OTHER

AND

PEOPLE'S

HOW

MONEY

THE

BANKERS

USE

IT

OTHER
AND

PEOPLE'S
BANKERS

THE

HOW

MONEY
USE

BY

LOUIS

D.

BRANDEIS

YORK

NEW

FREDERICK

A.

STOKES

PUBLISHERS

Mb

COMPANY

IT

1913,

Copyright,
The

McClure

Publications

Copyright,

1914,

A.

Frederick

All

March,

1914

Stokes

rights

#7!-

"

1914,

by

by
Company

reserved

if

ft

PREFACE
While

Louis

the

on

Brandeis's

D.
trust

money

Weekly

many

in

accessible

permanent

urgence

through

more

such

inquiries

have

would

clear

been

constituted

analysis and
the

industrial

great

in

expert

most

that

meant

here

was

published

which,

of

story

of

he

comprehends

which

to

followed
the

the
uses

inquiries

scholar
era

business

harnessing

of

ever

other

time

the

wise

greatest
is the
will

future

authority
and

the

was

the

our

that

ment
develop-

and

of

with

expansion

of the

Here

constitute

No

that

great

to

our

The

on

is the

era,

treatment

our

story

describe

able

an

which,

our

history.

The

industry.

be

of

Wilson

come

problems.

our

of

President

as

said, has

have

men

part

embodied

mind

profound

that

it

ably
inevit-

public recognized
to

most

on

that

States.

attentive

contribution

and

clearest

United

out
with-

articles

they

movements

the

the

these

by

Even

mail, however,

since

narrative

the

Harper's

publication

form.

that

book,

about

came

articles

in

running

was

of

series

unless

concentration

of steam

change, and

and
the

tricity,
elec-

great

PREFACE

vi

historian

No

excesses.

will find among

masterful

so

went

look

economics, the
of

time.

our

While

how

widespread
trust

money

is

"Great"

loosely,and
man.

In

of the

most

I look

the

of

figures.

As

in

belief among

diagnosis of

important

in many

I do not

that
Brandeis

of his

as

use

great

one
intellect,

is his comprehension

of the

one

bution
contri-

years.

elements

ciers
leading finan-

Brandeis'

"Mr.

is part of his greatness

My

indicated
sufficiently

are

were

the

said to me,

lawyer

mathematician."

to

composition

important

as

ample opportunity

Mr.

upon

of the country

greatness

in

of the words

one

mind

sound

brilliant

thought

the field of

running

the most

was

to current

and

was

this

that

intelligentmen
our

had

who

many

having, in

as

his articles
I

concentration

among

inventive

most

Harper's Weekly
know

one

Brandeis

Mr.

upon

but

am

ion,
opin-

my

documents

contemporary

our

analysis of why

an

astray.

future,in

of the

this

s
as

views

on

in the

rial
following edito-

subject

Harper's Weekly.
AEITHMETIC

About

Company
Mr.

five

of New

Brandeis

Cooper

Union

before

years

came

York
down

went

the

into the

from

prophesied

Metropolitan

that

hands

Boston, and
that

company

of
in

a
a

Traction

receiver,

speech at
must
fail,

PREFACE
Leading bankers
recommending
made

his

in New

York

the stock

prophecy

merely by

did

controversy?

In various

would
record
that
the

he

Boston

win

Mr.

analyzing

in the

heartily-

were

Brandeis

the

published

Pinchot-Glavis-Ballinger
doubt;

but

perhaps the
critical step was
when
he calculated just how long it
take a fast worker
to go through the Glavis-Ballinger
and
make
a
judgment of it;whereupon he decided

Mr.

Wickersham

time

it

have

must

and

to their customers.

figures. How
most

vii

Most

of

could

stated

was

ways,

predated.

Mr.

Brandeis's

have

not

to have

been

no

been

other

made

his report at

made, and

therefore

contributions

it

to current

When
arithmetic.
he succeeded
history have involved
in
preventing a raise in freight rates, it was through an exact
When
he got Savings Bank
Insurance
analysis of cost.
started

in

Massachusetts, it was

insurance
between
a

ought

definite grasp

shop if that new

knowledge of the
he established

gas

business

the wisdom

with

He

statesman.

he made

public utilitythat

of the

of course,
a

When

to cost.

cityand

by being able

could
idea

not

had

conditions

before

the

the

to

figurewhat

best

exists in this country,

was

necessary

less upon

that make
originality
have invented
the preferential
founded
not been
a
on
precise
in the garment

United

States

displayed of
they

are

the

on

Mr.

trades.

which, while

"

not

to

wrote

to the

'

New

he

edge
of knowlwhen

women

arithmetic, is built

Haven

present editor of this

years

before

Railroad, Mr.
paper a private

he said:

the New

resigns,the

the

the

only,

the amount

actually happens

resigned from

letter in which
"When

upon

When

Court

Supreme

intellectual quality. Nearly two

same

Mellen

Brandeis

what

overworked

than

reason

bined,
com-

"

and

constitutionalityof legislationaffectingwomen
relied much

contract

Decline

Haven
of New

reduces
Haven

its dividends

and

and

Mellen

Fall of Mellen'

will

viii

PREFACE

make

dramatic

story of human

interest with

moral

or

"

not
includingthe evils of privatemonopoly. Events canbe long deferred,and possiblyyou may
want
to prepare
for their coming.
I suggest the following
"Anticipating the future a little,
as
an
epitaph or obituary notice:

two

"

"Mellen

broad

was

masterful

of view.

He

resourceful,courageous,

man,

fired the imagination of New

distorted

but, being oblique of vision,merely

and

silenced its conscience.

laws human

impunity

on

with

delusion

the

victim

last,a

that

'"Remember,

The
of

other

the
work

is

won.

honest

country

Haven

leaders

He

for he knew

odds

any

long

time

of finance
Haven

kept

came,

the work

is the

first of the

than

methods
and

of

that

almost
He

of

exposure

who

person

soon

as

the

fight

respectableand

said

ahead.

ness
busi-

it is necessary

very

were

big

prehension
com-

single-handed

is

while

any

and

exposure

stops fightingas

For

crash

the

was

Brandeis.

Mr.

arithmetic.

financial management

the

the

against the New

actual

to

wasteful

fight and

five,he fell,at

"

of the

fights against
to

make

two

obsessed

was

railroad, more

Haven

over

of

he

with

safety.'

of

thing, led

New

and

of the bad

New

all

divine;but, as

two

the mother

one

he trampled

Stranger, Arithmetic

exposure

the

and

while

the relentless rules of humble

to

sciences and

For

its

England;
judgment

that

his

unsound
A

year

charges
and

before

excusab
inthe

however, he ceased worrying,

had

been

carried far

enough

PREFACE
to

complete

to

take

before

little

some

asked

someone

me

longer.

any

him

controversy shortly

collapse,he replied,"That

need

not

itself. When

part in
the

ix

Time

fight does

and

arithmetic

will do the rest."

This

Brandeis

bearing

with
and

notable
those

rests

his

life,the

together.

the

Company
of the

one

life,that

not

advantageous

his

understanding
and

insurance
man

lay
from

classes

through

could

most

been

the

City

methods

the

vast

important

it.
of

by

which

thus

Mr.

that

is

Behind

obtaining
laboring

advantage

community

fives and

elaborate

tween
be-

of Boston

good

is

themselves

make

Armstrong Committee

his

cost of it to the

of the

their whole

given him

partiesto

the proper

as

In

arrangement

contract

devising methods

unnecessary

The

The

of the

is

business.

guiding principlesof
no

of

sides of his mind

two

to both

energy

have

and

philosophy of

the fibre and

come

which

worked
Gas

of

understanding

American

Brandeis'

in Mr.

equally distinguishedgrasp

an

accomplishments

on

is combined

concrete

significance.His imagination

as

place in
have

of the

grasp

to

that would
the laboring
comfortable

perhaps

ing
mak-

systems of state help.

ideas

Report

put
on

previously suggested by

forth

in

insurance

Mr,

the
had

Brandeis,

PREFACE

acting
holders.

which

of

in

the

and

Mr.

to

most

most

and

he

the

also

about

to

takes

up

limitation

their hours
down

from
be

State

the

heard

what

In

women.

is

before

his

employer
constitute

to

to

to the

up

all the

to

solve,

Supreme

Oregon,

and

the

Minimum

lishing
estab-

of

Oregon,

the

Wage

Supreme

which

hours

be

in certain

futile

allow

then

the

and

understanding

of

once

said: "No

since Lincoln

people

as

with
them.

Louis

to limit

to be

cut

industrial activities

growing sympathy

man

industries,

their wages

expression of

an

he

of the

performance

These

is

Court,

really a logicalsequence

of women's

large part

common

welfare

have

we

ever

the

The

to

States, from

in consequence.
in

tions
condi-

of specialprotective
constitutionality

it would

since

York,

improve

today,

coming

case,

in the

New

it does

as

thinkers

United

legislationfor
case,

in

relation

Brandeis,

the

won

combined

to

important question

of the

Court

are

his

competent

the

much

so

policy

important

more

clothing industry.

laborer

seems

the

Protocol

the

done

has

Equitable

intimately

were

management

the

and

Business

statesmanship

of the

for

counsel

as

his

deep

and

working people
Florence

Kelley

has understood

Brandies

does,"

PREFACE
While

the

xi

progressive achievements
with

the industrial
in

through

the

saw

never

system,

limited

more

about

he

think

and
Senate

of the

the

by
The

that

the
space

for

I do not

good

are

have

you

much

as

as

do."

the

was

but

tell the

from

truth

coming

leading the fightor

in

constantly haunted

side, was
there

and

protect Secretary

to

Brandeis,

In

of the administration

power

prevent

about

ruling forces in the House

mystery,
to

Brandeis

you.

that

today

ment
Depart-

said: "Mr.

and

knows

He

Mr.

and
knew

who

agitation

mystery

editorial printed above

solved
more

Mr.

conservation
the idea

and

brilliantly

Interior

me

say

combined

were

light.

him

ethical

by

this

Department

Ballinger and
to

ical
polit-

with

man

of the

to

controversy, the

that

the

by

in

I want

lawyer.

Interior

been

more

respect for

no

motives

your

motives, but
the

After

down

sat

I have

wonderful

connected

I worked

cross-examined

and

Hapgood,

have

of detail

details

the

been

came

some

high constructive

with

had

been

sense.

grasp

politicalthinking.
most

have

great

Ballinger-Pinchotcontroversy,
a

combined

Brandeis's

of Mr.

majority

hints

it would
other

somewhere.
at

how

he

require much

sides,the

iasm
enthus-

conservation, the convincing arguments

PREFACE

xii

in

higher standards

for

of

conspiracy

this

needs.
moved
the

is

Seldom
it

as

with

the

at

Brandeis's

Mr.

hearing

final

plea

so

to

committee.

Possiblyhis

work

railroads will turn out to be

on

the most

significant
among

Brandeis

has

before

the

done.

the

His

the way

Interstate

be

more

idea.

It

is

that

the

this

will be

in 1910-11
Commission

Commerce

to be

for railroads

things Mr.

many

arguments

against the raisingof rates,

to

country's larger

audience

an

by

was

office,the connection

on

the

ground

made
efficient,

efficiencya

cardinal

in his

point

real progress

was

prosperous

more

toward

that

national

philosophy

tional
higher nalife will come
in all our
through efficiency
activities. The seventy-eightquestionsaddressed
Commerce
to the railroads
by the Interstate
Commission
in December, 1913, embody
what
is probably the most comprehensive embodiment
of his thought on the subject.
On nothing has he ever
worked
harder than on
his diagnosisof the Money Trust, and when
his
life comes
to be written (Ihope many
years hence)

only

its effect in
is indeed

of the

more

ranked

with

his railroad

work

for

acceleratingindustrial changes.
than

things he

has

coincidence

been

that

so

contendingfor

It

many

have

PREFACE
to

come

before

It is seldom

pass.

idea,

one

the

that Mr.

not

to

say

Brandeis

the
effectively

no

one

ideas, effectively
exaggerationto

inherent

the

the firstperson

was

puts

man

is responsible
for the

recognition of
He

that

many

it is

world, but

great size.

xiii

say

spread
wide-

now

weakness

who

of

set forth

that there is a limit to the

doctrine

and the successful demonstration

size of greatest efficiency,
of
to the

is

that

truth

subjectof

powerfully put

Senate

Committee

The

demonstration

testimony before

his

in

1911, and

tion
contribu-

profound

trusts.

In

was
efficiency

in

put in this volume.

that

is

it is

powerfully
delusion

destroying the
incident

common

the

of

size,he

of efficiency
through
emphasized the possibility
intensive
development of the individual,thus
with his whole study of
connecting this principle
to industrial
efficiency,and pointing the way

democracy.
Not

less notable

constructive
Brandeis'

than

intellect

the

and

the

into Mr.
ability that have gone
the exceptionalmoral qualiwork
ties.
are

Any powerful and entirelysincere crusader

must

much
in

sacrifice much.
in money,

in

Mr.

happiness.

has sacrificed

agreeableness of

effort,and he has done

human

Brandeis

life,

principleand for
of intensive work,

it for

His power

social

PREFACE

XIV

his sustained
been

have

could

Nor

devote

to

should

The

in

in the

bill has

and

But

Of the truths

essays

printedin

before
there

if

as

day.
out

the

now,

whole

the

his

which

idea

can

be made
many,

active citizens will be

not

are

ied
embod-

are

book,

these

of trust

some

it will be many,

but

system

as

group

cently
re-

undermined.

systems

this

will,therefore, be

during which

have

passed,and

been

passed.

be

being carried
years

others

changes, that

written, it looks

bills would

ended

and

being attacked has been

was

are

making

mistake, because

the

Brandeis

of Mr.

currency

words

his life to

make

anyone

brought about
which

without

done

has

he

true.

come

labors

the

what

done

being willing
dreams

for

necessary

have

will,and his courage

leadership. No
man

and

interest

are

many

effective;

many

years

strugglingfor

which
here
clearly,so
so
are
principles
eloquently,so conclusivelyset forth.
all written
articles reprintedhere were
The
those

1913.

"The

appeared

in

before November,

Management"
Aug.

16, 1913; the

22, 1913

and

Dec.

other

Failure

Harper's Weekly

between
articles,

17, 1914.
Norman

March,

1914.

of Banker

Hapgood.

Nov.

CONTENTS

CHAPTER

PAGE

Our

II

How

III

IV
V

VI

Financial

Oligarchy

Combiners

the

Interlocking

Combine

28

Directorates

Serve

One

What

Publicity

Where

Master

Only!
Can

Banker

the

51

69

Do

92

Superfluous

is

.109
.

VII

Big

Men

Little

and

Business

.135
.

VIII
IX

A
The

Curse

of

Bigness

Failure

of

162

Banker-management

189
.

The

Inefficiency

of

the

Oligarchs

201
.

xv

determination

to

with

themselves

address

must

men

MONEY

PEOPLE'S

OTHER

future

long

the

serve

earnest

an

and

the

liberties of men."

true

Pujo

The

Committee

in

appointed

"

1912

"

found:

"Far
to

of

banks

under
in

resources

is

banks

our

by

all the

bankers

and

been

the

as

here

the

every

very

vitals

of

of

in the hands

which

if

or

of these

who
allies,

policiesof
acts

most

of this

nevertheless

competition than

the trusts, for

they

thing
any-

strike

potential competition

industry that is under

condition

be competition

The
.

or

continue

raisingmoney

described,have

destructive

more

should

financial

existingsystems.
group,

there

greater

they

their partners and

accomplished by
at

if

group."

of bonds

together dominate
inner

be

would

small

system

currency

facilities for

sellinglargeissues

of the

our

different

impossible that

with

few

comparatively immaterial

controlled

"It

over

groups

industries."

"Whether

to be

pened
hap-

of elimination

of these

the domination

and

less is

has

industry is the control of credit

in

the

all that

in the past in the way

us

competition

through

than

dangerous

more

their

permitted

to

in

protection,a
continue, will

OUR
render

FINANCIAL

OLIGARCHY

all attempts

impossible

conditions

competitive

to

in

restore

the

mal
nor-

industrial

world.
.

"If the arteries of credit

choking by

to

the control

be

may

the

obstructions

of these groups

conducted

to the tribute

they

their

possibleand

its merits

on

that

so

important
system, competition in large

become

enterpriseswill

and

the

self-constituted

of

opened

are

through

created

permitted freelyto play

part in the financial

be

clogged well-nigh

now

business
of

instead

being

can

ject
sub-

ful
will of this hand-

good

of

trustees

the

national

prosperity."
The

promise

proclaimed
The

myer,

the

joyously

was

mittee
Pujo InvestigatingComUnterand its able Counsel, Mr. Samuel
have laid before the country, show
clearly

by

the

which

which
will

called upon

promise some
be
to

few

The

America.

of

what

Freedom

New

in 1913.

facts which

means

How

of

control

men

ness
the busi-

report proposes
relief

ures
meas-

Additional

dies
reme-

proposed. Congress

will

soon

be

act.

shall the
lines shall

emancipation
we

proceed?

fullyunderstood, will teach

us.

be

wrought?

The

On

facts, when

DOMINANT

THE

dominant

The

service

industrial

bestride

bankers

that

world, so

course,

but

most

business

the

wealth.

Combination

concentration

"

advancing

First: There
banks

and
"

and

and

their
of

key

companies;

control

to their power

three

obvious

are,

of

of

extraordinary

intensive

interlockingdirectorates

and

distinct

prehensive
com-

lines:

consolidation
the

less

is

of

obvious

are

"

of

banking

tutions
insti-

legally connected;

not

and

joint transactions,gentlemen's agreements,

"banking ethics" which eliminate competition
among

Second:
into

on

pation
partici-

through stockholdings,voting trusts

which
the

is the

trust

affiliations

in

The

their

large fortunes;

of

possession

abilityor huge

business

bankers

factor

potent

these

large enterprisecan

possessed

is not

"

America's

These

approval.
men

his subjects.

middlemen,

without
successfully

able

the

but

panies
com-

railroads,
public

corporations are

practicallyno

be undertaken
or

life insurance

and

masters

as

Associated

banker.

properly

Though

garchy
oli-

financial

our

Controlled

his tools.

and

in

investment

companies

trust
are

ELEMENT

element

is the

banks,

MONEY

PEOPLE'S

OTHER

huge

the investment
There

is the

systems,

bankers.

consolidation

the

of railroads

large combinations

of

OUR

FINANCIAL

OLIGARCHY

public service corporationsand

industrial

local,independent banking

alone

cannot

created
York

the

supply

dependence

the

lines

only,

Trust

Money

"

of combination
Third:

associated

however

could

another

Investment

New-

classes of

in

have

produced

and

more

potent factor

bonds,

stocks

functions

into
in

and

which

Morgan

notes,
three

of bonds

and

stocks.

became

which

conducted

the

life insurance

and

great

our

the

"

became

They

the

makers

directing
and

companies,

other

corporate reservoirs of the people'ssavings

"

of bonds

directingpower

and

life blood

others

They

also in banks

of
depositaries
the

stocks.

and

carried

the
of
on

and

became

trust

business,with

the
the

companies

quick capitalof

the

which

try
coun-

they

operations. Thus
essential to business,

their

four distinct functions,each

croached
en-

other

railroads,public service

operations are

buyers

the

their business

They

contact.

business

in the

J. P.

of the

companies through

industrial

power

not

corporationswith

brought them
directing power

intensive,along

bankers, like

the

upon

"

has

added.

was

Co., dealers

the

so

concerns

funds,

necessary

upon

combination,

these

"

of

bankers.

But

"

the formation

trusts, which, by making businesses

that

"big"

by
exercised,originally,

each

and

of business

It is to this union

of the

existence

of

development

The

banker.

functions
is

Trust

Money

distinct set of

investment

the

in

united

became

men,

MONEY

PEOPLE'S

OTHER

that

mainly due.*

financial

our

the

followed, in this respect, lines with

oligarchy
which

the

despotism has familiarized

history of political

us

ment
usurpation, proceeding by gradual encroachthan
rather
by violent acts; subtle and

"

functions, which

when

beneficent

are

of

concentration

long-concealed

often

separately

administered, and dangerous only when

in the

these

as

Rome.
had

Caesar

The

makers
like

by

was

of

our

dangers

to

combined

of

master

Constitution

own
our

such

processes

became

Augustus

that

in mind

politicalliberty

they provided so carefullyfor the separation

when
of

It

persons.

same

distinct

governmental

powers.

PROPER

THE

OF

SPHERE

THE

INVESTMENT

BANKER

The

originalfunction

that

was

of dealer

buying mainly
*

Obviously

only

this great power;

in the

system,

at

in

of the investment

bonds,

wholesale
few

of

the

stocks

from
investment

but many
others perform
hereinafter described.
as

and

banker

notes;

corporations,
bankers

cise
exer-

tions
important func-

OUR

FINANCIAL

OLIGARCHY

states
municipalities,

need

and

money,

The
function

useful

very

conducted

those

ments.
seeking invest-

performs,in

this respect,the

and

merchant;

Large

one.

which

governments

sellingto

banker

of

and

the

function

business

is

enterprisesare

generallyby corporations.

The

manent
per-

capitalof corporationsis representedby

bonds

and

stocks.

important corporationsare

more

part, by small

investois,who
of the

in the management
the

require
for

and

bonds

The

they
to

owned, in large

do

participate

not

Corporations
banker-middleman,

company.
a

the

sellingtheir

bonds

own

Investors

investor.

and

The

middleman.
is very

but

about
are

For

New

different

$26,500,000,000,and
made
averaging

to
thirty-three
a

an

to

these
pass

many
an

banker-

Stock

comprise

issues
each
about

curities
se-

change;
Exabout

aggregating
year
two

of
an

the

part of these
York

amount

to make

small investor
from

listings alone

hundred

sixteen

and

its

the

on

stocks

of securities upon

number

large. Only

is listed

tele
clien-

in corporate

also, require the services of

securities,
market

of the

generally the reputation and

lack

essential to
direct

of

aid

stocks

ings
list-

new

hundred

$1,500,000,000.

tion
intelligentselec-

corporate securities

judgment
intelligent

"

upon

deed,
ina

PEOPLE'S

OTHER

singleone

MONEY

is ordinarily
impossible. He

"

trainingand

the
ability,the facilities,
to

purchase

is to be little better

needs

proper

advice

the

of

and

This

since

years,

of

of

and

stockholders
and

Company
the

Haven

and

the

of

has grown
who
have

Hartford

valuable

and

Railroad

sellingbonds

relies

This
customers

so

and
very

confidential
"

and

bonds
of the

the

of

York,

women.

