LXXXII. OUR GREAT AMERICAN PANICS FROM FIRST TO LAST…

LXXXII. OUR GREAT AMERICAN PANICS FROM FIRST TO LAST

The panic of 1907 naturally revived public interest in all our previous panics, and therefore a brief historical review of these is timely. The small one that followed the throwing overboard of the historic tea in Boston harbor in George the Third’s time, and which was the prelude to the War of Independence—the victorious struggle of the old Thirteen Colonies to throw off the British yoke—was of no importance, owing to the country’s scanty trade and banking development, and the corresponding scarcity of credits. It was a tempest in a teapot, this sequel to the Boston tea party.

The panic of 1812 was the first of much magnitude in the history of the United States, and it resulted from over-trading and undue expansion in all directions, but was precipitated by our war with England in that year. The banking capital of the country was then only seventy millions of dollars, yet more than ninety banks failed in the run upon their deposits that ensued, and the Government found great difficulty in raising a war loan. Meanwhile, trade and manufactures, which had been very active and prosperous before the declaration of war, suddenly became almost paralyzed.

The change from undue inflation to the undue contraction born of fear was disastrous in its wholesale destruction of market values and credits. But the Government war expenditures, after it had succeeded in disposing of its securities, gradually stimulated recovery from the worst effects of the panic, and industries that had been suspended were resumed, thus re-employing labor that had been left idle.

Not much has been recorded of the panic of 1823, which caused trade depression till 1825, so it was evidently much milder and less disastrous than that of 1812. It was another instance of the reaction that follows over-trading and an over-extension of credits, without any war or other great event to precipitate it.

The panic of 1837 was, however, much more serious and disastrous, because it involved far greater results owing to the growth of the United States in extent, population, and wealth in the interval. like its predecessor, and indeed all other panics, it was due to the over-extension of trade, speculation and credits, but it was precipitated by the troubles of the United States Bank, and President Jackson’s hostility to that institution.

Speculation had been running wild, particularly in land and new railway projects, which were then in their infancy in England. The achievements of George Stephenson, the builder of the first locomotive engine there, had quickly kindled the fire of railway enterprise in this country, and promoters busied themselves in raising capital for building and equipping railways here; and incidentally it gave a strong impulse to the widely prevailing speculation in land.

The panic of 1857 was, of course, infinitely greater in its extent and consequences than that of 1837, owing to the same causes that made the latter greater than that of 1812, namely, the growth of the territory, population, and wealth of the United States. Its main cause can be traced to the enormous increase of speculative enterprise in this country, especially in railway building, following the great gold discoveries of 1849 in California. But its immediate cause was the general alarm produced by the failure of the Ohio Life and Trust Company, which had its principal agency in Wall Street.

There, at the corner of Nassau Street, it had long been regarded as a pillar of financial strength, and no institution in the United States stood in higher credit or commanded greater confidence, although without any good reason. When it suspended payment, the news came upon the public with the suddenness of a thunderbolt from a clear sky. The unexpected shock filled the financial and mercantile community with dismay, and from one end of the country to the other credit was destroyed.

This, indeed, was panic. Bank-notes were everywhere distrusted, and presented for redemption; whereupon the banks everywhere suspended specie payment, except that the Chemical Bank of New York redeemed its own notes. Business depression and thousands of failures from Maine to California followed, and nearly three fourths of the railways, and other large corporations, defaulted in their interest and other payments, and went into the hands of receivers. The depression grew deeper from month to month for more than a year after the panic, and some of the best railway stocks declined to $3 to $5 a share, including Michigan Southern and Harlem. Meanwhile corporate foreclosure sales and reorganizations told the story of the financial wreckage of the time.

The country had not long recovered from the effects of this great panic when, on the 4th of March, 1861, Lincoln was inaugurated President, and the Civil War broke out. There was severe depression—a war crisis—then, but it was so slow, insidious, and prolonged that it was never called a panic. It may be said to have commenced—in anticipation of the threatened war of the South against the North—with Lincoln’s election in November, 1860, and to have continued till the Government began to issue the paper money of the war era in 1861, after the suspension of specie payments.

One feature of the panic of 1857, and the prolonged depression that followed it, duplicated the experience of 1837, and that was the almost universal prevalence of what were called “shinplasters.” These were practically I O Us given as change by anyone who had received a bank-note or check for more than the amount due him in payment for anything. In New York the notes of solvent New York banks were never refused in payment, while those of banks elsewhere were tabooed; but in making change, no specie was given, the banks having suspended specie payments. So, unless the exact amount was tendered, shinplasters were given for the balance.

The city was flooded with these personal evidences of debt for small amounts, issued by storekeepers, hotels, restaurants, saloons, barbers, and the rest of mankind, and many of these were passed from hand to hand till they became too dirty and dilapidated to be handled. They were the worst kind of filthy lucre, and understood to be only redeemable on a return to cash payments by the banks. But of course many of them never were redeemed. They ranged in amount from one cent to several dollars, and this sort of scrip was more or less extensively issued from Maine to Texas.

The Black Friday Gold Panic was a Wall Street convulsion, and not far reaching, like the others. It occurred on Friday, September 24, 1869, and was the result of a conspiracy, headed by Jay Gould, to corner gold, and force the “shorts” and importers to buy at a high premium. The Tenth National Bank, in Nassau Street, which he, and those associated with him, managed to control, became conspicuously involved in the corner through over-certifying their checks to the amount of about $7,500,000 on that day, and, as a result, it was closed by the Government bank examiner. Several scandals cropped out in connection with this conspiracy to corner gold, one of which involved the resignation of the New York Assistant Treasurer, and another two brokerage firms employed by the gold cornerers to buy and receive their gold. Gold, after being bid up by the conspirators day by day from 119½ to 162¼, broke thirty per cent on the announcement that the Government would sell five millions of gold. This was followed by the suspension of the Gold Clearing House Bank, and the Stock Exchange was also closed to check the panic in stocks that ensued. While not a commercial panic, Black Friday was very disastrous to many in Wall Street.

Next came the tremendous panic of 1873, which, commencing in Wall Street, on September 13, with the failure of several prominent banking and brokerage firms, including Howes & Macy, Kenyon Cox & Co. (in which Daniel Drew was a special partner), Fisk & Hatch, and then Jay Cooke & Co., rapidly spread, and soon covered the entire country. Many other failures followed these from day to day, and crowds of sightseers besieged Wall Street from morning till night, while the Stock Exchange was closed, and remained closed for ten days to prevent the sacrifice of stocks.

The severity of the distress that prevailed may be inferred from the fact that on the 19th of September twenty-two Stock Exchange firms suspended payment. Rumors of bank and trust company troubles flew thick and fast, and there was a heavy run on their deposits, while the Union Trust Company was temporarily forced to close in order to raise money on its assets to meet the run upon it. Several banks were known to be unable to stand the general run any longer, when, on the evening of September 20th, the New York Clearing House resolved to issue $10,000,000 of Clearing House loan certificates, in accordance with the resolution adopted to meet the crisis of 1860-61. It was on the same date that the Stock Exchange was closed by its governing committee.

On the 24th of September an additional issue of $10,000,000 of certificates was authorized, and on the 27th, so great and widespread had the panic become that all restrictions upon their issue were removed. The banks, instead of paying checks in cash, except for small sums, to depositors, certified them, payable through the Clearing House, and the weekly bank statement of the Association was suspended on September 27th, and not resumed till December 28th. The amount of Clearing House loan certificates attained its maximum—$22,400,000—on October 20th. In the interval business was resumed on the New York Stock Exchange on September 30th, after its ten days of suspension. While it remained closed there was a curb market on Broad Street for stocks and bonds, but sales for cash there could only be made at panic prices. The crisis of 1873 was far more severe than that of 1907, and recovery from it was very slow. The panic of 1884 extended far beyond Wall Street, but was most severely felt there.

There was a stock market panic in 1890, due to the failure of Baring Bros. & Co., in London, and heavy gold exports from this side to allay the panic there, but it did not spread much beyond Wall Street, and was soon over. The panic of 1893 was, however, severe and extensive, and 15,000 failures were attributed to it throughout the country. As usual, it resulted from undue speculation and expansion in trade, stocks, and new enterprises. But it was more immediately caused by the agitation of the 16-to-1 silver heresy, which led to a run on the gold in the United States Treasury till the amount of free gold held by it, at all points, was less than twenty millions, while the amount in the Sub-Treasury in New York was reduced to only about $8,700,000. It was then, in February, 1893, that President Cleveland made his famous gold purchase for United States bonds from the Morgan-Belmont syndicate, namely 3,500,000 ounces of gold for $62,312,500 of four per cent bonds. This, aided by the syndicate’s efforts, stopped gold exports and replenished the supply of gold in the Treasury, and so restored confidence. Therefore the run ceased; and after that the largely increased customs duties gradually swelled the gold belonging to the Government to a far larger amount than it had ever held before.

Coming down to the panic of 1907, we are confronted by its causes. These were cumulative, but, as in every preceding crisis, the main cause was far too large a mass of credits—that is, of debts—for the amount of cash in which they were redeemable. Trade and speculation had been long so active, and too often recklessly expanded, that this disproportion had become dangerous, and a menace to our safety, as I pointed out several times months before the crisis actually came. I said that a serious reaction, a serious revulsion, was inevitable unless we moderated our pace and mended our ways in the matters that I have elsewhere referred to and criticised.

From my knowledge of banking, and my personal experience of our previous panics, dating from that of 1857, I could foresee that this vast and growing disproportion between the volume of credits and cash would finally lead to collapse. This disproportion is always large, and always becomes larger in periods of activity in trade and speculation. But in this country, and particularly among our speculative Wall Street millionaires and promoters, it had become unwieldy, while, very largely, liquid capital had been converted into fixed forms that were unavailable in raising cash.

Yet the people generally did not see the danger and take alarm till, on October 21, the New York Clearing House was notified by the Bank of Commerce that it would not clear for the Knickerbocker Trust Company after the following day; and simultaneously the Clearing House made an examination of the Mercantile National Bank, and ordered all its officers and directors to resign at once, preparatory to assisting it.

Then the public suddenly took fright, and the run upon the deposits of the Knickerbocker Trust Company caused it to close its doors about two hours after it had opened them the next day. This added fuel to the fire of distrust, and the run on the Trust Company of America and its Colonial Branch, and also on the Lincoln Trust Company, began; and six banks and a trust company suspended in Brooklyn, and the Hamilton Bank in Harlem, on the day following.

At the same time there was a heavy withdrawal of deposits from all the banks and trust companies, and the money thus withdrawn was not deposited in other institutions, but hoarded. Hence the severe monetary stringency that ensued, which caused call loans on the Stock Exchange to command as much as forty to fifty per cent per annum at one time, and from fifteen to twenty-five till the end of the year.

The New York Clearing House saw the urgent need of promptly fortifying the banks in the Association against the drain on their deposits, and, on October 26, resolved to issue Clearing House certificates against such satisfactory assets as they might deposit, these certificates to be used by them instead of cash, in paying their daily balances at the Clearing House. This gave immediate relief to the banks, and was the signal for every other bank clearing house in the large cities to do likewise, besides which many of the country banks issued checks of their own, from one dollar up, in payment of checks against deposits.

The other principal features and details of the crisis I have given elsewhere. But it must not be overlooked that, severe as it was in its actual effects, it was very largely sentimental in the sense that it was precipitated by fear—fear born of distrust. That is the immediate cause of all panics, but without the superinducing causes this fear would not exist. In our case it was the very seriously impaired credit situation, arising from a multiplicity of contributory causes, which inspired the fear that caused the runs on the banks and trust companies, and the hoarding of the money withdrawn, as well as the withholding of other money which, in the absence of distrust, would have been deposited. To fill the vacuum caused by hoarding, we outdid all our previous efforts by importing about a hundred millions of gold.

This hoarding, and consequent stringency, apart from the issue, in all, of $81,000,000 of Clearing House loan certificates, was responsible for the premium on currency, which at one time was quoted at four to five per cent, for it practically forced the banks to a partial suspension of payments involved in requiring checks to be made payable through the Clearing House, except in cases where they were willing to accommodate depositors with small amounts of currency. But fortunately the premium, which had dwindled to ¼ @ ⅜ on the 31st of December, disappeared at the beginning of 1908. Meanwhile, all through the crisis, large employers of labor had found great difficulty, and incurred much expense, in obtaining currency enough to pay wages; and in Pittsburg and other labor-employing centers, wages were paid largely in scrip issued by the banks or employing corporations. This scrip was so generally issued that in Pittsburg all the street car lines accepted it for fares.

No wonder that these conditions seriously checked buying of all kinds, and caused demoralization and semi-paralysis in industrial corporations, and that hundreds of thousands of operatives were thrown out of employment by the stoppage or curtailment of work in mills and other manufacturing establishments. But the storm being over, and the money market again easy, there is every prospect of gradual, if not rapid, recovery to a normal standard of prosperity in our trade and manufacturing industries. It was not till January 11, 1908, that the Clearing House reported the deficit in the bank reserves wiped out, and a surplus of $6,084,050 accumulated against a deficit of $11,509,550 on January 3d, and at one time of $81,000,000.

It should not be thought, because we imported a hundred millions of gold from Europe to relieve the monetary stress produced by the crisis, that we thereby placed this country under obligations to any other country. The gold we imported we bought and paid for from our own resources, equivalent to cash, in the shape of exports of cotton, grain, petroleum, copper, and other American produce.

These commodities were even more necessary to Europe than the gold we purchased there was to us. So the transactions on both sides were mere matters of bargain and sale, no favor being shown on either side. Indeed, both England and France did all they could to restrict our importations of gold. The extraordinary advance of the Bank of England rate to seven per cent, and its retention there till we discontinued our purchases of gold, furnished practical proof of this. This was justifiable, of course, as a defensive and protective measure for the bank, but none the less it was an obstacle placed in our path.

Its proclaimed purpose was to prevent our taking gold from Europe as much as possible, yet in the face of this heavy handicap we bought and paid for and imported all the gold we wanted, and it was not till after we had stopped buying that the Bank of England lowered its rate to six per cent. This showed that we controlled the Bank of England more than the Bank of England controlled us. We were not assisted; we assisted ourselves, and neither asked nor received favors.

This important fact testified to the strength and wide sweep of our resources, both financial and commercial, and also to the solidity and soundness of our business position, and the foundation on which it rested. The firmness, too, with which we bore the enormous strain of the crisis, and the good order and condition in which we emerged from it, were equally eloquent in testifying to the same effect, and showing that ours is indeed a great country—the greatest of all nations in its material resources and acquired wealth.

The advantage of this is largely shared by us with the rest of the world, both in our enormous foreign trade and the vast amount of money spent every year by American tourists in Europe. If the hundred and fifty millions of dollars spent by them there in 1907 had been kept at home, it might have obviated the necessity of our importing gold to relieve the crisis. Europe has good reason to return thanks for all it gets from us; and what would the trade and commerce of Europe be, in this progressive age, without the United States of America?

The strength, the resolution, and the courage with which the country, as a whole, bore the brunt of the crisis of 1907 augurs well for a rapid recovery from its effects, and paves the way to renewed prosperity and progress; and there is every probability that it will recuperate more swiftly from the great and trying ordeal than it did from the memorable panics of 1812, 1837, 1857, 1873, 1884, and 1893, for its wealth, population, and general resources are now so vastly greater than they were at any of those periods that comparisons are out of the question.

The growth of our banking system alone since 1873 is indicated by the fact that in the very severe panic of that year the New York Clearing House issued only $16,000,000 of Clearing House certificates to the banks belonging to it, whereas in the panic of 1884 it issued $21,000,000, in the panic of 1893 $41,000,000, and in this last panic of 1907 no less than $81,000,000. The crisis was severe but it was purifying, and eliminated a vast amount of unwholesome and dangerous, if not dishonest, speculative elements from the management of many of our banks and large railway and industrial corporations, and left in its place the legacy of a higher standard of business morality than we had before. Hence, perhaps we may say, with Shakespeare, all’s well that ends well, and, with the Bible, out of evil cometh good. At least we have plucked the flower Safety from the nettle Danger.

This view of our country, and the situation, is shared by the banking community of the Old World, who also absolve President Roosevelt from blame or responsibility for the crisis. In this connection a leading London banker, Mr. H. H. Raphael, a member of Parliament and one of the most influential and popular financial men in Great Britain, said, in December:

“We regard President Roosevelt as not only one of the most courageous, but one of the ablest of all your long line of distinguished Presidents. We admire him for his courage and independence. No wonder the heart of the American people is with him; he is giving you a good housecleaning, and you well need it; and although you are passing through financial storm and stress now, we know something of the wonderful recuperative power of the United States, and it will not be long before America will be forging ahead on the highway of economical progress, cleaner and stronger than ever.”

This opinion is well worth quoting because of its evident sincerity. There is no suspicion of politics or office-seeking about the allusion to President Roosevelt, and if one man more than any other in this great country of ours deserves the resounding applause of a national “Hip! Hip! Hurrah!” for his public services, it is President Roosevelt.

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LXXXIII. WALL STREET AS IT REALLY IS. A VINDICATION

Many people, and some newspapers, have a false impression that Wall Street is a gambling arena that does a great deal of harm and no good, and that it ought to be, as far as possible, abolished, while Wall Street speculators have been recklessly and unjustly denounced as gamblers.

But those who know Wall Street well have no such impressions of it, or its speculators, or of the Wall Street community of bankers and brokers. They can, on the contrary, testify that there is no more honorable and responsible body of men in the world than its bankers and the members of the New York Stock Exchange, and that nowhere is honesty, integrity, and good faith more resolutely exacted than on that Exchange, as its constitution, by-laws, and rules clearly show; and nowhere is a black sheep, when discovered, more quickly and severely punished than there. The penalties involve expulsion from membership, or suspension for any length of time the Governors may think proper for violations of its rules, and they are rigorously enforced in all cases. The same remarks, I am glad to say, apply substantially to the stock exchanges in Boston, Philadelphia, Baltimore, and other cities.

During the crisis of 1907, and the exposures of corporate irregularities that preceded it, no members of the Stock Exchange were implicated in the wrongdoing that surprised and shocked the public. The men in control of the life insurance companies that were examined and held up to scorn, for their misuse and misappropriation of other people’s money, were not members of the Stock Exchange, nor were they Wall Street men.

The men who wrecked the Metropolitan Street Railway System were not members of the Stock Exchange, nor were those apostles of unsound banking, the speculative bank promoters who gained control of the three chains of New York City banks to promote their own speculative purposes, and inadvertently paved the way to the panic; nor was a member of the Stock Exchange responsible for the failure of the Knickerbocker Trust Company, or at all involved in that leading event of the panic; nor was a member of the Stock Exchange responsible for any bank, trust company, or corporation failure, or run that occurred anywhere during the crisis, or at any time in the panic year.

