CHAPTER LXXXI.
THE CRISIS OF 1907 AND ITS CAUSES. WAS PRESIDENT
ROOSEVELT TO BLAME?[9]
Footnote 9:
An address to the Cleveland Chamber of Commerce, Cleveland, Ohio,
Tuesday evening, January 28th, 1908, by Henry Clews.
It gives me great pleasure to meet the members of the Chamber of
Commerce of the city of Cleveland.
Next to New York—being from New York I have to make this
distinction—next to New York, I consider Cleveland the home of the most
worthy set of business men in the United States. Your forefathers chose
well when they elected to settle in this beautiful spot. The wisdom
which they displayed is proven by the twenty miles of docks on your
water front and by the fact that your people own the largest tonnage on
the lakes.
The natural resources of your surroundings have made you masters of
trade in coal, iron, and petroleum. Your harbors are commodious, and
what they lacked in natural formation you have supplied by the famous
breakwaters which have been built. Your city is not only a natural
business center, but also a railroad center.
Your Euclid Avenue is spoken of in the East as a model to be copied by
the lovers of beauty.
Fifty years ago Cleveland was a village. If you continue to thrive as
you have, where will you be fifty years hence?
It was in the soil of Cleveland that the seed was planted that has grown
and developed into the greatest business plant in the world. To-day the
Standard Oil Company commands trade in every country on the face of the
globe, and as a body are the greatest merchants that the world has ever
known.
Ohio has robbed Virginia of the right to be known as “the mother of
Presidents,” and I predict that the Republican Convention to be held
this summer will present as its candidate your most famous and honored
citizen, Hon. William H. Taft, who will be elected by an overwhelming
majority. I suggest that he and Mr. Roosevelt change places—Taft as
President and Roosevelt as Secretary of War, or still better, Secretary
of the Navy. Then we will be ever alertful and prepared for
eventualities both on our Atlantic and Pacific coasts. In this way we
will retain the services of both.
I will begin by saying that the elimination of the Godly Motto on our
gold coin many people may think means-“In President Roosevelt we trust,
but in God we distrust”; but I am sure the great mass of the Americans
do not think that way. They believe in trusting both God and the
President, and if the President will put back “God” on the American coin
they will put him back in the White House after his present term—thus
making our Motto: God first, our Country second, Theodore Roosevelt
third (term). The Three together one and inseparable for the next four
years.
It is my belief that there is not an intelligent man in the United
States who sincerely questions the “honesty of Theodore Roosevelt’s
motives.” Whatever he has done he has done to promote the public good
and the nation’s welfare, whether his speeches have helped to cause
distrust or not. He is an honest man, and an honest man is said to be
the noblest work of God. But, of course, as we cannot expect perfection
even in honest men, they may sometimes make mistakes in their judgment
of consequences, however good their intentions are. That we all allow
for.
You ask the question: Is President Roosevelt’s policy towards capital
sound? In other words, has he, in denouncing and instigating the
prosecution of law-breaking railway corporations, and industrial Trusts,
menaced the prosperity of the country? I contend that he has not. He
certainly had no intention to do so, for, while he was instrumental in
turning on the light, he was not responsible for the abuses of power
that the light revealed, and it is the revelation of graft and illegal
methods, on the part of certain railway and other corporations, through
the acts of their responsible managers, and controlling capitalists,
that has undermined public confidence in many of them.
It is true that the marked change in conditions and public sentiment,
especially in the stock market,—from the great optimism, buoyancy and
high prices of last year to the great depression and low prices of this
year of panics,—has caused many unthinking critics of the situation to
ascribe it to the influence of President Roosevelt. The speculative
capitalists and Trust magnates who have lost heavily by the depression
in stocks have this impression of the effect of his policy and speeches
in exposing corporate wrongdoing.
But it is an idea that needs to be controverted, or at least is open to
question, and his course is generally approved by popular opinion all
over the country. In other words the people generally are in favor of
the policy represented by all that the President has done to correct
corporate abuses and illegal methods and raise the standard of business
morality.
