CHAPTER LXXVIII.
THE FINANCIAL SITUATION.[6]
Footnote 6:
An address delivered by Henry Clews at the Fifteenth Annual Convention
of the Kentucky Bankers’ Association in the Auditorium, Seelbach
Hotel, Louisville, Kentucky, September 18, 1907.
_Mr. President, Members of the Kentucky Bankers’ Association_:
As all know, we have recently passed through a crisis of distrust in
Wall Street—distrust of corporate credit, and railway and other
corporate stocks. This was reflected in what I may call a slow panic, a
heavy and prolonged decline on the Stock Exchange under a continuous
flood of liquidation by both investors and speculators.
This crisis had been brewing for a long time, and we had a violent
intimation of the dangerous and disturbing elements in the financial
situation last spring, culminating in the collapse of the stock market
in March. But it was not until a United States Court at Chicago
inflicted a fine of $29,240,000 on the Standard Oil Company, of Indiana,
that investors, and the large capitalists of Wall Street, including
Standard Oilers, took alarm. Then the trouble became acute.
The Wall Street speculative multi-millionaires in particular felt the
shoe pinch very sharply. They had been trying hard to engineer a bull
movement in stocks, for they were very heavily loaded with them. They
had, however, met with indifferent success, for the outside public was
out of the market and refused to come in. This huge and unprecedented
fine, these leaders of the bull movement saw, was a disconcerting and
staggering blow at the property of corporations, and consequently at the
stocks of corporations. It amounted, if enforced, to confiscation, and
they, as large speculators, like the rich and moderately rich investing
class, reasoned that if the Standard Oil Company of Indiana could be
fined and have its property confiscated in this way, other corporations
would be liable to the same fate. They also saw that small investors and
people generally would think and argue as they themselves did, and that
their consequent distrust would lead to a heavy decline in prices under
heavy liquidation, through fear or necessity.
So they reversed their tactics. In other words, they decided to run,
and, being a little lame, they started early. Instead of continuing
their bull movement in stocks, they at once withdrew their support from
the market and began to liquidate themselves, for self-protection. The
rank and file of the bulls, seeing that stocks were going down with a
rush from this and other sources, were quick to do likewise, as if they
thought the devil would take the hindmost, while the bears helped the
market’s descent by an unopposed and vigorous hammering. The bull
leaders had abandoned it to its fate, and the banking interests were not
willing to stand in the gap.
The best and highest-priced stocks suffered the heaviest decline, and
for a fortnight there was an outpouring of stocks and a downpouring of
prices that finally carried nearly all of these below the lowest of
March. Wall Street trembled in its boots.
[Illustration:
ANTHONY N. BRADY.
]
The decline was accelerated by the unusual scarcity of money on time,
and the advancing rates for it, which undermined confidence in the
future of the money market, and in the ability of many corporations in
urgent need of money to borrow on their collaterals, or obtain
discounts. Fears on this score had very recently been justified by the
failure of a large iron and construction company in New York City, and
when it was followed by a receivership for the Pope Manufacturing
Company, the rush to sell stocks, and the fresh break in prices, added
to the previous demoralization. The bears held high carnival, for their
harvest was abundant enough to realize their dreams of avarice.
It was feared that this failure might prove the beginning of a long line
of similar failures, and there were many gloomy forebodings as to what
would come next, either in the way of failures or State or Federal
action against railway or industrial corporations, which would, by
damaging their credit, lower the value of their stocks, and possibly
imperil future dividends. We too often fear the things we think instead
of the things that are.
Through all this turmoil and disorder the want of money by many large
corporations and the difficulty of borrowing it was always an uppermost
topic. It touched their weakest spot, and showed the insufficiency of
their working capital. They had large assets in plant and materials, but
comparatively little cash to carry on their large and increasing
business. This made them dependent on the banks; and when the decline in
stocks and bonds caused distrust that led to a curtailment or refusal of
credits by the banks, they had nothing to fall back upon of their own.
They were between the Devil and the deep sea.
This want of a sufficiency of liquid assets is a common shortcoming
among our corporations, both large and small, and therefore a great
element of weakness, especially in periods of distrust, and should be
remedied as far as possible in the future. It is better to do less
business on a safe basis than could be done by extensive borrowing, with
the hazard of failure in some unlooked-for crisis or time of depression.
The greed of gain should be tempered by the wise admonition to make
haste slowly. But unfortunately most people are in a hurry, and want to
make short cuts to success.
The August crisis, like all panics, was brought about and aggravated
more by fears of impending trouble and false rumors than by actual
occurrences. Sentiment often sways as much as facts, and the public had
become extremely sensitive to unfavorable news and constructions
regarding the situation, and comparatively blind and deaf to its
favorable features. All this was ammunition for the bears on the Stock
Exchange, and they made the most of it by steadily and relentlessly
hammering stocks down, so increasing the depression caused by the
liquidation of both speculators and investors, and the loss of
confidence in values. But, like Oliver Twist, the bears still asked for
more.
This want of confidence was mainly due to exaggerated apprehensions of
the effect upon railway and industrial corporations and their stocks of
the Government investigations and prosecutions, and the hasty action of
the States against the railways in cutting down their rates. Much of
this State legislation is too restrictive, and will probably be
modified, or rescinded, after a trial.
It was argued that there was no telling where and when the so-called
crusade against the railways and the Trusts would stop, or what the
final result would be. The bears and the alarmists were equally loud and
excited in pointing to the twenty-nine-million fine as a sign of what,
in varying degrees and amounts, might happen to other corporations, and
bring ruin to many of them. Thus a merely unsettling influence was
magnified into a formidable element of national disaster. As prophets of
disaster, the bears outdid each other, regardless of their friends, the
bulls.
The threats and aggressive attitude of some of the Government’s law
officers alarmed many as much as their allegations against the
corporations they prosecuted did, and they feared that irreparable harm
to those corporations, and their business, would be done before their
cases were finally decided on appeal, and that their stocks and bonds
would suffer accordingly, with, it might be, interest and dividends
suspended. Thus they borrowed a large amount of trouble.
With these feelings uppermost in the public mind, or at least
influencing investors, it was not surprising that such a fever of
distrust prevailed on every stock exchange in the United States, and
that sympathetically and temporarily it somewhat affected the London
Stock Exchange and every bourse on the European Continent. The situation
had begun to look almost hopeless before reason began to take the place
of hysteria among most investors and speculators. Then the
indiscriminate slaughter of stocks prompted investment buying, and the
great scare, after two weeks of storm and stress, gradually passed into
history, while prices, with occasional setbacks, responded to the change
of sentiment by slow but general recovery. But whether this will be
followed by a relapse or not remains to be seen.