"

of
is

erous
num-

always
But

merchandising.

in

stocks, it is

largelyupon

customers'

the

Refining

dealer

small

investor

half

are

regular customers
in

ticipate
par-

become

of the New

the

to

do not

of the stockholders

exceptionalvalue, for

banker

ities
facil-

in recent

Sugar

possession by

element

of

business

American

Railroad

the

"

important

judgment.

the

corporationsand

others

nearly half

"

Good-will

an

the

Pennsylvania

New

has

corporations. Over
of

he

combining

large a part of the stocks and

so

his

thorough investigation.

management,

great

our

the banker

women

in the
owners

dependence, both

of investors, upon

time

gamble,

judgment,

to make

incentive

than

expert, who,

an

with

special knowledge

the

investigation.Unless

essential

lacks the

that

reason

of

the

the banker's

relation

knowledge

of

the

of the

privateaffairs acquiredincidentally
"

PEOPLE'S

OTHER

10

formed

Company
and

Trust

the

of

duties

Steel Trust, the Harvester

the

Shipping

undertaker

Trust.
those

to

bankers

investment

MONEY

of

directors.

Morgan

associates

the

midwife,

they participatedas
in the reincarnation

"Reorganization Managers"
became

of

tective
security-holders'"Pro-

then

Committees";
unsuccessful

the

became, in times of corporate

disaster, members

of the

And, adding

corporations and
It

ultimately

in this way

was

that

their hold

acquired

the
the

upon

Pacific, the
Railway, the Northern
Reading, the Erie, the Pere Marquette, the
Chicago and Great Western, and the Cincinnati,
Southern

"

Hamilton

of such

continuance

voting trust; but

created,

"

Co.

in the

and

But

hold

of

became

extensive

need

sufficient

reason

excuse

"

of

the

not

directors.

the

Often

investment

organizati
re-

Kuhn,
Pacific

An

to

cases

urgent

considered

banker's
without

banker

ment
manage-

limited

was

money

for

was

Ohio.

participationin the

new

of the

upon

also that

reorganization.
of

the

voting trust

acquired

was

corporations was
or

device

potent in the Union

banker's

promotion

board

no

the

in this way

was

Baltimore

the
of

where

insured

they

by

control

even

secure

It
Loeb

Often

Dayton.

has

entering
even

or
a
a

such

secured

OUR

place

FINANCIAL
the

upon

Board

powerful influence
Such

proxies.
then

banker
have

The

entered

the

Board

the

for

its

properly

called

where

controlling influence
decides
the

that

the

and

sell them,
securities

other

to

on

directors

cious
tena-

and

he

the

on

stocks.

buy

becomes

his
rector
di-

occupies a position
which

by

being

from

Can

there
is

on

he

be

both

real

sides

banker, through his

the

of Directors,

Board

price at

the

decides

besides

may

for he

to

corporation shall

himself.

naturally

man

same

decides
securities,

once

proves

securities

investment

The

trade?

grip

wants

bargain.
the

"

whatever

"

when

corporate

of

Haven

When

transaction

the

prevents

New

bonds

in

corporation,he

acquires

of

But

cheap.

bargaining

is

he

merchants,

trance
en-

money.

good bargains

merchandise
of

new

banker

investment

fatal

usually supreme;

of

supply

his

"

his influence

other

which

occasion

the

management

York,
1892.

the

lookout
Like

New

the

in

been

controls

into

[Morgan

his

of his customers'

been

Railroad,
has

and

have

to

11

Directors,through

the control

or

prosperous

Hartford

of

seems

of Mr.
the

OLIGARCHY

that

it

The

fact

the

banker

issue and
which
shall

that
on

sell

it shall

sell the
there

are

the Board

PEOPLE'S

OTHER

12

does not, in

holds the

dominant

usually the

beingthe

becomes
purse-strings,

executive

votingagencies, membership

financial
finance

or

committees,

J. P. Morgan
directorships,

mere

associates, held

result.

spirit. Through

trusteeships,exclusive
on

this

practice,
prevent

banker, who

The

MONEY.

such

"

financial

or

by-

Co., and their

in at

power

least

thirty-two transportation systems, public utility

corporations and
with

for

Mainly

J. P. Morgan

marketing

in ten

"

any

marketed,
Loeb

Kuhn,
bankers

other

many

bankers

an

not

But

huge

gating
aggre-

does

sum

privately,nor
of

intra-state
and

similar

SECURITY

of

few

not

any
porations.
cor-

other

control

over

ample supply of
merchandise

these

disposed to

bond

take

BTJYEKS

railroads,public service

corporations assures

prices; and
sold.

trolled,
con-

corporations.

control

industrial

so

procured the public

Co.

"

exercise

COXTEOLLESTG

Such

panies
com-

"

security issues

issues marketed

issues, however

investment

Co.

This

11,950,000,000.
include

corporations

of

years

companies

capitalizationof 817,-

aggregate

an

273,000,000.

industrial

even

to

and
a

the investment

securities

well
stock

and

at attractive

bought

is half

merchants

slightrisk

as

are

to their

OUR

market

abilityto
could

they
the

FINANCIAL

OLIGARCHY

their

control

goods.

the

13

They

that

saw

well

as
security-buyers,

security-makers,investment
made

The

it

the

upon

small
be

and

prominent

their

their

fluence
in-

large part, however, of all bonds

of many

stocks

bought by the

are

corporate investors;and

nent
promi-

most

companies,

the lifeinsurance

are

of the

strongly to

The

purchase

only relieves

not

merchandise, but recommends

the

believes

investor, who

small

that these institutions

controlled

dependence

being duly

securityby these institutions

the banker
it

cannot, in the

companies, and the banks.

the trust
of

insures

these

among

investors

controlled;but

banker
A

issued

they

so.

numerous

strict sense,

as

banking would,

indeed, be "a happy hunting ground"; and

have

if

wiselymanaged.

are

corporate investors

only large

not

are

These

be

dating
particularlyaccommoIndividual
investors
are
moody.
ones.
They
They buy only when they want to do so.

customers,

but

sometimes

are

may

be

investors, if controlled,may

buy

when

natural

well

bankers

need

that the investment

get control
as

the

as

porate
Cor-

inconveniently reluctant.

market.

bankers

of the great life insurance

of the trust

companies

made
It

to
was

proceeded to
companies,

and

the banks.

PEOPLE'S

OTHER

14

The

field thus

for

institutions

companies

No

stops the inflow of

of

stream

or

from

of

$55,000,000
if
1904

they
"

did

just

The

331,738.18 of

issue

before

the

They

assets.

York

legislature
placed in

since

has

three per

aggregate
the last

growth;

1906

that

assets

of what

it

of these

eightyears

to

tion
investiga-

together$1,247,-

had

issued

in that

was

New

certain restrictions
their

business

new

averaged $547,384,212,or
cent,

over

policy.

policies. The

new

so

singlenew

had

of

annually,

Armstrong

companies

$1,025,671,126 of
their

great

have

invest

to

money

est
inter-

Mutual

would

"

year

upon

perennial

three

Life, the

Equitable

not

these three

"

York

new

the

and
existingpolicies

on

the

shortage

money

money

New

the

"

York, and

In

new

premiums

companies

even

panic

leading

our

huge surplus and

always clamoring

existing investments.

on

New

are

savings. Their

investment.

rich.

uncommonly

augmented daily,are

reserves,

for

is

occupied

fife insurance

The

MONEY

only fifty-

in 1904.

companies

But

the

increased

in

$1,817,052,260.36. At the

time, of the Armstrong investigationthe average

age

of these three

companies

The

growth of assets

in the last eightyears

half as

large as

fifty-sixyears.

was

fifty-six
years.

the total growth in the

These

three

was

about

preceding

companies

must

OUR

FINANCIAL

OLIGARCHY

15

invest

annually about $70,000,000of new money;

old investments
besides,many
expire or are

and

changed and the proceeds must

large part of all life insurance
invested

are

bond

investments

It
should

seek
of

of the

companies.

made

in

serves
re-

aggregate
on

investment

these

New

bankers

reservoirs
never-failing

Perkins

Vice-

was

York

Life,the largestof
remaining such he was

While

"

the

sold the New

The

securities.

Co., and

Armstrong
York

New

Life

York

in

gation,
investi-

$38,804,
Life

is

supposed to be controlled by
policy-holders. But, as the Pujo Committee

mutual
its

the

preceding

his firm

and

companies

partner in J. P. Morgan

the four years

918.51

three

capital. George W.

President
the

that

control

to

The

$1,019,153,268.93.

was

natural

was

surplus

bonds.

in

of these

January 1, 1913,

be reinvested.

funds

company,

"the

so-called control of lifeinsurance

panies
com-

through mutualization
by policy-holders
"its only result is to keep in
is a farce" and
office a self-constituted,
agement."
manself-perpetuating
The
stock

stock.
law

to

Equitable
and

company

The
seven

Life

dividend
per

is controlled
on

Society is

Assurance

by $100,000

this stock

cent.; but in 1910

is limited
Mr.

of

by

Morgan

PEOPLE'S

OTHER

16

$3,000,000 for $51,000, par

about

paid
this

stock,

return

amount

stock

to

especialvalue

an

the

bankers; namely,
"

in banks

stock
The

and

insurance

company

holdings of bank

to

dispose of

to that

effect

extended.

part

but,

their
the

the

by
sold

and

insurance

bank

companies

the time

then

trust

trust

law
later

was

of

disposed

stocks;

company

bankers,

and

trust

five years.

companies

investment

the

within

companies
bank

and

insurance

enacted,but

was

The

of
as

the stock

the

the

recommended

Committee

legislationcompelling

the

through

exerted

power

The

of

large holdings

investigation disclosed

stock.

company

for investment

financial

of

certain

companies.

trust

Armstrong

extent

one-

controlled

And

$500,000,000.

had

dividend

The

the assets

of

value

is less than

investment

over

assets

share.

cent. ; but

per

one

now

of these

$5,882.35

or

the

on

eighth of

MONEY

controlled

were

these

gentlemen
stocks

company

to

themselves.
such

Referring to
Life, as
Committee

well

as

from

the

from

the

Equitable,

Mutual

the

Pujo

found:

"Here, then,

were

companies

and

trust

purchases

stocks
one

of

of
our

five

important

largest national

18

OTHER

golden

eggs

The

laid

people'sown

the

wealth, they would

Astors

And

doubt

no

they
of

wealth

in amount

of

America,

or

liberty.

wealth

growth

is

of power

dynamic.
of

our

its

In

others.

companies
their

two

the

of the
influence

associates
investment

The

power

financial

in the
actual

and

three

The
the

only
Astor

Morgan
and

the

oligarchscomes
quick capital of

great life insurance

of J. P.

them

It lacks

have

owners

of

is exerted

by

insignificant

City.

wealth

wielding the savings

from

It is

wealth.

own

The

is static.

associates

and

their

from

income

But

endanger

not

York

largelybecause
significance
the

when

the aggregate wealth

with

of New

even

social.
un-

increment.

does

Astors

compared

as

are

peculiarlyunjust

seem

industrial

or
political

their

like those

They

democracy.

the

ers'
bank-

regrettable. They

they represent largelyunearned

the

people

with

fortunes

Vast

with

inconsistent

are

only

now

relativelylittle influence

have

are

the
If the

money.

business.

American

of the

control

commensurate

were

power

on

their associates

and

privilege. They

enjoy that

else's goose.

somebody

by

bankers

investment

through

MONEY

PEOPLE'S

Morgan

without

whatsoever.

"

Co.

any

dividua
in-

Even

Equitable,where Mr. Morgan bought an

majority of all the outstanding stock, his

OUR

FINANCIAL

investment

amounts

of

cent,

one

The

per

bind

people'sown

But

the

which

their

greatest

the

of

nation.

of

They

invested.
which

controlled

bankers

the

life insurance

the

reallyquick capital

the

companies.

life blood

nesses.
of busi-

of wealth

permanently

banks

and

abilityto

companies,

trust

to be

declared

Committee

directly

held $1,983,associates,
of these institutions

000,000 in deposits. Control

means

the

draw

now

the trust

are

the Morgan

by

people's money,

and

amount

34

Pujo

company.

greater than

The

the

one-half

effective force is much

equal

an

of the

other

is not

the banks

Their

than

people are forged from

investment

depositsrepresent

of the

that

the

power,

companies, but

assets

19

gold.

reservoir

from

Bank

to little more

of the

fetters which

the

OLIGARCHY

lend

large part of these

to themselves; and
funds, directlyand indirectly,

what
to

is often

prevent

even

the

funds

being lent

huge

deposits can,

These
of those

When

bonds

permanently
can,

in

in

needs

temporary

important,

more

and
these

stocks

in
to

power

terests
rival in-

to any

control, be used
of their

the

the
meet

cretion
disthe

subject corporations.
are

issued

corporations,the

largepart, be loaned

by

to

bank

finance

its
depos-

the investment

OTHER

bankers

in control

to themselves

securities

that

so

MONEY

PEOPLE'S

80

bought

by them, until

sold to investors.

deposits

be

may

loaned

to

or
jobbers in securities,

to

the bonds

or

them

to carry
to

Tight

money

control

over

the

and

banks

pricesin

bonds

affect the

to

power

and

banks

or

money

market.

the

fall.

them

bankers

great,

so

time, the

ket
mar-

and

the

a
on

ity
secur-

against

when

companies,

trust

of

over

Its sale

whether

upon

trend

power

greater.

on

others,

among

general

discriminated

or

the

to

even

depend

may

is favored
offered

Easy

Their

stocks.

particularsecurityis
the market

In this way,

Exchange.

have

stocks.

by lending or refusingto lend

for money

they

bankers,

speculators,to enable

often determine, for

they can

the Stock

allied

leading investment
trust companies is

the

by

bank

these

nearly always makes

The

that

Or

ciates;
asso-

carried

be

may

securities rise in

make

tends

their

and

as

collateral for loans.

Furthermore,
access

banks
any

to

other

people's

and

trust

companies

individual

part of the
The
soon

it is the

banker's
be

banking

annual
own

exhausted.

investment

banker's

in

controlled

money

which

to take

concern

output

alone

of bonds

capital,however
And

even

and

enables
so

large

stocks.

large,would
the

loanable

OUR
funds
but

FINANCIAL

of the

for the

banks

OLIGARCHY
would

often

large deposits made

21

be

exhausted,

in those

banks

by the life insurance,railroad,

publicservice,and
industrial

corporations which

control.

On

December

bankers

the

also

ing
31, 1912, the three lead-

life insurance

companies had deposits in

banks
and trust companies aggregating $13,839,As the Pujo Committee
189.08.
finds:
"The
who
men
through their control over the
funds

of

able

are

and

railroads

our

to direct where

thus

to

people'smoney,
to

are

interested

are

the

funds

companies

shall be

and

kept

great reservoirs of the

ones

who

in

are

reservoirs for the ventures

tap those

they

such

these

create

industrial

and

to

prevent

position
in which

their

being

of which

they do not approve.

latter is quite as important a factor as the
The
consideration in its
It is the controlling
former.
effect on competition in the railroad and industrial
tapped for

purposes

world."
TOUK

HAVING

But
other

the

than

achieve

and
the

trust

AND

EATING

IT

of the investment

people's money

effective
banks

power

CAKE

that

is often

exerted

companies.

TOO

banker

more

over

direct

and

through controlled
J. P.

Morgan

supposedly impossiblefeat

of

"

Co.

having

their cake
and

of controlled
and

concerns,

do

eatingit too.

and

stocks

the

by

their money.

of

deposit of the controlled

of

having

controlled

buy

an

instead
retained
be

drawn

the
in

upon

only

the bank

becoming

corporations,instead

all spent

until

the balances
Thus

merely

some

funds

are

needed

the securities

as

are

by

issued

raised is often not

money

long thereafter,the aggregate

remaining
J. P.

in the banker's

Morgan

Philadelphia house,
November

the

as

large blocks,and the

on

plished
accom-

in whose

corporation. And

huge.

of

deposit in

company

is

This

still

operationothers have
share.
When
J. P. Morgan " Co.
some
issue of securities the purchase money,
of being paid over
to the corporation,is
for the corporation,to
by the banker

least

at

bank

industrial

and

purchase price;and

simple device

the

the bonds

They buy

railroads

the

pay

part with

not

MONEY

PEOPLE'S

OTHER

called

1, 1912,

"

Co.
Drexel

hands

of
are

(includingtheir
"

Co.)

held

deposits aggregating

$162,491,819.65.
POWER

The
of

operations of

AND

so

PELF

comprehensive

system

concentration

bankers
power

necessarilydeveloped in the
And
the bankers'
overweening power.

grows

by what

it feeds

on.

Power

begets

OUR

FINANCIAL

wealth; and

added

for the
The

wealth

that
for the
in

would,

even

service

wealth

bankers

are

reasonable

very

23

new

tunities
oppor-

and

power.

vast

so

and

tion
compensa-

performed by the bankers,

comes
in-

aggregate, produce for them

the

to result in

largeas

so

these

ever

opens

acquisitionof

operations of

numerous

OLIGARCHY

huge

accumulations

compensation taken by the

bankers
commissions
or
as
profitsis often far
quently
reasonable.
from
Occupying, as they so fredo, the inconsistent positionof being at
for
the same
time seller and buyer, the standard
so-called compensation actually applied, is not
of

But

capital.

the

bear."

reason", but "All

of

"Rule

the

this is true

And

The

sinister motive.

prevents

there

of human

weakness

is

no

nature

of their

deservings.

own

syndicate formed

The
to

where

even

traffic will

being good judges

from

men

the

the

underwrite

$62,500,000

States

United

"

cash.

in

Co.

$12,500,000 in
were

J. P.

Morgan " Co.

Steel Corporation

for its services securities which

took

Morgan

by

entitled

this

Of

huge

sum

netted
J.

P.

received,as syndicate managers,

addition to the share which they
to

receive

as

of $62,500,000 was

This

sum

paid

for the service of

syndicate members.
only a part of the fees

monopolizing

the steel in-

OTHER

24

addition

In

dustry.

MONEY

PEOPLE'S

commissions

the

to

taken

for organizing the

United
States
specifically
Steel Corporation, large sums
were
paid for
organizingthe several companies of which it is
Tube
composed. For instance, the National
was
capitalized at $80,000,000 of
Company
stock.
common
stock; $40,000,000 of which was
taken
Half of this $40,000,000 was
by J. P.
Morgan " Co. and their associates for promotion
services;and the $20,000,000 stock so taken
later exchangeable for $25,000,000 of
became
Commissioner
of Corporations
Steel Common.
Herbert
Knox
Smith, found that:
"More

Steel

than

$150,000,000 of the stock

Corporation

issued

was

underwriting

or

one-seventh

nearly
of the

Steel

issued

services.

of

the

Corporation

directly

or

directl
in-

directly or

for

(through exchange)

of the

mere

In

tion
promo-

other

total

words,

capital stock
have

to

appears

indirectly to

been

promoters'

services."

The
the

so-called

bankers
of

launched

and

the

large. But

fees and

even

commissions

associates

trusts

have

upon

been

after the trusts

the exactions

taken

by
the organization
exceptionally

are

successfully

of the bankers

are

often

26

OTHER

new

issue,as

soon

that

demand

the

Company
680,000

to be

THE

These

in

in

the

their

bank

should

the

not

they

themselves

so

Business'?"

do

To

the

from

so

temptation
the

by

was

the banks

was

trol
con-

deposits
essential

profits.

companies

trust

Why

field?

should

investment

business

into

followed

by

making

the realm

the

of

'Big

parture
de-

the

of temporary
But

concerns.

to

involve

is the

not

bankers

incident

would

banker

into

tionary
revolu-

that

huge

these

under-

leading

our

an

irresistible. The

was

investment

operation

to

legitimate sphere

banking business, which

loans

to

of the

functions

new

$1,-

BANKERS

of

and

become

all the

Co.

the

naturally asked, "Why

banks

profitablea

in

"

obvious

was

securing

for

which

promotions,

bankers

officers

share

too, with

It

such

at par.

companies

trust

in

then

was

Morgan

conduct

investment

and

the

and

security purchases led

the

And

in

INVESTMENT

institutions.

banks

element

take

BECAME

change
by

J. P.

pay

large profitsfrom

writings and

banking

was

bonds

106

at

willingto

BANKS

offered

public

to

were

MONEY

announced,

as

willingto buy

months

WHY

PEOPLE'S

the

invasion
banks'

counter

of the

of

field of
invasion

investment

OUR

banker.

Most
the

were

of

FINANCIAL

OLIGARCHY

prominent

National

New

York.

invasion.

But

The

joined

forces
and

country,
was

control

cemented

by

directorates
There

ever

resulted

more

and

complete

the

industrial

subjection.

fullest

public

railroads,
concerns

met

allies,

as

business

voting

by

hostile

of

by

trusts,

joint

the

The

spoils."

the

and

National

not

was

the

"divide

to

First

forces

contending
to

the

theirs

banks

the

among

and

City

27

liance
allocking
inter-

ownerships.

"cooperation";
service

were

and

corporations,

brought

into

II

CHAPTER

the

Among

"

been

has

the

the

National,

of

the

are

about

Morgan
appears

of

those

its

The

firm
that

have

they

also, huge
deposits reported

not

have

been

Each

Bank

are

88

about

Bank

company)

disclosed.

But

$162,500,000.

is
The

of

deposits from
as

and

resources

for

of

(including

National

available

in

Stillman;

security

$200,000,000.

the

Co.,

Directors.

First

Siamese-twin

"

President,
of

gan
Morof

Baker.

F.

City

the

P.

combination.

security company)

$300,000,000;

(including

J.

James

Board

National

Siamese-twin

is

formerly

of the

Chairman

resources

it

George

was

like

in

the

Money

Morgan

genius

City

gentlemen

now

its

by

National

the

Each

of J. P.

"

with

of

resources.

firm

dominated

First

these

the

banks,

two

huge

like

banks,

two

has

Co.,

group

"

National

First

constitute,

inner

of the

Each

Trust.

the

They

the

firm,

Morgan

banks

York

New

two

and

City

preeminent.

stand

In

allies,

National

the

COMBINE

COMBINERS

THE

HOW

their

their

the
it

tions,
opera-

subjects;

HOW
The

THE

COMBINERS

private fortunes

combination

have

of
possibilities

of "other

use

wealth

29

of the chief actors

been

not

sporadic evidence

COMBINE

indicates

in the

ascertained.
how

accumulation

great

are

the

one

has

the

when

Mr.

people's money."

But

Morgan's

became

proverbial. Of Mr. Stillman's

was
specifically
investments, only one
many
referred
in Europe
during the
to, as he was
that one
and did not testify. But
investigation,
is significant.His 47,498 shares in the National
about
worth
$18,000,000. Mr.
are
City Bank
this as "a very
Jacob
H. Schiff aptly described
nice investment."

Of
as

Baker's

Mr.

testified

he

in the

shares

investments

on

National
His

$20,000,000.

least

banks

York

about

worth

and

trust

the

which

and

in six other

be

at

New

together

are

vestmen
of his in-

scale

inferred from

his

of New

Railroad

so
large
largeststockholder
with a few friends he held a majority of
$27,436,800 par value of outstanding stock,

Jersey. .He

He

may

20,000

worth

are

companies

holdings in the Central

former

the

stocks

$3,000,000. The

in railroads

that

Bank

more,

His

subjects.

many

First

know

we

is

was

its

"

bought

Reading

director

presumably

in 28
a

other

at

$160

railroad

stockholder

in,

share.

companies;
at

least, as

30

OTHER

many.