Before entering further into the subject, however, I will say that
gatherings of this kind, where the burning questions of the day are
discussed in a frank and friendly way, are productive of good
fellowship, and good results. Different minds view important events from
different standpoints, and any association that meets for this purpose
with a desire to obtain by mutual discussion, the fairest and best
understanding relating to public measures, is doing a patriotic service,
and is worthy of the highest commendation. It is particularly so at a
time like this, in view of the prevailing depression and distrust.
It is very fortunate that a presidential election did not take place
last year, as the people were in such a state of uncertainty and
apprehension that many well-meaning men would not, I fear, have voted
with a desire for their country’s good, but be biased by personal
interest or a determination to obtain revenge for what they have lost by
the great and prolonged decline in the stock market and the disturbance
of credits.
It is, of course, greatly to be deplored that some of the men high in
command in the industrial and railroad companies have abused the trust
reposed in them and made it imperative for the President to instruct the
attorneys of the national government to investigate their doings, and
prosecute those corporations and their officers charged with using their
corporate powers to do illegal acts, like rebating, and such chicanery
as that of the Chicago & Alton reorganization. The fact that, in nearly
every such instance of Government prosecution, the guilt of the parties
accused has been proved on their trial, justifies President Roosevelt in
his action.
While capital may continue timid until the whole truth is known and
confidence in corporate management restored, the agitation, will, in the
end, prove beneficial to the country; for it will purify it by
eliminating the unlawful evils complained of. This will inspire foreign
capitalists as well as our own with confidence; and they will invest
heavily in American securities, just as soon as they feel assured that
the surplus earnings of our railway and industrial companies will be
fairly divided among the stockholders under honest management, regulated
by law, and subject to Federal and State supervision.
Recent events have shown that drastic action was necessary to insure a
square deal for all. Mr. Roosevelt is not attacking capital, but he is
attacking those in control of corporations who have misused their power
and position to do illegal acts and presumably for their personal
profit. Confidence received blow after blow from this source, before
getting another rude shock through the exposures resulting from the
Metropolitan Securities investigation, and the action of the New York
Clearing House with regard to the Heinze and Morse banks.
It is now over two years since public disclosures of this kind as well
as of railway rebating began, followed by the collapse of the copper
manipulation and, very recently, by the scandals connected with the New
York Traction situation. No wonder, therefore, that confidence is
seriously disturbed. And who is responsible? Not President Roosevelt and
Mr. Hughes, the famous life insurance investigator, who have been
instruments of exposure, but the individuals who conceived and conducted
these unlawful operations. Of course the guilty protest against
financial house cleaning; and they endeavor to ward off official
investigations on the plea that these disturb confidence, and make the
innocent suffer. But the whole responsibility should be placed where it
belongs—upon the perpetrators of misdeeds, and not upon those who, in
the discharge of the duties of their high office, have been the means of
turning on the light and preventing future operations of the kind. Those
who have trifled with the public interest, and displayed a blind
disregard of the people’s rights, are the real transgressors.
It becomes daily more evident that when all our railway and industrial
corporations are known to be honestly managed, and when stockholders and
investors get their due, values will be more stable, and American
credit, which is now at a low ebb in all the great financial centers of
the world, will be restored to its rightful place.
Throughout all these disclosures of illegal methods and wholesale graft
there is one gleam of encouragement, and that is, that public opinion is
aroused and will insist upon clean as well as capable corporate
management in the future, and thus these disclosures will result in the
raising of the moral standard of corporate management. Meanwhile, the
public is disturbed by these revelations, and wonders what financial
irregularity will be brought to light next. The action of many corporate
managers has seemed to indicate that they think little of violating the
laws, and that, if they are broken by one high in authority, or in
social life, immunity must be granted; or some subordinate be made to
suffer instead of themselves. If a poor man commits a crime, he is sent
to jail. Sympathy for his family may sometimes make the judge lenient as
to the time of his incarceration, but, however short the term, it
generally brings sorrow and want to the family for which he is the sole
provider. Thus, the innocent have to suffer with the guilty in such
cases.
In corporate matters, if a manager or controlling capitalist breaks the
law, justice should punish him, as it would anyone else. The law should
be no respecter of persons.
