political parties, as with the life of the people themselves. This is
clearly shown by such historians as Lord Macaulay and John Bach
McMaster. And looking at history in this way, surely John D. Rockefeller
must be regarded as one of the most interesting types of the great
commercial powers of the day. He was a pioneer, a commercial Daniel
Boone, striking out into a new and untrodden field of enterprise, taking
great risks, undergoing grave financial perils of a novel kind and at
length winning a complete and lasting success—a success which has filled
business history with his achievements and the world with his fame. It
was a great stride from the little farmhouse in Tioga County, New York,
to the place which he fills to-day. Born in 1838 he is now in the prime
of life. Reared by strict, church-going people, his word is as good as
his bond; he is the soul of business integrity, and a striking example
of what thrift, enterprise and persistency will do for a young man who
starts out in life with apparently little or no chance of success. His
old schoolmaster, it seems, was the first to get the young man to look
into the refining of petroleum. Not so many years ago, they used sperm
oil, and it cost $1.50 a gallon. How to refine the thick, ill-smelling
oil found in the water courses of Pennsylvania was a problem. It was
black slime, and John D. Rockefeller, by hitting upon a method of
refining it and introducing it in the home throughout the world has made
a fortune that recalls the fable of Midas. Before he was twenty-one he
formed a partnership with a man named Hewitt and at first engaged in the
warehouse and produce business. Then came the great oil craze in
Pennsylvania. Poor farmers suddenly became rich; thousands flocked to
the oil fields. Young Rockefeller kept his head. Asked to make
investments in oil wells for Cleveland friends he dissuaded them from
the project on the ground that the thing was being overdone, and with
Samuel Andrews, who was familiar with the general processes of
distilling, engaged in the refining branch of the petroleum trade. The
firm subsequently became Rockefeller, Flagler & Andrews, which rapidly
expanded its field of operations, and in 1870 organized the Standard Oil
Company with a capital of $1,000,000. It started pipe lines to ship the
oil to the seaports. It made millions in by-products once considered
worthless. It established markets all over the known world, cheapened
its methods of production and outstripped all competitors. Little wonder
then, that its “extra” dividend in the year 1899 amounted to $23,000,000
over and above the regular dividends on the whole capital stock. Mr.
Rockefeller attributes his success to early training and perseverance.
That is, like other men who have stamped their individuality upon the
affairs of mankind, he is what is termed a causationist; in other words,
he believes that nothing is got for nothing; that effects proceed from
causes, and the cause of success he believes to be largely perseverance.
He believes that perseverance overcomes almost everything, even nature
itself, and in that opinion this practical business man is at one with
the philosophers of antiquity.
He and his associates in the Standard Oil Company are naturally a power
in the stock market. They are, of course, very large holders of railroad
stocks and bonds and at times their influence is as irresistible as the
laws of gravitation. John D. Rockefeller’s influence alone could be so,
as he is supposed to be the richest man in America and indeed the
richest man ever known in human history. His is believed to be the
greatest fortune ever accumulated by any man within his own lifetime.
That he feels the responsibilities of his great wealth is obvious from
his munificent gifts to educational and charitable institutions, to
churches and to a hundred other praiseworthy objects. His princely
donations to schools, colleges and universities rival those of that
other public-spirited citizen, Andrew Carnegie. They are equally strong
in their belief that the greatest charity lies in helping others to help
themselves.
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