The

PEOPLE'S
full extent
that

inquired into, for

investigation. But
Baker

saw

not

was

of

was

issue

an

not

in the

surprisingthat Mr.
When

laws.

new

asked:

everything is all right

world, do

in this

of his fortune

it is not

little need
think

"You

MONEY

as

it is

not?"

you

answered:

He

"Pretty nearly."
KAMIFICATIONS

But

OF

expressed in figuresgives a wholly

wealth

inadequate picture of the

wealth
is dynamic.
It is
combination.

in
in

of the

It

allies

must

we

Baker

having, with
or

resources

But

the

National
extends

comprehend

try

with

resources

First National

in

22

the ramifications

corporations

subsidiaries,
aggregate
$7,272,000,000.

visible power

which

further.

the power

visualize

capitalizationof
and

expression

the forces operate.

director

Bank,

in

to

Their

by geniuses

To

their many

direct

its directors
directors

is

wielded
its proper

through which
Mr.

allies' power.

finds

of control.

means

POWER

Mr.

Baker

of

the

First

dominates,

The

that
Pujo report shows
(including Mr. Baker's
son) are
at

of
is

least

27

other

$4,270,000,000.
represented in

49

corporations
That

is, the

corporations,

HOW
with

THE

COMBINERS

aggregate

COMBINE

resources

31

capitalizationof

or

$11,542,000,000.

It may

help

to

appreciation of

an

few

of

corporations in which,

for

influence

visibly

to

power

name

is

exerted

"

the

and

National

Bank

of

Bank

"

committee

of

Mutual

Company;

Companies:
National
and

Loan

Insurance

York

Central

Reading, Erie, Lackawanna,

Haven,

Pacific,

Valley, Southern, Northern

Chicago, Burlington " Quincy.

Lehigh

3. Public

"

Trust

Company.

[Companies:New

2. Railroad

Lines; New

Life

as
or

man

York;

New

Farmers'

Commerce;

Baker's

directly

simple director.
1. Banks, Trust, and LifeInsurance
First

allies'

prominent

more

instance,Mr.

executive

voting trustee,

the

graph
Tele-

Corporations:American

Service

Adams

Telephone Company,

Express

Company.
4. Industrial

Corporations:United

Corporation, Pullman
Mr.

Stillman
with

but

which
other

the
he

is

aggregate

directors

in

dominates,

States

Steel

Company.
director

are

corporationswhich,

only

tions,
corpora-

of

$2,476,000,000;
National
City Bank,

assets

the

in

directors
with

in at least 41

their subsidiaries,

have

or
aggregate capitalization

an

$10,564,000,000.
J. P.

of the

forces,hold

allied

of

members

The

of

resources

of

firm

the

Co., the acknowledged leader

"

Morgan

of the

MONEY

PEOPLE'S

OTHER

S2

directorshipsin

72

47

largestcorporationsof the country.

The

Pujo

of J. P.

"

Morgan

controlled

trust

and

National

the directors of their

and

Co.

members

the

that

finds

Committee

and

of

City

Bank

companies

the National

the

First

together

hold:

banks

34

and

eighteen directorshipsin

and

hundred

"One

trust

companies having
total

$2,679,000,000 and

of

total

sources
re-

deposits of

$1,983,000,000.

"Thirty directorshipsin
having
"One

of

total assets

hundred

and

five

companies

panies
com-

$2,293,000,000.

directorshipsin

transportationsystems having
of $11,784,000,000 and a
express

insurance

10

total

32

tion
capitaliza-

total

mileage (excludin
steamship lines)

and

of 150,200.

"Sixty-three
and

directorshipsin

tradingcorporationshaving
of

24
a

producing

total

ization
capital-

$3,339,000,000.

in
"Twenty-five directorships

corporations having
$2,150,000,000.

total

12

public-utility

capitalization of

OTHER

34

PEOPLE'S

MONEY

nearly $1,350,000,000,in which

represented according

are

the

Morgan

the

to

allies

directories

of

directors.
Second:

schedule

Pujo

The

corporation with

any

does

of

resources

But

shown

their

humility by becoming

many

such.

City

Bank

directors

and

Co.,
and

in

directors

of

such

158

The

corporations in
include

by

those

by dummies,

have

Terminal
marketed

others)
But

the

name

1910

issues

the

only the
associates

they

represented

are

For

It does

instance, the
to the Kansas

for which

(in connection

they
with

aggregating $41,761,000.

of J. P.

on

also

are

directors.

Railway Company,
since

J.

National

Bank

Morgan

as

City Bank,
appears

P.

includes

otherwise.

member

no

National
Bank

four

of

the

Morgan influence certainlyextends

City

in

aggregate $78,669,375.

in which

or

directors

capitalizationof only

schedule

which

actually appear
not

38

Pujo

than

corporations. Available
the

these,but those

Third:

in

the First National

publications disclose
38

financial

instance, members

For

"

less

giants have

$5,000,000.

Morgan

these

include

not

or

"

Morgan
of the

Kansas

Co., of

First

City

the

National
Terminal

directorate.
Fourth:

The

Pujo schedule

does

not

include

HOW
all the

THE

COMBINERS

subsidiaries

instance,

For

is

New

the

Haven

System

bond

and

balance

Railroad

sheet.

also;

and

holding

while

to

is

New

New

New

outstanding securities.

Only

part

held

be

in

will

balance

company's
000,000
schedule

that

and

"

System,

only

sum

by

shown

as

Thus,

sidiaries
subof

the
the

the

small

holding
the

New

as

clear,therefore,that

the

over

the

in the
New

great;

Pujo

Haven

submitted

chart

twice

is

Committee,

company

while

appears

capitalization of

the

"

sheet.

like

capitalization is only $385-

Railroad's

Haven

represented

Haven

part

latters'
so

cluded
in-

control

small

of

Haven

Haven,

may

but

capital

holding

company

owning

That

slightextent

The

large corporations,

New

corporations

indirectly in the

most

the

controlled

capitalizationis only
directly or

the

stock

But

many

of

$385,000,000.

as

Railroad.

comprises

whose

given

35

corporations scheduled.

capitalization

the

represents

sum

of the

the

System

Haven

COMBINE

to

the

namely,

$849,000,000.
It is

referred
the
group

extent

by

to

the

Pujo

Committee,

of concentration

of the

Money

$22,000,000,000,

Trust.

effected

understates

by

the

inner

OTHER

36

PEOPLE'S

THE

CEMENTING

Care

that

power

has

It

taken

was

and

builders

on

are

ephemeral

and

Morgan

and

by joint

stockholdings,as
end

may

his

with

well

as

stock

and

$6,000,000 investment

made

of the National

of the

City

Co., the National

First

Bank.

Then

City, and

dominant

officers

their

Mr.

Baker) acquiredtogether,by

and

voting trusts, control

its

with

Commerce,

in the
J. P.

stock

Morgan

the First National

(or

"

election.

new

acquired oneNational
Bank,

partners

sixth of the

of

enduring.

side

every

imperial

for directorships
personal relationships;

close

"

of

be

should

structure

mutual

by
Mr.

ALLIANCE

these

buttressed

been

ownerships

TRIPLE

by

their

MONEY

Mr.

of the

Stillman
stock

and

purchases

National

$190,000,000 of

Bank

resources;

of the Chase

National, with $125,000,000;of the

Trust
Company, with $232,000,000;

Guaranty

of the Bankers'

000; and

of

Trust

Company, with $205,000,of smaller,but important,

They became jointvoting

number

financial institutions.
trustees

in

great railroad

systems;

(as if the

allies were

loyaland

efficient service in the banks

rendered

by

the

united

Mr.

First National

Davison
"

was

into

and
rewarded

and

finally

singleconcern)
Mr.

"

like that

Lamont

in

by promotion

HOW

COMBINERS

membership

to

"

THE

in

the

COMBINE
firm

of

P.

J.

37

Morgan

Co.

THE

Thus

"

bankers,

York;
be

to

restraint
three

for the

In

"

Kidder, Peabody

rich;

"

the

each

to

"

Morgan

there
in

two

are

America,

both

investors
of these

firms

about

100

greater interstate

of each
over

in bonds
has

and
chased
pur-

in conjunction
(principally

bankers)

of the

issues

aggregate
of

1907

"

underwritten

security issues

held

long established
extensive,
possessing an

Co.

Since

other

were

large international
Lee, Higginson " Co., and

stocks.

with

important

two

clientele of eager

or

is J. P.

But

are

each

and

other

centers

wealthy

the

Co.

name.

there

houses

banking
and

"

of Drexel

Boston

First

financial

mentioned,

important money
and Chicago.

Boston

the

P.

"gentlemen's" agreements.
dominated
Philadelphia too;

another

under

other

by

and

America's

certain

hereafter

allies

firm

for

together, J.
City

easily dominated

center, New

Co.

bound

Co., the National

National

The

ALLIES

and

equipped

Morgan

in

PROVINCIAL

banker

different
tions,
corpora-

amounting

in

tration
$1,000,000,000. Concen-

banking capitalhas proceeded

even

PEOPLE'S

OTHER

38

in Boston

further

in New

than

consolidations
banks

been

has

in 1913.

York.

number

the

from

reduced

There

MONEY

in 1898

19

to

also 23

now

cessive
suc-

national

of

58

in Boston

are

By

trust

companies.
The

National

National

Bank

Shawmut

Trust

Co., which

houses

and

aggregate

city.

These

which

their
90

1/2

per

whose

control, alone

and

consolidations,

of the

total

banking

And

linked

to them

are

9 other

banks

and

the

interlocked.

are

and
7

aggregate

trust

1/2

not

per

all

banking
But

even

companies,
cent,

the

which

of Boston

independent

resources

of

one

about
of 42

Thus

resources

of

together

cent,

per

remaining

banking

trust

aje

total.

Boston,
9 banks

hold

resources,

another.

sources
re-

locking
inter-

by

resources

of Boston's

in

directors,hold

also

are

companies,

33, with aggregate

banking institutions,
of "560,516,239, holding about
92 1/2
of

have

of the

resources

trust

aggregate

cent,

banking

which
banking institutions,

cent,

directorates

Colony

Boston

two

banking

directors
per

Old

$288,386,294, constituting

banks

of Boston.

companies

the

the result of many

other

21

together

of the

great

themselves
the

of

resources

one-half

and

these

their associates

about

are

and

of Boston

First

the

Bank,

but
are

Three

are

HOW

THE

linked

together; so

COMBINERS

six banks

only

interlocking

that

there

in all Boston

that

directorate
but

represent

banking

resources.

whether

all of

to the

is

also

other

linked

least 42

35

other

body
so

but

"

in many

other

Co.

were

some

both

are

which

with

proper,

as

"Greater

inner

Boston's

33

only
above

and

Boston's

respects, within

as

it

municipalities,and

banks

and

banking

of

the

42

shown, but has

trust

companies

in

active

small,

Kidder, Peacompetitors. They are

or

devoted

Co.

and

purely

has

been

with

interstate

the
actions;
trans-

these

great Boston

cemented

by mutual

the alliance with

houses

local matters;

co-operators

associates in larger and

and

banking

Boston

municipalities.

still in

Morgan

limited

cities like Worcester

Lee, Higginson "

Once

from

them, by interlockingdirectorships,

with

at

is not

known

suburban

of Boston

banks

Boston's

city. Around

interlocked, not

has

group

of the

of influence."

"sphere

gether
to-

groups.

concentration

important

Springfield,
are,

of

entirelyfree

are

popularly

These

Boston."

They

well be doubted

thirty suburbs,

over

what

form

the other

banking

are

it may

be

to

free from

are

cent,

per

those

legalconfines

proper

39

appear

relations.

And

even

affiliation with
Boston's

COMBINE

PEOPLE'S

OTHER

40

stockholdings
concentration

MONEY

co-directorships.Financial

and

found

to have

seems

pression
highestex-

its

in Boston.

Somewhat

triplealliance

"

First

Commercial

control
relations

doubtless

would

leading bankers

the

Committee

of the other
to

as

prevented by

was

Continental

which

be found

America,

of

centers

"

Illinois

together

$561,000,000. And

of

resources

the

Bank

National

the

Bank,

National

Savings Bank, and

and

Trust

the

tutions
Chicago's great financial insti-

and

its

"

relations exist between

similar

similar

to exist with

important
which

lack

cial
finan-

the

Pujo

of time

from

making investigation.
THE

Such

these

the

are

which

powers

are

such

as

"

Co.,

smaller

these

but

and

groups,

Harvey

lucrative
and

are

distributors of

the

Money

forces of

secondary
Trust;

but

magnitude.

principalgroups,"

says

"and

closelyaffiliated with
important banking houses,

Kissel, Kinnicut

large and

or

from

Pujo Committee,

them

the

supplemented by

are

such

primary,

comprise

"Radiating
the

AUXILIARIES

Fisk

"

Co., White,

"

Sons, who

patronage from
used

by

Weld

receive

ing
the dominat-

the latter

as

jobbers

the issuingof
securities,

which

these inner groups

"Beyond

and

sub-groups are

throughout the country who

in underwriting or guaranthem
teeing

bankers

and

banks

MONEY

PEOPLE'S

OTHER

42

co-operate with

the sale of securities offered to the

who

and

also act

as

distributors of such

public,

securities.

impossibleto learn the identity of these

corporations,owing to the unwillingnessof the
It

was

underwriters,but

of their

justify the
of the

cities

there

throughout

this and

to

least

at

are

into

they extend

that

and

names

sufficient appears

that

statement

of them

hundreds
many

to disclose the

of the inner group

members

foreign

countries.
"The
inner
to

by
may

group

these

and

banks

its
and

regarded

organization.

bankers, who
the great

self-interest to
be

proceeding from the

sub-groups is of great value
thus

patronage

as

Such

and

without

facilitiesof the

thus

issuing houses

part of this vast

much

tied
and

financial

yields no

siderable
incon-

of these banks

and

patronage

part of the income

bankers

are

risk

on

account

of the

for placingissues
principal
groups
of securities through their domination
of great
mestic
banks
and trust companies and their other doaffiliations and their foreign connections.
The underwriting commissions
issues made
on
by
earned and do
this inner group are usually easily

HOW

THE

COMBINERS

COMBINE

ordinarilyinvolve the
purchase of the underwritten
not

interest

unless

in the

they

by
There

the

take

inner

invited

do

them

should

that

In

thereafter

other

be

to

transactions

so,

the

Their

commission.

which

on

as

Bankers

quired
re-

and

permitted

to

under

lead

rule

lest

the

ticipate
par-

of

they join when

their

regardlessof

approval

of

by refusing they

to be invited."

cease

words,

this is
then

are

securities.

particular business,

the

of

underwriters

the

group

to

securities.

occasions

anxious

so

are

in

is

to

The

in these
the

to

payment

case.

underwriters

generallyadjusted
ties,
purchase part of the securi-

however,

to

brokers

choose

the

are,

not

transaction

43

invitation

an

from

these

As
royal bankers is interpretedas a command.
great bankers frequentlyget huge
a result,these
themselves
without
commissions
distributingany
of the

bonds,

or

ever

any

actual

subway

ing
financ-

having taken

risk.
"In
of
"

Co.

the

case

York

$170,000,000 of bonds
and

their

Pujo

Committee

were

from

were

of the New

100

by

Messrs.

reports]estimated
125

apparently glad

such
to

[as the

Davison

associates,Mr.

to

Morgan

that

underwriters
agree

that

there
who

Messrs,

PEOPLE'S

44

OTHER

Morgan

" Co., the First National

City Bank

National
"

equal

would

the bonds

their share

take

The

other

to render

it

is

cate,
syndi-

all

being required to

portion."

Money

to make

its

necessary

dynamic

freedom

Long ago monarchs

of absolutism, the

and
be

or

it is believed

The

longing for

It will express

against servitude

tensive
is in-

Trust

recognized as

sanction.

liability,

comprehensive; but

vulnerable, unless

is ineradicable.

for

this

Despotism, be it financial

moral

the

was

stable,and

cent.,

PSETJDO-ETHICS

combination

element

irresistible.

upon

OF

per

the risk of what

of

of the unsold

organization of
the

one

realize and

PROTECTION

THE

from

assumed

the underwriters

forming

for

"

the

Bank, and

receive

relievingthemselves

thus
whilst

should

$5,100,000

to

MONEY

force

cal,
politito

rest

freedom

itself in protest

ing
inaction, unless the strivmade

to

invented, as
fiction of "The

seem

immoral.

preservative

divine right of

kings." Bankers, imitatingroyalty,invented

that
which

preciousrule

it is declared

financial relief of any

the prey
"The

of another

of so-called

cently
re-

"Ethics," by

unprofessionalto

come

corporationwhich

to the

is already

"reputable" banker.

of competition between
possibility

these

HOW

THE

banking
the

by
that

in

the

purchase

Pujo Committee,
will not

one

"is

theretofore

where

further

in

have

bringing out
also

subsequent

issue

of the

is described

as

it

by corollaryof this,

shall

This

others,
which

customer

corporation, they
any

removed

and

given bankers

united
satisfactorily

out

securities,"

them

another, a

served, and

that

of

45

seek, by offeringbetter terms,

from

away

namely,
a

COMBINE

understanding between

to take

has

houses

the

says

COMBINERS

an

once

issue of

join in bringing
same

tions.
corpora-

principleof banking

ethics."
The
the

"Ethical"
interests

superior

to

basis of the
of

the

by

which

are

upon

alliance,and

accorded
the

among

"

banking

subordinate

that

such

lesser
New

of great

munity.
com-

the

be

bitious
am-

position

suppressed,

of influence"

the rule of

banking

Most

prominent
Kuhn,

faithfullyobserved.

Co., of
house

too

concerns,

"sphere

financial

of

are

ences.
adjusting differ-

are

powerful to

understanding

ethics will be

Loeb

too

take

one

that

ample "hinterlands"

rapacious nations
Important banking
willingto

of the

rest

reminds

with

be

bankers

of the

attitude

influence"

to be

in the

combined

interests

Their

"spheres of

the

rule must

potentates

York,

an

are

international

wealth,with largeclientele

OTHER

46

and

PEOPLE'S

MONEY

They

accorded

connections.

of influence"

"sphere

including
Baltimore

"

Southern

few

business

the

But

are

through

the

City
and

Commerce

have

The

THE

These

their excessive
whole
leave
and

to

invest

industrial

money

Co.

of

other

charge
"which

are

the
not
ports
re-

of the inner

relations

with
Bank

with

common

large

the

joint-

them."

RESULTANT

levy, through

owners

upon

toll upon
of

money

the
for

railroads,public service

companies, for leave

corporations,upon
"The

in

exactions,a heavy
it; upon

of

the National

banker-barons

community;

banking

financial institutions"

other

EVILS

group

Pujo Committee

and

Bank

operationswith

First:

the

"

associates, conducting

account

the

railroads

their "close

interests

"many

Morgan

and

"qualifiedallies

group"; and
of

the

Morgan

Loeb

Kuhn,

even

they

National

the

important

wholly independent.
that

systems

Pacific

and

They

roading,
rail-

American

other
Union

tant
impor-

an

exceptionspreempted

of

country.

in

among

Ohio, the

Pacific.

with

have

are

to

use

people; and, through

this
these

consumers.

of

capital,"says

of

course

enters

the

Pujo

mittee,
Com-

universallyinto

HOW
the

THE

price of

COMBINERS

commodities

in effect determined

supplying

COMBINE

it and

If there

and

the check

under

not

of

fundamental

so

supplying
of the

the

in other

ways.

the

performance

function

the

as

petition.
directlysuppressingcom-

suppressionenables

monopoly

profits;but

of the

burden

the monopolist

Monopoly

more

even

consumer

arrests

development;

arresting development, prevents

lessening of the cost of production and of

and

through

that

coal railroads

potent

conditions

in

the

take
the

among

Morgan

them?

prevailing,what

Nashville, and
and

the

when

all of

expected between
Great
Northern,
between

otherwise

competition exist

full

Can

would

which

distribution

the

in

excessive

extort

increases

and

principleof

serious,however, is the effect

Trust

That

are

tion.
competi-

arrangement

or

commercial

More

Money

to

those

capitalis peculiarlyinjurious."

of

Second:

plan

operation in

its

of

virtue in the

be any

prevents

service,is thus

by agreement amongst

competition, certainlyany
which

of

47

And

associates
with

Pacific

Southern, the

the

cite
anthra-

competition is

Northern

the

place.

Atlantic

Coast

Pujo Committee

finds:

to be

and

the

Louisville

Line;

Westinghouse Manufacturing
Electric
the General
Company?

the

like

or

pany
ComAs

PEOPLE'S

OTHER

48

affiliations tend

"Such
for

banking

And

the

of

agency

situated."

other

through

in

understandings

existingconditions

under

conduit

and

cover

and

thus

house

relief

competition through

restriction of
the

as

arrangements

secret

MONEY

tion,
combina-

of

houses

banking

is

precluded.
"It

would

be

likelyto

that
would
And

would

be

the

so

members
safest

protectionthat
of

the

refuge of

against future
these

inner

the

But

far

of

or

The

more

ter
charac-

latter

prestige.
by

the
the

powerful grip

the

or

or

combinations

throttle

that

upon

their

credit, and

will turn

are

group

constitutes

group

is upon

wheels

that

be afforded

can

competition.

signal those wheels

Third:

plans

great industrial

our

gentlemen

controls

their

of
the

displeasingto

with

interfere

banks,

this inner

in business

engage

the

institutions

from
seeking participation

thus

of

other

and

companies,

trust

that

hardly be expected

can

stop."

serious

than

even

the

suppression of competition is the suppression of

industrial
which
The

this

liberty, indeed

"the

institutions

manhood

overweening financial

intimidation

beyond

of

which

banks,

trust

power

it effects

itself,
entails.

extends

companies,
seeking participationfrom

and

far
other

this inner

OTHER

50

nothing

have

they

political

desire

they

not

and

fight

and

for

may

find

the

only

the

hero,

against

find

will

"

martyr,

who

dared
and
in

But

content

with

martyr

more

who

resisted

good

or

red"

to

"

Here

won.

greatest

the

tive,"
locomo-

manhood

resignation.

be

shows

hero,

loving

security,
and

"the
cannot

times
Some-

business."

you

or

but

sell,

to

or

Experience

buck

to

is

with

seeks

buy

peace.

independence

number,"
fit

advancement.

healthy

place

suffered

which

social

courageous,

wealth,

than

to

merely

there

and

blooded,

MONEY

either

"Business

and

Here

or

want

is

"it

that

you

PEOPLE'S

of

silence

America,
the

conditions
the

there

slave.

greatest
that

CHAPTER

III

INTERLOCKING

The

practice of interlocking directorates

of

root

DIRECTORATES

evils.

many

divine.

Applied

the

suppression

the

Sherman

deal

with

violation
two

serve

soundness

of

it

the

rejects

favors,"

of the

exercised

the

by

banks,

and

long

of

attainment
The
used

term

in

is the

the

sense

and

to
can

tends

to

destroys

field

most

potent
the

for

and

no

and

have

over

so

roads,
rail-

corporations,

trust

been

ment
instru-

control

bankers
industrial

companies,

taken

toward

Freedom.