Of course there may possibly be undiscovered black sheep in Wall Street as well as elsewhere, for we find them in church pews, and occasionally even in church pulpits; but we should not heap wholesale condemnation upon either Wall Street or the churches on that account.

To call the buying and selling of stocks or bonds, on the Stock Exchange, gambling, is a misnomer, a misuse of the word, due either to ignorance of the transactions there, or malice. It is so whether the purchases or sales are by investors or speculators, for speculation on the Stock Exchange is not gambling. Whether stocks, or bonds, are bought, or sold, by investors or speculators is immaterial between the contracting brokers on the floor of the Exchange. They know no difference whatever. Delivery of the stocks or bonds is made by the one, and received by the other, in every case, and payments made accordingly, at the sale and purchase prices, investment and speculative transactions being treated exactly alike.

A sale and purchase is the work of a moment in the Board Rooms, and no voucher is exchanged to prove it till comparisons are made at the brokers’ offices, usually after the Exchange closes. But no contract thus made in an instant of time is ever repudiated, no matter how heavy a loss it may involve to buyer or seller, for the penalty of such a repudiation would be immediate suspension from the Stock Exchange, followed by expulsion when proved.

Members of the Stock Exchange are not only men of assured solvency and respectability but of good social position, and generally of large means and more than ordinary education and culture. Most of them, too, belong to our best clubs. Any conduct of theirs that was considered prejudicial to the interests of the Exchange would render them amenable to discipline, and be promptly investigated by the Governing Committee, whose duty it is to inflict the prescribed penalties, in such cases, without fear or favor. The fact that a membership has a market value varying from $50,000 to $90,000 is a certain guarantee of solvency and fair dealing under ordinary circumstances. A Stock Exchange membership thus carries with it a large property qualification, and its owner is a substantial citizen, who is, as we know, often one of “the Four Hundred,” or to be seen in our best society, and whose wealth, in many instances, amounts to millions. Preliminary to admission also he has to submit to a searching examination by the Committee on Admissions.

Recent attacks upon the character of the New York Stock Exchange are entirely unjustified and have been prompted by either ignorance or prejudice. If the Stock Exchange were abolished great enterprises would soon be paralyzed. Without its medium it would be impossible to raise the capital for conducting our great railroad and industrial corporations; investors would be deprived of the means of finding profitable employment for their capital, and there would be no free market for the many millions of securities there dealt in. Abolish the Stock Exchange and the free play of market forces which best develop real values; then investors would be kept in the dark and their properties would be exposed to grosser manipulations than ever thought of by stock market operators. The New York Stock Exchange, it should be remembered, is nothing more than a well-systematized market place for the exchange of or trading in securities. From the very nature of its purpose and its organization it cannot exercise any direct control over the management of the corporations whose securities are dealt in by its members. It may establish certain rules as to the conduct of business by its members, and may insist that only securities of certain standards shall be dealt in on its floor. Beyond that it cannot go; and buyers and sellers alike, as in all matters of business, are expected to exercise their own intelligence as to the merits of investments. One thing is certain, that whatever its shortcomings there is no organized body of business men where the standards of integrity are higher and more fixed than on the New York Stock Exchange. Its transactions are carried on chiefly by word of mouth; the spoken word being as sacredly kept as signed contracts. Further, there is a Board of Governors to whom any complaint can be carried, whose purpose is to prevent all abuses within its power and to maintain the highest possible standards of business. All infractions of the rules are promptly punished. Certainly, whoever begins throwing stones at the New York Stock Exchange should first look and see if his own window-panes are not in danger.

A great deal of nonsense is also heard about speculation. Now, speculation, like many other good things, may be carried to excess, and is then injurious and open to the severest criticism. But speculation within reasonable limits is most beneficial. It is one of the main incentives to enterprise. Crush this disposition to venture, or the willingness to accept a risk, and enterprise would languish, trade and industry would decline, and we should gradually settle down to certain industrial and commercial decay. In the present highly developed state of modern civilization speculation is a motive power of the first importance, and being a part of human nature itself cannot be eradicated. In the course of ordinary business, speculation is the natural balance wheel of trade, furnishing a class of operators who are willing to buy or sell when others for various reasons are disinclined. Moreover, by keeping up the conflict between a large body of buyers and sellers the true value of securities or commodities is more safely determined than when speculation is entirely absent. The short seller is always a buyer at a lower price, and therefore a supporter in case of decline. Conversely, the long buyer restrains undue advances by selling to secure his profits. Again, the banker is better able to judge the value of collateral in a free and active market, a factor which is much to the advantage of both legitimate borrowers and lenders who may not have the remotest interest in speculative movements. The giving of credit and the making of loans is very largely dependent upon a thorough test of values such as speculation only often determines. Of course speculation is sometimes carried to excess, and much injury results in consequence. Such excesses which are the consequence of defects in human nature must always be expected and are better corrected by experience and public opinion than by any artificial regulation. Who has not the right to profit from good business judgment, especially if that judgment incurs the risk of the future; and who should complain if his own judgment leads him into losing transactions? Concerning speculation there is also another foolish misconception. Speculation is frequently confounded with gambling, although the two are radically different. Speculation is based upon knowledge and facts, whereas gambling deals solely with chance. It is a fallacy to suppose that any but a small percentage of transactions on the New York Stock Exchange come under the head of gambling. What difference is there between buying stocks and bonds on part payment, or margin as it is often called, and buying land or houses or other property with only one-fifth in cash and carrying the balance on mortgage? Such transactions are speculative, are strictly moral, and entirely a matter of business judgment. All operations entering into the future are necessarily speculative. So far as the New York Stock Exchange is concerned its rules are drawn for the strict purpose of protecting legitimate trading, and an actual transfer of property is required for every transaction. Of course, abuses exist in all trades and will continue to exist, rendering it the more necessary to use a little intelligent discrimination before condescending to loose denunciation, which may easily do much harm and no good.

The President’s attack on options in his recent message to Congress certainly cannot apply to any business transacted on the New York Stock Exchange, as options are not dealt in there. Options of from three to sixty days were dealt in a great many years ago, but were abandoned long since. Every purchase and sale now made on the floor of the New York Stock Exchange provides for a delivery on the day of purchase, or the following day, and payment made therefor upon delivery of the security, and no law can possibly be passed by Congress, or the State Legislature, to prevent a broker thus buying securities for a customer on part payment on terms satisfactory to himself, any more than a law could be enacted to prevent a dry goods, hardware, grocer, or merchant in any other line from extending credit to his customers. Nearly all the business of the world is thus transacted, and could not be done on a large scale otherwise. In London, however, most of the business is virtually on an option basis, as it provides for fortnightly settlements, there being two settlement periods each month, which can be extended from time to time indefinitely at the option of the parties connected therewith.

The method of doing business in “futures” prevails on the Cotton and Produce Exchanges, and could not well be transacted, to the extent of making an active market for the benefit of the producers, on any other basis, in my opinion. To do away with dealings in futures would simply do away with the exchanges, which would be to the disadvantage of the farmers. A farmer, as soon as he ascertains that his crop is secure, makes a calculation of how long it will take to put it in his barn, thrash it out, and transmit it to Chicago, and he sells it to deliver during that month or a later one, thus ridding himself of any further risk of fluctuation in the price, and is made happy thereby. If he is deprived of such a market, it puts him back to the old way of doing business, when the large dealers from Liverpool, Chicago, and other quarters sent their agents direct to the farmers at harvest time, and by bringing all kinds of discouraging influences to bear upon them made them sell at a fraction above the cost of production; as against this they are at present able to hold their crop back and get the highest price. In having the ready market which now exists the farmers have all become rich. Why, therefore, change the present plan, which has given so much prosperity to the producers of cotton and other products, to what might be likely to reverse their present satisfactory condition?

Members of the New York Stock Exchange, in cases of insolvency, are required, by the rules, to immediately notify the Stock Exchange of their inability to meet their contracts, and the selling or buying in “under the rule,” to close defaulted contracts, if there are any, usually follows the announcement of a failure and failure carries with it suspension. But failures in the Stock Exchange are very few and far between, considering that there are eleven hundred members. They are indeed far below the average of failures in mercantile business, and they are generally followed by satisfactory settlements and readmission to membership, and a resumption of business.

This speaks well for both the integrity and the conservatism of Stock Exchange houses. It is very seldom that what would be called a bad failure occurs among them. There are, in fact, no abuses on the Stock Exchange, for trickery and unfair dealing is impossible, owing to the strictness of the surveillance and discipline constantly maintained over the members, who are also themselves punctilious in keeping their contracts and observing the rules, and doing only what is fair and square in business. This is essential to their own interests and success, as bankers and brokers, without regard to the penalty of suspension, or expulsion, for any irregularity. That penalty they approve of, for it is a protection for all of them, except an occasional black sheep that they are glad to see weeded out of the Exchange.

How necessary the Stock Exchange is to the banks was shown during the recent crisis, as in preceding panics, when to protect themselves they were forced to call in their loans by wholesale, and where necessary to at once liquidate the collaterals. It was the Stock Exchange that made this liquidation possible, and saved many of the banks and trust companies from suspension, as well as many bankers and brokers, who were enabled by it to pass through the trying ordeal, instead of going to the wall in Wall Street.

The Stock Exchange therefore obviously performs a great and very useful and important function in monetary affairs, besides being the barometer of values for stocks and bonds, as measured by prices, while the cotton and the grain exchanges perform a similar service with regard to those speculative commodities.

Yet one effect of the crisis of 1907 has been to give a new impulse to Wall Street detraction, and sharpen the teeth and claws of the detractors. While many are mistaken enough to hold Wall Street responsible for the past year’s financial disaster, many more are equally mistaken in declaring that President Roosevelt caused them by his speeches and the Government prosecutions of law-breaking railway and Industrial Corporations. Both charges are unreasonable and false, but this consideration is a small matter to those who have no hesitation in making reckless assertions which they are unable to prove, and who are as ready to vent their spite as they are their prejudices.

Many indeed without knowing anything about Wall Street speculation, and who have never speculated anywhere, blame speculation for a host of evils that are in no way due to it. Some of them would even close the Stock Exchange to stop speculation there, forgetting apparently that this would deprive investors and banking institutions as well as speculators of a market for securities, and make all the stocks and bonds now listed and dealt in there practically unmarketable. In such an event there would most certainly be a fall in their prices greater than any we witnessed in 1907.

It is true that in the manipulation of stocks matched orders may have been occasionally resorted to, despite the rule against it on the Stock Exchange, but it is only because of the difficulty, or impossibility, of discovering or proving it, for there is no body of men subject to stricter discipline, or more amenable to it, than the members of the New York Stock Exchange, nor any more patriotic, as their generous acts during the Civil War, and at other times, have abundantly shown.

Neither should it be forgotten that they pay the State of New York a tax of two dollars on every hundred shares of stock they sell, which is an important source of revenue to the commonwealth. That the Stock Exchange, as a free market for securities, is indispensable to the country is beyond question. It is necessary to our national needs, and I am proud of being one of the oldest of its members, my membership dating from 1864; and I am able from long personal experience and observation to testify to the integrity, soundness, and general good character of my fellow members and the banking community of Wall Street.

Therefore take my word for it that Wall Street is not as black as it is painted, and that anyone’s money is as safe there as anywhere in business, if properly placed, and handled with good judgment. If any of it is lost it is by its owner, and he has only himself to blame for his ill luck. But it is always to the interest of his banker and broker to have him make money, for when a customer loses his money his broker in some degree shares the loss by losing him as a customer.

In conclusion, I hope that if any of you ever take a flyer in Wall Street, you will come out of it, with flying colors, on the winning side, and with a good opinion of the Street proportioned to the magnificence of your success!

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Chapter LXXXIV

THE FINANCIAL AND TRADE SITUATION, PAST, PRESENT

AND FUTURE, REVIEWING THE CRISIS OF 1907, WITH CAUSES AND REMEDIES.[10]

Footnote 10:

An address delivered by Henry Clews at the annual meeting of the Pittsburg Chapter, American Institute of Banking, at Pittsburg, Pa., on Tuesday evening, February 25, 1908.

It gives me no ordinary pleasure to address an audience of Pittsburg bankers, for Pittsburg is the hub of our iron and steel industry, and as it has no rival in the manufacture of iron and steel, it may well feel proud of its supremacy. It is no exaggeration to say that the rise and progress of that industry in Pittsburg is one of the marvels of the age. A few years ago Pittsburg was known in New York as the Smoky City. A little later she became known as the City of Steel and Coal. Now, through the alchemy of the brains of your wise men, she is known as the place where smoke and coal and steel are in some mysterious way mixed up in such a form that they fill your pockets with pure gold. To the millionaire of to-day we bow in deference to his wealth. But to the grimy sons of toil, who planted the seed and bore the burdens of the earlier days, we take off our hats with reverence. The founders of your city chose wisely in selecting this spot for settlement, at the river’s junction, in the midst of rich deposits of coal and iron. It seems rather odd that your two greatest products should be glass, which is brittle, and steel, which is tough. You also excel in producing cork, which is light, and iron, which is heavy. Surely extremes meet in your city as well as rivers. Down our way we wonder what you do not produce when we learn of the diversity of your wares. It certainly seems to me that a man could learn a whole lot if allowed to visit all your various foundries, factories and mills, but it would take him nearly as long as to go through college, as their name is legion. The welcome which you have given me touches me deeply, and I assure you that in future I shall preach the doctrine that there are others in Pittsburg whose mission it is to dispense happiness besides Mr. Carnegie.

If we glance at the history of steel manufacturing in the United States, we find it centered in and very largely confined to Pittsburg, and if we recall the enormous fortunes made in that industry by Mr. Carnegie and many others, under the protection of high tariff, we see one of the greatest wonders of trade development and modern enterprise.

Yet it was not until after the beginning of the war between the North and the South—the great conflict waged from 1861 to 1865—that any large or even considerable amount of steel was manufactured in the United States. But now we lead the world in making it, and Pittsburg is our great source of supply. At the same time, we can justly say that the march of invention and modern improvement in other directions has kept pace with the growth of Pittsburg and our marvelous progress in iron and steel-making.

This reflection is particularly gratifying in view of our recent financial crisis, in which New York was the storm-center, and Pittsburg almost as stormy for a time. But both cities, like the country at large, stood up bravely and made the best of the situation by all the means at their command. Both fortified themselves by a good emergency measure and issued Clearing House Certificates, according to their needs. Pittsburg, however, went one or two better than New York, and, like many other cities, issued scrip; and better still no one in Pittsburg refused it, not even a car conductor for fares. Here was public spirit rising almost to the height of patriotism.

Now, Pittsburg in common with the rest of the country is again about on an even keel financially, with its banks on a cash basis, its cashiers’ certificates and scrip redeemed, and its Stock Exchange reopened. But unfortunately the crisis gave industry a blow from which it has not yet recovered, although conditions are steadily improving all over the United States. The iron and steel industry received the hardest blow of all, and from a feast you quickly passed to a famine, which is a way the iron trade always had. It is proverbially, however, as quick to recover as to collapse; so all we have to do is to keep up our courage and wait, and we may feel assured there is a good time coming. But whether it will come soon, or later, is a question about which iron-masters, financiers, and trade doctors generally are much divided in opinion at present. It is a good sign, however, that work has been resumed in fully three-fourths of the entire Duquesne works of the United States Steel Corporation in Pittsburg, although it is admitted that only 46 per cent of all the Corporation’s works are running.

In September, 1906, when stock and bond prices were manipulated abnormally to a 3½ per cent basis, while six months’ money was loaning at 6 per cent, it was evident that one or the other was too high; and considering the growing demand for the use of money it became quite apparent it was not money that was too dear, but securities. At that time I persistently advised every one to get out of stocks and out of debt, and keep out for a prolonged period.

Since then security values went down prodigiously—$3,500,000,000 would scarcely cover the depreciation at its lowest point of those dealt in on the New York Stock Exchange alone. Our financial situation is vastly different, however, from what it was in any of our previous great panics, of which there have been a number, since that of 1857, which began with the failure of the Ohio Life & Trust Co. at the time of my advent in Wall Street. I have been in all the subsequent panics, and the present conditions differ from those of all the other great financial storms because the wealth of the nation has become so vast as to make it the richest in actual wealth and productiveness of all nations. As a matter of fact, our wealth-making developments have been so extensive and excessive as to have forged ahead of our banking facilities. This has had much to do with our recent setback. Wise and sagacious capitalists saw the handwriting on the wall in Wall Street and elsewhere, and those who did unloaded their securities in 1906, dumping their stocks at top-notch prices, amounting to at least $1,000,000,000, upon weaker-backed people.

This unloading, together with the San Francisco earthquake disaster, which wiped out $350,000,000 of property, struck the staggering blows which did more than anything else to pave the way to the recent panic conditions. The selling out by big holders was followed by all the large railroad systems in the country selling huge amounts of bonds, stocks and short-term notes. These being offered to stockholders of record at apparently tempting prices, were floated. But this great mass of new securities coming on the market was an indigestible one, and absorbed the capital of a very large number of the rich men of the country and put it in fixed form; and most of these heretofore very rich men have ever since been in the position of a man who, having had a “Sherry dinner,” is urged to accept another dinner at Delmonico’s immediately afterwards—his wish strong but his capacity lacking.

What produced the panic was a number of adverse factors happening one after another in rapid succession.

I summarize, briefly, the causes as follows:

FIRST.

The Boer war which left England in almost as bad a financial strait as we were in through the culmination of a similar period of overdoing in trade and speculation in new industrial ventures, together with an excess of new issues of British Consols during the war period resulting in a recent decline in the price of these prime securities to 81—about the lowest price on record.

SECOND.

Germany was in fully as bad a condition owing to extravagant industrial enterprises, rivalling our own, and which required the most careful nursing to avoid a collapse.

THIRD.

France acted alone in financing Russian loans, and in the crisis of the Japanese-Russian war was compelled unwillingly to supply new funds in order to protect the French loans already outstanding. Hence France had little or no money to lend except to the French.

FOURTH.

The Japanese-Russian war brought both of these countries forward for the first time as prominent and important factors in the world’s money market, and both are still, like Oliver Twist, crying for “more.” This conflict and the Boer war combined wasted over $2,000,000,000 of capital.

FIFTH.

Funds were almost unobtainable except at prohibitive rates at the time of our recent crop-moving period, and for causes already mentioned we could not look to Europe for help. Usually Europe discounts New York securities bills for about $300,000,000 at this period, but last year Europe said: “No; we have troubles of our own.”