The apprehension excited among investors and speculators in stocks by
that $29,240,000 fine against the Standard Oil Company of Indiana did an
immense amount of harm through the enormous losses to which it led. In
combination with the prosecution of the Southern Railway by Southern
States, involving the conflict between North Carolina and Alabama and
the United States Courts, that extravagant fine, so suggestive of _opera
bouffe_, was the immediate cause of the heavy liquidation that produced
this August crisis and turned the New York stock market into a storm
center. Although there was no probability or even possibility of this
fine ever being collected from a million-dollar corporation, even if
affirmed on appeal, public sentiment was about as much disturbed as if
it were ultimately collectible. By creating, although without sufficient
reason, fear of confiscation, it led to those enormous sales and
sacrifices of stocks by investors, as well as by speculators, and the
virtual panic that lasted those two long and memorable weeks.
The innocent thus suffered with the guilty, and the evil effect of such
a fine was clearly demonstrated by a very severe and disastrous object
lesson. The true remedy for rebating and other wilful violations of law
is not to be found in the infliction of heavy penalties on the guilty
corporations, but on the responsible and guilty officers of those
corporations, and not alone by fine but by imprisonment. Heavy fines
inflicted on corporations fall finally on their stockholders, through a
corresponding loss of dividend-paying power, and the lowering of market
prices for their stocks. The proper remedy is punishment behind iron
bars.
As the stockholders are in no way responsible for delinquencies in
management, it is unjust to make them suffer the consequences of these.
It should, therefore, be the future policy of both the Federal
Government and the States to punish corporations for illegal practices
by criminal proceedings against those in their employ who are found to
be responsible for them. Thus punishments will be confined to the
guilty, and confidence will be restored among investors, for such
prosecutions would in no way tend to depreciate the value of the stocks
and bonds of the corporations concerned, but on the contrary they would
tend to enhance their value by promoting honest management. This is a
pivotal point to be kept constantly in view. Backsliders would be the
only sufferers.
The collapse in Wall Street stocks was, however, not so much due to the
trust prosecutions, the Southern States Railway legislation, the
twenty-nine-million fine, and the avowed policy of President Roosevelt’s
administration, as to the general condition of monetary affairs, and the
condition of the stock market itself, although the causes enumerated
started the August collapse. The outside public had for a long time been
holding aloof from the stock market, owing both to the railway and
industrial prosecutions, and hostile State legislation, and the great
activity in trade, and in land, mining, and other speculation calling
for a great deal of money. Speculation outside of Wall Street was never
more rampant.
At the same time stocks were very largely concentrated in the hands of a
few men of great wealth, who were anxious to sell them at improving
prices, and they could only do this by making a market for them. They
had in this endeavor a hard row to hoe, as the farmers say, for money
was scarce and dear on time, not only here but all over the world, with
the European market, like our own, overloaded with securities for sale,
and, worse than all, with no demand for them from investors. They were
in a tight place, rich as they were.
This condition of affairs was reflected in the gradual and persistent
decline of British Consols, that had always been rated as the best and
safest securities in the world, to 81, the lowest price at which they
had sold since 1848—the year of the Smith O’Brien uprising in Ireland,
when they touched 80. The depression in the other European stock markets
was almost equally great, particularly in Berlin. We could, therefore,
look for no market for our stocks, or our vast accumulations of new
railway and other bonds, in Europe. The foreign markets were closed to
us, and wanted nothing American but our gold. Our speculative
capitalists loaded down with these unsalable securities were severely
handicapped. From being giants, they had become cripples. Their wealth
was tied up instead of being in the liquid form of poorer men who had
their money in savings banks, withdrawable at any time. One New York
City institution, the Bowery Savings Bank, held and still holds over a
hundred million dollars of deposits.
Here was wealth in a liquid form that our large Wall Street capitalists,
like most of the large corporations, sadly lacked, and they well might
have envied their poorer brethren who owned these deposits. In
proportion to their means, the poorer men were better off than the rich.
The fact is that our rich men undertook too much, both in the forming of
syndicates to underwrite new bond issues and in attempting to control
the stock market under adverse circumstances. They overestimated
themselves very largely, or, in slang parlance, bit off more than they
could chew, and when the shoe pinched most severely in March, and again
in August last, they had to sell stocks at a heavy sacrifice to pay off
the loans that were called in by the banks, or to meet the calls for
more margin. For once they were really hard up.
This over-extension of Wall Street capitalists, with their efforts to
unduly inflate prices, had its counterpart elsewhere, for such
over-trading was by no means confined to them, but extended to, and was
conspicuously shown by, railway and industrial corporations in their
efforts to keep up with the increasing demands upon them consequent on
the country’s great prosperity and natural growth. This over-extension
was in the form of excessive expenditures and vast issues of bonds,
stocks, and short-time notes. These far exceeded in aggregate amount the
capacity of our own investors to absorb them. Hence, hundreds of
millions of these are still being carried by the banking syndicates that
underwrote them, and of course they at present show a very heavy
aggregate loss. This kind of medicine is much disliked even by
multi-millionaires.
Stimulated by the country’s enormous prosperity during the last few
years, we have gone ahead too fast in all kinds of new and costly
construction work and improvements. We have, in fact, gone ahead
regardless of expense; and railway and manufacturing corporations have
stretched their credit, in too many instances, almost to the breaking
point. Meanwhile the railways have been overtaxed with traffic and the
manufactories overrun with orders for their product, and they still are
so notwithstanding all the much discussed and confidently predicted
falling off in trade.
Through over-taxing their capacity, their working capital, and their
credit to keep up with it, the national prosperity has proved a
two-edged sword to many corporations as well as individual firms, and
the greed for excessive profits among them led to much of the corporate
dishonesty, illegal acts and methods, and wholesale graft in high places
which we have seen exposed. These excesses and irregularities are now
being corrected.
No wonder that their exposure, from time to time, gave blow after blow
to public confidence, and kept investors from buying stocks, and turned
their attention and speculative enterprise in other directions, and into
other channels. These exposures and violations of law naturally aroused
severe public criticism and indignation, and called for investigation by
the Federal Government. In this President Roosevelt took the lead for
the purpose of correcting the mal-administration, the abuse of power,
and the illegal practices that had been exposed.
It was far from his intention to disturb public confidence among the
stockholders of the railway and other corporations that, through their
officers, had been guilty of illegal and fraudulent acts, particularly
rebating. His object was by extirpating abuses to secure honest and
lawful methods of management, and so protect and benefit investors in
bonds and stocks, and secure justice and equality for shippers of
produce and merchandise of all kinds, with the same rates for all, small
and great, rich and poor, without special privileges to any, great
corporations being compelled to respect the law as well as small ones.