New

"Interlocking

broad

and

man

it

fair

investment

will

which

undemocratic,

Break

Trust.

and

of

pull of privilege for the

life insurance

step

is

to

violation

no

event

"A

the

It

public-service
over

It

platform:

Money

that

incentive

judgment.

manhood.

of

push

either

removes

substituting

"

it tends

disloyalty

to

law

In

to

and

corporations

to

fundamental

it

and

it tends

masters.

human

corporations,

Applied

other,

inefficiency; for

laws

competition

law.

of the

offends

rival

to

of

each

It

is the

directorates"

including

as

51

is here

all intertwined

PEOPLE'S

OTHER

52

MONEY

effected.

device

whatever

of

alike to contracts

of its directors

one

he is a

of which

director

or

likewise

to

of director

financial
J. P.
New

Co.

borrow

New

Mr.

of

"

to

with

which

Trust

Company,

(or

is

partner)

spends

the

proceeds

of which

director.

of which

of the

The

bonds

Co.

for the bonds

to the Penn

director.

"

Morgan

to pay

"

Morgan

Company,

sell the bonds

Life Insurance
a

our

Railroad,

J. P.

P.

J.

(or a partner) is

Co.

which

Hartford

sell to

bonds.

Guaranty

Morgan

Morgan

"

Haven

the money

the

from

through

"

(or a partner),a director of the

Morgan

issue

an

actually

not

operates:

that company

causes

tions,
corpora-

CHAIN

chain

oligarchynow

York,

position

will illustrate the vicious circle

the endless

"

or

objection extends

inconsistent

ENDLESS

singleexample

of control

officer

an

corporationsdo

THE

firm

other.

each

with

with

tion
corpora-

potentiallycompeting

if those

even

deal

holding the

in two

as

The

stockholder.
men

another

with

is interested

he

with

individually,or
or

by

objectionextends

The

corporation whether

member,

which

in

form, and

the

interests,whatever
conflicting

J. P.
Mutual

Mr.

Morgan

New

Haven

in

purchasing

INTERLOCKING
steel rails from

the United

of which

director.

DIRECTORATES

Mr.

The

States Steel

Morgan

United

Steel

spends the proceeds of the

supplies

from

Company,

of which

Mr.

is

director.
the

to

The

Western

subsidiary

Union
the

of

(or

partner)

has

Company

The

director.
the

from

(or

Pullman

Company

of which
The

director.

The

Company,
and

and

Morgan
Telegraph
with

the

(or a partner) is
its passenger
of
a

(for

cars

which

Mr.

director.

The

local

Locomotive

use)

motives
loco-

Company,

(or a partner)is a director.

Electric,the

General

the
New
Corporation and
buy locomotives
Pullman,

Company.

The

Morgan

buys

the

Mr.

wire contract

Company,
partner) is

Morgan

Reading,

in both

and

the Baldwin

Mr.

supplies

Telephone

Reading buys

Morgan

sells

Telegraph Company,

Mr.

Pullman

from

Electric

exclusive

an

of which

Reading,
a

is

Electric

(or a partner)

American

Telegraph Company;

purchasing

General

Morgan

Corporation

rails in

the

General

tion,
Corpora-

(or a partner) is

States

electrical

53

Steel
the
the

Haven,
from

the

Corporation,

New

Haven,

Baldwin

the

like

Steel
the

Baldwin
the

phone
Tele-

Reading,

Companies,

like

the

Pullman

the

Western

Union, buy electrical suppliesfrom

the

General

Electric.

The

Baldwin,

the

Pull-

PEOPLE'S

OTHER

54

the

man,

the

and
New

the

General

Electric
steel

buy
Each

Corporation.

each, the firm

This

enters

it

and

times

many

with

represent fully the extent

of

our

is in

with
of

funds

operations.
tious;
part suppositi-

men

Haven

example,

to which

the

New

the interests

Instead

railroad

the

as

be multiplied

permutations

many

intertwined.

are

it must

Only

to

New

through

represents truthfullythe operation of

interlockingdirectorates.

few

these

further

upon

specific illustration
but

the

with

and

Co.;

panies
com-

deposits its funds

Co.; each
"

Morgan

Steel

of the

its securities

markets

"

Morgan

the

from

one

every

the

like

companies,

products

and

last named

J. P.

Telephone, the Telegraph

Reading,

Haven,

J. P.

MONEY

York

of

taking

startingpoint

in

Central, the Santa

Fe, the Southern, the Lehigh Valley, the Chicago

and

Great

Western,

might
Guaranty
any

trust

one

of

instead

dozen

as

other

instead

bonds,

of the

the

or

Pere

quette
Mar-

selected;instead

Company

companies;

purchaser of the

Erie

been

have

Trust

the

the

other

General

banking

important

of the

of the

Penn

banks

Mutual

insurance

The

or
as

nies;
compa-

Electric,its qualified

competitor, the Westinghouse Electric and

Company.

voir,
reser-

chain

is indeed

facturing
Manuend-

INTERLOCKING

less;for
with

each

controlled

55

corporation is entwined

others.

many

As

DIRECTORATES

the

of

nexus

Business"

"Big

the

Steel

Corporation stands, of course, preeminent.

showed
that the few men
Stanley Committee
control

the

Steel

Corporation, itself an

important railroads,are
nine

other

of line

railroad

(more

United

than

States),

companies.
influence

half the railroad

mileage of the

and

few

men

street

in

all these

carriers

for

steel.

companies;

similar

and
in

many

largest

influence

further.

with

These

in twelve

oil

gas,

of

aggregate

corporations through
"

United

its

the

panies^
com-

same

steel-using
of

some

the

They are directors in forty

steel-usingmanufacturing

users

The

companies.
exert

the

and

water

panies,
com-

products; and
great wire-using telephone and telegraph
extensive

the

And

as

railway systems, including

machinery

and

steamship

but

"

also directors

are

alliances

and

only

much

largest in the world.

in

important steamship

railroad

of steel extends

users

also in twenty-

controls, the Steel Corporation's

as

customers

of

owner

126,000 miles

pervades
not

"

who

systems, with

Through

traffic it

huge

directors

The

their

influence

States

"

exceeds

over

iron

assets

of these

which

these

the

sixteen

business

ent
differ-

few

men

of the

billion dollars.

OTHER

56

PEOPLE'S

MONEY

Obviously, interlockingdirectorates,and
that

before

of American

the freedom

fundamental
that

nature:

The

of morals

law

"No

man

can

serve

is that

surprisingfact

firmly rooted

should

two

masters."

principleof equity so

been

have

of human

departed from

dealing with

of law

has, in other connections, been

applied,than
occupying
with

corporations. For
that which

inconsistent

himself,

or

from

holding

similar

or
association,

called
have

obviously a

as

positions in
in

private

specifically
by

ously
rigor-

more

prohibitsa
using
And

trustee

ing
deal-

fiduciary

director

trustee

as

of

persons

unincorporated

an

trust

that

his

at

rule

no

positions,from

positionfor personalprofit.
corporation is

novatio
in-

an

and

all in

from

be

not

be

can

merely give full legalsanction

It will
to the

business

prohibition will

The

regained.

effectuallyprohibited

be

implies,must

term

all

estate, who
The

name.

are

Courts

recognized this fully.

Thus, the Court

in

important

an

"While

of

not

Appeals

subject

to

were

the

York

clared
de-

case:

technicallytrustees, for

of the corporate property

itself,they

of New

charged

was

in the

with

liabilities of

the

title

corporation

the

trustees.

duties

and

Clothed

of

between

contract

contract

only

election

the

beneficiaryis

and

that

well

as

of

that

the

domination

two

men;

in

and

of the
The
in the

of directors

so

cooperation"

for

secures

each, in his

own

of

effective

taken, subtly,

minority
has

And

dominated,

there

one

sentation
repre-

resulted
one

in
or

all criticism
where

even

is too

often

directors

among

line,a due share

corporation'sfavors.
second

limitation

making

of which

of

absolutelyvoid

which

by

"

the

participatesactively, are
instead

act

corporationsby

power.

action
in-

the influence

the

practicallybanishing

dominant

is not

of

denial

of most

"harmonious

which

to

is

vote

by

ignored,also,the

the most

that

any

the

boards

on

that

knows

one

some;

provable participation. Every

know

the board

It

from

his trust

is confined

before

without

of the

action.

director

is done

should

merely

not

that

advice

nature, in assuming that

voting. Every
work

rule of law

disinterested

to

violate

may

by

as

of human

laws

and

entitled

trustee

voidable

corporation.

ignored the

all his trustees, and

from

corporations, the

two

of the

first limitation

The

making

the

absolutely void, but

not

was

at

MONEY

participatedactivelyin

director

mon

PEOPLE'S

OTHER

58

interested

held
"

contracts,

merely

director
voidable

ignores the teachings

INTERLOCKING
of

DIRECTORATES

experience.

voidable
them

has

resulted

valid.

It

that

board

with

would

be

and

directors

there

occurrence,

nor

dominant

avoided.

Philip sober

and

the

effective

an

the

the

to

or

is
avoid

Pujo

with

of the

board's
Committee

"None

bankers

frequent
lack

we

and

the
not

course,

stockholders
which

body

to any

to interfere

contracts

unfair,

have

is essential

it be made

to

of stockholders,

of individual

attempt

with

existingmanagement

an

ordinarily prohibitive. Proceedings

membership
a

by

Besides, the financial burden

directors

brought, except
in

of

appeal, whether

courts.

stockholders

here

Directors

minority

the risks incident

and

of

not

would,

directors,to the whole

to

reason

into

But

rarely the knowledge of facts

to

control

Appeals from

are

fruitful.

very

stockholders

appeal;

who

is little

appealing party.

an

declaring

director,however

subsequently
to

merely

contracts

practicallyin
the

fellow

such

contract, entered

any

Philip drunk

even

is

action;

corporate
expect

hold

To

59

after

board.

membership

are,

radical
And

are

to

dom
therefore,sel-

change

radical

in the

changes

Indeed

rare.

the

reports:

of the witnesses
was
testified)

(the leading American

able to

name

an

instance

in

OTHER

60

the

PEOPLES
the

history of

in

succeeded
of

that

it appear

does

in

in any

management

so

in

country

succeeded

had

MONEY

to

as

have
the

secure

of

Xor

ever

even

investigation

corporation

been

it has

whether

ascertain

ing
exist-

an

largecorporation.

stockholders

far

holders
stock-

the

overthrowing

existing management

an

which

well

to

honestly

or

managed."'
Mr.
Harvard
to

aid

the

that

state

by

the

company

that
States

federal

the

aside

and

disaffirmingthe

from

interested

therefrom.
National

And
Bank

of every

be

bank,

the

trust

to

take

suffered; or
to

recover

profitsderived

State

examine

State

and

ents
Superintend-

Interstate

company,

United

contracts

also,that

Examiners,
directed

such

the

to this end

made

and

same

contracts

directors

of Insurance, and
Commission

of the

damages

any

without
the

all

set

quired
re-

ested;
is inter-

director

any

investigatethe

recover

urged

contract

Attorney-General
to

He

stockholders,and

officials every

proceedings

proper

to the

in which

the State

or

come

corporation be

of every

report annually

and

April, 1913,

minority stockholders.

president

to
to

of

the

in

the government

that

Review,

Law

the

proposed

Pam

Max

Commerce
the

insurance

records
com-

INTERLOCKING
railroad

pany,

and

company

in interstate

engaged
views

DIRECTORATES

careful

to

he had

for years

advantages

full

Pam's

the

As

are

nently
promi-

counsel

organizationof trusts,

opportunity of weighing

the

disadvantages of "Big Business."

and

conviction

practiceof interlocking

the

that

publicand demands
much
is significant. And
can
legislation,

directorates
drastic

is a

to the

menace

be

said in support

he

proposes.

to

fundamental

be

to

remedy

effective,the

be

comprehensive.

and

PEOTECTION

OF

ESSENTIALS

Protection

which

measure
specific

of the

But

THE

that

tion
corpora-

Mr.

commerce.

study.

identified with

must

other

every

concerning interlocking directorates

entitled

His

61

minority

stockholders

demands

corporations be prohibited absolutely from

making

in

contracts

private interest, and

declared

not

voidable

which
that

director

all such

merely,

has

contracts

but

be

absolutely

void.
In

the

case

of

railroads

and

public-service
to
private

corporations (in contradistinction

manded,
industrial companies), such
prohibition is dealso, in the interests of the general
public.

For

and

interlocking interests

disloyalty;and

the

breed

efficie
in-

public pays,

PEOPLE'S

OTHER

62

in

higher

the

rates

whether
be

rates

contracts

does

sides,the

prevail.

not

And

railroading,where

effective

the

But

this

the

competition

in its

is

own

particularly
field.
for

reason

prohibiting

of

protection of

from

the

the

incidents

Conclusive

of

evidence

the

and

For

even

and

the

directorates must

end

to the

not

most

the

be

the

remove

Money

than

practicein

and

Trust.

the

Trust

graft.

that

benefited

without

the
all
of

objections.

efficiencyare

because
'prohibited,

Money

public

efficient form

politicalliberty;

imperiled by
to break

the

important

more

the

(if obtainable)

was

organization, would

protection

inefficiencyand

practice of interlockingdirectorates
stockholders

true

often lacks

so

is neither

nor

are

properly spent

interlockingdirectorates
stockholders,

who

tion
presump-

company

compelling

important

common

been

the

properly

are

directors

through

cannot

whether

known

company's

spent has

money

excessive

corporation

when

both

on

that

the

made

are

interested

in

of

or

it is

until

For

expended.

service,a large part of

inefficiency. Indeed,

adequate

are

earnings

and

graft

determined

gross

in poor

or

for

penalty

MONEY

these

dustria
inare

Interlocking
it is

sible
impos-

putting an

largercorporations.

INTERLOCKING

BANKS

AS

The

DIRECTORATES

PUBLIC-SERVICE

CORPORATIONS

practice of interlocking directorates

peculiarlyobjectionablewhen
because

of

the

institutions.

part of
as

be

factor in

treated

business,but

recognizing it

and

right than

should

be

the

law

not

The

to loan

money.

granting
the

private

And

already regulates

to

of

bank

a
no

more

its powers

use

destroy other

to

withholding

or

determined, so

borrower, solelyby

therefrom

It has

or

up

railways.

as

function

carrier

build

almost

public services.

ways.

The

businesses.

loans

making

those

are

our

such, the law

common

specificallyto

as

of

important

an

They

commerce

of the

to be

it in many
is to receive

by

one

as

are

far

is

banks,

to

functions

system.

Receiving deposits and

should

applied

deposits

currency
a

and

nature

Bank

our

essential

loan

63

of

the

concerns

as

interest rate

the risk

and

siderations
involved; and not by favoritism or other conforeign to the banking function.
Men
safelybe allowed to grant or to deny
may

of

loans
see

bank

their

own

are, in the

resources

fourths

nor

to

by

main,

may

not

the directors.

of the aggregate

resources

they

whomsoever

their motive

fit,whatsoever

stockholders

money

But

be.

owned

by

Nearly
of the

the

three-

thirty-

PEOPLE'S

OTHER

64

four

hold

industry
of

reservoir

common

that

of

the

interest."

And

the

be

should

be

applied to
Senator

"My

Chairman

utilityinstitution
is

and

the

to

unjust

banks.

the

Committee

bank

be

cannot

the

simple

invited, under

government,

making

such

of

is that

and

private affair,for
public

forbids

Currency, said recently:

and

judgment

own

the

with
have

the

logicof

this is

United

States, public and

beyond

of

treated

as

receive

public deposits."
must,

of

and

bank,

course,

be

The

private, should

officers of

banking

entrusted

the

in the

where
public-utility
institutions,

directors

the

its interests

All banks

escape.

as

that

safeguards

right to

public-

treated

reason

deposit its money

public has

is

safeguarded through organized authorities.

The

as

preferenceshould

operationsof

Owen,

Banking

on

the

the

public

which

rule

general

merce
com-

complete,

so

with

"affected

giving undue

or

resented
rep-

recognized

public-servicecorporations from
discriminations

are

deposits,as

quick capitalis

businesses

Morgan

influence

bank

upon

the

dependence of

The

deposit banking

one

which

predominant

by deposits.
and

in

institutions

banking

associates

MONEY

be

they

tions
institu-

with

wide

"We

cannot

which

public

the

that

say

adverted, and

have

we

MONEY

PEOPLE'S

OTHER

66

others,

business

of

banking

contrary

we

,are

it may

opinion that

of

regulationto prohibitionexcept
it may
prescribe."
as

would

make

interest

refrain from

has

from
ditions
con-

It

make

might

shall

private

restrictions

or

bank

of his investments

some

making others;but

holding of

banks

hardships

directors.

dispose of

director

director

undue

impose

bank

upon

in which

loan

no

such

upon

that

requirement

the

on

go

the

PRECEDENTS

OFFICIAL

Nor

whole

On

its control.

under

not

are

taking the

the State in

sufficient to warrant

to

interests

that

the

from

holding another,

it often

office

one

happens

precludes a

compels

or

and

him

man

dispose

to

of certain financial interests.

judge

in which

case

interest;and
act

in any

upon

disqualifiedfrom
he

has

the

even

judges, in

most

arisingin

matters

sittingin

order

could

in any

matter

Interstate

conceivably
that

Commerce

owning

any

might

or

free to

all investments
their

before

Commissioner

bonds

to be

their court, proceed,

bias

come

any

financial

smallest

taking office,to dispose of

which

from

is

stocks

judgment
them.

is

An

prohibited

in any

corpora-

INTERLOCKING
tion

subjectto

It is

officer

the

serious
of

DIRECTORATES
of the
jurisdiction

criminal

the

offence

federal

pecuniary profits of
indirectlyinterested.
And

the

directors

exercise

today

which

of

function

country's welfare

than

departmental
SCOPE

In the
four
1.

executive

to

transact

corporation in the
is

directly or

stituti
great banking in-

our

judges
less

no

of bank

credit,

important

of the

judges

to the

of

our

commissioners,

commerce

heads.

OF

THE

PROHIBITION

this

proposals for legislationon

subject,

important questions are presented:

locking
the
Shall
principle of prohibiting interin

directorates

potentially competing

corporations be applied to
as

2. Shall
or

well

from

applied to
banking

to

the

tutions,
insti-

banking

state

the national

as

it be

only

3. Shall

banks?

all kinds

of corporations

institutions?

principleof prohibitingcorporations

entering into transactions in which

management
both

for any

he

that

courts, the interstate

and

any

the ultimate

as

Commission.

government

business with

government

67

has

directors and

applicationto

private interest
officers

officers

only?

or

be

be

the

applied to

confined

in its

OTHER

68

4.

Shall

prohibit
which

PEOPLE'S

the

principle

transactions

one

stockholder?

of

its

with
directors

MONEY

be

applied

another
is

interested

so

as

corporation
merely

to

in

as

CHAPTER
SERVE

The

that

the

Combination,
shown

of

cure

measures

aid

in

remedies
is

not

advise;

required

is

by

alleviate
the

proposed

are

Indeed,

' '

Serve
69

ment
enact-

framed

to

and

Pujo

legislation

present

suffering

But

"local"

major

of

many

and

ones;

which

is

operation

is

treatment

one

dustry,
in-

provisions.

has

fundamental

the

the

freeing

evidence;

the

Committee

the

although

of

the

disease.

possible, without

simple

vice

to

the

adopted

arresting

This

necessary.

to

disclosed

were

fundamental.

"

wisely

are

effected.

interests,

recommends

undoubtedly

would

of

view

is

specific remedial

abuse

some

if all of these

the

With

Committee

these

it

which

Their

tion
concentra-

all-pervading

twenty-one

of

Most

inevitable.

intertwining

the

system.
the

and

the

clearly

so

financial

by

the

presented
Trust

intense

be

to

has

Money

means

"

ONLY

appear

discloses

and

meet

the

conclusions

the

present

MASTER

Committee

concerning

diagnosis

is

ONE

Pujo

facts

IV

Master

hesitated
treatment

only.

' '

PEOPLE'S

OTHER

70

The

incident

evils
of

are,

in

have

are

stricted
re-

that

recognizes

Committee

First: The

respect

sphere.

narrow

very

that

the

but

fully recognized;

course,

ates
interlocking director-

to

prohibitions proposed
to

MONEY

tentiall
po-

competing corporations should

director; but it restricts
common

not

this

"

prohibition

of

directors

to

national

banks,

saying:
"No

officer

shall be

officer

an

of any

or

director

or

trust

under

director

or

in the business

in

buying

loaning

privatebanker
of bankers

and

no

of any

or

that

person

national

member
is

of

engaged

trust

company,

financial

firm

of bankers

is located

that

or

in the

in which

engaged

in

same

such

business:

or
ganized
or-

that is engaged
on

money

receiving deposits:Provided,

at

financial

collateral

sellingsecurities except

director

or

bank

ized
law, that is author-

depositor

on

provided;

section
officer

and

of

other

other

federal

or

to receive money

of any

institution,whether

or

state

bank

national

or

company

corporation

other

of

shall
bank

firm

as

or

in this

be
who

such

or

engaged

city,town,
national
Provided

bank

or

is

of

bank,

institution,
banker,
at

an

ship
partner-

in the business
That

or

or

in business

villageas

is located

further, That

or

SERVE

director
such

of

the

bank

laws

is

at the

be

may

than

more

or

partner of

officer

an

71

director

or

organized

company

in which

in business

and

of

such

national

doing

business

place."

Second:

The

Committee

corporation should
one

of the

but

it restricts

has

national
credit

that

in which

contract

private interest;

prohibition(1) to
the officers,
saying:

national

bank

advance

this

(2) to

or

recognizes

make

not

management

and

money

bank

the state

engaged

"No

ONLY

trust

one

of

same

banks,

MASTER

national

director

not

by

ONE

shall

lend

purchase

or

or

discount

or

any

promissory note, draft,bill of exchange or other

dorseme
of debt
evidence
bearing the signature or inof any

of its officers

such

of which

of

indirectly,or

or

officer

such

stock,
for

or

lend

or
on

owns

of

upward

of

behalf

partnershipor
from

any

officer is

ten
or

has

advance

of any

member
as

or

herein

of

such

officer or

officer

in which

or

of

which

capital

credit
of any

purchase

he is

or
specified,

interest

the
or

money

partnershipor corporation of
is

beneficial

corporation,or
such

ship
partner-

centum

per

of any

member, directly
corporation in which

any

or

or

or

such

such

any

from

to,

curity
se-

any

officer

ested,
financiallyinter-

of any

corporation

PEOPLE'S

OTHER

72

of

which

time

of its officers is

any

of

Prohibitions

intertwining relations

will

killed.

not

director

common

should

companies,
it should

snake

Trust

Money

financial

end

not

in

well

as

apply

to

as

and

The

prohibitionof corporate

one

of the

should
and
to

apply
to

other

national
such

to

classes

banks.

broad

directors,as

banks

state

and

and

industrial

porations
cor-

trust

porations
cor-

in which

private interest

well

as

to

officers,

companies

trust

of

institutions.

contracts

has

be

banks; and

banking

to

management

banks

national

to

railroad

fully as

as

prohibition

to state

visions,
pro-

most,

potentiallycompeting

apply

stricted,
re-

concentration.

will, at

The

so

other

supplemented by

however

scotched,

officer at the

an

transaction."

of such

The

MONEY

and

of

corporations,as well as to
And, as will be hereafter shown,

legislationis

within

the

of

power

Congress.
Let

THE

us

examine

PROHIBITION

this further:

OF

COMMON

COMPETING

1. National

Banks.