Sodom and Gomorrah were destroyed because the people broke Nature’s
laws; and this government, although the best known to man, would be
destroyed in the course of time, if the rich and unscrupulous were
permitted to break the laws with impunity, while the poor were punished
for much less serious offenses. This invidious distinction has caused
those who have suffered by the corrupt and illegal practices of
corporations and their managers to unload their grievances upon the
President. In their communications they tell him that, while many from
their ranks are being sent to prison, they fail to see any of the rich
being sent there, although the evidence against them is unquestionable.
This unjust distinction, if it continues, I repeat, cannot fail to have
an unsettling effect upon the American people, and may finally result in
something more, as this is a government of the people, for the people
and by the people, and a discrimination in favor of the wealthy—whether
corporations or individuals—will not be very long permitted by the plain
people, who are largely in the majority.
President Roosevelt took the oath at his inauguration to be guided by
the Constitution, and as the Constitution requires that the Executive of
the nation shall enforce the laws, he would have been derelict in his
duty and unfaithful to his oath if he had not taken the action he has,
to compel corporations to conform to the Interstate Commerce and Sherman
Anti-Trust laws and their amendments. Whenever evidence has reached him,
through the complaints of people who have suffered in consequence of the
violation of these laws, he has very properly handed the material
received over to the Attorney General to make the necessary
investigation, and as in every case thus prosecuted the results have
justified all he has done as to these, he deserves great credit. The
so-called indiscriminate attacks that are claimed to have been made by
him upon corporations and business interests have no sound basis. So far
as his intentions go, he has only attacked dishonesty and law-breaking.
While I fully approve of what Mr. Roosevelt has done in the way of
reform, I confess I do not fully approve of his too oft repeated
passionate utterances on the subject during the recent period of
distrust. It undoubtedly has helped to unsettle the minds of timid
investors and weak-minded depositors. The President has probably been a
little too outspoken at a time when silence would have been golden.
There are periods when the least said the better; still, I applaud his
good intentions and his excellent deeds, which cannot fail to prove
fruitful in the end. We should all be willing, therefore, to overlook
his recent volubility and frequent reiterations.
A short time ago France stood ready to invest large sums in American
bonds and stocks. But just after her first venture in Pennsylvania
Railroad bonds our corporation scandals filled the air with their
unpleasant odor and French capital was locked at once against everything
American.
When all the old evils have been exposed, and wrongs righted, and
foreign as well as home investors again seek investments for their funds
in our securities, we may rest assured that, having undergone rigid
investigation, they will be looked upon as the best in the world.
That President Roosevelt should be blamed in any way for the banking
troubles, business failures and losses that have been made in the stock
market is unfair; but it is always the case that the Executive in office
bears the brunt of whatever disasters of the kind occur during his
administration.
Those of us whose hair is no longer black, brown, sandy or red,—or very
abundant,—can well remember the calumny and evil reports that were
heaped upon the broad shoulders of the well beloved Abraham Lincoln. The
noble cause he fought for cost millions of lives and billions of
dollars, and of course there were very many who suffered at that time by
the war. Of these many were most bitter in their denunciation of
President Lincoln, and this nearly broke the heart of that great man,
but did not for a moment cause him to desist in the work he saw it was
his duty to perform to the end. To-day, those who traduced him join
freely with the whole nation in doing honor to his memory. President
Roosevelt may be severe in the frankness with which he reiterates his
intention to punish those who break the law; but, in the distant future,
the world at large will remember him as one who dared to suffer under
unjust denunciation for the sake of right, and even now the great mass
of the people are with him in his efforts to improve and purify business
conditions.
Those capitalists who have lost money largely by this year’s decline in
prices of stocks, and the monetary disturbance, are naturally bitter and
resentful; but even the majority of such, down in their hearts, grant
that in principle President Roosevelt is doing his plain duty, though in
his speeches he may have said too much too often. If what he has done is
wrong, it is the fault of the law, for he has urged no greater
punishment than the enforcement of the law. But the man would be daring,
indeed, in the face of the exposures already noted, who would presume to
say that the law is unjust. It aims at equal justice for all, and we are
a law abiding people.
In view of all the wrong doing in corporation management it must not,
however, be forgotten that the majority of our corporations are ably and
honestly managed in the interest of the stockholders. It is not
surprising that black sheep have crept into some of them, for a certain
percentage of people in every walk of life and every association, church
or social club, are bad at heart, and show up in their true colors, when
subjected to the temptation to commit wrongs which will tend to their
personal advantage. The assumption that now prevails, that all
corporation management is dishonest, is, therefore, unjust and has been
causing much of the hysteria that has prevailed in Wall Street and
elsewhere.