The righting and correction of wrongs practised in violation of the
Inter-State and anti-trust laws of Congress would have had no disturbing
effect upon investors, and the public mind, if properly viewed; and it
requires a stretch of imagination to hold Mr. Roosevelt even indirectly
responsible for the twenty-nine-million fine, the immediate cause of the
disturbance in Wall Street that followed it.
Under the general monetary and other conditions then existing, that fine
proved to be the last straw that broke the camel’s back, and, as is too
often the case, the innocent stockholders were made to suffer with the
guilty in the collapse of the stock market. The judge who frightened
investors with visions of confiscation by inflicting that preposterous
fine, must bear the responsibility of starting that downfall, not
President Roosevelt.
August, 1907, was one of the most remarkable months in the history of
Wall Street. After opening in profound gloom, with the stock market
crumbling rapidly away under the rush of investors and speculators to
sell, regardless of price, and with the bears and alarmists busily at
work predicting widespread disaster, few expected during the twelve
exciting and perilous days of the crisis that the month would close with
the stock market gradually recovering, confidence somewhat restored, and
many of both the bulls and the bears as unreasonably eager to buy as
they before had been to sell, while the sentiment of the Street had
changed from extreme depression and despondency to a cheerful and
hopeful optimism. Incidentally the bulls were hanging the hides of some
of the bears on the fence.
When the fall in prices was greatest, new low records were reached for
many of even the best stocks, not only for the year but for several or
many years, as in the case of New York Central, which sold at 99½, or
lower than at any time since 1898. In those twelve eventful days
investors might well shudder, for market values shrunk about three
thousand millions of dollars, if we include all the stocks dealt in on
the New York Stock Exchange measured by their lowest prices and total
capitalization. But, of course, the actual losses sustained were
comparatively small. Wall Street as soon forgets its sorrows as its
joys, and looks ahead.
When at their lowest prices—and I give them as specimen
bricks—Amalgamated Copper stock had depreciated 43 millions, Union
Pacific 51 millions, Northern Pacific 36 millions, Great Northern 34
millions, New York Central 25 millions, Pennsylvania 28 millions, and
Southern Pacific 21 millions, while in the Curb market Standard Oil
stock suffered a shrinkage of 80 millions, and American Tobacco stock of
32 millions. That much of oil seemed to have been cast upon the waters,
and that much of tobacco to have gone up in smoke.
The partial recovery in the stock market and the gradual return of
confidence were coincident with and in the face of a rising market for
cotton. There was an advance in middling cotton to 13½ cents a pound,
the highest price on record for thirty-two years. Yet there was no
dearth in the supply of cotton, and no sign of a “corner,” or the
possibility of one, and we carried over into the new crop year, which
began on the 1st of September, a visible supply of 1,200,000 bales of
American cotton, making a world’s supply of 2,300,000 bales, or nearly
540,000 more than at the same time last year. These statistics may be
dry, like a certain brand of champagne, but they tell their story in a
nutshell.
I dwell on cotton because cotton is still king in the South, although
less powerful in its sway than before the war, owing to the South’s
development of its other resources and its more diversified financial
and commercial interests. It is fortunate in not having all its eggs in
one basket.
The recuperative power shown by Wall Street, after the crisis, was
typical of that of the whole country. Speculative sentiment quickly
passes from one extreme to the other. We are a great and progressive
people and soon recover from disasters however formidable. We had a
conspicuous illustration of this in the San Francisco catastrophe, to
say nothing of the civil war. But a period of stability and comparative
quiet would now be salutary. The recovery in the stock market,
notwithstanding the severity of the recent strain, was mainly due to the
sober second thought of the people, in conjunction with the announcement
of the plan of the Secretary of the Treasury to ease the money market by
making deposits weekly in the National banks of the large cities till
the middle of October. This allayed anxiety as to the money market and
it will, or may, have the desired effect in a large degree till the crop
moving season is over, by preventing the undue locking up of money in
the Sub-Treasuries at a time when it is most imperatively needed for
business uses. The better feeling resulted, early in September, in the
40 millions of New York City 4½ per cent. bonds being bid for five times
over, although at premiums averaging only a trifle more than 2 per cent.
The very severe decline in copper and the copper stocks, this month,
has, however, caused some renewed and widespread disturbance, and the
reduction of dividends by the Calumet and Hecla and Quincy copper
companies will doubtless be followed by a general reduction of copper
dividends. This is at present the worst feature of the general
situation, as it indicates a largely reduced trade demand for copper,
and foreshadows a curtailment of copper mining.
The Treasury plan is only a makeshift, however. The true remedy for this
currency evil lies in the abolition of the independent Treasury and
Sub-Treasury system, and the substitution in its place of now existing
National bank depositaries. Congress should abolish it accordingly, and
it probably will if the banks unite in demanding it, and so keep the
currency in the banks, and in active circulation. The present antiquated
system has been outgrown by the country, and is a reproach to our
national intelligence as a great commercial people.
Simultaneously with the improvement in conditions here, and partly
because of it, for example is contagious, there was a decided turn for
the better in both sentiment and prices on the London Stock Exchange and
the Berlin Bourse. Apprehensions which had been felt there of the
trouble here extending, so as to more or less seriously involve Europe,
subsided when it was seen that we had regained our composure, and were
going ahead as usual. The situation had indeed changed so much that it
really looked as if nothing very disastrous had happened, despite the
hysteria and the crash that followed the spectacular fine of that
Napoleon of the bench, Judge Kenesaw Mountain Landis, a long name—or
some of it—that will be remembered, especially by the Standard Oil
Company, long after the fine has been set aside, or O.K.’d, by the
United States Supreme Court. But it would be rash to assume that the
trouble is all over. There are still many weak structures and disturbing
causes that menace the situation. There is future danger in a too sudden
recovery of confidence, and in under-estimating the danger we have
passed through.
Meanwhile, because of what the Government has done to correct abuses in
the management of the railways and the trusts, their stockholders will
find that it has added to the security of their holdings of railway and
other stocks, at the same time that it will prevent the acquisition of
large fortunes, in dishonest ways, at their expense. The business
situation will also be the safer and sounder and more conservative for
it, and its general betterment will compensate for the suffering
involved in the ordeal we have passed through. Often out of evil there
cometh good.
All concerned in the ownership and management of corporations should
willingly conform to the Federal laws now in force, and, if any of these
should prove onerous, unjust, or defective, Congress can be called upon
to amend them. They might as well make a virtue of necessity. The same
course should be pursued with regard to railway rates, fixed by the
respective States, until these, and their justice or injustice, have
been passed upon by the Supreme Court of the United States. Through this
compliance with law the popular craze against the railways and the
Trusts will gradually subside, while the misconceptions and exaggerated
views concerning Mr. Roosevelt’s policy and its influence will die out
in the clearer light of a better understanding.