SIXTH.

The California earthquake with losses of $350,000,000, and the Chili and other earthquakes of less importance and severity in various parts of the world were heavy blows at prosperity.

SEVENTH.

The compulsory unloading of very many millions of dollars of stocks and bonds by large capitalists and operators, together with immense sales of new securities by corporations and railroads, and the manipulation of prices and stocks up to a 3½ per cent interest basis while time money was loaning at 6 per cent, and above, on the best of collateral. Besides which heavy, excessive and reckless operations in real estate and mining enterprises having been made all over the nation, caused large amounts of capital to lose its liquid quality and become fixed.

EIGHTH.

The investigation of the great life insurance companies and the Metropolitan railroad, and the sad disclosures, followed by the absurd fine of $29,400,000 by Judge Landis against a corporation with a capital of only $1,000,000, had a demoralizing effect upon the public mind. This preposterous fine savored of confiscation and alarmed investors.

NINTH.

The Interstate Commerce Commission’s examination of the Chicago & Alton deal and the consequent developments further undermined the confidence of investors.

TENTH.

The making of injudicious loans by the Knickerbocker Trust Co. and the chains of banks, both in Manhattan and Brooklyn, which caused the suspension of the institutions and arrest of officials on criminal charges intensified public distrust, while the collapse of the Copper market unsettled the metal markets all over the world and resulted in a reduction of dividends on copper shares, and a serious break in the price of all that class of securities.

LASTLY.

A gross abuse of our credit system and the consequent inflation of all values, stimulated by loose banking and promoting methods, proved the climax in a series of events which culminated in the sharpest though not the severest panic the present generation has experienced. The main cause of the panic was that of general overdoing. Credit was over-extended; speculation was reckless and ill-advised; expansion of every sort was being carried to excess by over-confidence, until finally the country’s floating capital was practically exhausted through being turned too rapidly from liquid to fixed forms. We have only to glance at the demands upon new capital during the last year or two to realize this fact.

Some idea of the congested state of the stock market may be obtained from the fact that during the last five years the total amount of new securities authorized was $6,800,000,000; the eleven months of 1907 alone accounting for $2,000,000,000 of this total.

During the latter period our railroads authorized $1,400,000,000 securities, of which they were able to issue only one-half, owing to money market conditions. Of industrial securities less than $500,000,000 were authorized, but nearly $400,000,000 of these appear to have been issued.

These figures take no account of the issues of municipal securities, and those of many other business concerns of a minor character, but they are quite sufficient to indicate the extraordinary demands upon the money market during the last two years, demands which in connection with huge speculative borrowings imposed an unbearable strain upon the banks and precipitated the March, August and October collapses in the stock market. Other influences have undoubtedly been at work to cause the breakdown, but no single factor compares in importance with that of the excessive issues of new securities and obligations during the past two years which the country was utterly unable to assimilate.

In discussing the cause of the recent 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.

As I have said, there were many other things that contributed to bring about last year’s depression and disturbance, and to cast over the bright sky of business prosperity the heavy clouds of distrust, reaction and panic.

The recent 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.

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. 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 railroad 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; President Roosevelt can no more be blamed for the recent 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 wrongdoing on the part of many of the great railroad and industrial corporations disturbed the confidence of the public to the core, and paved the way to it.

Being now myself optimistic, I look on the sunny side and hope for the best. It is, however, a time for conservatism, and while trusting in Providence, it is well to keep our powder dry. It is a good time to cultivate the virtue of patience, and make haste slowly until all the aftermath of the panic, in the way of liquidation and the elimination of unsound timber from business structures, is completed.

This will leave everything in the financial and industrial world stronger than before. It will also leave us with a higher standard of business morality resulting from the exposure of looting and other illegal practices and abuses of power in the management of large corporations. The stoppage of the evil of rebating by the railroads is of itself a great gain in this respect, and for this we have to thank President Roosevelt.

As to the future, Pittsburg and the iron and steel trade should be the first to feel improvement in the general business of the country, for iron is still the best barometer of the times, as it leads all other industries in both depression and recovery, and what an eventful history Pittsburg can point to, the world knows.

It was at Pittsburg that the Bessemer process was first applied to steel making in America, and the giant strides in the industry that followed its supersedure of the open-hearth process not only astonished ourselves but all Europe. It was a new departure on a grand scale, this application of science to mechanical methods, a revelation that was marvellous in the trade expansion and wealth it produced.

Yet it is not improbable that before long, if not immediately, the Bessemer process by which this immense development was achieved will be very generally superseded by the open-hearth process of steel making, which originated and had its early development in this country. Thus in the whirligig of time it will displace the Bessemer process, by which it was itself displaced. This, as you are of course aware, is owing to improvements, chiefly by Talbott, an American engineer, in the open-hearth process, which for a long time has been considered almost out of the race in competition with the Bessemer process. This reminds us that history repeats itself.

The open-hearth process has now been brought to such perfection that its superiority over the Bessemer process is declared by many in the trade to be established. Thus practice makes perfect, and time works wonders. Its superiority over the Bessemer process is said to have been particularly demonstrated in dealing with ores of any but a very low phosphorus grade. This American improvement in the open-hearth process has been already widely recognized and adopted in England, and we are in this way repaying the debt we owed to that country for the Bessemer process.

The steel manufactured in the United States last year aggregated 23,246,000 tons, of which 12,275,000 tons were by the Bessemer process and 10,971,000 tons by the open-hearth process. There were also some other varieties of production, copied from processes in use on the European Continent, but the general drift, I am informed, is now towards the open-hearth process.

Out of Pittsburg, of course, I should not talk so much about steel, but iron and steel are Pittsburg’s bread and butter. This reminds me that apart from agriculture the principal sources of our national wealth are minerals and manufacturing. Mining and manufacturing are primary and fundamental industries. Our agricultural income last year, according to the United States census estimates, was about seven thousand millions of dollars, while the metals mined were valued at about two thousand millions, against $1,902,517,565 in 1906.

This metallic product for the year, it is estimated, was turned by manufacturing it into materials having a market value of fifteen thousand millions of dollars. If we add that of agriculture, the metallic products, and manufacturing, together, we have a total valuation for the year of twenty-four thousand millions of dollars. The fertility of our natural resources is here shown by their rapid rate of development. But this, while contributing so largely to our present national wealth, is not an unmixed good. We should always bear in mind that the more we take out of the earth, and the more we strip our forests of timber, the less we have remaining. In forestry, however, we are now preparing for the future by replanting, but we cannot replant minerals.

The mineral products of this country have more than trebled since 1890; more than doubled since 1899; and are more than five fold what they were in 1880. From 1900 to 1906 our mineral product increased at a rate representing a hundred and ninety millions a year.

I am quoting these statistics as a reminder of the vastness of our natural resources, and the recuperative power of the nation, which is one of the most encouraging features of the national situation. These resources are the backbone of the country’s greatness; and those who can see nothing cheerful in the outlook and to whom everything at times looks as blue as indigo, will do well to think of them, for they are Nature’s national banks, that can never fail, and unfailing sources of our national prosperity.

It was these resources, in the form of exports to foreign countries, that enabled us to purchase and pay for—without borrowing or asking favors—the one hundred millions of gold that we imported to relieve the crisis. Here was indisputable evidence of the large international trade balance in our favor, and of our monetary and commercial independence of the rest of the world; and this gold we still hold, although in the ordinary course of commerce we may reasonably export some of it before long, for we have plenty to spare and money is superabundant at two per cent on call in Wall Street. Meanwhile our exports of produce and other merchandise continue extremely heavy, and they were never heavier than during the crisis, that is, in the last three months of 1907, while in January, 1908, they rose to a total value of one hundred and twenty-eight millions, or $17,742,352 more than in January, 1907. This is all the more favorable because our imports since the crisis have very largely decreased. In our January exports, cotton alone represented $76,687,508 of the total, and breadstuffs $24,463,503.

As to our national finances and the defects of our currency system, there is much that calls for reform, but there seems to be little or no prospect at this session of Congress of the passage of a comprehensive financial measure, although it is a remedy we need. We shall therefore have to rest content for the time being with the much amended emergency currency measure, familiar to us as the Aldrich Bill. This provides only for the issue of a maximum of five hundred millions of currency by the Government to the national banks, to ward off a panic or mitigate its effects, the banks to pay six per cent interest per annum for whatever they take of this emergency currency, and give security in acceptable railway, municipal and other bonds for it to the Treasury.

So far, so good. I am, therefore, strongly in favor of the Aldrich measure as a panic remedy, naturally so as I originated the fundamental part of it. It will do much to prevent panics, and will effectually stop the hoarding of currency that accompanies them, for what inducement would there be to hoard it when a supply of five hundred millions of new currency would be open to the banks? There could be no extreme scarcity of money then; nothing in any way approaching the stringency that not only New York but the whole United States suffered under in the last three months of 1907.

Yet the great remedy, the comprehensive financial reform measure we need will be ultimately passed by Congress, and its provisions will include the modification of the Sub-Treasury system, which has always been a source of much mischief through locking up Government money received for Customs duties and internal revenue taxes, that ought to be kept in circulation. The proposition, however, to establish a central national bank in New York, or anywhere else, as a substitute for it, is to be strongly deprecated. It would be a rich plum for those who controlled it, but would excite the jealousy and hostility of all the other banks. Moreover, such a bank would in effect be a revival of the old United States Bank, against which, and the scandals and corruption connected with it, President Jackson made war so vigorously as to force it into liquidation. The second experiment of a United States bank was no less involved in scandal and no less a failure than the first, and in each case there was the same inglorious end, compulsory liquidation. Both, too, were used as political machines, and guilty of favoritism and many abuses of power, and a new central bank would give us another big political and speculative machine, liable to the same evils and objections. Therefore all bankers should resolutely oppose a central bank. It would not be a remedy for any of the evils complained of, but, instead, furnish us with a new complication.

While we can hardly expect any fundamental changes in our currency system at present, one improvement might easily be made in it by Congress at once, and that is by the removal of restrictions on the amount of national bank notes taken out or canceled per month, as well as by establishing a bank-note redemption bureau at every United States Sub-Treasury, so as to save the delay and expense of sending to and from the Redemption Bureau at Washington, that all the national banks are now subjected to. As a minor remedy this should be urged upon Congress.

Turning to the United States bonds pledged with the Treasury to secure the national bank notes, we all know that they are as good as gold, if not better, but still they are evidences of debt, and it is a false economic principle to issue currency on such a basis. Moreover, it is costly for the Government, for it practically and permanently prevents it, in the interest of the national banks, from redeeming the bonds deposited to secure national bank notes, out of its surplus income. Still it has great merit in giving us a safe and sound bank currency. Ultimately this system, born of the civil war, will be superseded by a better one, but this will doubtless be done in a manner which will not interfere with or impair vested interests.

Owing to the short time now left of this session of Congress, nothing more than the “Aldrich” bill can possibly be enacted at this time. Its simplicity is a recommendation to Congress. But, nevertheless, Congress should later pass a permanent currency bill, a bill which will settle every question as to the finances of the nation, at once and for a century to come. Such a bill is possible, and in fact it would be the simplest kind of measure for the Government to adopt—one to provide for just the kind of currency, and the amount of currency the business of the nation, the banks, and the people should have; one to provide for a perfectly elastic currency without creating the slightest depreciation of money or danger of loss to banks or Government. It should provide a perfect way of obtaining money to move the crops, and furnish an all-sufficient means of preventing or breaking panics. It should make the money of the United States still more current and acceptable in all parts of the world. This would make the nation greater in the eyes of other nations, and give the United States Treasury a proper command of the commerce and finances of the world, within ten years after being put into operation.

All the Government need do to effect such change in the finances of the country, and to acquire all such advantages for the Government and the people, in my opinion, is to wipe out the whole system of National Bank Currency, and give such banks, or any banks, Government currency direct, upon the same securities and such other kinds of securities as the Government is willing to accept, and permit the banks to increase or diminish the amount it obtains whenever the business of the banks requires it; every bank to do no more than give sufficient security for the money. The Government need do no more than to take the security and hand the bank the money. The Government should be paid for the use of the money a low rate of interest, say one per cent. No bank should be required to pay more.

The credit of the Government will be all sufficient for the credit of the currency, and every dollar of it would be perfectly secured by the security given the Government for it by the banks. The issuing of the money by the Government under this system would not injure the credit of the Government in the slightest degree. Banks should be allowed to increase or diminish the amount of money they obtain in amounts which can be decided by the law. Such a system would be satisfactory to all the people, except the national banks. These banks have been given the privilege of having their names on the money they issue long enough. The money of the banks has ever been Government money. The Government has promised to pay it if the banks did not, and has had the means of paying. Let the Government do as it should: issue all the money. Let it be circulated by banks which give proper security for it. Enlarge the means of securing the Government, by accepting State and Municipal bonds, or even Railroad bonds, to the extent of say 50 per cent, and Government bonds for the other 50 per cent.

The amount of additional business this change in the finances of the country would make the Government, would be no greater than any other change would make, and would be much less than what will be necessary if the present bill before the Senate is passed. All the great work and expense of settling up the affairs of broken national banks and paying off their notes will be stopped.

There would be no such things then for the Government to settle. The Treasury can be required by the law to keep all the currency issued for the purpose, that may be taken up, distinct and separate from all Treasury receipts from other sources.

The severity of the panic ordeal of 1907 that the New York banks passed through was reflected in the issue to them by the New York Clearing House, on and after October 22d, of, in all, a hundred millions of loan certificates, although the largest amount of these outstanding at any one time was eighty-four millions. This form of banking relief is purely American and has never been adopted in Europe. The maximum issue of Clearing House loan certificates in the panic of 1893 was $41,690,000, and in the panic of 1873 $26,565,000. But in 1893 New York bank deposits were only $400,000,000; in 1907 they were $1,050,000,000, exclusive of Trust Companies. The maximum of certificates in 1907 was reached in the third week of November, but the Clearing House banks showed their largest deficit in reserve—$54,100,000—in the first week in November. Simultaneously the loan certificates issued by the Boston Clearing House reached their largest aggregate, $11,995,000. It is noteworthy also that three powerful New York banks then held one-third of all the loan certificates issued by the New York Clearing House. One of these held $13,500,000; another $10,000,000; and the third $7,500,000. The obvious object of this was to enable the strong banks to loan a part of their cash reserves to weak associates.

The Clearing House Committee and the New York banks individually and collectively did splendid work in mitigating as far as possible the effects of the panic, while the Secretary of the Treasury, Mr. Cortelyou, rendered very valuable service by co-operating with the national banks to reduce the monetary stringency through large Treasury deposits and facilitating the importation of gold.

Mr. Morgan and several other private bankers also rendered praiseworthy service during the panic, and my firm did its part by loaning to the members of the Stock Exchange, at the most critical period, three million dollars at moderate rates of interest.

The New York Clearing House is a non-incorporated association, but its reserve is the foundation for an enormous amount of the country’s commercial credit. Of course, the banks and others holding practically unsalable collateral for loans, that the borrowers were unable to repay, were forced to help the borrowers and save themselves from loss by continuing to hold them through the crisis for a better market. There were many cases of this kind, particularly among the Trust Companies, and there has been much slow and careful after-panic liquidation of such collateral, and much of it has still to be done. It is, however, being facilitated by the decided improvement that has taken place in the market for first-class bonds.

Capitalists who for the past two or three years had been dissatisfied with the returns of ordinary investments and who had gone into hazardous speculations and extensive underwriting of new bond issues in the hope of large and quick profits, have been sobered by their heavy losses and are now seeking safety in prime investment bonds.

Had the market for bonds not improved as it has, it would have been practically impossible for the New York Central and other Railway Companies to have marketed the large amount of notes they have succeeded in selling since the beginning of this year. The after effects of the panic, as well as the panic itself, would also have been far worse than anything we have witnessed had it not been for the previous heavy stock-market liquidation, a liquidation that in many cases had been practically continuous from the end of 1906, and that was most drastic and disastrous in August, 1907.

That the banking situation has become normal is indicated by the elimination of loan certificates and the resumption of normal methods by all the Clearing Houses in the United States, and particularly by the resumption of the weekly detailed bank statements by the New York Clearing House. This occurred on February 8th for the first time after their suspension on October 26, 1907, and was supplemented by statements of the non-Clearing House banks and Trust Companies, including actual as well as average conditions. This last is a new and commendable feature, which every Saturday will enable us to learn how all the banking institutions in New York City and its several boroughs stand, both individually and collectively, in their average and their actual condition.

That we are assured of a superabundance of money at low rates of interest is evident from the large and growing accumulations of surplus funds in the banks from Maine to California, and the light demand. All the indications favor a protracted period of extreme ease in the money market, modified only by gold exports and the withdrawal by the Government, from time to time, of some and probably a large part of its deposits in national banks. This again reminds us that the Sub-Treasury system makes the Government an unlimited hoarder of money, with only evil results. This, alone, calls for its modification.

But while the large aggregate of the surplus funds of the banks testifies to the return of confidence, and with it the return to banking channels of hoarded money, it also reflects the dullness of trade and much idle machinery and unemployed labor. Hence the bank clearings of the United States in January were twenty-five per cent less than in January, 1907. This condition of affairs has been and still is severely felt by the Railways, whose largely reduced gross and net earnings and long lines of empty cars tell why a number of them, like many industrial corporations, have reduced or passed their dividends, or paid them in scrip. More railway and industrial corporations will probably have to accommodate themselves to circumstances and do likewise in consequence of reduced earnings. That we expect, and are prepared for, while the trade depression lasts, and hence we all hope and trust it will be short.

Meanwhile we cannot ignore the political situation in this Presidential year, and the disturbing and depressing effect of the recent message of President Roosevelt to Congress, with its onslaught on Wall Street, followed by the unjust bitter attack of Mr. Bryan on Stock Exchange speculation, which he denounced as gambling. Wall Street was thus ground between the upper and nether millstones of the Republican and the Democratic parties; it was fired on from both sides with hot shot, grape and canister, without any good reason.

Speculation in stocks, as conducted through Stock Exchange brokers, is no more gambling than speculation in real estate or ordinary merchandise. All trade is more or less speculative because it involves risks. If it did not involve risk there would not be so many mercantile failures as there are every year, yet no one calls trade gambling. Every time a merchant buys a line of goods, he makes a venture, not knowing whether they will rise or depreciate in market value on his hands. He buys also on credit, just as he gives credit to his customers; and what is the difference in principle between this form of credit and the credit a stock broker gives his customers who pay ten per cent on the par value of their purchases while the broker provides the balance and holds the stocks as security? This is the margin, which is a credit in the account of each of them; and I call it a credit instead of a margin, which is a better word for brokers to use.