To protect minority stockholders, especially in the Interstate
Railroads, they should have at least one representative in the board of
directors, and he should be elected by the minority at each annual
meeting. If such a director was a cool-headed, honest business man,
certain abuses, which have been prevalent in the past, could not have
occurred and would be prevented in the future.
It is much to be regretted that to aid personal schemes, some of the men
in power, even in some of our large National Banks, have resorted to
methods which have caused loss of confidence in them, which resulted in
their retirement, practically under compulsion, as officers and
directors. It is almost needless to say that, of all corporations, our
National Banks should be the last to be used for illegal purposes, or to
promote personal gain or speculations.
When a man in power imperils the solvency and good reputation of one of
our banks, he is a public enemy, and as mean and guilty as one who
attacks the virtue of a virtuous woman. To destroy confidence in that
woman and her good name is to do her an irreparable wrong. Destroy
confidence in a bank and you destroy that which is one of the
corner-stones of business prosperity. Those who invest in railroad
stocks, or stocks of Industrial corporations, risk only the cost of
their investment, but the holder of record of a National Bank stock is
liable for an additional amount equal to the par value of his holdings.
Publicity is the greatest safeguard of the prosperity of any corporate
enterprise, and the best preventive of irregularities and frauds. Many
men will do in secret what they would fear and refuse to do under the
public eye; and if hitherto secret ways are, in the future, made known,
and seen of all men, there will be less breaking and unfaithfulness
among many classes of business men in high places.
This doctrine of publicity I have preached for years, and it was the
topic of an address I delivered before the Wharton School of Political
Economy in the University of Pennsylvania eighteen months ago. I saw
then what was going on in corporate corruption and grafting, and
railroad rebating, but, of course, had no tangible evidence or legal
proof of these misdoings.
During the intervening time, however, so much of this came to light that
there was no alternative for the national government, as well as many of
the states, but to take drastic action to stop these evils, and probe
right and left to locate and convict those responsible for them.
President Roosevelt led the way to this laudable end. He is not in favor
of persecution, however; but he is in favor of the prosecution of those
known to be guilty; and I firmly believe that his courageous stand in
this movement to correct and punish corporate abuses will overshadow, in
the history of his Presidency, all his other achievements.
Remember: he would punish only the guilty and protect property interests
in every way possible, so that the innocent may not suffer with the
guilty, or at least suffer as little as possible.
The lawyers engaged to defend wealthy corporate wrongdoers may sometimes
prevent their conviction and punishment; but the people are entitled to
the protection which comes from an equal administration of justice.
In these days the truth of the biblical saying, that “the wicked
flourish like a green bay tree, but they shall be cut down,” has become
evident to us in certain instances applicable to corporations.
Some ancient cities and empires, including the great Roman Empire, were
ruined by the lawlessness and unscrupulousness of their rich men—the
great oppressors of those days—and our America was fast falling too much
under control of large corporations and corporation capitalists; but,
the plain people of this country are for equality, equal rights, and
fair play for all, and opposed to a plutocracy.
In his address at Memphis, this year, President Roosevelt said:
“I will no more stay my hand because a wrongdoer masquerades as a labor
leader than if he masquerades as a captain of industry.
“I am against undesirable citizens when they are great capitalists who
win a fortune by chicanery and when they are men who, under the guise of
standing for labor, preach and encourage violence and murder.”
To show that he recognized the sensitiveness of certain corporation
capitalists who are cast into a frenzy by his most common sense remarks,
he once said: “It has come to a point where my saying that honesty is
the best policy is liable to lead to a run on the banks.”
In discussing the cause of the present panicky contraction and
disturbance in the business and financial world, nothing, however, could
be further from the truth than to charge it all to the great corporation
exposures and prosecutions.
There were many other things that contributed to bring about this year’s
depression and disturbance, and to cast over the brightest sky that ever
shone the heavy clouds of distrust, reaction, and panic.
The clouds in the financial sky can remotely be attributed in a large
measure to the effect of the tremendous railroad, industrial and
commercial development of the last ten years, which brought about
capital requirements in excess of the ability of the country to supply
them.