Of one thing we may be sure, and that is that President Roosevelt will
always stand firm in his policy of enforcing the laws against wrongdoing
by corporations. We heard this from Secretary Taft in his strong
endorsement of that policy, and we heard it re-affirmed in the
President’s Provincetown speech. But the penalties should always be
inflicted on the individual officers responsible for violations of law,
and these, to be effectual, should involve imprisonment, not fines
against them or the corporations. That remedy is the only certain cure
for the disease, if it again appears. By uniting in support of the
President’s policy, which simply means the enforcement of the
Inter-State Commerce law and the Sherman Anti-Trust law, as amended,
those in control of railways and industrial corporations will increase
the value of their stocks, and raise their credit both at home and
abroad, while inspiring the other officers, and the rank and file of
their employees, with a higher sense of honor, and responsibility to the
public, than was compatible with the old rebating and graft-seeking
trickery.
A large part of Wall Street was in such a nervous state during the
crisis that it jumped at shadows, and trembled at a touch. It shuddered
when Attorney General Bonaparte facetiously said that there was a fine
covey of game among the large capitalists in control of corporations,
and that he would be a poor marksman who would not bring some of the
birds down.
It found fresh cause for alarm in the fight between the Southern Railway
and the Southern States, and when the railway had its license canceled
by Alabama it had a fresh attack of “nerves,” and, later, saw an ominous
event in the surrender of the railway to the State, to recover its
license. It feared the anti-corporation storm would wreck and devastate
the business of the country. But after a storm there cometh a calm, and
the nation, as a whole, is unscathed.
In considering the situation we must never fail to bear in mind that
although investors, and holders of stocks and bonds, and many of the
weaklings of the business world, have been made to suffer severely by
the stern and uncompromising course of the Federal Government and some
of the States—and that confidence was so undermined as to cause a
temporary halt in enterprise—good results will follow. This ordeal has
been at least a purifying one, and while the East has exaggerated its
disturbing influence, the West and South have been comparatively
indifferent to it. Those sections were never more prosperous and
progressive than they are now. This arises from the fact that the East,
being richer than the West, and having much more invested capital,
especially in stocks and bonds, is correspondingly more interested in
the market for these than the West, and more disturbed by great
depression in Wall Street, and the causes producing it. The East is,
therefore, much more likely to borrow trouble than the West or the
South, especially when it cannot borrow money.
This borrowing of trouble took the usual form of fearing from day to day
that worse consequences of the crisis awaited us than we had yet
experienced, and it was increased among business men and corporations
when they found their banks would no longer accept as collaterals for
loans and discounts many of the securities they held for investment, and
upon which they had been previously able to borrow in proportion to
their market price. They found, too, they were generally unable even to
borrow, on time, what they wanted, on the best of collaterals.
They were therefore cramped for money, and this restricted or
embarrassed them in their business, and in a few instances caused their
failure. Here we recognize the close connection that exists between
trade and finance. The severe depression on the Stock Exchange so far
impaired the market value of stocks and bonds as to make the banks and
other money lenders everywhere distrustful of credits, the result being
this inability to borrow, or at least to borrow all that was necessary.
So it was not surprising that those with insufficient working capital
were badly cramped, and had to curtail their business and make
sacrifices, or go to the wall.
The curtailment from this cause among mercantile and manufacturing firms
has been very extensive. It was better than going to the wall, however,
and the after-effect upon the business situation has been salutary and
wholesome. It has acted like a safety valve in checking over-trading,
over-capitalizing, over-borrowing, over-stocking, and overdoing
generally. It has slackened the pace at which too many scantily equipped
concerns were going on the road to ruin. So it has made the business
situation stronger and safer for the sound and solvent; and the
elimination of a mushroom growth of irresponsible credit-seekers should
be welcomed by the banks.
Wall Street is the great monetary clearing house of the country whose
ramifications are co-extensive with the nation itself. It does not
create values, but it reflects everything affecting securities and
commodities, and represents all material interests. It is an unfailing
barometer of values and the times. So those who say a heavy fall, or a
panic, in stocks only affects Wall Street speculators shoot very wide of
the mark. Wall Street radiates its influence over the whole country, and
to a large and growing extent over the whole world, and it, or I should
say New York, is destined, within no very long time, to become the
financial center of the world. The recent severe financial disturbance
in Wall Street, resulting in a reduction in the value of securities
aggregating over $3,000,000, has proven one important thing, and that is
that Wall Street and the industrial interests of the country have
finally largely separated, and that a panic in Wall Street, while
depressing, need not necessarily cause one at the same time in
mercantile circles.
No doubt some of the Trusts and railway companies, accustomed to driving
with a too free hand, and without much regard for the law, considered
they were being handled very harshly by the law officers of the
Government when they were brought up with a round turn and heavily fined
for rebating. But, as they had violated the law wilfully, they had only
themselves to blame, and they well knew that the way of the transgressor
is hard—when convicted. There was some reason, however, in the complaint
of some of the railways that in many of the States they had been made
the targets of an aggressive popular policy towards corporations, that
is, the policy of enforcing rigorously laws which might in some cases,
such as the passenger and commodity rate laws by the States, finally be
declared unconstitutional by the Supreme Court of the United States.
Our large railway and industrial corporations were primarily responsible
for the disturbance and loss of confidence in the monetary situation
through their recklessly extravagant issues of bonds, stocks, and
short-term notes. For a long time they seemed to be doing their best to
kill, in this way, the goose that laid the golden egg, and they finally
succeeded in exhausting both their own borrowing power and the ability
of the banks to lend, or of investors, at home or abroad, to purchase
their issues. This tremendous output of new securities had to be
checked, for it not only glutted the market, and overloaded underwriting
syndicates, but depreciated values and created distrust among investors.
It was piling Pelion on Ossa with a vengeance.
The collapse of last March in the stock market, and the more prolonged
one of August, were obviously outbreaks of the same malady, the latter
intensified by that twenty-nine-million fine. The distrust that caused
these explosions had been brewing for years, and had its origin in the
wholesale issues that over-taxed the money market and the lending
capacity of the country and also squeezed Europe like an orange for all
the money it had to lend.
It was righteous retribution that overtook some, at least, of the
wrongdoers among the larger corporations. Their chickens had come home
to roost through their own unrestricted and extravagant exploitations
and illegal and dishonest practices.
The wholesome remedy of their discontinuance, combined with proper
curtailment and conservatism, has been forced upon them by the
necessities of the situation; and the enforcement of the new laws has no
doubt put a stop to at least the most flagrant of the corporate abuses
before prevalent. But the too sudden application of the brake at a
critical turn in the road may at any time work havoc; and it is doubtful
whether rigorous prosecutions for violations of law in years gone by are
not productive of more harm than good. They are always unsettling, and
unsettlement involves a corresponding weakening of confidence.