DIRECTORS

IN

TENTIALLY
PO-

CORPORATIONS

The

objection

to

mon
com-

as
directors,
applied to banking institutions,
is clearlyshown by the Pujo Committee,

OTHER

74

PEOPLE'S

of Scotland

banks

who

persons

board

all exclude

no

The

of

with

designed

ago

the

through
wealth

enacted

laws

Massachusetts

of

curb

to

savings

by deposits in
in 131

banks, located
These

only
banks
the

banks

194

in

Massachusetts

bank

can

bank.
years

hold

That
ago

could

hold

the

savings banks.

These
different

194

In

by

few

provides that
(director)of

office in any

passed

was

towns.

distinct;not

order
a

great

is represented

and

officers of
office in any

attempted

of the individual
discernible.

Of

that

the

financiers,
no

tive
execu-

any

savings

other

savings

in 1876.

A few

supplemented by providing that

similar

Massachusetts

tion
concentra-

separate

of the executive

none

tion
genera-

cities and

law

statute

large part

in fact.

any

it was

than

among

in

wealth
Common-

different

trustee

or

the

banks.

be controlled

not

officer

are

are

but

form,

may

its

distributed

are

bank.

one

financial

the

on

is also

by

more

of Massachusetts

deposits

be

to

than

more

By

banks.

recommendation

Committee's

harmony

other

is allowed

person

of management

their boards

from

in

directors

are

law, in Russia

MONEY

thus

and
financier;

When

aggregate deposits

in

that

savings

national

to curb
no

Act

bank
bank.

the power

disadvantages
was

passed the

its savings banks

were

SERVE

ONE

MASTER

ONLY

75

of deposit accounts
$243,340,642; the number
739,289; the average
deposit to each person

the
the

deposits

aggregate

the

number

of

has
the

deposit

few,

least

at

consistent

with

of the whole

banks

and

to

state

which

York

there

15

those

are

of

resources

Trust

and

of

banks

members

of the

November

on

has
one

former.

If

in

banks

directors

common
or

national

of which

clearinghouse;
Indeed
of

resources

Trust

Money

trust

In New

companies

but

the Bankers'

$205,000,000,
with

Company,
are

the

among

Trust.

larger deposits than

bank

to

in

2, 1912, aggregate

$827,875,653.

of the

The

Companies.

banks.
essentially

are

$232,000,000,

the country

state

of

prosperity

including those

37 trust

tools

only

the

appliesequally

with
Company
the
Guaranty

useful

with

common

are

had

15

the power

respect, is entirely

Trust

prohibiting

companies
only

sachusett
Mas-

$381.04.

curbing

this

and

institutions

City

2,200,917; the

account

and
efficiency

Banks

for

banking

in

$838,635,097.85;

were

that

1, 1912,

people.

2. State
reason

shown

November

accounts

each

deposit to

average

and

On

population $144.

of

No
the

sources
re-

most

bank

in

latter;

larger deposits than the

were
permitted
directorships
such

trust

companies, the

76

OTHER

charters

of

leading national

would

elude

under

state

laws.

prohibition

trust

one

same

place.

door

to

The

bank

with

has

directors.

one

can

as

be
in

of

is

than

from

of New

York.
each
trust

would

are

The

has

in

the

the

place the

first

of

board

the

director

of

and

thus

be interlocked

with

who

trust

38

no

rector
is di-

directors

in

of 38

ent
differ-

of Commerce

Bank

in the

bill

company,

of the

National
a

Pujo

director

companies

Thirty-seven

company:

bank

opens

director
such

one

becoming
York

national

the

prevent each

to

37 trust

become

under

bank

national

nothing

the

In

while

trust company.

There

tentiall
po-

interlockingof any
with one
trust company
only,
trust companies as the bank

For

more

bank

the

the

permit

many

one

concession

proposed

not

but

in

doing business

dangers.

grave

national

director

company

provision would

there

directorships in

common

be

to

man

and

apply

rigorcompeting banking institutions ously

banks.
It permits the
to national

even
same

of

failed to

has

Pujo Committee

The

institutions

the

by re-incorporating

control

federal

less
doubt-

would

banks

surrendered; and

be

soon

MONEY

PEOPLE'S

directors.

City

directors

of New

might

different

New

37

companies

the

trust

National

York

Bank

of

SERVE

ONE

Commerce,
the

unless

Pujo

the

also
bill

would

still be

Committee

different

by

national

actually conducted
least

in

classes

the
of

makes

loans

different

by

bank; but

business

bill
of

is

from

from

by

private

that

is of "a
acted
trans-

business

company

is, at

have
a

the

as

the

its

that
the
banker

the

these

bank

also transact

may

character

Committee's
the

each

common:

private banker
of

trust

sion
conces-

properly

But

institutions

banking

each

and

that

to

business

East, quite similar;and

in

elements

of the

to

as

bank

company

bank.

by

of

so

It is true,

trust

from

character"

number

amended

were

states, that "the

by"

of

adopted.

doubtful.

be transacted

may

the

the wisdom

company,

77

recommendation

possible interlockingof

singletrust
Pujo

ONLY

limiting

were

if the

even

limit

the other

Committee

directors to 13
But

MASTER

of

two

vital

deposit,

deposits.

business

some

properly

ducted
con-

of

the

terms

engaged

receiving deposits

would

in
be

prevented from being a director of a national

bition
underlying that prohibank; and the reasons
apply equally to trust companies and to
private bankers.
interlocking of
3. Other
Corporations. The
of the factors
banking institutions is only one

OTHER

78

MONEY

PEOPLE'S

The
developed the Money Trust.
interlockingof other corporations has been an
And
the prohibition
equally important element.
be exshould
of interlockingdirectorates
tended
to
potentially competing corporations
whatever
the class;to life insurance
companies,
railroads and
industrial
companies, as well as
has
The Pujo Committee
banking institutions.
shown
that Mr.
George F. Baker is a common
which

have

which

director in the six railroads

of

cent,

all anthracite

associates

are

the

competing
Pacific
the

and

the

Louisville

Coast

marketed

of all anthracite

cent,

per

Line,

industrials

and

railroads

Northern;

between

Money

PROHIBITING

the

Southern,

the management

Atlantic

Electric

tric.
Elec-

be

severed,

broken.
IN

PRIVATE

has

and

large potentially

WHICH

THE

INTEREST

principleof prohibitingcorporate

in which

posedly
sup-

Northern

the General

CONTRACTS
HAS

gan
Mor-

the

the

all the

is to be

COEPORATE

MANAGEMENT

The

Trust

88

own

such

competing corporations must

if the

per

partiallycompeting
and

between

nexus

and

Westinghouse

Manufacturing Company
The

as

80

The

between

Nashville

like the

and

deposits.

nexus

Great
"

haul

contracts

private interest

SERVE
is

ONE
in

applied,

the

only
only

to officers.

permitted
national
have

of bank

banks, and

in them
to be

corporationsare

the

practice;and

directors

owners

be

to

are

in

even

free

thereon:

in which

in his

after

that

nor

be interested

lenders

transactions

to

in syndicates,
participate
underwriting of securities in which

may

or

be made

funds

or

their banks

the

All other

mendations,
recom-

accept compensation for promoting

not

promotions

only

79

conflictingprivate interest,except

must

loan

to national

the

ONLY

Committee's

Pujo

continue

to

banks

they

MASTER

that all loans

; and

ample notice

facts shall be

underwriters

spread

shall

shall be authorized

and
co-directors;

to

or

other

or

director is interested

name

own

as

of the

the records

upon

that

corporation.
The

Money

would

Trust

be disturbed

not

prohibition limited to officers.

that character, financial control
to

be

exercised

impairment;
through
officers

but

by

the

the

somewhat

a
are

the

resign

financial
as

would

continue

power

would

ordinarilytheir obedient
are
who, as bank officers,
in

without

appointees

of

the

be

become

of

exerted
Bank

directors; and
Individuals

important factors

concentration,would

officers and

law

substantial

channel.

servants.
now

Under

few

different

by

merely

doubtless
directors.

OTHER

80

The

loss

PEOPLE'S

No

the

"

Morgan
of

directors

they

one

of

aggregate

affect the

not

banking

these

as

operations.

to officers would

operations with

boards

of

any

with

their vast

on

carry

If there
bank

firm

$1,283,000,000, through which

prohibitionlimited
Morgan

officer in

an

institutions

banking

thirteen

resources

is

Co.

of the

member

be

could

involved

official salaries

of

easily compensated.
J. P.

MONEY

tions.
institu-

minority representationon

were

the

(which

Committee

Pujo

wisely

advocates), such a provisionmight afford some

protection to stockholders
through the vigilance
minority directors preventing the dominant

of the

directors

using their

minority stockholders.
would

primary
not

to

purpose

But

safeguard
of

to

through

the

their

prevent

intertwined

prohibitionlimited

the

vision
pro-

public; and

the

is
legislation

ers;
injuringstockhold-

injuring the

control
to

the

injury of
then, the

even

Trust

Money

prevent directors from

but

No

not

the

to

power

of

officers will

public

the

banks.

materially

change this condition.

The
even

prohibition of interlockingdirectorates,
if

applied only
would

to

all banks

practicallycompel

to resign from
representatives

the thirteen

and

banking

trust

the

panies,
com-

Morgan

the directorates

institutions

with

which

of

they

the

corporations,which
as

use

if

it

fit.

sees

all

applied to

affect

even
proposed prohibition,
banking institutions,would not

The

of

source

well

J. P.

"

PRIVATE

THE

industrial

should

apply

conflict

the

where

second

corporationin

is also

that

merely

of interests

serious

as

another

with

if his interest

even

is

corporation

TO

ing
corporation enter-

its directors

of

from

INTERESTS

into transactions
one

of

PROHIBITION

INTEREST

prohibitionagainst one

which

tions,
corpora-

of directors.

STOCKHOLDING

The

include

to

quickly retire

will

Co.

substantiallyall boards
APPLY

power.

members
banking institutions,

as

Morgan

Morgan

made

prohibition is

the

and
railroad, public-service,
as

is free to

firm

Morgan

directlythis great

If,however,

MONEY

PEOPLE'S

OTHER

82

in

he

the

be

may

corporation, as

if he

just

only

stockholder

second

stockholder.

director

is

of

in

interested,

in

also

were

director.
One

of the
which

annoying petty monopolies,

evidence

exclusive

Committee,

is the

the American

Bank

York

Exchange.

Stock

issue of New

York

taken

was

Note

City bonds

the

Pujo

privilegegranted

Company
A

by

cerning
con-

recent
was

to

by the New
$60,000,000
denied

listing

SERVE
the

on

ONE

Exchange, because

submit

to

exaction

an

for

Company
New

York

work

this

explain
shown

that

the

with

but

was

there

when

in

the

No

director

do

it

the

American

to

was

Company.
Mr.

was

Morgan,

of the

American

sufficient influence

was

the

tending

American

member

of the

the

in the financial world

largeststockholders

give

to

As

to

the American

would

$44,500.

prominent

men

refused

bonds,

Company

for

6,000 shares.

firm

the

by

83

extraordinary monopoly,

stockholders

Among

city

of $55,800

Note

well

ONLY

the

engraving

Bank

equally

were

MASTER

Morgan

Company;
exerted

how
some-

the

Company

stock

exchange monopoly.
The

Pujo Committee,
that

be
a

as

as

direct

potent

mend
recom-

has

prohibited,recognizesthat

of

interest

stockholder's
may

be

failingto

in which

transactions

private interest

while

an

than

more

director

of

instrument

personal interest;for

certain

size

influence

it recommends

that:

"Borrowings, directly or

indirectly by

corporation of the stock of which he (a bank

director)holds upwards of 10 per cent, from the
of which he is such director,should only be
bank
any

permitted, on

condition

that

notice

shall have

given

been

loan

if it

affords

did,

lesser

fix

of

low

so

Bank

Certainly

"

even

be

extended

terest
stockholdinginthan

smaller

effective

most

10

in

$6,000,000 investment

cent,

per

undoubtedly

if it had

election of his

been

not

of

City
the

have

of
Bank

bank's
been

J. P.
sented
repre-

stock;
effective,

supplemented

to the board

son

SPECIAL

The

be

interest will not

Co. in the National

only 6
would

public; but

inducing
Morgan's
stockholdings in the
Note
was
only three
Company

The

cent.

and

to

singledirector,much

Mr.

American

Morgan

such

it is difficult to

financial

that

cent., might

favors.

per

applicationought

its

action.

influence

per

which

at

the

protection to

no

stock-holdings. Indeed

limit

entered

be

above, the particularprovision for

shown

notice

meeting

full

authorized."

was

As

to

of the

that

shall

transaction

the

the minutes

upon

and

his co-directors

to

of

statement

MONEY

PEOPLE'S

OTHER

84

by

the

of directors.

DISQUALIFICATIONS

Stanley Committee,

the Steel Trust, concluded

directorates
of certain

were

after

of
investigation

that the evils of interlocking

so

serious

industries which

that
are

sentatives
repre-

largely

SERVE

dependent

ONE

railroads

upon

prohibited from
officers

MASTER

serving

ONLY

should

85

be

absolutely

railroad

as

directors,

employees. It,therefore,proposed to
officer or employee
disqualifyas railroad director,
any

or

person

railroad
selling

or

rail

ing
engaged in the business of manufactur-

structural

or

coal.

The

is the

in

drastic Stanley

desire to do away
of the

life-insurance

of

Armstrong

investigation showed

in financial

factor

exercised

was

ownership

their

and

in 1905

they

legislationdirected
the

Equitable

of

the

banks

bankers

did

bought

associates

so

the

life-insurance
and

trust

control

the most

power

banks

controlled

by
The

in part.
stocks.

Mutual
But
And

and
stock
strong
Arm-

life-insurance
The

The

potent

Their
the

or

surance
life-in-

that

huge deposits.

to sell their stocks.

banking

provision,be

concentration.

which

of

companies.

largely through

companies

trust

and

directors,officers

as

employees

were

great

Trust.

similar

selling

how

employees

acting

companies

and

present abuses

Money

should, by

disqualifiedfrom

mining

shows
bill,

with

Directors,officers,and
institutions

locomotives,railroad

or

steel,or

lessen the power

to

cars

panies
com-

Life and

the

Morgan

now,

instead

companies controllingthe

companies,

the

the fife-insurance

latter and

companies.

the

OTHER

86

Trust

Money
of

all classes

MONEY

MAT

PROHIBITION

THE

HOW

The

PEOPLE'S

be

cannot

LIMITED

BE

destroyed unless

directors

prohibition

of

transactions

by corporationsin which

has
follow

that

interlocking

prohibitionmust

the

corporation of each
are

class.

entirelyconsistent

with

ethics

demand

that

from
has
universal

making

in

its

305,336.
of

(other than

Of

or

their

these

either

could

interest

1610

$5,000,000.

Few

also be

poration
cora

should

number

Dec.

rector
dibe
of

31, 1912,

have

capital
corporations

capital of

less than

appreciably affect general credit

through their own
operations

affiliations.

statute

The

States

Corporations (other
of less than

might, therefore,be excluded

of the

every

business

in which

only

banks) with capitalresources

000

to

not

exceptions

and

contracts

with

agement
man-

prohibitinga

application.

banks)

$5,000,000 could
conditions

rule

the United

than

more

Certain

private financial

corporationsin
was

the

of

it does

apply

stockholders

minority

and

merely protectingthe
Trust; although protection

public against the Money

of

the

the

But

private interest.

in

included

corporations are

for the
limited

present.
so

as

not

from
The
to

than

$5,000,the scope

prohibition
apply

to

any

SERVE

ONE

industrial concern,

capital and

MASTER

ONLY

regardlessof the
doing only

resources,

business;as practicallyall large

engaged

are

This

would

local

jobbers

excluded

exclude
and

from

banks
of less than

manufacturers

the

and

trust

less than

for

than, say, $2,500,000.

the

smaller
the

any

in

some

the

otherwise
wise
Like-

act.

in cities

might, if thought

the

present if their

In

their

resources

larger cities

the
cities,

directorates

community
of bank

would
all the

through

exclude

ject
subcome
over-

able

fear of

from

business

the
of

men

losing the

tunity
oppor-

accommodations.

exception should also be made, so

permit interlockingdirectorates between
An

and

even

might be raised that

locking
prohibitionof inter-

objection which
directorates

bank

and

concerns

banking institutions should be

Such
law.
exceptions should

smaller

porations
cor-

commerce.

located

$500,000, and

less

to

industrial

the

companies

100,000 inhabitants

intrastate

not

operation of

advisable, be excluded,
capitalis

retail

of

amount

an

in interstate

some

87

its proper

subsidiaries.

And

as
a

to
poration
cor-

the

ment
prohibitionof transactions in which the managehas a privateinterest should,of course, not
apply to contracts, express or implied, for such
services as
performed indiscriminatelyfor
are

whole

the

service

community

POWER

question
to

power

conduct

of

banks?

And

asked:

other

if the power

banks

into

state

escape

from

bank

banks

ample

Congress
the

upon

national

than

Congress is

ited,
lim-

so

the

financiers,upon

law,

their national

convert

trust

or

companies,

and

congressionalcontrol?
both

to

answer

of

dominant

the

Has

limitations

business

of such

has

be

impose these

enactment

questions is
to

power

impose

gress
Con-

clear.

prohibitions

such

practicallyall corporations,including state

upon

banks,

trust

and
While

evasion

Congress

insurance

and

companies
has

been

not

companies,

life insurance
be

may

regulate directly state

and

of

CONGRESS

OF

may

any

will not

The

to

depositors.

The

thus

public

services,common

for

ordinary service

like the

THE

the

and

railroads

by

corporations,or

all customers,

for its

MONEY

PEOPLE'S

OTHER

88

made

or

commerce,

it may

by

virtue either of its control

or

through

the

power

trust

or

to

life

railroad,public-service

industrial corporations,except

interstate

impossible.

granted

banks, and

panies;
com-

do

in respect to

indirectly

so

of the mail

privilege

taxing power.

Practicallyno business

in the United

States

can

PEOPLE'S

OTHER

90

has

no

the

issue

prohibit,or

to

power

MONEY

of bank

to

by

notes

regulate directly
banks, but

state

it

indirectly prohibited their issue by imposing

of ten per cent, upon

tax
a

state

bank.

The

power

of

has

of

and

Law;

of

instrumentalities

telegraph and
such

the

for

as

not

its exercise

is

dent
inci-

an

enacted

commerce,

and

the

full power

over

like

commerce,

of

the

has

congressionalpower

for, at least,half

should

cidents
ac-

telephone.

exercise

common

merce
com-

directly to

has,

it has

by

Congress

Employers' Liabilitylaw

Slave

As

it

regulating interstate

Railroad

White

undertake

or

prostitution;but

suppress

been

interstate

over

similarly utilized.

employees

to

the

issued

note

ordinarilyprovide compensation

cannot

the

Congress

been

bank

any

hesitate

now

to

gress
century, Con-

employ

urgently needed.

For

it where
hensive
compre-

prohibitionof interlockingdirectorates
an

essential

Freedom.

change

condition
Such

in the
to

other

purpose

of

Money

great change; and

financial

law

relation

bankers

our

of

our

attaining the

would
of the

businesses.
Trust

involve

New

great

leading banks
But

it is the

legislationto

unless it does

oligarchycannot

so, the

be broken.

is

and
very

effect
power

of

SERVE

But

the

though

essential

not

ONE

alone

supplemented

to

the

restore

by

MASTER

ONLY

of

enactment

such

of

industrial

liberty.
remedial

law

business,

emancipation

other

91

measures.

It

it

must

is
will
be

CHAPTER

is justlycommended

Publicity

to

and

be

the

best

already played
the

important part in

an

toward

The

charted.
counted

provisionsin

to be made

securities would

stock

be

That

remedial

been
a

towards
bill

have

New
and

located,
necessary

relief.

The

concerning the
and

with
a

the

surveyed

was

exchanges

doubtless

the statement

the

listingof

beneficent

further call upon

effect.

publicity

pending
potent force must, in the im-

struggle,be
continuous

"

in connection

should

for service.

one

the Committee's

incorporation of

there

long

important

of

have

appraised. That

and

"

forces

concerning

most

attainment

hostile

and

first step

struggle

Committee

facts

battlefield has been

The

Freedom.

the

Pujo

the

of

disclosure

contribution

But

The

Trust.

concentration, made

financial

for

remedy

Sunlight is said
electric light the
of disinfectants;
publicity has
policeman. And

against the Money

has, in

as

diseases.

industrial

efficient

most

DO

CAN

PUBLICITY

WHAT

social

utilized
measure.
92

in many

ways

as

WHAT

PUBLICITY

CAN

DO

93

WEALTH

Combination
and

money
are

and

of other

the main

Money

control

banker

in the

But
is also

the

the

relative

in

financial

factor

steadily.

It

of

value

Insurance

of

eighth

of

control
which

was
one

per

of

cent,

the

the

traordinar
ex-

recent

wealth

as

has

grown

enabled

of

Mr.

Equitable

the

direct income

by
a

law

to

year;

Morgan

from

but

one-

it gave
It

legal
wealth

was

associates to

Life
this

less than

of $504,000,000, of assets.
enabled

ment
invest-

$3,000,000 for $51,000

His

limited

of the

in

wealth

which

stock

Society.

investment

with

concentration
wealth

the

These

of the

And

his

in 1910, to pay

Morgan,
par

wealth

importance

was

people's

development

factor.

growth
years,

other

people's businesses.

factors

Trust.

of

from

buy

Life Insurance
Equitable and the Mutual
stituti
the stocks in the several banking inCompany
which, merged in the Bankers' Trust
and
the Guaranty Trust
Company,
Company
control
of $357,000,000 deposits.
them
gave
the

It

wealth

was

acquire

his

which

shares

in

enabled
the

National

City banks, worth

which

cemented

he

institutions.

the

Mr.

First

Morgan

National

to

and

$21,000,000,through

triplealliance with

those

OTHER

94

PEOPLE'S

how

Now,

has
Some

of

Some

the

to

Then

was

of

toll

mulated?
accu-

accretion.

bankers'

by

operations.

wealth

as

of these

cause

of it is due

Some

wealth

capitaland
as

of.

the

tolls taken

exacted

been

special opportunities for

to

main

huge
to

been

natural

it

breeds

But

avenues

of

extent

power

is the

wealth

wisely availed

vast

power.

this great

it is due

investment

MONEY

those

largefortunes

who

control

the

There

has

to investors.