Naturally and necessarily, this resulted in precautionary steps being
taken by bankers and others to limit demands that capital could not
supply.
This conservatism and consequent contraction of the overwhelming volume
of business, will, it is believed, prove the strongest force in averting
further trouble and disaster. I have for some time been urging the
application of this brake, or safety valve, of conservatism, and it is
really imperative.
In an effort to meet the demands of the enormous business offered them,
the great railway and industrial corporations sought to enlarge their
equipment at vast expense. In this they acted unwisely. They overtraded.
To use a common saying, “they bit off more than they could chew.” It
was, perhaps, excusable, not very long ago, when confidence was in its
zenith and credit superabundant, to attempt the financing of mammoth
undertakings. But unexpectedly and like a bolt out of a clear sky, came
the startling insurance and other exposures, and gradually timidity took
the place of confidence. Then capital, which is always more timid than
usual at such times, began to contract, and many railway and industrial
corporations found themselves unable to borrow the large sums needed to
meet their extraordinary expenditures.
The banks in many instances, having already over-extended credits, were
unable to provide the necessary funds, and new securities, owing to
excessive supplies and other causes, ceased to find the ready market
that they had enjoyed for so long a period. Investors took wing.
Curtailment, therefore, in every direction became a necessity, so
President Roosevelt can no more be blamed for the existing depression
and panicky disturbance than he can be credited with all the great
prosperity that preceded the crisis.
That this reaction, culminating in a panic so severe, came just at the
time it did, is largely if not wholly coincidental. It cannot be denied,
however, that the startling disclosures of wholesale wrongdoing on the
part of many of the great railway and industrial corporations disturbed
the confidence of the public to the core and paved the way to it.
The indictment and prosecution of the rich and powerful corporations
that had been violators of the law were but the necessary and legal
consequences of their own guilty conduct.
Article II, Section 1, of the Constitution of the United States requires
that before he enters on the execution of his office the President shall
take the following oath: “I do solemnly swear that I will faithfully
execute the office of the President of the United States, and will to
the best of my ability preserve, protect and defend the Constitution of
the United States.”
Section 3 of the same Article of the Constitution, in enumerating the
duties of the President, says: “That he shall take care that the laws
shall be faithfully executed.”
As at the time of his inauguration as President of the United States,
Theodore Roosevelt solemnly swore that he would faithfully execute its
laws, all of you, I know, will agree with me when I assert that he was
bound to loyally and fearlessly keep that oath.
As an honest man, he has only tried to do his duty. He has attacked the
law-breaking corporations, and those in control who have amassed large
fortunes out of them dishonestly, and these only. Not to have prosecuted
and to have let these corporations, and their officers, go on, unchecked
and unpunished, would have been to violate his oath of office and to
neglect the duty imposed upon him.
It would certainly make a farce of this great republic, and cast a
stigma upon our integrity, if the laws of the land were not enforced
against the rich and the poor alike! No such reflection as that upon our
national honor will ever be tolerated by Theodore Roosevelt! He has been
ready at all times to uphold the national honor. It has been well said
that the honor of the nation is the soul of the nation.
President Roosevelt’s resolute and unyielding stand for the rights of
the people, against the powerful corporate wrongdoers who had thrived so
long upon their secret misdeeds, has commanded the attention and
admiration of the world. His excess of earnestness and denunciation at
times, we can forgive.
Victor Hugo, in speaking of one of the world’s greatest “Immortals,”
truly said: “When a man is a glory in the face of his nation, that
nation which does not perceive the fact astounds the human race around.”
President Roosevelt has proved himself a successful crusader against
successful corporate dishonesty, involving violations of law; and it is
doubtful, as he says, whether his policies have had any material
influence in bringing about the severe depression and banking crisis of
this memorable year. But whether they have or not, he declares, with the
courage of his convictions, that during the remainder of his term he
will not swerve from these policies, but persevere in them
unflinchingly. Yet all that his administration has done has been to
unearth the wrongdoing. It is impossible to cut out a cancer without
making the patient feel temporarily worse than before.