But future offences should be prosecuted with the utmost rigor of the
law, and the railway companies and industrial corporations now fully
understand this; and not one of them would be likely to run the risk of
again violating the law, especially with imprisonment for offenders as
the penalty. We must, however, always be careful not to make the remedy
worse than the disease. In other words, the interests of the country at
large are of more importance than the punishment of corporate wrongdoers
for long past offences. Some allowance must be made for the heat of
competition in the strenuous years we have passed through, and the
former general tendency to moral laxity of men controlling and
representing corporations, when acting in their corporate capacity, a
laxity they would probably not have been guilty of in their own personal
affairs. This would, of course, indicate their want of a proper sense of
responsibility and honor. But that failing is not uncommon. Now their
eyes have been opened to the danger of being without it.
The apparent indifference of some of the principal prosecuting officers
of the Government to investment interests, in the published interviews
with them, was, however, complained of as of itself disturbing and
disconcerting to investors. It may have indicated a supposition that
only capitalists, speculators, and those of large means were affected by
the decline in stocks and bonds. The erroneousness of this impression is
shown by the stock transfer books of every large railway and industrial
corporation, in which the small holders of small means are very
numerous, running up to several or many thousands in each corporation,
and reaching a very large aggregate of shares. The small investors thus
suffer by depreciation with the large ones, and even the people of small
means with only savings bank deposits are, as we can all see, menaced
through their dividends by the depreciation of the securities held for
investment by the savings banks. Their depositors may learn a lesson in
finance from this.
Those of the State of New York report for the half year ending on June
30, 1907, a new high aggregate for deposits and resources, the deposits
being $1,394,296,034 and the resources $1,490,760,675. Yet their
surplus, calculated on the market value of their holdings of stocks and
bonds, had fallen from $108,671,735 on June 30, 1906, to $95,743,206.
Here we have a shrinkage through the decline in prices of nearly
thirteen millions or twelve per cent. of their surplus, in one year,
although the savings banks are by law restricted in their investments to
the most stable of first-class securities. If we go back to their
reports of January 1, 1901, we find their surplus was $118,294,674,
showing that the market for bonds has meanwhile been on a declining
scale. Thus the savings banks and Wall Street are shown to be related.
In this August crisis there was far too much hysteria shown where calm
judgment was called for, and this hysteria made the situation dangerous,
although there was nothing dangerous in the actual condition of the
country, apart from the distrust of credits and the scarcity of money on
time, resulting from the immense activity of general business here and
the monetary stringency abroad. A moderate slowing down of business is
consequently the best remedy for this excess, and the one that will in
the most direct and natural way generally restore ease to the money
market. Meanwhile, the banks should assist within proper limits, when
called upon, corporations and firms of proved earning capacity and known
to be sound, and discriminate against those that have only an insecure
or speculative foundation. This would accord with the teaching of the
Bible, “To him that hath shall be given and from him that hath not shall
be taken away even that which he hath.”
The popular feeling against very rich men, who have acquired their
wealth through the trusts and railways, is not a prejudice against
property, but against the supposed ways and means by which their large
fortunes were acquired. The impression is, with many, that those means
were dishonest, and that their rapacious grasping for riches involved
corruption in corporate management, and, in general, a feathering of
their own nests at the expense of the people, or at best other people.
To see them flaunting what they consider their ill-gotten gains
exasperates men, and spreads discontent and unrest among the millions.
Envy and malice are easily cultivated.
It is an inequality of wealth that they resent because they believe it
to have been created by rebating, stock watering, inside speculation,
and tricks and devices by which other people’s money was got unjustly,
and by various illegal and fraudulent practices and abuse of corporate
power. The exposures made from time to time tended to confirm the people
in this impression and prejudice, and President Roosevelt was only
responding to their call when he urged the prosecution of the
corporations known to have been among the most flagrant violators of the
anti-rebate law.
These violators were not the corporations, which we all know have no
souls, but their officers; yet the officers have gone thus far unwhipped
of justice, much to the disgust of the masses of the people. But in
future this defect should be remedied, and rich and poor among the
individual violators of the law should be prosecuted criminally, and
upon conviction sent to jail like any other criminal. I can understand
how many men, who as private individuals would have avoided criminal or
wrongful acts, had no scruples about violating laws in their corporate
capacity. This, however, is an indefensible plea. They showed a moral
laxity which has been exposed and branded as a crime, and instead of it
let us hope they have now a sense of corporate responsibility and
honesty, as a result of these Government prosecutions, and the knowledge
that in future such violations of law can hardly be repeated with
impunity. They will certainly find that honesty is the best policy.
The cry against Mr. Roosevelt has been so indiscriminate that it would
often be amusing but for its serious aspect. If a corporation, firm, or
individual fails in business nowadays, Mr. Roosevelt is blamed. If a man
makes a bad investment in anything, or if his creditors press him for
payment, or his creditors are slow to pay or go into bankruptcy, he
blames Mr. Roosevelt, while the vast host of large and small investors
in stocks and bonds all over the country are almost of one mind in
blaming Mr. Roosevelt for the depreciation in the market value of their
stocks and bonds.
I should not be surprised if very soon even the ladies who have lost at
the fashionable game of bridge will blame Mr. Roosevelt for their
losses. Everyone, nowadays, dumps his misfortunes upon Roosevelt, and
attributes the cause to him. I recently heard of a man who had been
doing a thriving business on Long Island shore catching eels and selling
them in the New York market. Lately the eels have stopped going into his
pots to be caught, so he is now going about howling against Roosevelt
for ruining his business. That is no more ridiculous than many other
things for which he is blamed, without having had anything to do with
them. In thus complaining they overlook the long train of causes and
events that led up to this year’s disturbances in Wall Street.
The public must have a scapegoat in times of excitement and discontent,
and many of our wealthy people thoughtlessly held the President
responsible for the disturbances and unsettlement we have witnessed, and
their own losses and disappointments, because he had taken the
initiative in calling upon the law officers of the Government to
prosecute the railway and industrial corporations known to have violated
the law. They seemed unaware that he did this to stop those illegal
practices which had made enormous fortunes for the favored few, and
enabled them to crush or impoverish their competitors and impose upon
the people. He was the people’s champion.
He did not advise these prosecutions without good cause, for in every
instance where a case was tried on its merits the Government secured a
conviction. Fines of large, but not enormous, amounts were levied
accordingly against many of our principal railway companies, including
the New York Central, and against large industrial corporations,
including the Sugar Trust, for rebating and accepting rebates. But as
the punishment was always by fining the corporations, and never by the
imprisonment of the officers, who were the actual violators of the law,
the masses of the people complained that while they themselves would
have been sent to jail if guilty of criminal offences, these high and
mighty railway and Trust officials were not, and that by fining the
corporations only the innocent stockholders were made to suffer instead
of the individual wrongdoers. Their complaint was just.