The present anti-speculation crusade is accompanied by many delusions and very imperfect ideas concerning the conditions and equities of business operations. Who is to decide which are speculative transactions and which are not? Business cannot be conducted without making contracts entering into the future, and that is speculation. The builder who contracts to build you a home is a speculator; the manufacturer who agrees to deliver a thousand cases of cotton goods sixty days hence is dealing in futures, and all operations extending into the future are unavoidably of a speculative character. Even marriage is often called a lottery. It is quite impossible and thoroughly stupid to try to eliminate speculation, for it is an essential element in all business transactions, except those for cash. If business were reduced to the latter basis, it would soon become injuriously restricted and more exposed to corners and violent fluctuations than ever.

As to legitimate or illegitimate speculation, who is to decide between the two, and where is the line to be drawn? If the investor buys securities in advance of his income, expecting to complete the purchase later on, is that legitimate? Suppose circumstances compel him to change his mind and sell before his original purchase is completed, is that legitimate? And in what respect does such a transaction differ from the ordinary marginal contract? It may, perhaps, differ in intent; for the speculator usually buys with a view to taking advantage of temporary fluctuations. Yet, who would be bold enough to investigate the intentions of buyers or sellers? Only the most drastic kind of force could compel divulgence of such secrets, and is it possible to establish any such system of espionage in this country? Speculation, as often stated in these advices, when confined to reasonable limits is beneficial. It is the natural balance wheel of commerce and finance. By its means and through the conflict of opinion between buyers and sellers real values are established by simpler and more reliable means than by any other known methods. No Government investigation will ever ascertain the real value of our railroads so well as the higgling and bargaining between buyers and sellers, which is alike the moving spirit of commerce and the arbiter of values on all Stock Exchanges the world over. Speculation is liable to be carried to excess, and abuses in speculative methods undoubtedly exist; but these are better corrected by a strong and elevated public opinion than through any legal measures based upon political claptrap. There is a flood of nonsense in this campaign against speculation, anti-option, etc., which does not find believers here but may in other parts of the country. It consists very largely of political humbug, and is nothing more than one of the usual methods by which crafty politicians play upon the ignorance and prejudice of the masses for their own advantage. After the elections this mania will probably pass away, to be then recognised as one of the psychological features usually following a panic. Previous instances of this sort of agitation were the granger and populist movement, which exhibited many of the present symptoms of political insanity. Nevertheless, such agitation may do serious harm, and its fallacies should be fearlessly exposed in order to prevent the people from being deceived and misled. Even now this agitation, especially us manifested in hostile State Legislatures, is seriously interfering with that restoration of confidence that is absolutely necessary to business recovery. It is keeping both capital and labor idle. Capital is proverbially timid, and until such attacks cease enterprise is sure to be more or less repressed. Of course there are abuses that need rectifying, but it is folly to carry restraint to the point of extinction. Because a few individuals play golf to harmful excess, would any sane person suppress so wholesome a sport? Yet that is precisely the policy of many of the reformers of the present day. Too frequently these reform movements savor of ignorance. Their purpose is frequently admirable; but the country sadly needs more sanity in their application.

President Roosevelt condemns “options” very vigorously, as if they were now dealt in on the Stock Exchange, as they once were, ranging from three to sixty days; but they have not been traded in there for many years, all purchases and sales of stock being deliverable and receivable on the day following the transactions on the floor of the Exchange, except those specifically for “cash,” which means, to be delivered and received the same day. But on the Cotton, Produce and Coffee Exchanges, and Chicago Board of Trade, nearly all the transactions are in “futures”—and these are a boon to cotton and grain growers and coffee importers, who, through them, can sell their growing crops and importations months before they actually possess and are ready to deliver them, so in advance making sure of the prices they will get for their farm products and importations.

This is speculation, yet perfectly legitimate, and I think that if President Roosevelt and Mr. Bryan knew more about these markets and the N. Y. Stock Exchange from actual experience, they would see the injustice of much that they have said in decrying the evils of speculation. Black sheep and exceptional wrongdoing should not be held up as examples of all and everything in Wall Street; and because unscrupulous men sometimes embezzle in order to get money to speculate with, Wall Street should not be held responsible for their crime, any more than a river should be blamed for a man’s suicide because he jumps into it to end his troubles. There is nothing illegal or against public welfare in a broker buying and selling stocks and bonds for his customers in conformity with the rules of the N. Y. Stock Exchange, nor can there ever be; and I know that such business is just as honorable and legitimate as the buying and selling of iron, dry goods or real estate on credit. It is credit that keeps alive the business world.

The attacks on the financial center of this country are indiscriminate, and I am sorry that President Roosevelt, who has done so much good in other respects, should have nipped the bud of reviving confidence in the stock market in the way he did, for his denunciation of Wall Street, coupled with Mr. Bryan’s wholesale and wild condemnation of the Stock Exchange, led to a renewal of liquidation in the stock market, and a fresh decline in prices through creating fresh distrust of their holdings among investors.

The New York Stock Exchange is a great national and international market, and its 1100 members compose a very honorable and wealthy body of men, whose integrity in all their business transactions is unquestioned. They are bound not only by the rules of the Stock Exchange to be absolutely honorable and strictly honest in their dealings, but their own interests and their relations with their fellow members and their customers compel them to be so, and to be also above suspicion. Summary punishment, even to expulsion from membership, would follow any dishonorable or dishonest act on the part of any of them, and such instances are of extremely rare occurrence. It is therefore unjust to stigmatize these men, these bankers and brokers of good business standing and good social position, in the manner they have been stigmatized recently by Mr. Bryan; and again I think that if he knew Wall Street better than he does he would have been more discriminating, and would have confined his severest criticism to the speculative capitalists who have probably at times abused the Stock Exchange by the manipulation of stocks.

The so-called practice of “washing” is strictly prohibited by the rules of the Stock Exchange, but as it is very hard to detect and prove, in some instances, doubtless it may possibly have gone unpunished. The Stock Exchange, however, earnestly endeavors to ferret out and prevent and severely punish all violations of its rules.

After every great panic, the Stock Exchange has been made a scape-goat, and unjustly assailed as the main cause of the trouble. The fact however that the two great opposing forces in national politics are now united in their attacks upon Wall Street is unusual, and foreshadows more attacks of the same disturbing character during the presidential campaign. This is a depressing factor in both the financial and trade situation, and we see evidence of it in all directions. It is, of course, a factor that retards recovery from the crisis by retarding the growth of confidence, and how far its influence will extend we have yet to see. But of one thing we may be sure, and that is, we shall be reminded of it very forcibly from time to time from the batteries on both sides of the political battle ground until after the November election; then the guns will cease to belch their thunder. Hence we must be prepared for it in the interval and make the best of it, remembering the old adage-“Forewarned, Forearmed.” But never before has politics hurled its javelins so fiercely against Wall Street, and that practically means all the Stock Exchanges in the country. The joint attack is against stock speculation, and no Stock Exchange in the world ever was or ever can be free from that. It would obviously be absolutely impossible to distinguish investment from speculative transactions on the floor of the Stock Exchange, or tell whether long or short stock was being bought and sold. Because speculative capitalists in control of large corporations have managed them dishonestly for their own benefit, and in furthering their schemes and speculations employed stock brokers and used the Stock Exchange, it and its members should not be held responsible for the wrongdoing of these men, as it is a market open to all the world, just as is the London Stock Exchange or any Bourse in Continental Europe. To restrict its scope and operations by law would be to lessen its usefulness to investors and corporations issuing securities, and destroy its utility as a free market for all.

Wall Street being not only a local but a national and international financial center, the whole world, not only the whole country, is tributary to it, and it is indispensable to the whole country. Yet it is made the target at present for all sorts of political abuse, and various schemes have been urged for suppressing trading in stocks, all of which are of course chimerical, for as long as we have securities, there must, in justice to the millions of holders, be a market for them. Without it there would be a sort of chaos of confusion and abnormal prices, for it is the speculator who is often the most keen and discriminating in judging the true value of securities. The much maligned “bear” is the safety valve of the market. He often prevents the manipulation of the price of a stock to an unfairly high figure by exposing the weak points in the situation, which is a protection to a prospective buyer.

A great deal of shallow abuse is still being showered on the Stock Exchange from all parts of the country. This always follows a panic. It pleases a certain class of ignorant and misguided people to hear Wall Street denounced and maligned on every opportunity. It matters little whether the accusations are right or wrong. So pessimistic is public opinion that the worse the charges the more numerous the believers. No one looks on the other side; no one is told of the manifold services and advantages of Wall Street as a financial center. No one is taught that Wall Street is merely a central market for capital, just as Chicago is for wheat, Boston for wool, New Orleans for cotton, etc. How many appreciate the fact that Wall Street is as essential to the business life of the country as is the Legislature at Washington to our political life? How many realize that Wall Street is the primary nerve center of the American business world; that a blow struck there is an injury to the whole financial and business fabric of the nation? How many forget that in Wall Street the investor can deal with greater advantage to himself, as a rule, than in any other financial market? How many understand that there the country can best settle its accounts; send its savings, and make its investments more readily and on better terms than anywhere else? The very individuals who most violently abuse Wall Street are often among the first to go there for financing new enterprises or to pick up cheap investments. Thither, also, these same grumblers hasten in order to “get rich quickly.” When they succeed nothing is heard about the “wickedness” of Wall Street, and they flatter themselves as to their own superior shrewdness. But when these same individuals lose, then Wall Street is nothing but a “gambling hell and a cesspool of iniquity.” They fail to recognize that their losses are the result of their own cupidity, or inability to discriminate between sound and unsound investments. They usually lose because of their own bad judgment; but nevertheless, there is no end to their objurgations.

Now Wall Street after all is little different from any other department of business and industry. Its makeup naturally includes men with similar failings and similar impulses to good and evil that exist everywhere; men who are better than the politicians who make capital by abusing Wall Street; men who are better than some of the trusts or the unions which aim to selfishly and often relentlessly grasp all within their power. It may also include a very few who unscrupulously manipulate property for their own advantage and at every opportunity. But it also includes a vast majority of men of high principles, of great foresight and of enlightened self-interest; men who recognize that their own welfare is dependent upon their regard for the welfare of others. Most of such men are rarely heard of, and their good deeds and honorable achievements are not exploited in the daily press, which is naturally interested in the search for the abnormal. Wall Street probably contains a much larger percentage of strong brainy men than any other community, because right there centers the management of large affairs and great organizations which demand the highest ability. True, Wall Street attracts some men of unscrupulous and predatory instincts because of the great opportunities for accumulating wealth by devious and often improper methods. The occasional flotation of questionable schemes and the improper use of funds held in trust undoubtedly are sometimes among the greatest evils connected with Wall Street. They are evils that its best men are most anxious to see eliminated, and it is satisfactory to know that strong efforts are being made in this direction. It cannot be too strongly stated that many of the abuses which aggravated the late panic could not be repeated, and have been stopped forever. Whatever defects remain, the business standards of Wall Street are upon a distinctly higher plane than existed some time ago. In spite of troubles and pessimism the world is growing better and better. But so long as fools with money are to be found, just so long will there be sharpers ready to take the one and leave the other. It is useless to expect the millennium. Human nature changes slowly, and the only means of checking abuses is to establish rules and standards of a high order, and to keep alive a public opinion that will insist upon their enforcement. An alert and vigorous public opinion is often more effective in preventing evil than the punitive measures which are applied after the wrong has been done.

No king, on being crowned, was ever prouder or happier than I, when I first stepped on the floor of the New York Stock Exchange as a newly elected member. The pride that I felt at that time has grown and increased every year since that day, so long ago, as I have seen the Exchange grow in influence and moral power. There is no body of men in the world superior to the members of our Exchange in honor, integrity and truthfulness. Every transaction on the floor is done on word of mouth. Sales involving millions of dollars are consummated without a scrap of writing, and it is a rare occurrence that even a dispute arises over a transaction, and even then, unless a witness can be found to the transaction, the matter is settled usually by each party assuming one-half the loss, as both the buyer and the seller know that the other is just as square and honest as he is, and that the dispute is over a misunderstanding and not a misrepresentation. Many people are wont to worry over the nervous strain under which their friends in the Stock Exchange are laboring in busy times. Their worry is unnecessary, as the busy time on the “Street” is the happy time. Many people pretend to be shocked at the want of dignity which prompts the members to skylark and act like boys. Don’t be shocked. This is the recreation which offsets the strain and keeps the members young. One of the most impressive scenes that can be witnessed is viewed from the gallery on the morning of a very busy day. At five minutes to 10 the members are seen quietly gathering in little groups around the different “posts,” chatting and smiling—at 10 o’clock exactly a gong sounds which announces that business can begin. Every man on the floor commences to yell and paw the air, and one who did not understand would think that he was watching the working room of bedlam. But if he watches closely he will see that order reigns in seeming chaos. Automatic signals on the walls, quickly moving pages and telephone clerks in the booths at the side of the Exchange room, all work in harmony, and the great machinery “moves in a mysterious way its wonders to perform.” Almost everything in the country, yes in the world, has its influence in this great market. The grains of wheat, the kernels of corn, the bolls of cotton, the chinch bug and the boll weevil: each has a vote. The miner deep in the bowels of the earth and the crew on a swiftly moving railroad train, the track walker and the laborer are all exercising indirectly an influence. All the great railroads and industrial corporations come to Wall Street in their time of need, and if their object is worthy they do not leave with their wants unsupplied. Wall Street proper, as represented through the New York Stock Exchange, is the barometer of the country. Every man, woman or child who has a dollar invested or deposited in a savings bank is interested in the good or bad times which prevail in the Street. In times of great disaster or need, the members of the Exchange are the leaders in contributing to the relief of the afflicted. There is a lot of good in Wall Street that outsiders know nothing of; if you are one of them, find out the truth. Be sure to hear witnesses on both sides. Honor and truthfulness are the cornerstones on which the whole fabric of business in Wall Street is built, and confidence is the keystone of the arch that covers all transactions. The fact that a weak spot is occasionally uncovered proves the strength of the general structure. There is no place in the world where the measure of confidence between employer and employee is so large and where loyally to each other is so marked. In whatever business a young man intends to embark, a year or two in Wall Street is a good training, as he will learn much that will benefit him in after life. He would realize the necessity of close attention to work and the true application of the principles of the Golden Rule. In these times of reckless denunciation of Wall Street a general application of this rule by those who attack by innuendo and without a scintilla of truth would help to restore confidence and give evidence of fair-mindedness on their part. Men in high places prefer charges and the very wording of their complaint proves that they are beyond the depth of their knowledge. Wall Street will survive all attacks, and the refutation of these attacks by well-meaning but mistaken men will in the long ran redound to its lasting good. This is a time of trial by fire in both business and private life, and those who have nothing to fear will come out of it unscathed, and the New York Stock Exchange will be in the front rank of those declared guiltless and worthy.

Possibly there are a few abuses undiscovered on the Stock Exchange that should be remedied. Nevertheless, I affirm without fear of contradiction that there is no business institution in the United States where standards are as high or where the integrity of its members is equal to that prevailing on the Stock Exchange. Therefore, let the people and our Legislatures come to their senses, and awake to the fact that in striking at the financial district they are hurting themselves quite as much as those whom they seek to destroy, and that the evil transactions are small in comparison with the good. Let them understand that in fomenting discontent of this sort they are intensifying the general depression, adding to the number of unemployed, driving capital into hiding and generally interfering with that recovery in commerce and industry which is now so earnestly desired. The present antipathy to Wall Street savors largely of public hysteria, bogyphobia and political dementia. Apparently, it is a disease which must run its course; if so, the best cure will be a period of reflection in which to cultivate calmer and more rational views.

At the same time that Wall Street is being riddled with hot shot, the railways are being harassed by State legislation, involving low rates, and projects are on foot that in effect would prevent their development to meet the wants of the people. All this is oppressive and inimical to the national welfare, and I advocate as a remedy removing the interstate railways from the control of the States, and placing them entirely under the control of the United States Government. This Congress can and should do promptly.

Another great difficulty the railways and other large employers of labor now have to contend with is the refusal or unwillingness of the Labor Unions to consent to a reduction of wages to meet reduced earnings. A lowering of wages has become absolutely necessary, for they are still at the high figures to which they were pushed during the long period of prosperity. They are at a boom level that railway and manufacturing corporations cannot afford to pay in these altered times. The Labor Unions should recognize this at once, and reduce their wage scales, and not wait until they are forced to yield. Moreover, they should see that with reduced wages a larger number of men could be profitably employed than is possible with wages as they are, and in this way the ranks of the unemployed would be reduced. This of itself would be of great benefit to both the working men and their employers, as well as to the country at large. It is a time when common sense should be brought into play in the adjustment of means to ends in wages as well as other matters, for the more it is the quicker will be recovery from the effects of the panic, and the less will be the suffering from industrial depression by labor as well as capital. This in the concrete means that it would result in there being fewer workmen in actual want, and fewer corporations going to the wall. It is one of the great remedies that the situation now calls for.

A general reduction of wages would to almost a certainty cause some mills that have closed to reopen, and cause others that are running on part time to run on full time. The advent of Spring will of course tend to stimulate recovery, so we shall have the help of Nature to repair damages. With Nature as an ally, we ought to rapidly overcome all obstacles in the way of complete recuperation.

Readjustment of existing conditions is the order of the day, and where there’s a will there’s a way, as we all know. The general reduction that has taken place in the price of commodities, and to some extent in rents, furnishes a very good reason of itself why wages should be reduced from the high points to which they climbed to meet high prices. As it is, the inequality between wages and prices is very conspicuous, and equality should be restored as quickly as possible. Equality is another name for justice. It is also the touchstone of taxation. Workmen should not forget that even half a loaf is better than no bread, and that by accepting reduced wages they are paving the way to better times for themselves as well as for the country. Then, too, they owe a duty to society at large. No one should be governed by the narrow, selfish policy of living for himself alone. This is a world in which we must give and take, and labor and capital have mutual interests.

The decline in commodity prices, that were before excessive, has been salutary and of vast benefit in bringing the necessaries of life within easier reach of the wage-earning masses, and in preventing many industries from going from bad to worse, through cheapening their supplies of raw material. The people generally, as consumers, benefit by this reduction in the cost of production, and in turn it tends to increase consumption and quicken trade and manufacturing enterprise. All these influences, too, toad to strengthen confidence in the situation and hope for the future. But the over-trading, extravagance and excessive speculation that primarily led to the panic should be carefully guarded against in the future.

The very severe and extensive liquidation that we have witnessed, not only in Wall Street but all over the country, has made the financial situation sounder and therefore safer than it has been for several years, for it must be confessed that many of our speculative captains of industry and finance passed far beyond the bounds of conservatism in their operations, and invited the crisis we experienced by their reckless assumption of inordinate risks and liabilities.