It is a mistake, or a slander, to say that Theodore Roosevelt has made
war against capital. He is only opposed to dishonest corporate methods,
and dishonestly acquired wealth. He respects the possessors of honorably
acquired and honestly used fortunes, and would protect their property
interests in every way possible, and guard them against injustice, and
be resolute in defending their rights; for their success leads to the
inference that they are good citizens. But he will assuredly stand
against crimes of unscrupulous cunning in the management of railway,
industrial or financial corporations as resolutely as he would against
crimes of brutal violence, and equally punish the rich man and the poor
man, for crime is crime whether committed by a plutocracy or capitalist,
a poor wage earner, or a mob. These are his avowed principles and
policies.
He would regard a man who builds a railway where it is needed, and
operates it fairly and honestly, as a public benefactor; but if that man
manipulated the stock and bonds of that railway so as to swindle the
stockholders or bondholders, or the public, or gave rebates or otherwise
favored one shipper over another, he would regard that man as an enemy
of our institutions who should be punished for his wrongdoing. All this
goes to answer the question: Is President Roosevelt’s policy towards
capital sound? I say that it is, when rightly understood!
Furthermore, the regulation of corporations by the Federal Government
should be made absolute, and taken away from the States, where they do
an Interstate business, like the railways and express companies. This
would be better for the corporations, themselves, as well as the people
than present conditions. They should be placed under National control,
just as the National Banks are.
This central undivided control would do away with the confusion of
Federal and State authority now existing. Moreover, I would favor the
extension of this Federal control to all interstate corporations, and it
will come in time. Meanwhile President Roosevelt is paving the way for
it, and to him let us give all honor for his long step in the right
direction.
But, now that Mr. Roosevelt has substantially achieved his purpose, he
can well afford to rest satisfied that his work will continue to bear
good fruit without any further public addresses on the subject.
The people are already familiar with his views, and their continued
reiteration by him in his speeches, especially during this period of
financial and industrial distrust, depression and unsettlement, would
tend to inspire fresh uneasiness as to the situation and the value of
corporate stocks and bonds. It would do this, owing to the extreme
nervousness and timidity of capital that prevails.
It is this abnormally sensitive and apprehensive condition of public
feeling that led to the recent senseless run upon certain New York trust
companies, and in a minor degree upon banks and savings banks, and that
caused very many of the depositors, after withdrawing their money, to
hoard it in safe deposit vaults, and various less safe receptacles,
instead of depositing it in other institutions.
Their hoarding it, naturally made conditions all the worse, through very
seriously increasing the stringency of the money market. So great became
the scarcity of loanable funds that from the 23d to the 31st of October,
call loans were made daily on the New York Stock Exchange at rates
averaging 50 per cent per annum, with some ranging from 75 to 100 per
cent. Such hoarding, on a large scale, is fraught with great danger, as
it involves a sudden contraction of the circulation and drain upon bank
reserves. In this instance it caused renewed panic and fresh breaks in
stocks, and it alone compelled the New York Bank Clearing House members
to vote unanimously to issue Clearing House Certificates—nothing else
would have offset the run on deposit institutions.
It would be very far from President Roosevelt’s wish to say or do
anything that would cause people to hoard money instead of employing it
in customary channels; for hoarding is a public injury and contrary to
good citizenship. Furthermore, it is entirely un-American. But the
public mind has been wrought up to such a pitch of distrust and
semi-hysteria, through the disclosures of corporate dishonesty, and
other disturbing causes, that a false, or at least exaggerated,
impression exists among many that all corporations are, or may be, in
the same boat. This want of confidence in the situation is very largely
what has caused the heavy and prolonged liquidation in stocks, and led
to the bank and trust company runs and great monetary and industrial
disturbance we have witnessed in this great and far-reaching crisis.
Mr. Roosevelt will, therefore, see, now that he is becoming more and
more cognizant of the situation, that what the public, and particularly
the investing class, needs in this period of stress and storm and
anxiety, is to be calmed and reassured and made aware that there is a
silver lining to the cloud, and no good reason for their loss of
confidence; for the country is still as great and grand, and prolific in
its resources, as ever, with its future no less promising and
magnificent than it was before this crisis darkened the sky.
It is known that he takes this view of the situation, and is earnestly
co-operating with the Secretary of the Treasury to ease the money market
and restore confidence.
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