I trace the causes of this year’s state of affairs as far back as the
failure in London of Baring Bros. & Co., in 1890, for that unexpected
event gave a shock to confidence, and curtailed credits all over the
world. Indeed, the long career and prestige of that celebrated and
honorable house gave it a credit in both hemispheres that was second
only to that of the Bank of England, and its collapse wiped out of
existence the immense amount of credit and the banking facilities that
it had enjoyed so long. This involved a corresponding international
contraction of the medium of exchange, and tightened the purse strings
of the world, and it continued to do so long after the failure had
passed into history.
The Boer war involved, in another way, great and prolonged depression in
England. It drained her of an immense amount of money, and drained her
also of a vast number of men whose labor was needed at home. To raise
the sinews of war, she had to issue from time to time large amounts of
consols, and these, being in excess of the power of investors to absorb
them, steadily declined, and now—years after the war—they are still
heavy. It naturally surprised the world when last August they reached
81, the lowest point in their long decline, and John Bull was sorely
puzzled to define the cause.
The Russian-Japanese war was another very costly and depressing factor,
and adversely affected international money markets because it involved
immense borrowing by both Russia and Japan, and their bonds are still
helping to glut the European markets, and to some extent our own, as
many of the Japanese bonds are held here. At the same time France is
particularly unfortunate in being burdened with a vast amount of Russian
securities, far more than ever before, which leaves her correspondingly
powerless to make other investments, or extend assistance, when needed,
to other countries.
Then came our Pacific coast disaster, the earthquake and fire at San
Francisco, which involved enormous losses there, and struck Wall Street
and its speculative capitalists a tremendous blow, for the latter were
about as heavily loaded with stocks at that time as before the March
crash, and these had a severe break in consequence. It also involved
English and German as well as American fire insurance companies in heavy
losses.
The effect of this train of disastrous events, both here and in Europe,
has been more or less cumulative, and their influence was so great and
far reaching that it is still being felt, especially by our rich and
speculative Wall Street men, with little of their wealth in the liquid
form they would prefer, notwithstanding their heavy liquidation. They
are still tied up with large amounts of stocks and bonds, bought long
ago at higher prices, and for which there is but a limited market. As
the same condition of affairs exists in Europe, they may find some
comfort in that fact, for we are told misery loves company. They
certainly have plenty of it.
Fortunately the reports of the National and State banks all over the
country show that they are in a sound and strong condition, the result
of proper conservatism, and in protecting themselves they have protected
their depositors and stockholders. So the banks have escaped being
involved in serious losses through the crisis in the stock market, and
are in a position, now that the depression, if not over, is at least no
longer acute, to lend assistance in the recovery that sooner or later
inevitably follows such a cyclone and excessive decline in prices as we
have witnessed.
The banks, however, have in common with all other holders of stocks and
bonds suffered loss by the depression in price of the securities owned
by themselves, this being, as I have shown, particularly the case with
the savings banks, and it may possibly, if not soon recovered, lead to a
reduction of their dividends. If it should so eventuate, it would be an
object lesson that would show the poor man that even his savings bank
deposit was not beyond the depressing influence of a Wall Street crisis.
But let us hope that there will be no such far-reaching result. The
savings banks have, however, already deducted large amounts from the
value of their holdings of securities on account of the past and present
year’s depreciation. Few of their depositors understand this, and where
ignorance is bliss ’tis folly to be wise.
We are fortunate in being Americans and having so great a country under
our sovereignty, for its vast geographical extent, its diversified
interests and resources, and wide differences in climate make one
section to a certain extent independent of another. Thus the South, the
West, and the Northwest looked with complacency upon the Wall Street
crisis as something confined to the East. There was no falling off in
bank clearings, no lessening of the activity in trade South or West. The
industrial and agricultural resources of the country were unaffected,
and the outlook for the crops and trade is reassuring in all directions.
Yet last month many feared the country was going to the dogs.
The last Government report indicates a decrease in the estimated crop of
wheat, but with the invisible left-over supplies, it will fall little,
if any, short of last year’s crop, while the corn and other grain crops
will largely exceed the demand for home consumption. The cotton crop,
too, which the planters will soon begin to gather, promises to be almost
equal to the last. Yet its price is much higher. The grain crops, by
reason of damage to the crops in Europe and elsewhere, and higher
prices, are likely to yield more when marketed here and abroad than in
recent years. Our exports of cotton, too, in the last fiscal year were
valued at more than half a billion of dollars, while our exports of
manufactures aggregated 750 millions. Our coal, iron, copper, gold,
silver, and other mineral products will be larger in 1907 than in 1906,
and our total industrial income will show no diminution. Yet in August
many felt as blue as indigo about the situation.
[Illustration:
_Stuyvesant Fish_
]
I say all this to show that the railways will have all the freight
traffic they want, and the enforcement of existing laws relating to them
will be more likely to increase than diminish their net earnings, for
they will gain largely by the stoppage of rebating and other abuses.
Some of our State and possibly some of our Federal laws may be too
drastic, and, so far as their requirements are unreasonable, oppressive
or unnecessary, they should, and doubtless will be, amended by Congress
and the States, or set aside as unconstitutional by the courts, as in
the case of Pennsylvania’s two cents a mile rate, for an unjust or
vexatious law is abhorrent to justice—justice so well typified by that
blind goddess who holds the scales on such an even balance in the world
of art. Corporations, as much as individuals, are entitled to a square
deal, and a square deal for all is what President Roosevelt is working
for.
As it is, most of the Western railways have, like the Southern lines, a
double track traffic for a single track road, and there is abiding
prosperity in this plethora of business. It is a sort of embarrassment
of riches, for, notwithstanding the vast additions that all the railways
have made to their rolling stock and motive power in recent years, and
the enormous amounts spent in building branches and double tracking
portions of their main lines, and increasing their terminal facilities,
they are still unable expeditiously to cope with the present
superabundance of traffic; and this will naturally increase with the
growth of population. So the outlook for their stockholders is better
than ever.
For his courageous course in unearthing and prosecuting the rebating
evil and other wrongdoing, President Roosevelt is entitled to the
highest praise; and I reiterate that the heads of railway and other
large corporations will best serve their own and the country’s interests
by co-operating with him and his administration to secure strict
compliance with the law in future, with the hope of clemency for their
past violations of law.
That the railway companies always, as a matter of policy, are disposed
to be conciliatory and not willing to be openly antagonistic to the
enforcement of law, is beyond question. Like the American people, they
are law-abiding. We saw an instance of this in the course of the
Southern Railway and other Southern lines, in withdrawing their appeal
from the State Court to the United States District Court in the rate
case, and agreeing to charge only the State rates, namely, two and
one-quarter cents a mile, in North Carolina, two and one-half cents in
Alabama, and three cents in Virginia, till a decision on the
constitutionality of the State rate laws is rendered by the United
States Supreme Court. This concession was avowedly made to avoid further
conflict with those States, although the companies were within their
legal rights in the appeal they had taken. They were wise.