It was a fitting retribution when some of them were engulfed by it. Especially culpable and dangerous to the public were those speculative capitalists who sought and gained control of chains of important national banks, and then used their resources to extend their own hazardous speculative schemes. These men were really the immediate cause of the crisis, and they are now deservedly paying the penalty for it. But this is a small consideration in comparison with the enormous amount of havoc they created. One good thing, however, has come out of so much evil, and that is improvement in our banking condition, by the exposure and eradication of this unsound banking that prevailed in New York, and to some extent elsewhere.

We shall, in this generation at least, have no more such speculators stepping into control of large New York banks and using them pretty much as if they, their assets and deposits, were their own property. Those responsible for this unsound banking were public enemies, and we are still feeling the effects of their reckless and illegal proceedings. The fact that several of them are now under indictment for their offences is a reminder that the way of the transgressor is hard. Their elimination from the banking world removed a source of great danger, which might, if allowed to continue longer, have resulted in a far worse state of things than they actually created before their career was brought to a close.

A salutary effect of the panic is the check it has given to extravagance and waste in living expenses, and the practical lesson in economy that it has taught very many, for economy is wealth. To reduce expenses after business reverses is the best way to recuperate, and a little adversity is not without its uses among us, for we are beyond question the most extravagant people in the world. This extravagance in living has been the prime cause of much of the “graft” evil that has lowered the tone of our business and political life, to say nothing of abuses of power, embezzlements, corporation-looting, and other forms of dishonesty.

President Roosevelt in his war against illegal and dishonest corporate practices has certainly worked for the good of the country and to raise the standard of business morality; and the life insurance, railway and other corporate scandals that we are all familiar with have shown how much reform and purification were needed even in high places. Let us never forget, as the Bible tells us, that “Righteousness exalteth a nation” however great may be its material prosperity.

That there is a very large amount of money lying idle and available for investment in first-class bonds was conspicuously shown by the result of the sale by the City of New York on February 14th of fifty millions of four and a half per cent bonds, when three hundred millions were bid for, at an average price of about 104¾. This oversubscription of six times the amount offered came from people who would not have touched any but gilt-edge securities.

Of course, the present cheapness of money accounts for much of this large New York subscription, as apart from investors, banks and bankers are seeking safe employment for their surplus, in securities that can be promptly marketed on the Stock Exchange whenever necessary. The latter is an indispensable condition with them, particularly now in view of the national banks being enormously indebted to the Government in the shape of Treasury deposits, and also in view of the future needs of the Government calling for their return. This is already giving a hardening tendency to time money.

Although trade is largely prostrated through inactivity, it is safe to say, notwithstanding what is bad in the situation, that fundamental conditions are generally sound, and therefore recovery while gradual will be the easier for it. Meanwhile with inactivity forced upon us, let us be masterly in our inactivity, and make a virtue of necessity. There is much in knowing when to stop and when to go ahead; when to ’bout ship and when to take in sail, and double reef the mainsail and the topsails, or heave to, and when to sail under bare poles or a full spread of canvas. Skillful navigation is necessary to success.

With regard to bank reserves, it is especially important during this period of depression that they should be kept exceptionally strong and as much as possible, within reasonable limits, above the required percentage. Twenty-five per cent of reserve against deposits in the central reserve cities, and especially in New York, is not always sufficient, as we have seen, from time to time, to enable the banks there to weather a storm.

The Bank of England maintains an average reserve of nearly twenty-five per cent larger than that; and it is guarded from suspension in times of panic by a suspension of the bank act by the Government, which allows it to issue its notes ad libitum without any compulsory reserve. Here are two elements of safety. The stronger in reserve the banks keep themselves, the more confidence in them and in the situation will be strengthened, and the stronger confidence becomes, the more enterprise can build upon it. So the banks by their conservatism should do all they can to encourage confidence as the prime requisite in recuperation.

The New York banks, holding as they do largely the reserves of other banks throughout the country, should hold a reserve nearer to that of the Bank of England, which is also the depository of the reserve of other banks, but in a much larger proportion. If the New York banks had held thirty per cent reserve last October, when the Knickerbocker Trust Company failed, there might have been no necessity for issuing Clearing House certificates, and in that case there would have been no hoarding of money and little or no panic. But the banks are naturally desirous of making money by keeping their loans and discounts at high figures, so they are apt to look upon reserves above the legal limit as money wasted. The legal limit, however, is too low in the central reserve cities. My remedy is to raise it. It ought, in my opinion, to be at least thirty per cent instead of twenty-five per cent, and apart from any legal requirement, the New York Clearing House should adopt a rule requiring the banks in the Association to keep a reserve of thirty per cent. The banks would lose a little in profits by this change, but they would gain in safety, and reduce our liability to panics. Their experience during the crisis, when for ten weeks, until the end of December, currency loaned at a premium ranging from two per cent to five per cent, should make them anxious to avoid another such ordeal, and an ounce of prevention is better than a pound of cure.

One unpleasant part of the aftermath of the panic in New York was the failure in one week, at the end of January, notwithstanding that they held five millions of loan certificates, of four banks belonging to the Clearing House, because of runs on their deposits, and the refusal of the Clearing House to give them further assistance. Whether or not any of these will be able to resume is still undetermined. Yet, in sharp contrast with the excitement and alarm that prevailed for weeks after the Knickerbocker Trust Company failed, the public regarded these failures with apathy, and the recovery in the stock market which was then in progress, chiefly under the covering of short contracts, was not even checked by it, so much had sentiment changed in the interval. These failures had been practically discounted, large as they were, by what had gone before, including the decline in stocks. Yet collectively they had more than twenty-one thousand depositors. These may eventually be paid in full, but it is very uncertain when that will be, for the law is a slow coach, especially when a permanent receivership is fastened upon a bank, largely owing to the long wait usually necessary for the conversion of slow assets into cash. Moreover, the expenses of liquidation eat up a large part of the assets under the system of fees for receivers and their counsel, which have always been much too large for the work done, and consequently they involve injustice to the creditors. Laws should therefore be passed substituting for fees fixed rates of compensation, per diem, for both of these, that is salaries; and meanwhile the courts should, under the existing laws, reduce their fees to reasonable amounts, and so correct this evil of extravagance in the cost of liquidation, which in some instances has been so excessive as to practically amount to robbery of the victims. This is a needed remedy that should be urged upon State legislatures.

Two of these failed banks are expected to resume within six months, while the other two will be wound up, and probably pay depositors forty per cent or fifty per cent of their claims within about that length of time.

Very fortunately, however, the crisis of 1907 was much less prolific of bank failures than that of either 1873 or 1893. In 1893 no fewer than one hundred and fifty-eight banks suspended, and of these sixty-five went into permanent receiverships, while eighty-six resumed within the year, and seven later. But few of these banks had a capital of half a million or more, their average capitalization being only $169,000. The banks generally in the fourteen years interval had gained immensely in strength as well as in number, and their power of resistance to the effects of the crisis, when it came, had been correspondingly increased.

While the profits of trade and manufacturing have been dwindling, prophets as to the future of business and prices have increased enormously, and they were never more numerous or more divided in opinion than they are now. Some of them point to the fact that with the single exception of steel, in the hands of the United States Steel Corporation, prices have declined, and they argue that unless demand increases they will, like stocks and wages, naturally go lower, and that the Steel Corporation will be forced, by the reductions already being made by the independent steel makers as well as by the heavy decline in iron, to follow suit. These also look for somewhat prolonged depression. But many other prophets are sanguine that we are already seeing the worst of it, and that commodity prices are about as low as they are likely to go. The true prophets are probably the conservatives who steer between these conflicting opinions and avoid both extremes. But whatever may come, on the ebbing or rising tide, of our business life, we should, as Longfellow says, “Learn to labor and to wait, with a heart for any fate,” and at the same time hold ourselves always ready to make the best of our opportunities as they arise, and, as America is pre-eminently rich in opportunities, we shall not find them waiting long. In any event, the wants of eighty-four millions of our people must be supplied, and we are the most progressive nation in the world. I therefore ask—Who’s afraid?

I am quite of the opinion that the time has arrived for calamity howling to cease; there is now no occasion for undue anxiety. Caution, however, may be necessary, especially in commercial operations. The worst of the financial depression has been seen, and the long-distance view is certainly more encouraging than at any time during the last six months. Business men have now no reason to feel otherwise than confident. I firmly believe that recuperation will be quicker after the recent panic than was experienced after any of the previous great panics since the one of 1857.

Now is the time for the timid to develop bravery, for the strong to aid the weak, for the ignorant to be willing to learn from the wise. Let us all work together for the common good, and the upward tide will bear us all along towards better times and lasting prosperity. Panics come in cycles and it will be years before another one can strike us. Let the worker give his best services to his employer. Let the employer grant justice and fair pay to the worker and to all, and the nightmares and storms of the past year will be forgotten or remembered only as a lesson taught by experience, which will serve to teach us not to overdo in the future but to temper enterprise with conservatism.

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LXXXV. AMERICAN SOCIAL CONDITIONS.[11]

Footnote 11:

An address by Henry Clews, LL.D., to the students of Yale University, New Haven, Conn., November 1, 1907.

Mr. Chairman and Students of Yale University:

As you gentlemen of good old Yale are studying American social conditions, I am glad to have the opportunity of addressing you, and I congratulate you on the prestige you will derive from graduating at so great and famous a university. You are now on the threshold of American citizenship and have good reason to be proud of the prospect before you, with its unlimited possibilities.

Surely it is a privilege that you all value, and can hardly overvalue, that of becoming American citizens, and thus forming a part of this free and glorious Republic, where the gates of opportunity are thrown wide open to you, and the golden harvest of success stands ready to be reaped by the worthy and deserving, who are able and willing to do good work, and work hard in their chosen calling. I may reasonably predict that some of you will become leaders of thought, trade, science, literature or art, and that will be your ample reward. I base my prediction on the fact that you are not here because you are compelled to be, but because you have a thirst for knowledge, for information, or suggestions that may be of use to you in this connection, and are willing and anxious to work hard to attain what you desire. The first requisite to attain success in any form is this willingness to study and work for what you want, so, being equipped with this necessary quality at the start, you are prepared to make headway in the battle of life.

The pessimist is abroad in this fair land of ours, in these days, preaching the gospel of discontent, and a favorite text is that the young man has now no show, or little chance to get on in life. Do not be misled or discouraged by such a false doctrine. There never was a time when brains were at a greater premium than at present, nor courage, education, industry, and energy more requisite or in greater demand. The harder you have to struggle to complete your education, the better fitted you will be for that battle of life, for in your youth you will have attained victory over the obstacles which lie in the path of success. Disappointments may embarrass you, but you must conquer them, instead of allowing them to conquer you. Every victory, thus won, will be an incentive to further efforts and achievements, and will provide a stepping stone to success.

Right here, let me impress upon you that the foundation stones of real success in life are industry, honesty, and truthfulness. These are jewels which every man can possess, if he cares to. Do not be honest because it pays, or as a matter of policy. Be honest because you are conscientious, and it is right to be honest and a reproach to be dishonest. A man who is honest and truthful in all things is the highest type of manhood, and commands respect in every walk of life.

While you are still young, I advise you to have an ideal. Make up your mind what you are best suited for, and strive with all that is in you to perfect yourself for the work of such a position or profession. While it is the almost universal desire to become rich, remember that there are other things in life more to be desired than great wealth. Whether amassed in Wall Street or elsewhere. Few of the great authors, scientists, professors, or inventors have been wealthy men, yet they were great public benefactors, and their names will live in the pages of history long after the very rich men of the world have been forgotten.

Learn well the history of your country. Study the science of Federal, State, and Municipal government. Study also finance and banking. Whether you go into Wall Street or not, it will be useful to you. Before you leave Yale, try to inform yourselves on all the subjects that will make you useful citizens, as well as competent, practical workers. School yourselves to be polite and courteous under trying circumstances. Politeness is one of the strongest allies one can have in his dealings with his fellow-men. It is not only so in my field of activity—Wall Street—but everywhere.

Read only good books. Libraries are now so plentiful that—even if you have not one of your own—good books are within the reach of all, and here at Yale you, of course, have an embarrassment of riches from the Greek and Latin classics to modern literature.

While you are improving your minds, take good care of your bodies. You are not yet too old for me to give you points. Exercise all you can in the open air. Cleanliness of body, and neatness of dress, even if you are not millionaires and your clothes are threadbare, will often be taken as a guarantee of good character. Be thrifty and economical, even if you cannot equal Russell Sage, and never get into debt, if you can help it.

Strive to learn to do some one thing, in the line of your studies, better than anyone else can do it, and you will have a specialty to recommend you to a chosen career. Whatever you attempt to do, do it with your whole soul—as Mr. Roosevelt, our strenuous and gifted President, says: “Buck hard and hit the center of the line.”

I have been much impressed with the manual training schools, which have recently been established in New York City. I wish that manual training could be added to the course in every school and college. Mr. Booker Washington has ably presented the plan in his Tuskegee Institution, where every man to get an education must learn a trade, and every man who learns a trade gets an education. It is a substantial personal asset for rich or poor.

Because you live in a city, do not think that the country is less attractive, and has no chance to grow like a town. The State of Texas alone could give to every man, woman, and child in the United States a full-sized building lot 20 × 100, and then, allowing for public highways, have over one-third of the area of the State left for the production of food supplies. The West, the Southwest, and the South, are yearning for newcomers. Horace Greeley used to say: “Go West, young man!” The emigrants from foreign shores will some day realize that there is a welcome ready for them outside of cities. Colonies will be formed and men of intelligence will be needed to rule and advise the newcomers; and those of you who can speak a foreign language will be well fitted for such a position. But you may aspire to the United States Senate, or to become Wall Street millionaires.

The natural resources of our country are constantly being developed, and men of brains and courage will be sought to lead the armies of workmen. Every man cannot be a captain of industry, but a man of pluck and education need not remain a private in the ranks very long. Still, avoid that vaulting ambition that overleaps itself and falls on the other side.

Whatever your calling may be, try to become your own master in your younger days. Nothing will give you so much self-reliance as the habit of relying on yourself. You may possibly fail at first, but great successes are often built on failures, if the one who fails will profit by the lesson. Bulwer Lytton tells us that in the bright lexicon of Youth, there is no such word as Fail.

When you graduate, do not imagine that your education is completed. Consider that you are just beginning to be able to learn, and that your College life has simply been a period of training to put you in condition for the real struggle for knowledge. Practice makes perfect in all the professions.

See to it that you acquire some new point in knowledge every day that will be of future value to you. This will mean 365 good ideas acquired in a year, and every one of these ideas will be like money out at interest, or like seeds planted in good soil. They will blossom and bear fruit.

Do not believe that all men in politics are rascals, or weaklings, who can be bought for a price. If you have the inclination, get into political life and be a factor in the affairs of your district. Honest and truthful men will be most welcome in this field, and may be of great public service.

Do not be worried by the statements made by so many pessimists that society, and the country at large, are on the verge of moral bankruptcy. I tell you that the world is growing better every day, and good men are held in higher respect than ever. Of course there are more rascals, and more thieves, than there were fifty years ago, but that is because there are far more people. The percentage of bad to good is relatively smaller. Men who do wrong are found out oftener and sooner than they were in the olden days, and the news of wrongdoing is carried all over the land by telegraph and telephone and published broadcast in the daily papers. A hundred years ago a man might commit a crime a thousand miles from New York and we could not get the news of it in a month, even if it was sent at all.

Use all your endeavors to suppress the use of profanity or obscenity in public places or elsewhere. This is one of the crying evils of the day and our women are never safe from the insults of having to listen to talk that would not be tolerated in a first-class barroom. But of course the present company is excepted. You are all gentlemen and scholars.

Be cheerful under adverse circumstances. Ella Wheeler Wilcox expresses what I mean when she says:

“It’s easy enough to be pleasant, When life goes by like a song; But the man worth while Is the one who will smile When everything goes dead wrong.”

Whenever you see a chance to help a fellow-man who is not as well equipped as you are, give him a lift up. If you do so, you may forget it, but he never will, and you will secure a friend who will be looking for a chance to do you a good turn.

An old clergyman used to preach that true religion consisted in doing something good each day, so that when one went to bed at night, he could feel that the world was a little better, or some one a little happier, because he had lived that day.

Chemistry is going to play the important part in the next twenty-five years that electricity has in the past quarter of a century. Fortune awaits any man who can make use of waste material. Millions of dollars’ worth of this is thrown away every year because the mind of man has not, as yet, been able to solve the problem of utilizing it. Students are now at work to this end and who can tell but one of you may be the man who will play an important part in this great work of discovering new sources of wealth and progress. If so, he will find a bigger gold mine than Wall Street.

Railroad magnates are on the watch for improvements and devices of any kind that will tend toward saving time, increasing facilities, lessening liability of accident, or saving in cost of construction or equipment. Here is a broad field for action and for fertile minds to work in.

Copper metal is in such demand that the price has recently been higher than in a generation, namely, twenty-six cents a pound, and some cheaper metal may be found to possess qualities that will allow it to take the place of copper in a degree.

Surgeons and physicians now perform operations and effect cures that would have been considered miracles in my younger days, and still we find each year that they have much to learn. It is possible that I am now addressing some youthful savant, who will startle the world in the distant future by still more miraculous skill.

Wherever you go, whatever you do, keep your eye on the star of Hope. Every man has his place in the world if he can only find it. Opportunity knocks at every man’s door at some time during his early life. Look sharp and secure it when it knocks at yours, and grab it before it flies.

But, to all I would advise that when you have found occupation, whether it is in the professions, or not, strive to please. Don’t expect to sit in high places at once. Remember that most of you are in the junior class and can only graduate to a higher class by merit. Study well your surroundings and what is ahead of you. Carefully consider what may await you. If you see no evidence of a position worthy of your hopes, do not hesitate to make a change. It is better to change several times while you are young than to waste your time by remaining where you cannot expect to achieve success.

One of the fundamental principles of business is that civility costs nothing and always pays good dividends, both in and out of Wall Street. Very often the temptation will come to you in dealing with a nervous or cranky customer or client, to give vent to your wrath or impatience. My advice is don’t. That is also Punch’s advice to those about to marry. To succeed in holding and pleasing such a customer is a high accomplishment, and sure to attract attention.