"all
literally

breeds

that

the

traffic

will bear."
BANKEES'

EXCESSIVE

The

Pujo Committee

by

lack

by

the

unfortunately prevented

was

of time

country the evidence

COMMISSIONS

from

covering the
bankers

investment

as

underwriting commissions
could
exercised

have

by

bankers, as

the aggregate of these

It would

years.

the
collect

Money

these
disclosed

have

so

taxes

Trust

data.
some

taken

amounts

ing
profits. Noth-

clearlythe
schedule

levied

be well worth

showing

within

while

power

now

recent

to

investigationmerely

But

the

promoters' fees,

and

demonstrated
the

presenting to

earlier

open
re-

to

investigations

illuminating,though

adic
spor-

facts.
The

syndicate which

promoted

the Steel

Trust,

WHAT

took,

compensation

as

securities
J. P.

PUBLICITY

CAN

for

DO

few

95

weeks'

work,

yielding$62,500,000 in cash;and
"

Morgan

Co. received

for their

of

this,

as
services,

Syndicate Managers, $12,500,000, besides their

share, as syndicate subscribers,in the remaining
$50,000,000.
the

promoting
stock

The

of

out

Tube

issue

limited

to

for

And

in cash.

sum

Nor

of the

cash

have
Nor
to

floatingpreferred

been

considerable

these

1/2

often

like burdens.

heavy charges
Even

concerns.

of

supposedly

took

cash

concerns,

to 10 per

exacted.

On

bankers'
10

points

common.

have

was

stocks

preferred stock

manufacturing

are

stances
in-

one-third

concerns,

issued,besides

raised

More

in many

of

industrial

credit

monster

were

high-classindustrial concerns,
of from
commissions
5 to
(or profits)
bonds

common

promotions.

(or profits)of from

commissions

for

$80,000,000 stock

for the sale of

of well established

cent,

of

trust

recapitalized industrial
stock

took

$20,000,000

syndicates have,

received

of all common

syndicate

common).

recently,bankers'
of

Trust

total

(preferred and
commissions

Morgan

railroad

high grade,have
At

time

been

when

been

confined

securities,

subjected to

the New

Haven's

still unimpaired, J. P. Morgan

the New

York, Westchester

"

Boston

"

Co.
Rail-

PEOPLE'S

OTHER

96

way

first mortgage

New

Haven

1/2; and

at 92

took

Railroad
credit

they

the

at

"

Terminal
Maine

about

these

88, and

marketed

were

92.

at

the

by

for their services

sions
underwriting commisgreat banking houses, not

these

of

large part
is taken

sellingthe bonds,

in

risks,but for securing others

bonds

and

boro
"

tral
Cen-

corporation of unquestionable

"

marketed

were

Portland

the

bonds, guaranteed by

Company

the

bonds, guaranteed by

1/4. They

96

at

MONEY

Railway

most

"

its recent

financed

J. P.

risks.

incur

Morgan
that
that

"

Thus

the

Inter-

corporation
bond

$170,000,000
3 per

issue,

cent,

mission,
com-

is, $5,100,000, practicallyfor

should

others

suming
as-

sell the

to

when

prosperous

received

Co.

in

nor

underwrite

and

ranging
ar-

sell

the bonds.
The

aggregate commissions
houses

by leading banking
the

as

has

been

not

or

full amount

profit varies
has

issues

bearing
of

only, J.

P.

upon

of their

securities

Morgan

very

the

of

"

taken

transactions
rate

widely.

supplied
the

profitsso

only be conjectured,

can

disclosed,and

Pujo Committee
data

or

some

of

mission
com-

But

interesting

subject: Counting
interstate

Co.

the

the

corporations

directlyprocured

the

OTHER

98

agreements

sole fiscal agent to

creatinga

securities of interstate

supervision

the

Commission;

and

disposed of only

that

of

Some

be wise

with

Railroad

the contrary.

by
to

the

railroad

York

Stock

last five years

either

the

in

bidding.

public-servicecommissions
and

power;

this power

But

it may

possibly

the interstate

upon

recommendation

of the

Commission

Committee

have

or

the

the

on

New

aggregated in

$4,525,404,025,which
jailroad

security

new

corporations listed

Exchange

posed
pro-

be confined

would
the

to

are

the official regulationas

corporations;and

issues of other

of investigation

tions
punish combina-

and

Securities

Pujo

be

prescribed

full powers

competition

commission, although the

Hadley

be

regulationsto

such

to confer

Commerce

public or private competitive

upon

state

exercise

the

their securities should

that

prevent

the

of

placed under

be

Interstate

will discover

which

dispose

issue

the

railroads
the

Commission

the

now

of

under

bids, or
by

MONEY

security issues; that

their

of

PEOPLE'S

is

more

municipal

the
than

issues.

Publicityoffers,
however, another

and

even

promising remedy:

of

regulating

bankers'

charges

which

method
would

apply

and
railroad,public-service
corporations alike.
to

more

tically
automa-

industrial

WHAT

The

PUBLICITY

question

excessive

which

be

may

asked:

been

charges

CAN

DO
have

Why

submitted

to?

in the first instance

bear

capital,have, doubtless, submitted

of

banker-control;

kindred

investors

the
these
so

far

charges

of

borne

the

the

upon

small

by

of all

control

bankers

to

avenues

knew

buys

capital.
it

Is

not

the
the

from

the

But
to

be

exactions?

entirelyfree
fact

extent

banker

to

strike of

is

do

they

as

investor's

his

that

doubtedly
un-

the

recognizedly safe

if

which

is diluted
and

the

the

servility

ignorance

probable that,

underwritings, commissions
would

to

army

substantial

are

the

fully

as

large

submission

to

avenues

partly, also,

due

facts.

the

almost

investments

is

The

security buyers,

due, in part,

all

shifting the

in

succeed

Their

have

why

investors,except

community?

control.

banker

among

ultimately

investors, constituting

majority
from

since

corporations

as

burden

submitted,
are

relations,

But

competition.

to suppress

because

combinations

indirectly through

bankers

charges

directly through

interlocking directorates,or
and

these

tions,
Corporathe

for

exercised

99

of

each

the
vestor
in-

security he

by

excessive

profits, there

capitalagainst

these

unjust

PEOPLE'S

OTHER

100

STRIKE

THE

British

recent

view.

In

brief

MONEY

OF

CAPITAL

nine

period last spring

issues,aggregating $135,840,000,
the London

by syndicates on
taken

was

but

about

only

average

the

by

the rates
no

well

supplied

Mail

presented an
long

hands

of

remain

and

the

that

that

which

afford,by
to

sell

issue

begun

in the

reason

climax

in

issue.

are

of

loan

become

they believe

that

to realize the

the

It

ill
will

for many

issuing and
discussed

loth to

lower
Stock

is

subscribe

the underwriters

of the commission
at

the

expressing the

question being

have

at the

revolutionary effect

system

subsequently

price, and

Daily

loans

new

city

have

The

public

were

London

Rothschild

great

present

the

for stock

to

reached

it may

underwriting.

liberal,

investors

The

series of rebuffs

many

the

upon

funds.

very

topic of financial discussion

opinion

the

that

loans

"tight,"

was

were

the

on

explanation:

of investors

success

days,

public. Money

with

offered

were

of these

cent,

per

doubted

one

"The

10

ent
differ-

market, and

of interest offered

and

this

experience supports

can

they receive,
price

than

the

Exchange

has

public'sattitude.

The

public

WHAT

in the underwriter

sees

that

the

loan

has

were,

lower

may

it off at
to

of

if,when
be

would

high

the

issues

one

more

less need

to

await

to

it

as

at

that

an

he

tunity
oppor-

profit. They feel

made, the stock
attractive

protest is

that
were

price,there

underwriters

the

pay

It is another

which

sures
in-

in return

in order

so

practicalprotest,

existence

indirect, against the

middleman,

who

obtaining stock

of

public

were

commissions.
if

much

101

profitsubsequently. They

at

DO

middleman, who,

dividing that

them

CAN

subscribed

subscribe, but

these

offered

as

than

price

prefer not

so

opportunity

an

pass

not

shall be

its commission

for

PUBLICITY

of

the

of the features

one

present-dayfinance."

of

Compel

AS

bankers

when

public the

make

receiving.
or

PUBLICITY

Let

services, and
the

of

issuing securities

what

or

circular
a

bond

or

received

banker

the

what

REMEDY

commissions
every

advertisement

the

issuing corporation. That

which

both

the

is

are

letter,prospectus
show

stock

and
is

clearly

middlemanstocks

knowledge

existingsecurityholder

prospectivepurchaser
bankers'

profitsthey

for his

bonds

to

fairlyentitled.

and

net
to

the

If the

compensationis reasonable, consider-

OTHER

102

ing

PEOPLE'S

skill and

the

objection

risk

Such

it known.

also for another

will aid the

in

the

investment.

there

In

classes

two

are

whether

issue

get

sold at the issue

chieflyin
investor

price.

buying

knowledge

of the

security;and
the

present, the

at

and

to

the

investor

of the

investor

the banker

to the

as

investment
with

commission

(that is

the

quality

makes

banker
that

his

of

or

But

occupies

relation.
course,

Where

assumes.

large risk that the bonds

sold at the issue

small

of confidence.

one

promptly

security

The

it is this which

risk he

will

is interested

article.

judgment

banker

at the

chieflyin getting it

compensation should,

according
is

The

stock

exclusivelyupon

position inconsistent
bankers'

risk

is the

or

maker

good

for his

to

safety of

of securities

the

whether
The

relies almost

relation

bonds

interested

are

of the

marketing

for the

good article.

and the banker

It

reason:

of risks: One

other

price; the

or

(or the corporation)will find

the banker

ready purchasers

judging

the

vestors
in-

commissions

profitsis demanded
investor

not

"strike," as

of bankers'

disclosures

it is

no

recentlyin England.

done

to have

be

can

If

will

investor

reasonable, the
seem

involved, there

making

to

MONEY

stock

The
vary

there

will not

be

price,the underwriting
insurance

premium)

WHAT
should

be

ought

not

to

PUBLICITY

CAN

be

to

paid

largerrisk.

for

more

is greater.

And

and

railroads

fix bankers'

prevent

it should

profits. And

that

there

archaic

The

law

fair

dealing.

begun

has

connection

to

to

bargains.
chandising,
simplest mer-

the

emptor is vanishing.

requirepublicityin

Federal

The

seek

not

be full disclosures.

should

doctrine of caveat

The

should

law

bad

making

from

recognized in

now

his

public-service
corporations)to

investors

it is

But

the

(exceptincidentallyin

undertake

with

induce

to

Now

risk

own

security,the

incentive

him.

relieve

to

banker

underwriting the
the

weaker

banker's

greater is the
customers

the

for

ground that his

the

security,on

getting investors

practicethe

In

gets the higher commission

not

103

correspondinglylarge. But the banker

assume

weaker

DO

Food

Pure

aid of
does

Law

quality or prices;but it helps the

buyer to judge of qualityby requiringdisclosure
the most
of ingredients. Among
important facts
not

to

guarantee

be

learned

security
And
for

is

any

for

the

full disclosure

to

and

commissions
be

of

amount

excessive

marketing

investors

determining the real value

put

paid

security is
the

investor

to

their

the

of the

guard,

banker

Require

water.

profitspaid; and
on

it contains.

water

amount

of

amount

not

but

only

of
will

bankers'

OTHER

104

PEOPLE'S
will

compensation

tend

what

to

will in

"

EEAL

But
be

with
a

the

would

required a

with

the

instead
Nor

would

Stock

by

in

be

to

advertisement

which

public

the

be

is interested

the

provided

of the facts must

the

investor,and

could
in

facts

invitingthe
with

this

this
to

be

something

For
an

investor

requirement

not

waive.

putting

be

lar,
notice,circu-

in every

obligatory, and

investor

with

as

by requiring the

good, large type

also

story.

bill,be adequate.

purchase. Compliance

should

deposit

to

tell the

to

incorporated,

home

done

Food

ingredients,

full statement

letter and
to

of

the

effective,
knowledge

best

merely

label

if

That

if the Pure

as

statement

with

or

state.

requiring the
filingof

suffice
of facts

Corporations

of

it must

statement

manufacturer

actuallybrought
stated

of
filing

Pujo Committee

be

To

And

It will not

ineffective

as

Exchange,

the

can

the

Department
of

quired
ac-

cease.

federal and
officials,

be almost

Law

unjustly

be real.

must

Commissioner

of other

score

large part

to the investor.

requiremerely

to

of

cessive
Ex-

DISCLOSURE

the disclosure

disclosure

reasonable.

this form

"

itself automatically

adjust

to

is fair and

commissions
wealth

MONEY

the whole

end

to

the

PEOPLE'S

OTHER

106

Not

long

house

was

taken

by

undertaking
his firm

stock
bankers

about

of the

been

asked

been
had

what

shrugged

know,

stock.

stock

We

to teach

he

might

had

give

of

B.

"

Investment

the

have

today secured

successful

the

give
dent
presi-

the business

he

have
If he
didn't

customer

for

$10,000 of the

his shoulders."

with

icans
practicalAmer-

like this:

statement

A.

We

said
a

him

shrug

to

of the effectiveness

Think

and

lost many

not

to

of the stock.

thought

to

fifty-

day

some

We

were

even

citywhere

his shoulders

him

There
had

in the

might have

we

couldn't.

we

we

could have

(naming

located). He

was

if we

much

to

leading bank

The

concern.

course," he said,

"Of

too

ferred
pre-

$250,000 in cash,

large part.

$10,000 of stock
of

favorite

ing
stock, amount-

ourselves;but
up

commission

now

common

participants. Why,

seven

the

floatinga

manufacturing

have

divide

leading banking

justifya

to

$2,000,000.

it all for
to

of

for their services

would

kept

for

one-third

to

had

of

took

besides

"that

member

ago

MONEY

machinery

Co.
Bankers
substantial
business

control

of

heretofore

WHAT
conducted
has

by

been

of the

name

with

capital

$5,000,000 is Preferred

which

customers,

we

were

owners

agreement

we

an

stock

able

$95

marketing

stock

to you

commission

little

over

$5.00 per

stock,which

commission

from

the

the

ferred
Pre-

shall net

or

at

$100.75

profitwill

share,

or

say,

$1,500,000 of the Common

received

we

confiding

share.

own

$250,000 cash, besides

stock

secure

Our

share.

of

price which

offer this excellent

only

to

for
fix

to

we

"

clientele

large

in cash

owners

We

and

the

Manufacturing Company

be

which
Illinois,

have

per

107

$5,000,000 Common.

As

the

DO

at

$10,000,000,of

and

CAN

incorporated under

Excelsior
of

PUBLICITY

we

as

are

bonus.

to divide

This

cash

in various

in
proportionswith the following participants
underwriting syndicate:

C. D.

"

I. K.

"

bankers

Co., Philadelphia

Co., Chicago

such

notices

would

only reasonable
be

York.

Co., New

"

O. P. "
Were

York

Co., New
Co., Boston

E. F. "

L. M.

the

taken,

"be

the

common,

worthy

of

their

compensation would

investment

hire,"

for

ordinarily

of

case

make

an

many

be

that

is

only

for

financial

and

as

service.

useful

stock,
Co.

bankers

investment

essential,

can

preferred

Manufacturing

Excelsior

above,

to

the

marketing

For

MONEY

PEOPLE'S

OTHER

108

But

they

excessive
where

altogether

economy's
concentration.

should

sake,

be

but

ever,
how-

are,

services
and

with;

eliminated,
to

position

strong

banker's

the

dispensed
he

performed

There

charge.

cases

possible

their

to

doubtless

they
used

the

referred

were

middlemen

in

as

break

where
not

up

CHAPTER
WHERE

The

BANKER

abolition

greatly
end

THE

curtail

to

of
the

associates,

will

of

them

will

far

toward

go

But

concentration.
within

his

as

his

where
the

of.

availed
which

of

means

proper

can

be

legislation,

to

to

Committee

business

and

is

and

simple

he

where

practically

hand:
is

power

conducted.

"

every

be

must

remedy,

without

even

Eliminate

new

the

superfluous.

all governments,
109

welfare,

attained,

effective

applied,
at

near

be

has,
control

public

that

lessening

financial

banker

properly

to

ing
bank-

acquired

the
is

details)

arrest

investment

menace

widely

lies

banker-middleman

Today

the

specific

technical

tend

Freedom

New

the

Pujo

the

legitimate province,

extensive

even

of

correcting corporate
thus

and

aid, particularly by

with

dealing

and

abuses;

profits

Many
by

an

Publicity

commissions,
effective

will

by putting

power

exactions.

(some

directorates

combinations.

recommended

measures

If

bankers'

lend

undue

SUPERFLUOUS

interlocking

bankers'

concerning

so

IS

improper

many

curbing

VI

states

and

municipalitiespay

toll

sold.

should

bonds

Why

the banker

which

the

of taxes

levied

the

of

loan

bidder

on

such

some

sealed

sold

The

our

that levied
few

states

where

the

people

middleman,

at

though

even

upon

issues

the

of

highest

syndicates

bonds

which

considerable

city

every

on

to the

bankers'

of

the

cities escape

new

public auction, or

large blocks

to

and
him

by

or

the

proposals,the

dinarily
or-

rata

pro

to the banker

tax

Even

usually secure
are

But

can

has become

banker

state

sold at

are

stocks

by

it makes.

bonds

through

avenue

and

upon

cause
be-

It is because

the

him

all

on

is not

gatherer. True,

corporations.

payment

It

only

The

is less than

governments

they?
needed.

the

be reached.
tax

banker

in bonds

investor

universal

the

to

always

is

controls

banker

the

MONEY

PEOPLE'S

OTHER

110

profit.

unnecessary,

lects
col-

his tribute.
There

is

legitimatefield for

Investors

other

merchants.

already owning

such

bonds

must

through
And

holdings.
lack

investors,
there

are

they
or

established

an
or

which

those, states

which

markets, need the

But

in state

for

medium

which

dealers

as

municipal bonds,

and

many

must

banker

can

municipalities

and

among

distant

more

to distribute

states

sell their

reputation
seek

have

new

cities which

issues.
have

SUPERFLUOUS
established

an

market

at

direct

to investors

And

without

111

have

should

These

the intervention

bonds

and

also be sold direct to the investor.

and
efficiency

The
not

business

The

functions

nothing
with

with

two

that

often

are

limited

very

with

to do

the

buyer and

seller

compensation,
of

per

one

the

par

cent.

value

banker
is

and

stock

He

The
has
of

or

of

he

the

broker

properly

securities,

sale

as

He

exercises

method

together,or

He

agent for

of

no

bringing

executing orders.

receives

moderate

commission, usually one-eighth

(12 1/2

also is
an

cents

for each

securitysold.

of the

not
principal,

must

into the market.

the

service

his humble

For

in

the

possible.

banker

originalissue

specificorders.

discretion,except

is

combined; but

service.

their introduction

under

that

of the bond

merely negotiatesa purchase

another

financial

BROKER

essentiallydifferent.

are

performs

nor

Both

of the investment

be confused

broker.

AND

should

stocks

industrial

BANKER

of

prevailwith

libertydemand
toll be abolished,where
that

bankers'

home

sell their bonds

like conditions

as

corporations,their

some

and

reputation

hand.

middleman.

BANKERS

mere

agent.

The

is also

on

ment
investBut

middleman.
He

$100)

merchant

he

112

OTHER

in bonds

and

PEOPLE'S

stocks.

MONEY

compensation received

The

for his part in the

accurately described

more

So

far

he

acts

securities

at wholesale

the

to

the

but

even

the

be

services

properly performed, they

On

purchases

of

cially,
espe-

selling

risk and
rate
corpo-

large;

very

entirelyproper;
needed

are

and

of great value.

are

of government,

and

state

ipal
munic-

profit is usually smaller; but

small

very

mission.
com-

sellingat retail

often

profits are

banker's

securities the

and

purchases of

are

even

issues

merchant's

large profit may

the

for when

the

new

and

profits. On

securities

as

buying

the maker

investors;taking

merchant's

profitthan

behalf;buying commonly

own

from

cases

municipal bonds,

and

merchant,

as

his

on

as

concerns

as

state

government,

is in many

transaction

be

profit cannot

if
justified,

unnecessary.

THE

HOW

The

banker's

functions,and
First:
banker

BANKER

services

retailer to

SERVE

include

three

distinct

only three:

Specificallyas
has

CAN

the
sell

expert.

The

investment

responsibilityof the
only that merchandise

good of its kind.

But

his

ordinary
which

in
responsibility

respect is unusually heavy, because

is
this

he deals in

an

banker

stock, the

in

By carrying securities
a

MONEY

PEOPLE'S

OTHER

114

service also to investors,who

enabled

buy securities

to

thereby

are

times

such

at

forms
per-

they

as

desire.

require all

of

these

banker

is

needed, and

compensation
such

no

him

to

need,

the

and

municipal bonds,

and

state

there

is

clearlysuperfluous.

originalissue

in respect to the

And

is

of

payment

Where

is proper.

banker

investors

or

services,the

three

any

or

investment

securities

of

makers

Whenever

of

of

of many

our

corporate

some

such need exists.

no
securities,

It needs

of Massachusetts

Boston, Philadelphia or
of lesser American
The
are

city whose

reside in the

bonds
are

are

not

simple,that they
by

any

interpretationby

can

in

to

such

most

question.

Where

Bankers

the

they

easilysummarized

expert.

sible
pos-

particular state

prospective investor
an

bonds

of many

generally known,
be

scores

investments.

knowledge

common

who

financial facts

understood

of

investors;and, certainly,of

investors

so

regard

us

York, of

and

safe

tell

to

New

Baltimore

cities,are

part of the

American

or

or

basic financial facts in

a

NOT

SERVES

experts in value

banker

no

bonds

that

BANKER

THE

WHERE

are

and

without
often

SUPERFLUOUS

BANKERS

115

their own
employ, before purchasing securities,
accountants
to verifythe statements
suppliedby
the makers
of the security,
and use these accountants'
certificates as an aid in selling. States and
of the
municipalities,the makers
securities,
might for the same
employ independent
purpose
of high reputation,who would
public accountants
give their certificates for use in marketing the
securities.

Investors

banker-aid
sound.

that

Bankers,

the basic

before

invited

are

the

should

the

supplement

their

which
legality,

if states

It would
and

opinion

Neither

the

legalityof

should

to find investors
a

issue

new

of
a

willingto

its

at the

tors
invesanswer

of

their

legal

counsel
would

banker

take

of New

be needed

in small

up,

York

or

lots,

chusetts,
Massa-

Boston, Philadelphiaor Baltimore, or

own

cities. A

American

municipality seeking
investor

own

the issue.

investment

of bonds

other

hundred

an

of

municipalities

representativesby that of independent

of recognized professionalstanding, who
certifyto

are

issue

an

from

examine.

to

purpose,

same

purchasing

to its

opinion as

an

out
with-

legalconditions

obtain

securities,customarily
counsel

also be assured

could

bonds

outset, some

to

market
would

direct

state
to

or

the

naturally experience,
in marketing a
difficulty

PEOPLE'S

OTHER

116

large issue.

in

And

MONEY

of

there is littleaccumulation
it might be

Investors

issue.
and

impossibleto

they

have

been

them, would
in

usually have

banker-fed

avoiding the

responsibleborrowers.
would

concerns,

this

the bankers.

others could,

as

the

of

advantage

dealingdirectlywith
like

to do educational

be much

less

private

work

are

; but

expensive and

that undertaken

investors

Many

trance
En-

monopolized by
be struggled for.

well

productive than

more

bankers

services.