After the good work the Government has already done in exposing and
punishing the rebate evil and other abuses, it would seem that the end
in view—namely, their stoppage—has been substantially achieved. I
therefore think you will agree with me that the Government can well
afford to rest on its secured results and its laurels, and discontinue
prosecutions for old offences, while holding all to the strictest
accountability for violations of law in the future. The law-breaking
corporations have been taught a lesson that they will never forget, and
have suffered penalties that they will not be willing to incur again.
By the Government thus showing clemency towards the offenders they would
all the more be put on their good behavior, and the clamor against Mr.
Roosevelt, in which they have been the leaders, would gradually subside.
Those who have been punished by the law are always very likely to have a
bad opinion of it, and to retaliate by charging injustice. Hence the old
English saying, “No rogue e’er felt the halter draw with good opinion of
the law.”
This reminds me that the two international congresses of socialists held
in England and Germany in August, one at Cambridge and the other at
Stuttgart, showed what large masses of the people there are laboring to
overthrow the existing law and order of society by putting restrictions
and fetters upon individual achievement, genius, and capacity for good
work, and by giving the inferior masses all that they would allow the
superior and educated to enjoy, a levelling process entirely
inconsistent with Americanism, for it would destroy all incentive to
great efforts, and reduce all to a uniformity inimical to progress. Some
of the decline in British Consols is attributed to this socialist
agitation in England, and notably in the House of Commons, several of
its members being radical socialists; and the same is true of Germany
and its Parliament.
In Berlin, which has been for some time the storm-center of Europe,
socialism and its revolutionary doctrines, and especially the meetings
and preachings of the rampant of the socialists, have added to the
disturbance, distrust, and depression caused by the monetary situation.
There, as here, over-expansion in all directions had over-taxed the
money market and glutted the Bourse, the banks, and the speculative
capitalists with new issues of securities that were either unsalable, or
salable only at a ruinous sacrifice, owing to the heavy shrinkage in
prices, and the absence of demand at the low prices. This presents an
almost parallel case to our own, except as to the effect of socialistic
agitation.
We have too many blatant socialists here, but they are not planted in
congenial soil, and their demagoguery and schemes for the destruction of
society as it exists will yield no harvest, for in this great country,
where all are free and blessed with equal opportunities, there is no
reason, no just cause, or excuse for socialism. The agitation in favor
of socialism and its doctrines is not American. It is antagonistic to
American institutions, and comes almost entirely from those who have
fled from oppression and despotism in Russia and elsewhere in the Old
World to our shores, and who fail to see, as they should, that the
conditions which have given rise to socialism in Europe are entirely
different here. So socialism will never take root in the United States,
however much it may be agitated by those of foreign birth who
reciprocate our hospitality in giving them all the rights of citizenship
that we possess ourselves, by advocating the downfall and destruction of
our institutions and system of society, which has made this great nation
of free and independent citizens what it is to-day, the wonder of the
world.
The Bank of France has continuously felt, but resolutely fought against,
depressing foreign influences by tenaciously holding on to its gold, and
it attracted more of it recently from this country by paying interest in
transit. Both London. and Berlin have long been trying hard to get gold
from France, but without success. This determined policy, and refusal to
finance anything that would take money out of the country, is intended
to fortify the Bank of France and French investors against a possible
crisis due to their colossal holdings of Russian bonds. France is the
guardian and watch dog of monetary Europe.
While the situation in Germany is strained, that country is taking the
lead in European manufacturing enterprises, and it is forcing its trade
in all parts of the world. To its great expansion in industrial work,
the locking up of capital there, in industrial enterprises of all sorts,
is chiefly due. Tempted by great expectations capitalists have invested
in them very heavily, and induced by high rates of interest the banks,
and other large money lenders, have loaned enormously on industrial
securities for which there is at present little or no demand from
investors, and this conversion of their resources from a cash or liquid
form to a form much more fixed than they expected, has very largely
curtailed the supply of loanable funds to others, and caused or
aggravated the long existing monetary stringency in Berlin. Yet, strange
to say, Germany uses very few bank checks. The German Government,
however, is about to consider a plan for regulating their issue and use.
Even the Government salaries, aggregating $211,344,000, or 888 million
marks, a year, are paid wholly in specie. Here we see 18 million dollars
a month withdrawn from circulation, to return slowly. This is almost as
bad as our Sub-treasury system. No wonder Germany is pinched for money.
One indirect cause, hitherto overlooked, of the prolonged monetary
stringency in Europe has been the absorption of gold by Egypt, India and
China, and it has been sufficient to largely neutralize the effect of
the increased gold product of South Africa, Australia, America and other
countries. India has desired gold of late years, instead of silver
exclusively, as before, owing to the depreciation in value of the white
metal, and China has been secretly absorbing it for the same reason, and
with an ultimate view to placing that nation on a gold basis.
Egypt, however, for several years has been largely buying gold with the
proceeds of its large exports, which include a particularly fine quality
of long staple cotton that commands a much higher price than ordinary
cotton. This gold is extensively hoarded by the Egyptian capitalists
instead of being placed in the banks there, and entering into the
monetary circulation. The consequence is that it is lost sight of, and
lost to the world outside, for Egypt is not only distrustful of banks,
but imports very little in comparison with what it exports. So it is
enabled to keep what it gets in gold. This seems to me an answer to the
question, “What becomes of the new gold?”
The world’s peace in the future is more likely to be disturbed on the
Pacific Ocean side than on the Mediterranean. I predict that within the
next few years all the great European nations will combine, in friendly
relations, offensive and defensive, against the balance of the world,
which means against China, Japan and India, that represent two-thirds of
the world’s population. If the United States wants to stand aloof and
avoid being drawn in on one side or the other, the Philippines must be
parted with. The contest of the European nations will be for commerce in
the East, and the European powers, especially Russia and Germany, will
do all they can to breed trouble between the United States and Japan and
would be glad to have both nations crippled through a war. So long as we
hang on to the Philippines we will have a war cloud hanging over us.
England, owing to her alliance with Japan, is in a better position to
take care of the Philippines than we are, and if we could make an
honorable deal with England to exchange them for her South American
possessions, it would be a good thing for us, as, when the Panama Canal
is built, those islands will be of much more advantage to us than the
Philippines, and by thus removing the bone of contention we would secure
permanent peace. The Philippines will be a great source of expense to us
without any possibility of obtaining corresponding advantages;
therefore, why retain what will keep a sore spot open as long as we hold
on? We are not a colonizing nation—we have territory enough of our own
within our own border, while England, on account of her meagre
dimensions, requires colonizing for self-existence.