The Almighty has endowed every man with two important allies, namely, courage and conscience. The latter can be blunted if not heeded and an elastic conscience is worse than a wooden leg. Be cautious not to enter into any deal or occupation when your conscience warns you that you are treading on dangerous ground; but, having made up your mind that you are in the right, press forward with all the energy that is in you. If you do not succeed, have the courage to rise and try again and renew the struggle. Nearly every man who has made a great success in business life has, in his earlier years, suffered reverses. These failures have been lessons that have taught him the way to win. You may often be temporarily discouraged by seeing success come to the dishonest and unworthy, but remember that such cannot command the respect of their fellows. There is more in life than “filthy lucre,” although Wall Street prizes it immensely. A contented mind is more to be desired than great riches, and, if you are poor, be independently poor. Andrew Carnegie says that to die rich is to die disgraced, so guard against that.

You are really now on the threshold of a new school—the school of Life. As the old forest guides were taught their wood wisdom by the rocks, the streams, the grass, the leaves, and kindred objects, so you will learn by actual contact with all the customs, rules, and complex situations of the business world, what to do and what to avoid.

Many young men are disheartened before they start in business by the fact that so many lines of manufacture are controlled by big corporations and trusts. As I have already shown, they hear the talk of the agitator and discontented that a poor man has no chance in life. Let me repeat that brains will always command a premium and that young men who have brains, backed by energy, will always be in demand. You must prove that you have these requisites, by good work, and you will find capital will seek to combine with such qualities. You may start in business, or the professions, with your feet on the bottom rung of the ladder; it rests with you to acquire the strength to climb to the top. You can do so if you have the will and the force to back you. There is always plenty of room at the top. The men now at the top have their minds and hands full, and are eager to delegate to smart assistants some of their work so as to ease the burden they bear. Success comes to the man who tries to compel success to yield to him. Cassius spoke well to Brutus when he said: “The fault is not in our stars, dear Brutus, that we are underlings, but in our natures.”

Form the habit as soon as you become a money earner, or money maker, of saving a part of your salary, or profits. Put away one dollar out of every ten you earn. The time will come in your lives, when, if you have a little money, you can control circumstances; otherwise circumstances will control you. You may often have to practice self-denial to save ten per cent. of your earnings; but compel yourselves to do so and you will never regret it. Most of the leading men in business life to-day started out less well equipped with worldly goods or education than any of you. What they have done at least some of you can do.

See that the money you spend is well spent. By careful judgment in this respect, you will acquire a habit which will cling to you in after life. Many a man makes bad investments because he did not learn to be cautious in the beginning of his business career.

The improvements in the past quarter of a century have been marvelous and the end is not yet. There are many new ideas being formulated, and some of you may bear an important part in solving problems which will revolutionize the world. Electricity and chemistry are perhaps still in their infancy, and latent forces are floating around unknown to men. The next fifty years may indeed witness changes just as great and startling as we have seen during the last fifty.

I once advised young men to go as soon as possible into business. I have changed my opinion somewhat and think that it is well to get a technical training in a business at college where special courses are taught. I still consider, however, that if a young man is to enter Wall Street he will learn just as much by going into the Street as soon as he graduates, and I consider a large office just as good as any business college, where a pupil can learn by actual experience as well as he could by a theoretical course in a business college. Almost every man in a leading position in a banking house has started as a junior clerk and gradually worked his way up.

The term “Get the habit” has become quite a metropolitan by-word and brings me to speak on this subject, for the habits we acquire have much to do with our progress, and as Lamartine has truly said:

“Habit with its iron sinews Clasps and holds us day by day.”

In the various matters of detail that make up the sum and substance of business—considered as trifles by the foolish, but by the wise as important and vital—such as our methods of occupation, our time, and our manners, great care should be taken to acquire the sterling habits of industry, punctuality, and sobriety. The most watchful and jealous care should ever be exercised by you all in this regard. A single deviation from the straight path may mean much, for habit is not of sudden acquirement, but is formed (and also lost) act by act, thread by thread, as we progress in the journey of life.

If you hold a fiduciary position in a Wall Street banking house, or bank, remember that the information you acquire regarding the secrets and inside facts of the business of your employers belongs to them alone and must not be divulged or spoken of to anyone. Very often you will hear of “tips” being circulated there as inside information. Never put faith in such tips, as an employee who would give away the secrets of the firm he works for would be unscrupulous enough to lie to you, and I warn you not to make a close friend of such a person. Do not think that I look upon you as boys in tendering this piece of advice, but rather as a veteran addressing new recruits.

The trait of tenacity of purpose is very often a natural gift; but if you have not this persistence by nature you must cultivate it. For, with it, you can succeed, you can make difficulties bend, you can make opposition give way, and doubt and hesitancy yield to confidence and success. Without it, the more shining qualities of our nature will not insure your success, nor avert failure and disaster.

At the time the Suspension Bridge over the Niagara River was to be erected the great question was how to get the cable over. A kite was elevated, which, with a favoring wind, alighted on the opposite shore. To its insignificant little string a cord was attached which was drawn over, then a rope, then a larger one, and then a cable; until the great bridge between the United States and Canada was completed.

First across the gulf we cast Kite-borne threads till lines are passed, And habit builds the bridge at last.

In like manner, my friends, our whole character is made up of little things, of threads and strands and ropes of habit. Let us be sure that they are always good and sound.

Next to the unwisdom of selecting and following bad or incompetent advisers in matters of business, there are also certain persons whom, if you wish to do well and make a fortune honestly, you should be careful to avoid. You will not always know them by their appearance; in fact, that is often the worst rule to go by, for they are generally well disguised. It is in their manner and conversation that you will find them out, and, that this be the easier, I have made a collection of their characteristics, as follows:

Avoid a man Who vilifies his benefactor; Who unjustly accuses others of bad deeds; Who never has a good word for anybody; Who, when he drinks, habitually drinks alone; Who boasts of the superiority of his family; Who talks religion downtown in connection with his daily business affairs; Who talks recklessly against the virtue of respectable women; Who runs in debt with no apparent intention of paying; Who borrows small sums on his note or check dated ahead; Who will not work for an honest living; Who looks down upon those who do; Who is always prating about his own virtues; Who imputes bad motives to those trying to do good; Who betrays confidence; Who lies; Who is honest only for policy’s sake; Who deceives his wife and boasts of it to others; Who chews tobacco in a public conveyance; Who gets intoxicated in public places; Who partakes of hospitality and talks behind his entertainer’s back; Who borrows money from a friend and then blackguards the lender.

With a population of 85,000,000 people, which this country now has, it is easy to find associates in life without selecting men possessed of any of these characteristics, and life is the better worth living without them.

You will both save and make money by strict observance of this short catalogue of men to avoid. You are not called upon to do anything or to risk any money in the exercise of this discretion. It simply consists in letting such people severely alone, and if you have been in the habit of being imposed upon by such characters, you will find your happiness, as well as your cash, greatly increased by prudently avoiding them.

There is another subject of signal importance, to which I invite your earnest attention.

You must ever bear in mind that while, when you become citizens, you will possess certain rights and privileges—such as the elective franchise and equality before the law—there are, as well, sacred obligations and duties imposed upon you, as citizens, that should be faithfully regarded and performed.

To properly understand and appreciate these duties, you should, I reiterate, make a careful study of our system of government, and acquaint yourselves with the manner in which municipalities, states, and the nation are governed.

As you mature, attend political meetings and read and discuss economic questions of the day; for public discussion is one of the best quickeners of individual thought and expression. Be prepared, when the time comes, to actively participate in the affairs of your city and state as well as the nation, and stand always ready and willing to lend your aid to the uplifting of the government to the highest ideals of Democracy, or Republicanism, as you see them.

If I should add a further word of advice it would be an appeal to you to ever cherish, deep in your hearts, undying love of country.

Not only be ready to defend it with your lives; but constantly cultivate and encourage the inspiring qualities of civic pride and virtue, so that your whole future career will reflect a sincere and patriotic affection for and just appreciation of the noble institutions of our great republic. As, however, you are doubtless all true patriots this advice may be uncalled for.

Leaving, these few precepts with you, I wish to assure you that in whatever you may undertake, in banking, trade, or the professions, you will have my good wishes for your success, and if I have planted in your minds seed that will bear good fruit, it will add to the pleasure I have enjoyed in addressing you and giving you incidentally, as students of American social conditions, my experience of human nature, for, in your case particularly, the proper study of mankind is Man.

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Chapter LXXXVI

THE FINANCIAL AND TRADE SITUATION AND PROSPECTS.[12]

Footnote 12:

An address delivered at the Annual Banquet of the National Association of Cotton Manufacturers, at the Hotel Brunswick, Boston, on Thursday evening, April 16, 1908, by Henry Clews, LL.D.

In familiarizing myself with the history, scope, and objects of the distinguished organization I have the honor to address—The National Association of Cotton Manufacturers—I was impressed by the vast extent and importance of the interests it represents through its membership, which covers not only New England but the whole manufacturing world of the United States, to say nothing of foreign countries in which it has a notable representation.

Such an organization is obviously capable of exerting great and lasting power for good in the improvement and development of the cotton manufacturing industry in this country, and incidentally it cannot fail to benefit all our manufacturing interests, for there are ties, visible and invisible, that bind them all together in a bond of mutual sympathy.

How immense these interests are is almost beyond computation; but we may form some idea of them from the fact that the capital stock of the textile mills, print works and bleacheries represented by your Association’s own members alone, aggregates no less than $334,500,000, without counting their surplus.

Your statistics further tell us that in these mills are 17,157,637 spindles, 1,472 sets of woolen and worsted cards, 5,849 knitting machines, and 67 printing machines. These figures are eloquently suggestive of the country’s manufacturing enterprise and skill, which have kept pace with its rapid growth, and the progress of mechanical science.

Beyond all this, you have $400,075,000 more capital in the affiliated manufacturing industries of cotton cloth, cotton, textile machinery, mill supplies and the like, represented by your associate members. This, indeed, is a grand exhibit.

So your association is the representative of $734,586,000 of capital, a large item in the national wealth of the United States. But, great as it is, it will continue to grow with this great and ever-growing nation, and with it will come still further improvements in mechanical processes, methods and machinery, and a far wider foreign market for our manufactures, especially in the Orient and South America, where the British and the Germans have dominated trade in the past.

This association in its work for the advancement of cotton manufacturing interests, and particularly in the promotion of their commercial relations, and whatever relates to improvements in manufacture, is a valuable ally of the motive power that turns the wheels and runs the machinery of the mills; and I congratulate you on being united for a purpose so conducive to both the prosperity of a great manufacturing interest and the national welfare.

I will now turn to the main subject, the financial and trade situation, present and prospective, in which I find much that is encouraging and favorable to a general betterment of conditions from this time forward.

With regard to business conditions and prospects, the general sentiment of both Wall Street and the rest of the country is optimistic, and to this may be attributed the extensive recovery of the stock market that has already taken place since the crisis that began in October. Although the dealings in stocks have been very largely professional, the improvement reflects the confidence in the situation of the rich Wall Street men who have led the movement, and confidence, like distrust, is contagious.

The absence of any considerable buying by the outside public has been conspicuous, but so also, since the end of 1907, has been forced or voluntary liquidation. Hence, there being no pressure to sell actual stock, it was easy for the powerful bull party at work to advance prices against the short interest, which was very large; and the bears were driven to cover their contracts at a heavy sacrifice of their previous paper profits. But, like the poor, the bears are always with us, and their expressed views as to trade conditions and prospects are, of course, as pessimistic as those of the majority are the reverse. But the majority rule, and Wall Street never fails to discount the future. It is the great financial barometer of the United States.

Leaving sentiment aside, there is ample scope for differences of opinion as to the exact situation and the future, so conflicting are the reports that come to us. In some sections, and some industries, very different conditions are reported than those that prevail elsewhere, and bankers, merchants and manufacturers in the same towns disagree as to things as they are.

This shows that we are in that uncertain transition period which always follows panic; and how long it will last, is the problem that business men all over the country are now trying to solve. Meanwhile the rise in stocks, which has been encouraged by the banking interest largely for the sake of its influence in promoting confidence among the people of all classes, may fairly be looked upon as the precursor of substantial improvement in general business.

Yet, however much we may hope for quick recovery from the effects of the crisis, we should always look unfavorable facts squarely in the face, for self-deception is the worst kind of folly. We must consider the worst, as well as the best, features of the situation, in order to gauge it correctly; and the reduction of ten per cent. in the wages of cotton mill operatives in New England, and the working of many cotton, woolen and other mills on part time only, and the shutting down of others, shows how much manufacturing industry there, as well as elsewhere, has been affected by the severe ordeal we have passed through.

But, so far as the banking institutions were concerned, Boston enjoyed a larger degree of immunity from trouble during the crisis than any other city, a fact that bears testimony to their soundness and conservatism. Boston may, therefore, well pride herself on this memorable circumstance, the result of good banking and good business methods. She had, fortunately, no speculative capitalists with chains of important banks under their control, as New York had.

The crisis accomplished one good thing, and that was the sweeping away of this unsound banking, which had become a menace not only to New York, but to the whole country.

The best banking authorities believe that actual business improvement is already making headway, although there is no uniformity in it, the recovery in some places, and some lines of business, being decided, while in others it is barely visible. Thus the Southwest, and its great distributing center, St. Louis, report a larger degree of betterment than any other section, while Chicago, like the Eastern and Middle States, reports comparatively little.

In the present stage of recuperation, the wage problem is forcing itself more and more upon public attention, and especially upon that of mill owners and the railway companies. The urgent necessity the railways are under of reducing them, to offset reduced earnings, is met by the unwillingness, or refusal, of the men to have them reduced. They have been encouraged in this attitude by President Roosevelt’s action, and now the labor leaders are urging Congress to legislate in support of their position. But Capital has its rights as well as Labor.

The railway companies, as an alternative to reducing wages, have proposed an increase in freight rates, but shippers are up in arms against this, particularly manufacturers; and the authorities of the States, as well as the Interstate Commerce Commission, signified their opposition to it. The railways, meanwhile, have kept pace, as far as practicable, with the contraction of traffic, by discharging large numbers of their men. In this way they have materially reduced their expenses, while they report increased efficiency by the labor still employed, every man in these times being anxious to hold his place by doing good work.

That is to say, jobs being now scarce, men want to keep their jobs instead of being “laid off,” as the phrase is. This of itself is a wholesome effect of hard times.

The labor problem is one of peculiar difficulty, and substantial, permanent improvement in trade and securities will not be seen until there has been a complete readjustment of commodities, prices and wages in accordance with the altered conditions. To insure steady work for labor, and a fair profit for employers, why would it not be wisdom for the labor union leaders to agree to a contract to last for the coming four months only, consenting to a reduction of 20 per cent. in wages?

Readjustment is a harmonizing process, and harmony promotes recovery and the full development of our powers and resources. This is what the business situation imperatively calls for now, and all business men should do their best to foster it, and so work together as a unit, for in unity there is strength. We have an example of it in our United States.

The cotton goods industry in New England has, I know, been much more severely depressed by the crisis than was at first thought possible; but, fortunately, the losses sustained will be the more easily borne because of the large profits of previous years. Notwithstanding the cuts made in standard goods, the demand for them is still abnormally light, and hence stocks are accumulating in the face of the heavy decrease in production.

No wonder, therefore, that those most intimately concerned are more or less at sea as to how long this depression will continue, and what the results will be. They see certain grades of goods that were selling at 8⅜ cents a yard just before the panic now being offered at 5½ cents, and this is an object lesson that tends to make even the most optimistic of them a trifle blue for the time being. But this is precisely the time when courage and confidence in the situation are most needed. I give you all credit, however, for being equal to the occasion.

With eighty-five millions of our own people to clothe—to say nothing of the rest of mankind—manufactured cotton products will before long be in demand again at rising prices, for civilization demands clothes in hot weather as well as cold.

Meanwhile, endurance is called for, and will doubtless not be found wanting, except where special circumstances impose limits to it, and we all know that patience is a virtue.

Recovery to normal conditions will, of course, be gradual, and it is better that it should be so, to ensure permanence. In the meantime, it will be a relief to the dry goods trade when sales are no longer extensively made by cutting under quoted prices more or less sharply.

The bold, and even aggressive, action of the American Federation of Labor in going to Washington and making demands upon Congress, and criticizing not only the laws but the decisions of the Supreme Court of the United States, puts a new and serious face on the old contest between Labor and Capital. It arouses some apprehension as to the lengths to which Labor will go, and how far its political influence may enable it to accomplish its purposes. Politicians are ever ready to show subserviency to Labor, merely for the purpose of gaining votes for themselves.

We all want to see justice done to Labor, but we also want to guard against injustice being done to Capital by Labor, and Labor’s resistance to a reduction of wages to correspond in some degree with the decline in the earnings and profits of those employing it, is a practical injustice to all those outside the ranks of organized labor.

The readjustment of wages to existing conditions is, therefore, of the first importance and should be first to receive serious consideration, with a view to harmonizing both sides, and a prompt settlement. Half a loaf is better than no bread, for both Labor and Capital, and it is not to the interest of either to kill the goose that lays the golden egg. Their interests are mutual, but Labor is posing as if they were antagonistic. It has often done this before, but never more conspicuously than now.

With respect to our foreign market for cotton goods, there is plenty of room to widen it, but our exports of these, in competition with England, Germany and other countries, are more or less checked by the high price of labor here, and its comparatively low price there. Hence we should constantly endeavor to overcome this disadvantage by keeping ahead of the rest of the world in labor-saving devices, and improvements in machinery and manufactures. We should try to surpass all Europe in the quality, as well as the cheapness of our goods.

As we are the most inventive of all nations, and the quickest to adapt ourselves to new or altered conditions, we shall doubtless find this feasible, if not an easy task, whereas England, our greatest competitor in manufacturing, is proverbially slow in changing machinery.

I once asked Mr. Andrew Carnegie what was the mainspring of his phenomenal success as a manufacturer of iron and steel, and he replied:

“I always kept foremost in making improvements in my machinery and methods of manufacture. Whenever a new invention that I could use was patented, I secured it at any cost, and so kept in advance of all my competitors.

“At one time I had two million dollars’ worth of new machinery that I was about to install, but a man came to me with an improvement in it that he had just patented, and I bought his patent and adopted it. In doing this, I had to cast aside, as old material, the two millions’ worth of new machinery. But the improvement recompensed me many times over for what I had sacrificed to make the change.”

It is in promoting improvements in manufacturing processes and machinery that this Association, apart from its general utility, can be of great and permanent value to the cotton mill industry and kindred manufacturing enterprises. Ready adaptability of means to ends is as important in manufacturing cotton sheetings, and the other products of the loom, as in every other business and everything else.

I remember that in conversation with Admiral Sir Charles Beresford, of the British navy, when he was visiting New York, he told me of an instance of American adaptability to circumstances, that he noticed while in China. The Chinese had been long complaining of the want of sufficient width in a certain grade of British cotton fabrics that they were using and they had asked the English agents from time to time if they would increase the width. But nothing came of their expostulations and requests, as the agents, after writing home, told them the Manchester manufacturers said they would have to alter their machinery in order to give them the desired width, and this could not be done.