Governments,

have

publicitywould

much

to

and

vention
inter-

attempt of states

to realize

middleman

the

The

their

as
investors,

time, be brought

conservative;

necessary.

market, hitherto

large

any

regard

to

dispense with

upon

But

as

be

to

naturallydiscourageany
cities to

and

buyers for

trained

of the banker
would

unemployed capital,

find

apt

are

where

community,

newer

by

already impatient

of banker

exactions;and eager to deal

directlywith governmental agenciesin whom
they
have more
confidence.
And a great demand
could,
be developed among
at once,
smaller
investors
whom

the

bankers

and

who

The

opening of
in

wider

now

some

than

never

this

have

now

unable

buy

state

new

field would

respects more
that

been
or

by

interest,

municipal bonds.

desirable

reached

to

furnish
and

ket,
mar-

certainly

the bankers.

SUPERFLUOUS
Neither

do

BANKERS

states

cities

or

services of the investment

bonds

pending

Where

there
and

states

should

"

quite as

well

of their
the

with

not

as

the

older

their

the

banks.

from

banker-control,and
people'smoney

should

other
the

no

people's
because

institutions

applicantto

cities.

not

preferential

these

will be received

large

our

people's

banks, often
Free

ing
await-

investor.

the

other

have

the

control

communities

while

to

of

use

investor.

largefunds,

Why

own.

their

temporarily,

with

Bankers

deposits in

than

bonds

bonds

they

favor

for

do now,

temporary

well?

of the

the

need

the bankers

as

carry

cities get

use

the

to

at least the

"

the

to carry

be able to raise the money

Bankers

money

banker

is immediate

distribution

money,

ordinarilyneed

distribution

cities

117

with

Boston,

borrow

greater
with

its

$1,500,000,000 of assessed valuation and $78,033,128

net

debt, is certainlyas good

Lee, Higginson " Co.

But

do

not,

of money
require large sums
does
need
of large sums
Such
time

met,

or

is to be

to time

when

some

taken

over

issues of bonds

where

risk

as

even

Kidder, Peabody " Co.

or

ordinarily cities

from

at

or

should

not

time.

one

any

not,

arise except

maturing loans

are

to be

existingpublic utilityplant
from private owners.
Large

for any

other purpose

are

usually

PEOPLE'S

OTHER

118

made
to

in

anticipationof

future

than

needs, rather

necessities.

present

meet

MONEY

efficient

Modern

public financiering,through substituting serial

chusetts
bonds
issues (which in Massafor the long term
has
the

remove

been

obligatory)will,in time,

made

need

of

large sums

paying maturing debts,since

at

each

for

time

one

ties
year'smaturi-

Purchases
paid from the year'staxes.
of existingpublic utility
rence,
plants are of rare occurand are apt to be preceded by long periods
of negotiation. When
they can, if
they occur
usually be financed without
foresightbe exercised,
will be

full cash

at

payment

Today,

when

time.

one

largeissue

of bonds

banker, while ostensiblypaying

the

city,actuallypays

money

which

Then

the banks

the

banker
for

has the

getting from
investors
on

the money

bankers

from

of the money

so

is returned

the

banks.

to

the

The

city.

the

pay.

as

And

process

The

bank,
it

much
then

the

again

results

city loses by
for its bonds

in
not
as

it loses interest

raised before it is needed.

receive from the

And

received.

opportunity of borrowing

the banks

would

to

money

city other people's

borrowed

operations.

loss to

the

own

posits,
get back, through the city'sde-

money

other

double

has

largepart

when

he

to

his

is made, the

For

the

citybonds bearingrarely

SUPERFLUOUS
less than

4 per

deposited

are

than

more

BANKERS

interest;while

cent,

in

119

banks

the

which

proceeds

rarely allow

interest

cent,

per

the

the

on

daily

balances.
HELPED

THAT

CITIES

In the present year

necessityto help
was

and

the

by

then

were

But

had

to

to be

"borrowit
the

from

cities which

the

led

by

market

tight
Bankers

ties
Municipali-

high

cities

many

ordinance

sellingon

money

made

or

issues.

pay

rates

manded
de-

ited
prohib-

were

than
paying more
good municipal bonds

from

interest; while

cent,

4 per

of

law

to

And

of them.

bond

reluctant.

bond

new

unwilling

been

uncertain, money

was

investor

ordinary

were

The

themselves.

loth to take

were

cities have

some

Business

poor.

THEMSELVES

1/2

to 5 per

raised,and

direct from

basis.

the attempt

was

the lenders instead

Among

banker-middleman.

raised money

cent,

in this way

Baltimore, St. Paul, and

were

the
delphia,
Phila-

Utica, New

York.

Blankenburg's
Mayor
Philadelphia, under
inspiration,sold nearly $4,175,000 in about two
days

on

4 per

counter"
with

sale

cent, basis and

has

been

the assistance

another

made
of the

since.

"over-theIn

more,
Balti-

Sun, $4,766,000

the counter"

sold "over

were

basis.

Utica's

And

since

have

had

The

other

cities

experienceof Utica, as
G.

interest

sale two

Reusswig,

and

former

of the

sinking

funds.

there
that

About

been

I had

does

the

our

devise

unable

make

it would

that

there

the

means,

that

they

copy

if I could

laws

sale attractive

to

under
small

successful.

to interest

did not

their

plenty of

was

prove

The

restrict the

vicinityand

undoubtedly

bonds.

our

not

our

for

of Baltimore

cities did not

I could

our

the first

attention.

my

found, in previous efforts

of small

for

unsold,
was

'popular sales'

law and

realized

local bidder

sell

to

plan conforming with

I could

investors

by

of

The

cent.

per

bidders,which

no

in this immediate

money

I had

were

1/2

for

the other

left $90,000

in effect in those

methods.

I advertised

at par

Philadelphia attracted

officials as

which

general

purchased $10,000

we

That

this time

laws

sales.

of

prove

at 4

purchased

was

and

must

small

ler,
its Control-

by

of $100,000, and

issues,one

latter issue

time

and
bond

stated

of the present year

$19,000, bearing interest

which

1/2

June

"In

of

large

"over-the-counter"

their

Fred

sales"

cent,

largely"over-subscribed."

were

then

1/2 per

on

"popular

two

bonds

cent,

per

MONEY

PEOPLE'S

OTHER

120

understand

people
the

PEOPLE'S

OTHER

122

believe that

"I

citywho

in every
if the

had

been
for

We

would

easier

of

program

had

successful
been

sales

able

bonds

on

cities which

have

followed

houses

have

bond

to 5 per

our

cent.

such

sold, instead

the

too

each

different

THE

St. Paul

the

have
lines.

keep
of

the

relying

increase

the rate

amending

the law

Common

Council,
and

tionment,
Appor-

bonds

which

pricesat

shall

sale at the Controller's

on

will pay

values

law,
to

of
as

PAUL

price.

The

graded according

different
have

make

basis of par

the

be

we

it,conditions

sale

maturities.

practicable

bids."

EXPERIMENT

wisely introduced

democratic

both

plan

of Estimate

issue should

ST.

to

came

callingfor competitive bids.

complicated

except upon

more

of

who

the present

Under
are

of

one

any

pricesupon
to

in favor

place the bonds

office to

the old
to

fix the

of which

1/2 per cent., while

had

the Board

may

Then

Syracuse

to

means

at 4

that

manner

approved by
be

am

bonds

similar

along

this

by

of persons

way,

and

procedure

interest rate

in

law.

by

to sell in the usual

unable

have

upon

largenumber
buy their own

neighboring villageof Ilion,both

the

since

are

made

were

way

and

me

there

MONEY

into its

feature,which

Tom

experiment
L.

Johnson,

SUPERFLUOUS
Cleveland's

which

Editor-in-Chief

it

was

of the

savings of

the

necessary

not

at

only
He

sinking fund

Johnson's

in

agree

an

prove

them

to

deposits are

savings

be

to

have

to

was

largeblocks
the

sioners
commis-

purchase

to

the certificates back

and

at par

experience,he insisted,

bank

redemption
withdraw

them

certificates in

power

embarrassment;

wishing

those

the

take

(under their

the

in

combine

to

plan

have

Savings
that

showed

to make

obstacle

$10, and

to buy
securities)

bonds

tions,
large denomina-

an

commissioners

of

denominations

the

that

municipal bonds

fact that

bonds, issue against

interest.

concluded

with

$1,000, presented

son
John-

reaching the

of

sought

say,

Mayor

not

Colver, now
Mayor

to issue

ordinarilyonly

of the

and

people; and

issuable

overcome.

the

B.

officials.

investment

privilege. The

(but did

Daily News, brought to the

par.

practically,bond

are

W.

denominations, but also

redeemable

bank

123

out

recognized the importance

small

very

his friend

of the St. Paul

attention

small

thought

great mayor,

and
utilize),

had

BANKERS

as

feature
the

would

percentage

their money

nearly always

not

far in

is

of

small;
of

excess

withdrawals.
The

St. Paul

City Attorney

sinking fund
O'Neill

commissioners

approved

the

and

Johnson

4 per

net

in the face of

and

plan;
a

PEOPLE'S

OTHER

124

during September,
sales

net

average

to the

$150,000, the

over

about

being

$5,700

the St. Paul

Colver, reportingon

on

during August, $147,-

of $502,300;

000; and

rates, sold

high money

basis,during July, certificates

cent,

amount

Mr.

MONEY

day.

experience,

said:
"There

have

been

about

the

average

making
There

or

$360.

to

banks.

deposit about

been

have

averaged considerablyhigher and

in very

represented

the

banks, from

hiding places

these

month

and

dollars,so

that

deposithas

fallen very

and

every

the

indication

to

goes

As
are

various
the

once

ten

the

city.
twice

or

twenty

or

individual

the number

increase

large deposits become

time

from

rapidlyduring September

is that

deposits will continue

of

ings
postal sav-

with

coming

average

considerable

the

deposited them

making deposits of

reason

savings which

of
from

people are

same

$350

deposits

for this

regularbanks,

the

and

the

had

accumulation
their money

time, withdrew

Now

people who

cases

many

chasers
pur-

certificates sold

no

first month

the

During

2,000 individual

and

less

of small
the

tively
rela-

frequent

as

on.

matter

stable,far

of
more

fact, these certificate deposits

than

the

depositsand

invest-

SUPERFLUOUS
of richer

ments

BANKERS

people who

reinvestments
about
four

rather

and

freely.

hundred

dollars

watch

who

The

savings

believe that

deposits every

that

net

and

that

almost

fund.

We
in

of all the

care

gain for

net

or

day here, day

to take

stillleave

three

will suffer

will disturb

day out, will continue

withdrawals

with

man

he

and

for advantageous

shift their money

anything before
the

125

figure at present being about

the

day,

$5,700

day."
cities

Many

are

prevented from

now

bonds

direct to the small

which

compel
or

to

the

bonds

to be issued in

highest bidder.
be

should

These

promptly

as

success

largely due

to

the

has

to

limitations
legislative

EDUCATION

already

unpaid

teaching "the

people"

the

buyers

salesmanship.

Sellingbonds

the

to

of the bonds.

first of
to

of

confined

be

have
legislators

must,

is

tional
the educa-

But
not

Municipal officials and

much
to learn.
They

work

educational

must

"

attained

been

done

be

nations
large denomi-

issue to be offered

leading progressivenewspapers.
work

laws

removed.

AND

SALESMANSHIP

Such

investors,through

require the

which

selling

quite as
all,study

people

is

OTHER

126

PEOPLE'S
The

art,stillundeveloped.

new

have

problems

there

will

be,

problems

which

which

must

in

nearly
be

time.

before

that had

doubtless

distributor

in

take

Cities must

problems and

to

even

It
to

bonds

have

was

from

ready

won.

these

for

Future

citybonds

important, because

direct

And

proper
an

of the

than
market

the

licity
pubomy,
econessary,
nec-

ers
bankfor

operationswould

the
is

rate

great

study

to

end, prove

higherinterest

be secured.

lions
mil-

spent

where
allow,on particularissues,

yield large economies.

direct market

preparing

market

the

exact, if thereby

could

large sums

ultimatelyreaped

the

might, in

periments
ex-

overcome

the

spend prudently for

somewhat

would

to

have

be

siderable
con-

of merchandise

had

their lessons

distributors.

work.

he

concerns

profits when
must

take

opening and

and
publicity;

tion
solu-

proper

there will be many

attained; and

Individual

immense
Cities

will have

to be invested

in wise

The

which

local

local difficulties

to be many

was

market.

solved,and

There
and

cities,

community,

every

must

obstacles

success

besides

and

all states

overcome.

Every great

the

And

generalproblems

made;
failures.

be

must

generalproblems

out.

to

common

of the

even

knows

worked

yet been

not

these

MONEY

obtaining of

growing

huge

increase

ever

more

in loans

SUPERFLUOUS
which

attend

must

municipal

BANKERS
the

functions.

127

expansion

constant

In

1898

the

ipal
munic-

new

issues

aggregated $103,084,793; in
$380,810,287.
SAVINGS

In

New

sixteen

BANKS

AS

where

savings banks

and
of

system

1912,

CUSTOMEES

York, Massachusetts

states

of

the

purely

other

mutual

is

general, it is possible,with
little organization,to develop an important market
for
bonds

the

issued

have

direct

purchaser

by Massachusetts

averaged recentlyabout

and

those

of the state

Massachusetts
of

assets

about

$3,000,000.

000

are

invested

increasingat

year.

towns, and

the

Massachusetts

have, within

few

in the hands

classes

of bonds

subject to

state

years,

of

notes

the
over

and
come

year,

The

194

31,

of states

$60,000,of Massachusetts

$8,000,000 in

savings banks
$30,000,000 a

municipal
to be

bonds

issued

tax

holder,whereas other
usually held by savings banks

exempt

are

rate

notes

about

depositsin

The

issues.

and

aggregate

about

sum

towns

October

on

and

this

in bonds

cities and

are

with

$902,105,755.94, held

municipalities. Of

The

cities and

savings banks,

and

bonds.

$15,000,000

1912, $90,536,581.32 in bonds

state

of

tax

of the

of one-half

of

one

per

cent.

PEOPLE'S

OTHER

128

of

the

banks, therefore,will

the

ies
cit-

cooperation of

easilydevelop a

"over-the-counter"

savings banks.

bond

And

offer similar

states

an

might, with

towns

Commonwealth,
for

to

Certainly Massachusetts

investments.

and

savings

lect
increasingextent, semunicipal issues for high-grade

Massachusetts
bond

Massachusetts

value.

market

MONEY

"home

market"

business

with

savings banks

the

the

the

of other

their municipalities.

opportunitiesto

coOpekation

obtained

Bankers

should

Why
by

of

means

the

municipal

bonds

with

over

could

hundred

and

aggregate

Every
are

year

issued

net

by

from
the

direct

eight

marketing

of

greatlyfacilitated.
each with a popucities,
lation

33

12,000

71

persons;

less than

of these

indebtedness

towns

5,000; and

over

indebtedness

about

states

be

population of

funded

have

has

population of

each with

and

free themselves

state, the

Massachusetts

cities

bination.
com-

by cooperation between

For

cities and

through

power

not

cooperation

the bankers?

of

their

250

5,000.

each
towns

Three

municipalitiesnow
outstanding. The

is about

$180,000,000.

$15,000,000 of bonds

the Massachusetts

and

cities and

notes
towns

PEOPLE'S

OTHER

130

under

regulation of,

proper

state, would
And

in another

serve

Massachusetts

354

aggregate large bank

the

balance

carried

of loans.

of

by

On

should

pended
unex-

unexpended

balances

2 per

banker, and

common

cent,

interest.

like those

The

of other
another

all of these

not

ceeds
pro-

they usually

farmers

and

supply
laborers

each

cities

Then

cities would

their

balances,all

cent,

on

other

with

cooperate through

credit unions?
per

in

cooperate, making, say, the State their

towns

as

the

Sometimes

having idle funds, when

Why

with

city represents

municipalities
vary

is in need.

funds

balances.

these

the banks

from

depositors;one
and

the

important respect.

sometimes

revenues;

balances

from

municipalitiescarry

the

receive

aid

the cities and

cooperationamong

These

and

cooperate.

might

state

MONEY

get, instead
their

of

money

worth.

was

The

Commonwealth

now

in its sinkingand

000

of Massachusetts

of

Massachusetts

other funds

funds.

nearly $30,000-

constituting
municipal securities,

nearly three-fourths
in these

of all securities held

Its annual

purchases aggregate

nearly $4,000,000.

Its

cities and

already exceeded

this year.

towns

have

It would

holds

purchases

be but

direct

from

$1,000,000

simple extension

of

SUPERFLUOUS
the state's function
a

BANKERS
to

cooperate,

joint,Municipal Bond

Union.

It would

efficiencyof
and

what

toward

is

the

even

indicated,in

as

SellingAgency

be

distinct

and

state

131

advance

municipal
important,

more

emancipation

of

dCredit

an

in the

financing;

long step
people from

the

banker-control.
COEPOEATE

SELF-HELP

Strong corporations with

locally or
themselves

from

Public-service
cities could
home

the banker

by

for

their

in this

by

by

corporations would
in the

from

money

In

of

some

manner.

leading

our

such

and

being
the

over

only

not

be followed

safetyhe

as

in

exactions,but

local support.

of valuable

and

be

corporations. Such

gain thereby

would

would

commissions

things economic,

wisdom
political,

and

supervisionnow

banker-control

winning

investor's

emancipate

similar

bonds;

the

state

some

of securities

freedom

in

tions,
reputa-

easily establish "over-the-counter"

greatlyaided
issue

nationally, could

corporationsin

markets

exercised

established

well

by
as

in direct

The

his sympathy.
in

things

appeals to

the

people.
The
Pennsylvania Railroad

upon

its stockholders

for

new

now

relies

capital.

largely
But

MONEY

PEOPLE'S

OTHER

132

and

corporation with its long-continued success

reputation for stabilityshould have much

the banker

eliminate

should

financial support and

the
2,700 stations
altogether. With
system, the Pennsylvania could, with
create

expense,

which

nearly as
be

would

money

BANKEE

be

It may

reputationsare

such

Was

Haven?

community

England?

Six years

system, the hidden

of

were

laid bare.

called

to

the

there

the

railroad

ever

investors

dangers
Proof

The

more

than

New

The

were
was

pointed

out

furnished

to

of

disaster-breeding
cies
polibankers

Repeatedly, thereafter,the
was

the

before the fall of that great

banker-experts.

rottingtimbers.

be-bankered

more

banker-led

the

have

when

pitfalls?

ever

New

guard him

to

littlesatellites protected
[their

people from
the

is needed

banker

or

there

outlived

pitfallsto the investors;and that

big bankers

these

its

meet

that

justifythem,

dangers. True; but

such

than

to

reputations often outlive

that

which

investment

Was

through

PKOTECTORS

urged

the conditions

from

slight

needs.

growing

the

obtainable

its

on

avenues

many

wider

took

bankers'

no

action.

attention

steady deterioration

of

the

SUPERFLUOUS
The

structure.
481

BANKERS

New

stockholders

Haven

books

are

residents

who

5,682 stockholders
in Rhode

Island; and

the New
Of
such
one

Haven

the

New

modest
to

sorelyin need
disclose

357

with

those

in

pen

New

Haven

of that

public of

the

disaster?

their

stock

eyes

and

own

to

England
it by
avert
the

voice

warned

or

Some

favored

the

of the

houses

Haven

were

But

to open

impending
timely measures.

New

or

customers

stock.

to the

England's leading banking

"cooperate"with

Interstate

ment
mismanage-

sought

who

ceded
pre-

holdings. Some

Haven

joined those

of New
to

few

dispose of New

banker

the

continuous

impending

whispered

which

either

great trust property

bankers

one

raised

againstthe

sold

to

Hartford,

years

investigationof

bankers

advice

and

in

26

City. But who, connected

York
ing
bankEngland and New

Commission,

in protest

Boston,

York

recent

Commerce

were

citydirectories

in

houses, during the long

the

from

investors

The

of

were

holdingswere

houses

New

Of

women.

10,222

The

protection.

33

in New

their

chusetts;
Massa-

York.

10,474 were

only.

banking

146

Providence,
and

of

of

3,510 in New

that

shares

disclose 11,-

Connecticut; 735

stockholders

means

ten

in

stockholders
Haven

133

not

the

disaster
New

ready

management

to

in

PEOPLE'S

OTHER

134

taking

endless

bankers

blind?
will

of

Perhaps
needs

of

supply
to

the

commissions

generous

nothing

the

it
New

Or
P.
is

for

securities;

new

protect

J.

MONEY

the

investors.

were

they

Morgan
the

Freedom.

banker

"

marketing

the

but

did

they
Were

afraid

to

these

oppose

Co.?

who,

most

of

all,

CHAPTER
BIG

J. P.
the

railroad

with

these

been

attained,
possibility

risked

funds

their
is

This

early

our

street

gas

true

had

success

of

the

of

hardy

'of

and

their

after

aid.

relation
had

success

after

demonstrated,
who

pioneers,

had

and

of

telephone

of

of

early railroads,

our

the

of

contrary

into

been

is

exhausted.

railways,

and

medium

"reorganization"

upon

industry;

industries;
branch

of

either

try
coun-

comfort

our

came

oil; of harvesting

and

steel

or

all, were

telegraph,

the
of

enterprises,

the

without

houses"

banking

the

statement

On
to

"initiated"

was

"great

fact.

contribution

such

every

the

in

the

That

to

all

of this

development

houses."

banking

letter

"practically

place initially through

The

but

that

unfounded

prosperity

BUSINESS

declare, in their

industrial

taken

entirely

the

Co.

Committee,

great

nearly

"

and

has

LITTLE

AND

Morgan

Pujo

of the

MEN

VII

the

nearly

manufacture.

The
135

of

automobile;

the
and

the

wireless;

machinery,

textile, paper
even*

our

other
initiation

and
and

of
shoe

important
of

each

PEOPLE'S

136

OTHER

of these

enterprisesmay
financial

the

contributed

gratitudefor

what

the instances

are

by investment

such

by
to

banker-aid
it

cases
a

was

Here

the

the

nal
origi-

It

business

or

and

But

undertaken

small.

or

by

was

man,

well-to-

some

pioneer, who

there

our

other

was

than

will

you

find

given; but usually in those

was

small

"great banking

where

rare

considerations

largelyby

are

inventors,in

common

inventor

agement
man-

accomplished.

taking risks;or

money-getting.

business

enterpriseswas

some

of the

influenced

been

who

men

introduction

bankers, great

done

accustomed

has

extremely

financingof

friend

their

ized
character-

the

and

share,equally with

entitled to

usually

aid

for

necessary

that

properly be

"great transactions";and

as

do

MONEY

local

house"

banking

which

concern,

helped

not

ate"
to "initi-

undertaking.
RAILROADS

We

have

with

railroads.
in the

and

But

associate

the

their part

was

Middle

West

extent, similar.