I am inclined to think that it may turn out to have been a mistake for
Commodore Perry to have opened the ports of Japan to the world—a caged
lion being safer than one let loose. It resulted in Japan building
herself up as a power; then followed the war with China, which was
instrumental in breaking down China’s exclusive walled-in method of
existence. So that now China is also opened to the world like Japan; her
350,000,000 of people will get themselves on a war protecting basis,
which will naturally make an alliance with Japan a necessity, and such
an alliance will after a while require the European combination as an
offset; otherwise, sooner or later some of the European nations will be
apt to meet the same fate as old Rome at the hands of the
barbarians—simply wiped out of existence. China and Japan will fight for
their self-preservation and commercial interests. The 300,000,000 in
India will fight for release from Great Britain’s rule, and backed by
fanatical inspiration, under skilled leadership, will make a dangerous
foe sometime. Hence India’s natural desires will make her akin to China
and Japan, arrayed against any foreign foe. So India, China and Japan
and the rest of the Orient, when well disciplined and well equipped and
led by Japanese generals, will require the combined European nations to
hold them in check. The European nations have now had all the wars they
want and they have gained through them their present forceful positions
of independence, hence all future great wars will be to keep the
900,000,000 of people in Asia in subjection, and it will need all their
combined power to do so.
I will now come nearer home and glance at the rising star of the South.
The continued material prosperity of the South is one of the best signs
of the times, and it has given a legitimate forward impulse to the whole
country. This section of the United States is in its natural resources
more favored than any other, and presumably will ultimately become the
richest. That indeed is its natural destiny under the industrial and
agricultural development which will come from the growth of population,
the consequent increase in the supply of labor and the progress of
education. Here, indeed, you have a splendid prospect where distance
lends enchantment to the view, and in aiding, encouraging and
stimulating this development, on good business principles, none will be
able to render better service than you Southern bankers. Already the
South is progressing in actual agricultural and industrial wealth from
year to year, and day to day, at a rate that would have seemed fabulous
not very long ago; and the banker shares with the farmer this rapidly
increasing prosperity, especially if cotton is selling at more than
thirteen cents a pound, or even at ten cents. It is, therefore, to the
banker’s interest to co-operate with the farmer, for by so doing the
benefit becomes mutual. You gentlemen, as Southern bankers, are favored
by Providence in being where you have such a wide and splendid field for
doing good to others on a safe and conservative basis, at the same time
that you are building up the South, and doing good for yourselves in the
time-honored business of banking.
While the South is increasing rapidly in actual and substantial wealth,
it is a good sign that this wealth is not going into a few hands, but
being widely distributed among all grades of the population. The city,
the town, the village, the factory and the farm give equal and abundant
evidence that all are sharing this boon of material prosperity,
resulting from their own industry and the Southern country’s legitimate
development. You have, figuratively speaking, only to tickle the soil
with a hoe, and it smiles with a harvest.
The South produced last year crops and other raw products valued at two
thousand millions of dollars, or four hundred and fifty millions more
than all the United States, outside of the South produced in 1880; and
last year also its manufactured products were valued at two thousand
five hundred millions, or five times more than it manufactured in 1880.
This is the right kind of expansion.
Last year, too, the increase in the assessed value of property in the
South was eleven hundred millions, or three hundred and fifty millions
more than the increase between 1890 and 1900. Contrast the increase of
seven hundred and sixty millions in that ten-year period with the
increase of over sixteen hundred millions in the last two years—1905 and
1906.
Such growth is as phenomenal as it is gratifying, not only to the people
of the South but to the people of the whole United States, and it is not
a forced but a natural growth. We see it most conspicuously in the
development of its industries, for it has now two hundred and fifty
millions invested in cotton mills, an amount exceeding the capital
invested in cotton mills in all the United States in 1880. This alone is
a grand exhibit.
The South also is making pig iron at the rate of three million five
hundred thousand tons a year, more than all the rest of the country made
in the year 1880, and the capacity of the South for iron and steel
making is practically unlimited. Turning to bituminous coal, the South
mined eighty-five million tons of it last year, and in the last fiscal
year the foreign exports of all kinds from southern ports were valued at
seven hundred and thirty-four millions against only about two hundred
and fifty millions in 1881. The South may well be proud of all this
productiveness.
So great is this material development and so great the consequent demand
for transportation facilities, that every railway in the South may well
need double tracking, while to keep pace with the South’s present rate
of progress, thousands of miles of new railways will have to be
constructed every year for many years to come. The South should
therefore continue to encourage capital no less than immigration, on a
scale extensive enough to meet all its legitimate requirements. This is
the work, Gentlemen and Bankers of the South, that lies before you.
Now I come to Kentucky; good old Kentucky—with which is linked the fame
of Daniel Boone, and a Civil War record of which it may well be proud.
We in the North, of course, all know that Kentucky is famous for its
beautiful women, its handsome men, its splendid race horses of the great
blue grass region, and the whiskey of which Colonel Watterson has told
us so much and claims to be so fine a judge. His story of “Old Kentucky
Bourbon” is a dream of eloquence.
But first of all to engage our attention are the women, whose beauty is
only eclipsed by their charm of manner, their refinement and bright
intelligence. They represent an aristocracy of the best blood of the
American people, and I can testify to their fascinations, for I won, or
rather surrendered to, one of the finest of Kentucky’s daughters, after
for a long time supposing that my surrender was impossible even to the
fairest of the fair; and therefore I am glad to come to Kentucky and to
enjoy the privilege of addressing so many of its stalwart sons as are
gathered in this distinguished assembly of Kentucky bankers, on the
general situation, after the financial storm we have passed through. I
indeed almost feel, in the tender words of the popular song, that I have
at length reached “My Old Kentucky Home.”
As a border State, you are claimed by both the South and the North, and
your hospitality makes visitors from every quarter believe that, no
matter where they hail from, Kentucky knows no North, no South, no East,
no West, in the welcome she extends to strangers, or friends, from every
sister State. When, in after life, these visitors sing the old song,
“There’s no place like home,” they will mentally add, “except Kentucky.”
I thank God that to-day we all know the United States as a United
Country now and forever, which during the present generation has grown,
and is growing, more united, more liberal, in a broader sense, and each
section more just and generous in seeking to solve the problem of
granting equal rights to rich and poor alike.
In closing I desire to impress upon you that I shall always have in my
heart a grateful appreciation of your kindness and courtesy in
permitting me to meet and address you on this occasion.
* * * * *
At the close of this Address a motion was made that “Mr. Clews be
tendered a vote of thanks by the members of the Convention for his very
able, very interesting, and most instructive address.”
The President of the Association—who presided—said, “Those in favor of
the motion will please rise.” He then declared the vote to be unanimous.
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