But the agent of a large American dry goods house, with extensive cotton mill interests, arrived at Shanghai, and hearing the complaint of the Chinese, he said: “Give me your order and you can have whatever width you want,” and he got the order. Sir Charles added: “So, you see, you people are smart and give them what they want; besides, you make your cotton goods heavier than we do and the Chinese like them better because they wear longer, for when the Chinese put on such clothes they never come off until they rot off.” Here was an instance of ready adaptability to the occasion and market needs by an American, which the English lacked.

An illustration of the importance of scientific investigation with a view to the discovery of new elements and processes in manufacturing, is found in silkine, a fabric closely resembling silk, which has come into popular use. It resulted from the discovery that the mulberry and other trees on which silk worms feed possess properties that could be extracted and utilized, to a certain extent, in the production of a silky fibrous material which in combination with fine Egyptian cotton, made a cloth so closely resembling silk as to be possibly mistaken, except by experts, for the silk of the silk worm. Here theoretical and practical science were happily combined with mechanical skill to produce an entirely new material, and doubtless there are many similar opportunities awaiting discovery. This Association by stimulating such investigation in mechanical science may achieve even greater results than it anticipates.

The world’s markets offer a most magnificent opportunity for the enterprise of American cotton manufacturers. We grow four-sixths of the world’s crop of cotton but manufacture only one-sixth. That is to say, we export three-fourths of the cotton we grow, leaving England and Germany to turn the fibre into yarns and fabrics for other countries in all parts of the world. A much larger share of this foreign trade ought by right to come to the United States, for the foreign market offers a field vastly larger and quite as profitable as the domestic field, if the extraordinary profits of Lancashire spinners during the past few years are to be taken as an index.

Last year Great Britain exported cotton goods valued at $500,000,000, while our exports of cotton manufactures were valued at only $26,000,000. During this same period Great Britain exported 6,298,000,000 yards of piece goods valued at $400,000,000; our exports meanwhile being only 216,000,000 yards at $15,000,000. Here, then, is a field for our best ambitions and skill. We cannot forever endure the sight of seeing other nations manipulating our raw product at enormous profits, a goodly portion of which should remain for distribution on this side of the Atlantic.

There is one respect in which the New England cotton industry much impresses an outsider. Your industry, I am glad to say, is, and always has been, remarkably free from the evils of promotion and speculative enterprise. Furthermore, it has most fortunately not been inoculated with the fever for trusts and consolidations; although I happen to know that such projects have from time to time been presented to your consideration. Perhaps your refusals to entertain such propositions thus far have been due to conditions peculiar to the industry; yet I venture to hope that it has been not a little due to the strong spirit of individualism which is one of the best characteristics of the New Englander; a characteristic which I trust will be cherished for generations to come, because it is a most wholesome and necessary check upon the paternalistic tendencies of the day. One beneficial result of this policy is that the cotton industry is adapting itself to the new conditions following the panic with much less friction than in other industries. You have lowered prices, curtailed production and diminished costs in order to stimulate a revival of consumption in a manner that promises to make you among the first in completing the process of readjustment. When recovery begins the cotton trade ought to be among the first to feel reviving influences. While other industries have been using or misusing their newly acquired powers of combination to resist natural tendencies, or to squeeze out dividends upon grossly watered stocks, you have squarely faced the new conditions and trimmed your sails accordingly. I have no doubt, therefore, that, with your mills honestly capitalized, you will soon be going along safely and comfortably in smoother waters when the trusts will still be struggling against adverse conditions simply made worse by foolish resistance to economic laws.

The most encouraging feature of our business situation now is the prospect of an unusually large wheat crop, winter wheat being in extra fine condition, and spring wheat having been planted under the most favorable conditions, owing to the season for farm work being three weeks earlier this year than last. The planting of other crops has also been facilitated by good weather, and altogether the agricultural outlook, at this date, has very rarely been so promising of bountiful results.

This is a great national blessing, for the foundation of our national wealth is our crops. Agriculture is indeed the great source of both our national and international strength. It was almost entirely from this source that we were enabled, from a merely nominal sum last August, to build up a foreign trade balance of 521 millions of dollars in the first eight months of this fiscal year, and the large preponderance of our exports over our imports still continues, and will make the balance in our favor at the end of the year one of unexampled magnitude.

This curtailment of our imports, especially of luxuries, has made the shoe pinch in Europe, for we had been Europe’s best foreign customers. But, naturally extravagant as we are as a people, we can economize with as much ease, celerity and determination as we can spend, when the necessity to do so arises. So we are at present economizing on a grand scale and with great success.

We have only to consider our unlimited sources of national wealth, however, to see that the prospect before us is one that should inspire absolute confidence in the gradual return of prosperity in all directions. Let us bear in mind that our agricultural products yielded us last year, as the returns of the Department of Agriculture show, $7,400,000,000.

Mining and manufacturing were the next largest sources of our national wealth. The metals mined yielded $3,000,000,000, and this metal product was converted by manufacturing into materials that had a market value of fifteen thousand millions of dollars. Thus the agricultural products, metals mined and metals manufactured, in the year, had a value of $25,400,000,000. We may, therefore, well and honestly say that this is a great country. “Long life to it!” as an enthusiastic Irishman was once heard to exclaim. “By jabers, it can’t be beat!”

The market for raw cotton has, of course, been handicapped by the depression in the cotton industry, and the efforts of the Southern planters to advance the price of the staple very materially by holding it back instead of marketing it, have failed, as they deserved to fail. Cotton is now lower than it was during the crisis, and about as low as at any time in this crop year, being 300 points, or 3 cents a pound, below the season’s top notch. But cotton is still king in the factories.

This decline is equivalent to $15 per bale, or a hundred and eighty million dollars on a crop of twelve million bales. So spinners and spot buyers in general have not for two years had so good a chance to purchase for summer and autumn delivery, and advantageously cover their season’s requirements as they had last month and this. But spinners have taken more than a million bales less of this season’s crop since the first of September last than in the same time in the previous year.

The Census Bureau in its final report for the season tells us the total crop ginned up to the first of March last was 11,261,163 bales, including “linters”; and it estimates that 127,646 bales remained unginned on March 1. Allowing for the usual under-estimating of the cotton ginned in the reports to the Government, it follows, from the figures, that the spinnable cotton from the last season’s crop will aggregate no more than 11,500,000 bales. This is with the average net weight of a bale, 501½ pounds.

The statistical or technical position of cotton is therefore bullish, notwithstanding the very large falling off in consumption and the requirements of spinners, this year, both here and in Europe, as the indications are that there will not be a very heavy or unmanageable load of cotton to be carried over into the new crop year, which begins on the first of September.

One very hopeful sign of the times is the check that has been given to radical state legislation concerning railway corporations by the Supreme Court of the United States, declaring the rate laws of Minnesota and North Carolina in certain respects unconstitutional. The decision practically denies the right of a State to enact and enforce rate laws against interstate railways. This takes the wind out of the sails of a good many Western and Southern political agitators, and makes the State courts more definitely than ever subservient to the Federal Courts. The clash as to jurisdiction between the two courts which we witnessed in the South last year is therefore not likely to recur.

The decision was based mainly upon the unreasonable penalties prescribed by the North Carolina and Minnesota statutes, but it sustains beyond all question the contention of the railway companies, which are now held to be at liberty to refuse to obey any State law reducing rates upon their making affidavit that it would reduce their earnings to an unreasonable extent. Upon such an affidavit a judge of the United States Circuit Court can order a suspension of the operation of the law until the law can be shown in court to be reasonable.

This is a protecting bulwark against radical and confiscatory State legislation, resulting from the inflammatory appeals of demagogues. By protecting the railways it protects investors, and adds to the security of railway property, which, in turn, strengthens confidence in that property, and confidence is what is most necessary to recuperation. Let us therefore help to increase it.

It is the desire to promote confidence, and clarify the business situation, that has inspired the recent utterances of President Roosevelt, and dictated the course of the Federal law department. This is commendable and has had a good effect.

The most spectacular event of the crisis, and its most sensational starting point, in New York, was the failure of the Knickerbocker Trust Company under a wild rush to withdraw its deposits on the 22nd of October, 1907, and the subsequent suicide of Charles T. Barney, its president; and the most satisfactory event in its later career was its resumption of business on the 26th of March, 1908, after many trials and tribulations. On that day, too, it received $1,500,000 of deposits more than it paid out, a remarkable contrast to the heavy run before the suspension. This, and the almost simultaneous payment in full of the depositors of the Oriental Bank, a New York State institution, were reassuring influences that did much in helping to pave the way to general recovery, and stimulate the rise in the stock market, which of itself had a good moral, if not material, effect upon the business situation.

It was not till the fourth day after the Knickerbocker’s suspension, namely, on Saturday, the 26th of October, that the New York Clearing House committee decided to issue Clearing House certificates to the banks in the Association needing them to pay their Clearing House balances. Then their issue against satisfactory collaterals deposited with the Clearing House, began at once. This was the signal for every other clearing house in the country to do likewise simultaneously.

On the same day the detailed weekly bank statements were suspended, and these were not resumed till the 8th of February, 1908. Meanwhile a hundred and one millions of the Clearing House certificates had been issued and redeemed, except some that were held by the National Bank of North America, the Mechanics and Traders Bank, the Bank of New Amsterdam, and the Oriental Bank, which had all failed. But these were all redeemed before the end of March.

It was in the third week of November that the issue of Clearing House certificates reached its maximum. But the banks had reached their largest deficit in reserve in the first week of November, when it rose to $54,100,000, a prodigious amount of which the public was in ignorance.

In Boston at the same time your banks had taken out $11,995,000 of their own Clearing House certificates, but this total was never increased. After that the banking situation all over the country was slowly on the mend. But, owing to the partial suspension of currency payments by the banks, caused by runs and hoarding inspired by the use of clearing house certificates, currency and gold commanded a premium in New York ranging from 1 to 5 per cent. This premium was current from the time the certificates were first issued till the end of December, 1907. The hoarding of money was, meanwhile, enormous. After that the premium became suddenly a thing of the past, and hoarded money was rapidly deposited with the banks.

It is noteworthy that in the panic of 1873 the New York Clearing House issued only $26,565,000 of certificates, and in the panic of 1893 only $41,690,000. But these figures merely show how very much smaller New York’s banking capital, deposits, and loans were in those years than they are now.

The throwing out of employment through the effects of the panic of large numbers of men, most of them of foreign birth, resulted in a larger exodus of steerage passengers to Europe than was ever before known, these aggregating 114,078 in the first two months of 1908, while only 50,601 immigrants arrived here during those months. The outward rush commenced in November and it still continues with little abatement. But as a safety valve for unemployed labor it is perhaps to be welcomed for the time being, as it reduces the ranks of the unemployed, and when the labor of these aliens is again in demand they will return as fast as they went. They know on which side their bread is buttered.

Immigration is, however, no longer as necessary to this country as it was in pioneer times. Our aim now should be to keep out undesirable immigrants, particularly anarchists, Black Hand Italians and Armenians, and rabid socialists who come here to make trouble, and preach doctrines of equality and confiscation, entirely inimical to American institutions and national as well as individual progress.

I now come to the markets for stocks, bonds, and speculative commodities, and the recent indiscriminate attacks upon them by Mr. Bryan and others both in and out of Congress, as hotbeds of what they call gambling.

As one of the oldest members of the New York Stock Exchange I can, from my long experience, testify to the integrity and high character of its membership, and the strict discipline of that Association over those composing it. Any breach of its rules, any deviation from the line of fair dealing, or anything prejudicial to its interests, is promptly investigated and as promptly punished, when proved to the satisfaction of the Governing Committee, by fine, suspension, or expulsion. But it is very rare for a member to be either charged with or found guilty of chicanery of any kind.

It is therefore unjust and outrageous for Mr. Bryan and others who have denounced the New York Stock Exchange to call it a gambling arena and its members gamblers. They are brokers in a free market, a market open to all the world, and they are ready to receive and execute orders from all the world, and whether or not these orders are for investment or speculative account, it is not for them to inquire. Still less is it for them to discriminate against speculation, when speculative far more than investment dealings are the life of every stock exchange in the world. A stock exchange to have any value must be a free market.

Speculation in stocks is no more gambling than speculation in real estate, or merchandise, although different in degree, but there may be excesses in speculation as in everything else. The stock exchange as a body should not, however, be held responsible for the excesses of individual speculators, or for the dishonesty of men who embezzle in order to get money for the purpose of speculating. Gas should not be blamed for causing the death of a man who deliberately locks his room door, shuts his windows tight, and turns on the gas to die.

Those who know Wall Street well, as I do, know how false a view of it Mr. Bryan and others, including certain members of Congress, have given to the public. If they really had known Wall Street well, and had any conscience, they would not have said what they did say. They have misrepresented it grossly and unjustifiably, and in their moralizings upon it they have not reasoned, but ranted.

Some of them have even advocated the entire elimination of the Stock Exchange. They would thus invite financial chaos and leave investors, the banks, insurance companies, and all other corporate holders of stocks and bonds practically without a market for their securities in which to either buy or sell. This would be putting back the hands of the clock of progress with a vengeance. It would be going back to the wigwam and the canal boat, but of course it would never be tolerated and therefore be impossible.

Yet this slandering and mudslinging campaign by representatives of both the great political parties for political effect is none the less injurious and reprehensible because it can never have any substantial result, much less the destruction of Wall Street. It is scandalous abuse of which we may have more before the November election, but it is already high time that it should stop in the interest of truth and justice and the public welfare.

These assailants of the New York Stock Exchange would also abolish all other stock exchanges, and the Chicago Board of Trade, as well as all the other grain and provision exchanges, and all the cotton exchanges in the country that deal in futures. Perhaps they are not aware that the farmers and planters of the West and South derive, or can derive, great benefit from having a free market for “futures” open to them, for it enables them to sell their crops before they are harvested, if the prices are satisfactory and they want to make sure of them. This applies also to the Coffee Exchange and importers of coffee.

To drive dealings in time options from the Produce and other exchanges would be to drive them to Canada, Liverpool, and London, and let the markets there make prices for us, instead of making them for ourselves, all of which shows the absurdity of this clamor against speculation in stocks and speculative commodities. Speculation is thus stigmatized as gambling with no more reason or justice than the inevitable risks of ordinary mercantile trade could be called gambling, for no one can engage in trade of any kind without taking risks.

Now that the storm of the crisis has passed away, and the investigation and prosecutions that have taken place have laid bare the corporate evils that were rife among us, including railway rate rebating and various forms of looting and wholesale graft by controlling capitalists, we have come into a purer business atmosphere. Corrupt, plundering, and law-breaking officers of banks, and railway, insurance, and other large corporations have, in many cases, been exposed and shown the error of their ways, and we have in consequence a higher business morality than we had before we passed through this ordeal of purification. In other words, the house cleaning we have had has done us good, and this of itself is a compensation that can hardly be overrated in its future influence. Banks and trust companies and railways, insurance, and other corporations have been freed from much unsound and dishonest management, and also loose, grafting and speculative practices, and we have in their place that higher moral tone which is safeguarded by greater publicity of accounts and more rigid official examinations under new and stricter laws than ever before.

Thus temptation to chicanery and other corporate wrongdoing, and abuses, by those in control of corporations, is largely reduced, and this is important, for an old proverb tells us that opportunity makes the thief.

Good grounds for an optimistic view of the situation and the future, you will all acknowledge, can be found in our unequaled and immense natural resources and their uninterrupted development. These and the enterprise of our people and our free institutions and popular government, which makes us all sovereigns in our own right, are national blessings. They fortify our national life, and leave our splendid growth and powers of achievement unchecked; and our wonderful progress in the past will no doubt be eclipsed by our still greater and grander future, with the United States of America the foremost nation in the world.

In all this progressive movement the cotton and other mill industries of New England, and the rest of the country, will share; and in this natural and legitimate expansion, gentlemen, you and your successors may look forward to, and find, the potentiality of wealth beyond the dreams of avarice, as Andrew Carnegie did in Pittsburg. From such a great American object lesson for manufacturers as Carnegie, you should all derive a vast amount of encouragement, and that hope that springs eternal in the human breast.

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LXXXVII. PEACE ASSURANCES FROM JAPAN

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ASSURANCE FROM VISCOUNT KENTARO KANEKO, THE EMINENT STATESMAN OF JAPAN, THAT BELLIGERENT REPORTS ARE GROUNDLESS.

* * * * *

FABRICATIONS, HE SAYS, OF SENSATIONAL NEWSPAPERS.

* * * * *

NO APPREHENSION IN EMPIRE OF ANY DISRUPTION OF FRIENDSHIP EXISTING BETWEEN THE TWO NATIONS.

* * * * *

Declaring that all talk of trouble between this country and Japan is the outgrowth of “pernicious fabrication on the part of sensational newspapers,” Viscount Kentaro Kaneko, who was special Ambassador to the United States from Japan during the Russian-Japanese war, has written a reply to a letter addressed him by me, in which the latter, under date of December 5th, last, expressed the hope that no difficulties might arise between the two countries which could not be readily and amicably adjusted.

Viscount Kaneko, whose elevation to his present title and whose appointment as adviser to the Emperor on all things American, came close upon the heels of the close of the struggle with Russia, besides is one of the present eminent Statesmen of the Empire. During General Grant’s first term, he was a member of a commission sent here to study American finance. Prince Ito was the head of this commission and I acted as friendly adviser, at the request of General Grant, then President. This commission afterwards went to London, Paris, and Berlin, and made a similar investigation of the financial systems of each of those nations, and on their return home, via the Suez Canal, they made a full report of their mission and in it strongly recommended their government to adopt the American system, which was promptly done, and I was appointed by the Japanese Government special agent to aid in carrying out their new financial system. I awarded the contract for the engraving to the Continental Bank Note Co., of New York, on their successful competitive bid, and after all the work of establishing their new financial system was accomplished I received a flattering commendation from the Secretary of the Japanese Treasury for my services in the matter and a very handsome pair of Japanese silver vases as a souvenir accompanied same.

My letter, which was sent when reports of impending trouble with Japan were numerous, is as follows:

December 5, 1907.

MY DEAR VISCOUNT:

It gives me infinite pleasure to congratulate you on the bestowal of your present very great title by the Emperor, knowing as I do that it is so richly deserved. No one in this country can bear stronger testimony of your untiring vigilance and masterly efforts in the work you had on hand in this country during your war with Russia, and the marvelous success which crowned your exertions. No one of your nation who has visited this country made more or stronger friends than you did amongst our people, and we are all hoping that the time will come when you will return as Ambassador. It would indeed be an appointment for the benefit of both nations, and would do more than anything I can think of to strengthen the long-existing friendly relations between the two peoples. There are occasional rumors of our relations being strained, but they originate, I am quite sure, in either Russia or Germany, owing to a desire in some quarters to disrupt the friendship. You can rely upon one fact, however, that if there is ever a severance, which God forbid, it will not emanate from this side.

Faithfully yours, HENRY CLEWS.

VISCOUNT KANEKO’S ANSWER.

MY DEAR MR. CLEWS:

Your kind letter of December 5th reached me a few days ago and I am infinitely obliged to you for your hearty congratulation on my recent advancement to a higher rank for a modest service which I was able to render my Emperor and country during the late war. In performing the duties which were entrusted to me during my sojourn in your country, what little I was able to accomplish was due to the kind encouragement and assistance which the friends in America so unsparingly gave me. and in this connection I assure you that you share the largest part of it.

You mentioned about the so-called strained relations between America and Japan. It is really a pernicious fabrication of sensational newspapers, and I am glad that you seem to believe it to be so too. So far as I am aware there is nothing of a serious nature diplomatically pending between the two countries. It is absolutely groundless, therefore, even to imagine, as some alarmists would have us believe, that there may be a possible disruption of the friendship which has been cemented so firmly ever since this country was introduced by America to the family of civilized nations in the world. I assure you that every one of our people on this side of the Pacific is keenly alive to the gratitude we owe you, and I think it most remarkable that nobody in this empire seems to entertain, even to the slightest degree, any apprehension of a breach of the friendship. Such a thing never comes into our head. Again thanking you for your courtesy,

Sincerely yours,

(Signed) KENTARO KANEKO.

TOKYO, JAPAN, January 21, 1908.

I have kept up a correspondence with Prince Ito and other Japanese Statesmen ever since I was first associated with them thirty-seven years ago. The letter from the Viscount spoke for itself and showed the utter nonsense of sensational reports.

I also wrote to Marquis Ito about the war rumors as follows:

December 5, 1907.

MY DEAR MARQUIS:

Notwithstanding the frequent rumors that have of late sprung up, both in this country and Europe, to the effect that the long-existing friendly relations between Japan and America are becoming strained, I think I am in a position to know that there is not the slightest foundation therefor, so far as we are concerned. There has been, however, a vicious motive in their circulation, and it is quite dear to my mind that they have had their origin in, and are disseminated by people in Russia and Germany, the wish being father to the thought. For some reason or other they seem particularly anxious that the pleasant relations existing between our two countries should be weakened, and finally severed, hence the strenuous efforts in that direction. I feel quite sure, however, that there is not the slightest possibility of such a contingency.

To show how false these rumors are, as well as to cement the friendship which now exists between our countries (which you and I know to be real and lasting) and to put an end to the jingo talk of the press both here and in Japan, would it not be an excellent idea for the Emperor to formally invite the Admiral and Commanders of our fleet, which is to cruise in the Pacific waters, to meet him at some convenient seaport in your country? I know that the American people would appreciate such an honor and that the greeting they would receive from your countrymen would banish all thought of a disruption of our pleasant relations. The Yankees of the West respect and admire the Yankees of the East, and every effort should be made to increase the harmony which now prevails.

Hoping, my dear Prince, that you are enjoying good health and happiness, I remain

Faithfully yours,

HENRY CLEWS.

MARQUIS ITO, TOKYO, JAPAN.

* * * * *

FLEET TO VISIT JAPAN.

INVITATION ACCEPTED.

NEW PROOF OF FRIENDSHIP BETWEEN THE TWO NATIONS.

Official Statement from Washington, March 20.

The American battleship fleet is to visit Japan. The desire of the Emperor to play host to the “Big Sixteen” was expressed to Secretary Root yesterday by Baron Takahira, the Japanese Ambassador. The invitation, which was in the most cordial terms, was considered by President Roosevelt and the Cabinet to-day. Secretary Root was directed to accept the invitation, and the acceptance was communicated to Baron Takahira this afternoon.

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LXXXVIII. THE EMPEROR OF JAPAN

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DECORATES HENRY CLEWS WITH THE ORDER OF COMMANDEUR OF THE MOST DISTINGUISHED ORDER OF THE RISING SUN—ON THE INSIGNIA IN JAPANESE LETTERS IS “KUN-KO-SEI-SHO”—WHICH MEANS “EXALTED MARK OF MERITS AND SERVICES.”

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LETTER FROM VISCOUNT KANEKO.

New York Tribune, March 21, 1908.

TOKYO, March 23, 1908.

MY DEAR MR. CLEWS:

Please accept my heartiest congratulation on the new honor which has been added to your already distinguished life by His Imperial Majesty, the Emperor, who was pleased to confer upon you the Imperial Decoration, in recognition of your valuable service to this country. In due time, I know, Ambassador Takahira in Washington will officially present it to you. I hardly need say how gratefully I am appreciating your kind friendship which enabled me to perform whatever was entrusted to me, though to a very modest extent, during my sojourn in your land in 1904-1905. And in this connection, I assure you that I now look back, with much feeling, to those pleasant times I had with you in America. I sincerely hope that our next meeting will soon be in this country where your special interest in us is already so greatly appreciated, as is shown in the recognition which has been given you by the Emperor this time.

With my renewed assurance of the warmest regards to yourself, and hoping that this will find you well, I remain,

Very sincerely yours,

(Signed) KENTARO KANEKO.

MR. HENRY CLEWS,

NEW YORK CITY.

COPY OF LETTER TO VISCOUNT KENTARO KANEKO.

April 25, 1908.

MY DEAR VISCOUNT:

I am in receipt of your most highly appreciated letter of March 23d, for which I cordially thank you; and I am daily expecting to be honored by receiving the Imperial Decoration which you state is to be conveyed by Ambassador Takahira. Upon its receipt I will formally express my gratification to his Imperial Majesty, the Emperor, for the great honor conferred.

If Japan were nearer to New York I might be able to promise that our next meeting would be in your own country—the Land of the Rising Sun—but as you have achieved so much good for Japan, in the United States, I doubt not that business, or international diplomacy, of which you are one of the masters, will bring you here again, when, I assure you, you will be received with the honor and respect which your distinguished services and your high personal character entitle you to expect.

With assurances of the highest regard and friendship for you and your countrymen, I have the honor to remain,

Very sincerely yours,

HENRY CLEWS.

VISCOUNT KENTARO KANEKO,

TOKYO, JAPAN.

CONSULATE GENERAL OF JAPAN.

60 WALL STREET, NEW YORK CITY, April 27, 1908.

ESTEEMED SIR:

Referring to the official dispatch of even date, I take liberty to ask you to appoint some afternoon in the near future which will be convenient for you to receive me at your home or elsewhere when I will have the honor and pleasure of carrying out the important mission of presenting you with the distinguished mark of honor. With kind regards,

Yours very respectfully,

(Signed) K. MIDZUNO.

MR. HENRY CLEWS,

630 FIFTH AVENUE, NEW YORK CITY.

I named Sunday, May 3d, at half-past one o’clock, at my residence, 630 Fifth Avenue, and invited a large number of friends to luncheon, which made the occasion a most enthusiastic and enjoyable one.

The Honorable Kokichi Midzuno, said: Mr. Clews, acting under the instructions of His Excellency Count Tadasu Hayashi, Minister of Foreign Affairs, I have the honor to inform you that His Imperial Majesty, the Tenno of Japan, my August Sovereign, as a special token of Imperial good will, has graciously been pleased to confer upon you the decoration of Commandeur of the most distinguished order of the Rising Sun, and I have the honor to present to you the said decoration. In performing this most pleasant duty, I deem it my privilege to avail myself of this occasion to tender my hearty congratulations and to convey to you, Esteemed Sir, the assurance of my highest consideration.

Which was replied to by me as follows:

MR. MIDZUNO:

In receiving at your hands under the instructions of His Excellency Count Tadasu Hayashi, Minister of Foreign Affairs for the Empire of Japan, the decoration of Commandeur of the most distinguished order of the Rising Sun, bestowed upon me by His Imperial Majesty, the Emperor of Japan, as a special token of his good will, I respectfully acknowledge my high appreciation of the honor, and shall always value the distinction as one of the greatest that could be conferred upon me. I shall ever regard it not alone as a flattering compliment to myself, and a recognition of such services as I have been able to render, but as an emblem of the friendly relations that bind Japan and the United States together in a bond of sympathy; and I trust that this tie of friendship will never be weakened. I at least will always endeavor to strengthen it.

I have long been intimately conversant with the affairs of Japan, and been deeply and sympathetically interested in the rapid and wonderful development of the Empire, and all the more so in consequence of my good fortune in having had the personal acquaintance, while they were in New York, of those two distinguished Japanese Statesmen, who are now Prince Ito and Viscount Kentaro Kaneko. Moreover, the correspondence that has passed between us since their return to Japan has only quickened my regard, and heightened my admiration for them and their Country. Both have proved themselves great in peace as well as war, and may the light of the Land of the Rising Sun never grow dim, and America and Japan be joined by their mutual interests in unbroken peace and concord forever.

With many thanks to His Imperial Majesty, the Emperor, for this great honor, and to His Excellency Count Tadasu Hayashi, as well as yourself, for your courtesy in the fulfilment of your duties, and for the evidences of your personal friendship for me, which touches me deeply, I assure you that my appreciation cannot be expressed in words.

This symbol of the Rising Sun indicates the coming of the day of greatness of your nation, and my fervent hope is that darkness may be unknown in your land.

In the midst of our festivities to-day there is a cloud, and I desire to express my deepest sympathy to the people of Japan in the loss of so many young lives in the disaster which visited them during the past week. Though dead, these young men still live as an example to others that a life given to country in time of peace deserves the same lasting glory as though given in battle.

I then requested the ladies and gentlemen to fill their glasses and rise and drink to the health of His Imperial Majesty, the Emperor of Japan.

The Consul General of Japan answered the toast as follows:

MR. CLEWS, LADIES AND GENTLEMEN:

As the local representative of Japan, I have the pleasure and honor to thank you for the toast to His Imperial Majesty, proposed by our esteemed Host and so heartily joined in by you all. It is high honor as well as great pleasure that I was in a position to personally present that high mark of honor to Mr. Henry Clews. But what makes me most happy is that this came in most opportune time, when the international horizon which was said to be more or less clouded for some time has become clear—so clear that even the yellowest journals of this country which are sparing no efforts to stir up anti-Japanese feeling among American people, can no more find any meteorological item for a pessimistic weather forecast. Now that all transient and incidental questions between your country and ours have been settled in an amicable way, now that your government, on behalf of your people, have gladly accepted our invitation to participate in the Grand Exposition to be held in Japan in 1912, and now that my fellow countrymen in Japan have most pleasant anticipation to welcome the officers and men of your mighty fleet of battleships in our beautiful ports, I hope and trust that the most friendly relations between two nations, which have existed and are happily existing, will be an everlasting one.

In conferring upon you, Mr. Clews, that high mark of honor which I have just had the pleasure to present, His Majesty is reflecting the friendly feeling and unfeigned affection that fifty millions of His faithful subjects entertain toward the people of this great Republic for their kind guidance and unshaken sympathy shown to Japan and her people from the time when your great Commodore knocked at the door of our Island Empire to invite its secluded people to the comity of nations down to the present day, not to speak of the most trying time Japan passed through a few years ago, and their gratitude for the most valuable service rendered by American people to effect the termination of hostilities and restoration of peace through the far-sighted, active, and able good offices of your great President, whose toast I beg to propose.

My acknowledgment by letter of the honor conferred upon me:

May 2, 1908.

DEAR SIR:

Please convey to his Imperial Majesty, the Emperor of Japan, my sincere thanks for bestowing upon me, as a token of his good will, the Imperial decoration of Commandeur of the most distinguished order of the Rising Sun. No words of mine can fitly express my high appreciation of this honor, and I shall always value the distinction as one of the greatest that it has been my good fortune to achieve. I consider it a symbol of the friendly relations existing between Japan and the United States—a friendship which, I assure you, I shall endeavor to foster and promote to the best of my ability.

With many thanks to his Imperial Majesty for the honor conferred upon me, of which I am justly proud, and to your Excellency for your kind offices in my behalf, I have the honor to remain,

Most sincerely yours,

(Signed) HENRY CLEWS.

HIS EXCELLENCY COUNT TADASU HAYASHI, MINISTER OF FOREIGN AFFAIRS OF THE EMPIRE OF JAPAN.

The following letter from Prince, then Marquis, Ito is interesting as a part of the world’s history, and shows the feeling and friendship of that great statesman:

TOKYO, April 14, 1904.

DEAR SIR:

In answer to your letter of February 17th, let me first of all thank you most sincerely for the constant sympathy you have shown to our country’s cause. Your friendly efforts on the occasion of the Chino-Japanese war are still fresh in my memory and in the memory of all those who have heard of them. And, in general, the sympathetic attitude of public opinion of your country is a great encouragement to us in our faith that in fighting for our own future security and undisturbed enjoyment of the fruits of civilization, we are to a certain extent fighting also for the common cause of all. Just as you say, the supremacy of Russia in Corea would mean not only a constant menace to the very existence of our island empire, but would also mean the wholesale destruction of our commercial and industrial interests already legitimately vested there in the past, not to mention the loss of natural outlet for our expanding people. The constant policy of Russia in this part of the globe has steadily inclined toward monopolization of natural resources of the country she conquers and annexes. Her Manchurian policy is the irrefutable evidence of the above statement. So that in fighting for our own interests we are at the same time fighting for the principle of “fair competition all around” in these new markets of the world. I am indeed very sorry that the negotiations carried on on our side, with sincere “bona-fide,” were not crowned with success so earnestly desired. If the Russian Government were a little more inspired by the spirit of moderation and of toleration for the legitimate interests of others things would not have come to this pass. As it was, there remained no other way for us but to try to enforce by arms what we could not do by reason. And we had to do so ere it would have become too late, for Russia was steadily and rapidly augmenting her fighting forces available in this part of her empire, so that before long the sheer mass of her fighting power would have made it a folly for us to attempt to resist the unscrupulous march onward. It has been nothing but a coolly thought-out step in the cause of State necessity. And I am much gratified to see that you as well as the general public opinion of your country, have understood our motives in their true light.

Hoping that you are enjoying as robust a health as when I saw you last in New York, and also hoping to be able to see you again in no distant future,

I remain, yours sincerely,

(Signed) MARQUIS H. ITO.

HENRY CLEWS, ESQ.,

New York City, U. S. A.

The following article, which I wrote at the time for one of our leading magazines, contains matter which may be instructive to my readers:

May 24, 1904.

The success of the Japanese in the present war with Russia is due to their great zeal. What they undertake to do, they generally do with great earnestness of purpose, which calls forth sacrifice, energy, courage, and determination. The concentration of all these qualities is the basis of success in all undertakings whether large or small. The success of the Japanese is easily accounted for also by the fact that they love their Emperor as a people—they are willing to fight for him and to die for him, added to which, they are fatalists and are not afraid to face death on the battle-field, because they firmly believe that the next world is better than this, and therefore to die in a good cause, especially in fighting for the salvation of their country, secures a high and honorable position there. Against these characteristics, which back the Japanese in the present war, their antagonists, the Russians, fear their Emperor, and under the autocratic rule of the nation soldiers are very often put into the army through force and kept there. There is a vast difference, therefore, on the battlefield, in the fighting qualities of soldiers who are backed by love of their Emperor and soldiers who are backed by fear of their Emperor. Then again, the discipline of the Japanese soldiers is of a more intelligent and up-to-date order than that of the Russians. Each regiment in Japan is composed of 400 men with a captain in command who carries a sword. Their training provides that if anything should happen to the captain, and his sword should fall to the ground, it must be taken up on the instant by the next in rank, and if anything should happen to him, the next in rotation takes his place, and so on all the way through to the last man; and each man to the end of the 400 is capable of picking up the sword and commanding with it, which also means to continue the fight until the last man in each regiment is killed or disabled; in other words, the fight is never to be given up except by total extinction. As an evidence of the interest and earnestness of the Japanese people, it is customary, amongst the trades-people, whenever a family that they have been supplying with the necessaries of life is deprived of the father of the family, in consequence of his going to the war, to continue to supply all their needs the same as before and without sending any bill therefor. It is pretty difficult, therefore, for the Russians, notwithstanding that they so largely outnumber the Japanese, to whip such a determined, forceful people either on land or sea.

There is scarcely an important college anywhere in the world in which Japanese students are not to be found studying for all vocations, and they are bent upon acquiring the best and most up-to-date methods in all walks of life. Admiral Togo was educated at Annapolis, and the American, English, and Continental colleges have educated many of Japan’s best army and navy officers now engaged in the war.

The Japanese are not given much to invention, but they possess great discernment and discrimination; they know a good thing when they see it, and are very skilful in imitation. Fifty years ago, when Commodore Perry successfully negotiated for the opening of the Japanese ports, that nation’s intercourse with the outside world commenced. A few years thereafter a commission was appointed to frame a constitution. This commission visited all the great nations in pursuit of information. They familiarized themselves with the American constitution and the basis of the government of other nations; they culled the best from all and put it into their constitution. It took them seven years to accomplish it. When they made their report to the Emperor he accepted it without any modifications whatsoever, and notwithstanding the great changes that have taken place in that country in consequence of its growth and development, there has been no occasion up to this date to in any way change that document.

They also appointed thirty-five years ago a commission, with the present great statesman, Marquis of Ito, at its head, to visit the various nations with a view of obtaining the best information possible in order to establish a financial system. On their trip around the world to study the various foreign financial systems with a view of adopting one up to date for Japan, they first came to this country and brought official letters to General Grant, then President. General Grant turned them over to me to teach them our financial system. I posted them up thoroughly on our financial methods. They then went to England, France, and Germany, and returned to Japan via the Suez Canal. On their return, their report strongly favored the adoption of the American system. It was accepted by the Government, and their Secretary of the Treasury appointed me their agent to get up the engraving of their new currency and bonds, similar to those of the United States Government. I sent the phraseology and denominations of all our different demand notes and various bonds to them, and they transferred the same into their own hieroglyphics and sent them to me. I had the same beautifully steel engraved through the Continental Bank Note Company, who were the lowest bidders, in competition for the work. Since that time I have kept up a most interesting and exceedingly friendly acquaintance and correspondence with Marquis Ito, and his recent letter to me contained much of interest, as it gave most excellent reasons for Japan being involved in the present war, which he said was not from his country’s desire, but through necessity, as a matter of defense.

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