Railroad
a

great bankers
not

early historyof the Eastern

in the

some

it is

to

come

owns

and

composite

the
The

railroads;

experience was,
Boston

leases 2,215 miles

of about

166

ous
conspicu-

"
of

to

Maine

line; but

separate railroad

OTHER

138

all the

great

floated

the

and

the first
The

paid.

It

Mercantile

which

selling

organized the Shipping

that

ferred
(pre-

dividend

no

of transatlantic

founded

Co.

Marine

justsixty-twoyears

was

was

"

"

Morgan

1/2 bonds, now

on

regular line

Cunard

P.

$100,000,000 of stock

common)

been

ever

International

60, and

about

at

developed practically

lines,J.

ocean

$52,744,000 of

its

MONEY

enterpriseshad

individual

with

PEOPLE'S

has
after

steamers

Mr.

"

Morgan

Trust.

TELEGRAPH

The

story of the
for

money

developing
his

supplied by
Vail.

The

built with

P.

the

Western

Morgan

by

"

an

Co.

Union

the

is similar.
invention

was

more)
to Balti-

appropriationof $30,000
Sixty-sixyears
became

bankers

through financing its

American

The

co-worker, Alfred

(from Washington

in 1843.

by Congress

J.

Morse's

partner and

initial line

was

made

telegraph

later
for
chase
pur-

Telephone " Telegraph

Company.
HARVESTING

Next

to

machinery

railroads
has

factor in the

MACHINERY

and

steamships,harvesting

probably been the most potent

development of America; and most

BIG

MEN

AND

BUSINESS

LITTLE

important of the harvesting

H.

McCormick's

to increase

fold.

the

No

machines

was

made

it

That

reaper.

harvest

grain

twenty-

banker

investment

had

this great business

McCormick
Butler

Ogden,

which

the

factory

the

of

$3,000,000.

as

the

The

huge

preceding
financed
in

business

year9

after

interest
back

for

in 1884,

in

as

the

in

paid

family had

one

any

him

interest

with

been

power,

viously
pre-

only

at

aggregate,
that

formed
per-

had, despite

in

the

all

had

banker
as

was

$25,000 for

of the

able
Two

invention.
a

half

bought

thereafter,until

members

Co.

five great

business, McCormick
but

1847.

Company,

investment

mechanical

in

consolidated

then

evidence

$50,000; and
no

and

commission

Indeed, McCormick

Odgen
the

the

received

earning

no

years

them.

William

"

$120,000,000,

strong

"

but

there

combining

capitalized,in
$10,500,000

invention.

Morgan

Harvester

and

assets

P.

concerns

of

stock

built

was

and

International

capital

their

of

service

companies,

harvester

thirty-

or

builder,ex-Mayor

later,J.

Fifty-fiveyears

possible

Chicago, supplied $25,000 with

of

first

man's

Cyrus

troduci
part in in-

any

means;

railroad

citizen

leading

without

was

139

his death

McCormick

in the business.

it

PEOPLE'S

OTHER

140

THE

be

It may

introduced

urged

before

capital had
and

been

had
would
had

the

that, consequently,it

in connection
firm

services

with

Kidder, Peabody

years;

and

yet the investment

had

the great

almost

Co.

Co.
over

in

Co.

fiftyfifty

forty-eight

banker

little part

as

to

seems

"initiating"

of the last half century,

improvements

did bankers

"

"

Morgan

old; Kuhn, Loeb "

old; Lee, Hlgginson " Co.

and

bankers

later industrial

of J. P.

years;

have

banker,

investment

fifty-five
years

six years

as

of investment

inquire what

The

were

"great banking houses"

established;and

development.
is

the accumulation

be fairer to

steamships,

harvesting machinery

America's

rendered

and

that railroads

developed

before

ERA

BANKER

telegraph and

the

MONEY

in the earlier

period.

STEEL

The

modern
old.

five years
in
a

steel

it.
initiating
of

man

in

process

1868.

iron

1898

had

America

"great bankers"

Andrew

large means,

steel and
we

The

industry of

In

had

Carnegie, then
introduced

the

is

the

no

fortypart

already
Bessemer

thirtyyears our
industry increased greatly. By
far outstrippedall competitors.
next

BIG

MEN

America's
of

reduced

AND

LITTLE

BUSINESS

141

production about equalledthe aggregate

England and Germany. We had also
costs

"American

much

so

Peril."

that
It

Europe

talked

1898, when

was

of the
J.

P.

Morgan " Co. took their first step in forming the

Steel Trust, by organizing the Federal
Steel
Then
followed
the combination
of
Company.
the tube mills into an
$80,000,000 corporation,
J. P. Morgan " Co. taking for their syndicate
services
the

$20,000,000 of
time

stock.

common

the consolidation

About

of the

bridgeand
structural works, the tin plate,the sheet steel,
the
hoop and other mills followed;and finally,in
zation
1901, the Steel Trust was formed, with a capitalisame

of

$1,402,000,000. These

thirty years

came

after the

steel

combinations

industryhad

"initiated".

been

THE

TELEPHONE

telephoneindustryis less than forty years

bution
It is probably America's
greatest contriThe bankers
to industrial development.
The glorybelongs
"it.
no
part in initiating

The
old.

' '

had
to
man

to

warm-hearted, business
simple,enthusiastic,
of Haverhill,
Massachusetts,who was willing

risk his

own

money.

H.

in
this,most interestingly,
Telephone":

N.. Casson
his

tells of

"History of

the

"The

only
it

stake

business

reasons.

attached

to

he

Both

and

was

had

that
first,

would

not

that

of

was

not

much

at

thousand

the

And

dragged by

before

his

he

and

inch

an

the

ten

judgment,
of the

until he

thousand

dollars.

1878,
that

made

againsthis
stretch

to

he

total of
If the

he often

be the richest citizen in

he

to

with

will and

his

credit

breaking-pointto help Bell

faced

toy'succeeded,which
which

were

telephone. Desperately

after note
and

any

was

long,expensive months
relief came
to Sanders,

compelled, much

was

business

within

many

He

first five

The

telephone.

so

1874

of the money

more,

ders'
San-

thirty-

than

Yet, from

telephones,and

Bell

manufacturers,

more

nine-tenths

his money.

that

worth

dollars.

on

be needed.

business, which

entire

time

any

advanced

spent

were

expectation,at

no

soles for shoe

cutting out

had

was

His

rich.

five thousand
he

money

for

Hubbard's

to marry

soon

daughter. Also, Sanders

was

Hubbard

and

to
was

mainly

primarilyby sentiment, as
from
the blight of dumbness

little son,

so

telephone

Bell

removed

had

the

did this not

he

dared

and

money

of

future

the

on

had

who

man

Sanders, and

Thomas

MONEY

PEOPLE'S

OTHER

142

new

signed note
one

hundred
'scientific

doubted, he would

Haverhill; and if it failed,

sorelyfeared, he would be a bankrupt.

BIG

MEN

AND

Sanders

and

by two,

to business

BUSINESS

LITTLE

Hubbard

leasingtelephonestwo

were

who

men

private lines of
This
Telegraph Company.
this

at

was

It had

enemy.

and

that

was

buy

reaching

out

by

Union

Western

and

In

others.

they

offered the

had

Orton, of the Western

wire.

refused

had

Orton

'

pleasantly, could

it.

The
and

might

for

to

ment
discouragePresident

$100,000; and

use/

this company

Hubbard

already bought
of

'What

all

rosiest

conclude

telephone to

Union,

tors,
competi-

monopolize

to

moment

one

inevitable

of its

the Bell patents, just as it had

many

Union

corporation

great

in front of Sanders

shone
the

Western

most

of communication

that

the

natural

swallowed

was

methods

hope

their

time

been

previouslyhad

the

using

143

he
of

make

asked
an

trical
elec-

toy?'
"But

besides

Western

Union

the

of which
These

minute.

believed,could
oddity
believe
"the

as

this until

Gold

its machines

and

had

with

customers

could

accurate

be

never

the

wires,the

own

printing-telegraphsand

of

telegraphs,some
words

its

supplying

was

kinds

various

operationof

Stock
been

of its
"

sixty

instruments, it

displacedby

telephone,and
one

transmit

dial-

such

tific
scien-

it continued

to

subsidiarycompanies

reported

that

several

of

superseded by telephones.

OTHER

144

"At

PEOPLE'S

the

once

Even

business

be

and

this

the

three electrical

Dolbear,

great wealth
and

his

upon

Bell's patent

ant's

Bell, it coolly

when

he

down

upon

It

trampled

concern

as

an
an

upon

complete bewilderment

and

made

of its

tramples

that
that

it

it had

by

the

all

of

the

ready

was

superior telephones with

improvements

and

bulk

all the

little

as

announced

originaltelephone,

quickly,

phone
Speaking-Tele-

body-guard.

the

To

its

at

$300,000 capital,and

With

with

have

nest.

its

inventors,Edison, Gray,

little

can

from

action

prestige,it swept

and

Bell

elephant

with

its staff.

on

It took

'American

and

Company,'

awoke

tiny nibbling

stopped.

organized

with

Union

Western

indifference.
must

MONEY

only

to

the

ply
sup-

latest

originalinventors

"

Dolbear, Gray, and Edison.

"The

result

Bell group,
were

at

world.

instead

once

of

lifted to

And

being driven
a

from

higher level

the Western

Union,

'

bell-wether

of the

'

to lead

The

the

field,

in the business

in the endeavor

protect its private lines,became

to
a

strange and unexpected.

was

involuntarily

in the direction
capitalists

telephone."

Even

then, when

it was
enterprise,
and

among

financial aid
from

these

came

not
capitalists,
was
capitalists

to the Bell

from

ers,
bank-

William

H.

PEOPLE'S

OTHER

146

MACHINERY

ELECTRICAL

The

business

thirty

interested

early

dominance

J. P.
in

of the

and

small

some

and

to their

other

Thomson

and

ton,
Thomson-Hous-

in many

formed

things,important

inventions

Prof. Houston.

of Prof. Elihu
is

Lynn

ten

Thomson's

early financial support

bankers, but mainly

and

used

to

investors;men
taking

Prominent
a

shoe

miles of State

was

manufacturer, who
and

Mr.

with

them

the Thomson-Houston

Morgan

formed

of America.

Street,Boston;
from

not

came

but

from

business

Lynn

their

became

company

money.

A.

Coffin,

connected
its

upon

the General

that

own

Charles

Company

presidentof

of the

one

active,energetic,and

risks

among

of

introduce,among

to

It is within

men

besides

respects the

principalshoe-manufacturing centers

Boston

three

Thomson-Houston

Lynn, Massachusetts, was

leader,having been

then

were

bination,
com-

Electric

Westinghouse,

The

ones.

effectinga

General

the

There

the

became

Co.

of

large electrical companies, the

the Edison

over

it; but their

today is due, not to

business

1892.

little

"

branch

one

organizing

in

Company

only

Morgan

"initiating"it,but

their

is

apparatus

old.

years

electrical

manufacturing

of

and

machinery

MONEY

with

zation
organi-

Electric when
in

1892, by

BIG

MEN

combining
his

To

AND

LITTLE

BUSINESS

the Thomson-Houston

continued

and

147

the Edison.

service,supported by

Thomson-Houston

other

in

high positions,the
is,in largepart,
great prosperityof the company
due.
The two companies so combined
controlled
probably one-half of all electrical patents then
than
existingin America; and certainly more
half of those
In

which

absorbed

the

Electric

In

thus

1903

the

in the world.

amount

In

1912

of

$89,182,185.

Steel Trust.

"

Electric

Company,

became

the

its

largest

machinery
of the Company

resources

It billed sales to

$131,942,144.

60,000 persons,
the

the

its patents

General

Electric

Stanley

value.

competition was

of electric apparatus and

manufacturer

were

pooled

and

large competitor; and

other

over

considerable

any

Westinghouse,
restricted.

further

as

had

the General

1896

with the

men

It

employed

more

than

And

it is

fourth

the

directly
as

many

protected against

of the Morgan
competition; for one
partners has been a director,since 1909, in the
Westinghouse, the only other large electrical
"undue"

"

machinery

in America.

company

THE

The
years

automobile
old.

It is

now

AUTOMOBILE

industry is about
America's

most

twenty

prosperous

PEOPLE'S

OTHER

148

When

business.
Packard
what
the

Car

the

extent

B.

Henry

Motor

Company,

is the observable

facts of

banker, etc.,that first the

He

He

has

believes

he

business

to

"initiating"

as

business

conceives

seer

do

can

"

Company,

is also
man,
tunity.
oppor-

sight.

develop

"

build

industry

an

an

second

something

Falls Power

Niagara

or

history,it

faith in his almost

construct

"

"

railroad

and

make

pay!
the

"Now

human

"A

raised

man

built

beet

said it
the

chance

with

factory (and
abilityto

do

his friends
He

there

was

not

were

successful.
financially

private individuals
trust

of

companies.

of

built

it pay.

the

sugar

of his

The

next

built,and

were

These

take

doubt

any

factories

sugar

would

only

that) but he made

acres
Wise-

gathered together
who

never

two

face

'make it pay'!

He

year

the

actual

factory in Michigan.

him.

more

the

in the late '90s and

nonsense.

from

money

the

the money

sugar
was

is not

measure

physical construction,but

in

in

of the

asked

was

aided

bankers

experience of thirtyyears

my

it

Joy, President

automobile, he replied:

"It

"

MONEY

were

built

by

wealth, taking chances

cries of

doubting

bankers

and

MEN

BIG
"Once
sound

would

which

the necessary

of

banks

and

older

business

of

the

operate.
same.

in my

me

business, the

the

in the main

(who

men

trust

large part

followed

gentlemen

companies

and

was

was

and

sugar

to construct

of
possibilities

the

soon

money

parted' etc., etc.

"

"Private
it

backs

new

149

industry

banks) said,'fools and their

the

first establishes

capitalat

when

success

banks

industry,

an

troubles,and,

its

through

financial

wins

the

business

few

vision

be

funds

motor-car

"When

to

lend

speedily organized

were

"The

the

then bankers

and
financially

companies

BUSINESS

that

demonstrated
one

were

LITTLE

AND

if

would

possible,
not

lend

dollar of aid.

having proved to
financially successful,then

business

"The

and

also

Such
the

industry

"

HOW

But

failed
have

the

was

financial

many

the

Ford

BANKERS

experienceof

do

the

Motor

ARREST

initiate

automobile

Company.
DEVELOPMENT

houses"

industrial

the greatest of

in the

successes

"great banking
to

be practicable

aid to its needs."

lend

banks

once

have

not

merely

development; they

definitelyarrested development

because

to

PEOPLE'S

OTHER

150

creation

the

them
The

in

recital

MONEY

of the

the

Memorial

largely due.

addressed
Guild

by the Investors'

President

is

trusts

in

the

to

November,

1911, is significant:
is

"It

well-known

combinations

tend

opposed

are

to

modern

strongly toward

products, and

and

process

that

fact

new

processes

and

nature

very

products

new

originatedby independent inventors,and

tend
and

sale of patents and

tend

to

thought, to
and

competition in

restrain

to

with

the

hence

development

patent rights;and

discourage independent

the great detriment

injusticeto

inventors

especially intended

of the

whom
to

of

constancy

their

by

trade

sequently
con-

tive
inven-

nation,

the

stitution
Conand

encourage

protect in their rights."

And

specificwas

more

the

of

testimony

the

Engineering News:
"We

are

in iron and

Germany
innovations
and

today something
as

are

"We

do

lead

not

set

believe

are

behind

metallurgy, and

being introduced

steel manufacturers

followingthe

steel

like five years

most

by

of them

by foreignersyears
this is because

our

such
iron

merely
ago.

American

BIG

MEN

AND

engineers are
those

of

scientific education

of

is the

wholesale

consolidation

place in

American

industry.

closelycontrolled
standard
do

and

pared
com-

believe

the

up

With

who

bother

the

be

the

which
A

huge

ment
develop-

the

market

profitscertain by following

methods, those
want

not

to take

original idea.

an

We

Germany.

organizationis too clumsy

of

indeed

may

those

cause

taken

151

ingenious or originalthan

trainingand

with

has

less

any

BUSINESS

Europe, though they

deficient in

main

LITTLE

of

control

trusts

our

developing anything

new.

instance

"We

metallurgy only by

There
where

same

try
plenty of other fields of indus-

are

exactly the

building

are

the

methods

as

in the art

inventors

and

machines

dozen
are

years

and

using

and

ago,

being made

We

exists.

the

the real

by European

manufacturers."

President

which

condition

same

same

advances

To

of illustration.

way

Wilson's

statement

may

be added:

"I

am

not

stopped by

saying

the

that

growth

all invention

of trusts, but

perfectlyclear that invention in many

been
discouraged, that inventors

had

I think

been
it is

fields has
have

been

PEOPLE'S

OTHER

152

MONEY

reaping

the

full fruits of

ingenuity and industry,

been
deprived of many

and

that

from

prevented

well

as

lower

at

the

as

their

mankind

has

and

comforts

veniences,
con-

opportunity of buying

prices.

"Do

have

know,

you

learn, that there is

occasion

had

you

to

hospitalityfor invention,

no

now-a-days?"
AND

TRUSTS

The

that

fact

is

development
burden

direct

But

prices.
the

industrial

imposed

financing of

of

of many

illustrated

by

trusts; that

huge

business.

in

is,the
the

Thus

York,

houses.

Trust, which

Steel

Trust
the

company

different
the

and

Tube

of

some

it has

this

usually

This

is well

is

trusts

Trust

stroyed
de-

of whole

trust

combines

branches

centration.
con-

has

large part

of

money

properties;for

banking

the Steel

holding

formed

in New

few

the

independence

centered

one

financial

created

trust

and

with

the

extortionate

feed

trusts

communities

lines of business

of

promotion

financial

the

than

even

through

Practicallyevery
the

arrest

harm-bearing incident

the most

Industrial
trust.

monopolies

serious

more

is their

trusts

CONCENTRATION

FINANCIAL

in

of
one

previously
of

the

combined

steel
17

PEOPLE'S

OTHER

154

New

Stock

York

stock

securities listed

be

the New

on

the rules of the

agent and

of

is to be held

by

York

Stock

Exchange,

registrarin

New

York

securitycan

no

offices of the

But

the

of the

tend

listingof

the

stock, once
the

subjectof

feeds the
It draws

The

York
money

members

of

amounts

from

are

ending
stock
the

the

on

the

Exchange

enhances

another

Stock

handle

the

power

An

way.

dustria
in-

the loans

York.
of other

Stock

Exchange; and
Exchange receive large

commissions.

For

of United

outstanding.

so

concentration.

of the country to New

bankers

December

was

That

City.

speculation;and speculation
Trust indirectly
in many
ways.

5,084,952 shares
stock

financial

active

Money

people's

in

the

listed,frequently becomes

the money

New

stock

more,
Further-

contributed

York

financial

to

Trust

Money

of

in New

trusts

would

alone

establishment

the

to

transfer

City.

banker-directorships have
largely

their

Exchange.

corporationhas

the

listed unless

so

had

Promoters

also investors,desire to have

public,and

Under

few of them

York.

New

large corporations,whose
the

and

Exchange;

offices in

financial

MONEY

But

instance:

There

States Steel

mon
com-

in

the

five years

31, 1912, speculation in that

extensive
an

that

average

of

there

were

sold

on

29,380,888 shares

BIG
a

MEN

is

Steel

the

Exchange

five cents

sold;
Thus

that

twelve

traded

and

The

in; and

largely trusts,

by

by

the

Steel

are

listed

on

other

138

the

New

buyer.

millions

is also much

preferred stock

there

the

common

averaging many

revenue

Steel

the

of stock

cents

cents

from

of twenty-

share

one-half

one-half

commission

afforded

year.

and

where

brokers, sales

the payment
for each

there

as

Except

for the

or

involve

is, twelve

the

alone

by

155

much

as

existence.

in commission

seller and

in
are

BUSINESS

times

six

common

transactions
the

on

LITTLE

nearly

or

year;

AND

industrials,
Stock

York

Exchange.
HAMIFICATIONS

TEUST

the potency of trusts

But

is illustrated

This

the

has

United

"The
is not
sheet.

now

extent

Bureau

of the

of

General

fullyrevealed by its
A very
large number

connected

with

it

the General

through

in

an

Electric

companies

water-power

disclosed

been

States

of

ways;

ramifying operations.

forciblyby

control

Company's
which

their

through

factor in financial

in still other

is manifested

concentration

notably

as

able report of

Corporations:
Electric

consolidated
of

influence
balance

corporationsare

its subsidiaries

and

OTHER

156

corporations controlled

through

affiliated with

or

circle of

wider

and

officers
and

Co.

whose

of

General

Electric

first place all the

Electric

Bond

through

these

General

Electric

These

18

General

States

the
h.

of

in the

is found

p.

in

in three

in the

security

Securities

Co.

and

Directly and

their officers the

large part

of

the

in

the

States.

companies
found

in

States.

18

2,325,757 commercial

developed

amount

companies

have

holds

Corporation,

are

group

of this total

greatest

Share

controls

939,115

State

and

Electric

horsepower
and

or

of

some

the

Electric

Securities

water-power

General

the United

of the United

power
.

stock

corporationsand

"The
.

Electrical

the

Company

common

holding companies

water

that

officers

corporations,

by

still

Electric

also

owned

are

fact

General

are

other

many

the

to

the

is

There

Company.

"The

the

of

subsidiaries

securities

Electric

due

sidiarie
sub-

these

by

them.

influence

directors
its

directors

Co.,

MONEY

PEOPLE'S

under

or

General
or

power

General

construction,

Electric

40.4

per

group

Electric

The

cent.

controlled
group

cludes
in-

by

the

in any

Washington. This is followed

York, Pennsylvania, California,Montana,
by New
In five of
Iowa, Oregon, and Colorado.

BIG
the

MEN

States

shown

in the

50

The

percentage of power

the

General

control

72

cent. ; in

55

58

in

per

Electric group
of

under

construction.

the

from

ranges

Michigan
In

mercial
com-

nearly

to

Colorado

in

cent. ; and

in

little

80

they

Hampshire

cent.; in New

Oregon

water-power

cent,

Pennsylvania.

per

the

157

in the States included

group

cent,

per

in

cent,

per

Electric

per

developed and

power,

less than

table

in the General

than

more

BUSINESS

LITTLE

included

companies
control

AND

61

per

Washington

cent.

per

Besides

the

developed

power

water-power
Electric

General

water

Electric

to

group

enables

control

power

the

shown

undeveloped."

in the table 641,600 h. p.

This

struction
con-

in

States

in the

own

under

included

concerns

group

and

control

General

the

public

other

service

:
corporations

"The

Electric

General

railways in

at

least

with
towns.

in 19

the

Though

particularlythose

cities and

towns;

light and
many

served

the

of

and

to

street

towns;

the

towns;

gas

cities and

in 78

cities and

electric

16

subject

control

influence

plants
electric-light
plants

companies

water-power

are

affiliated

plants in other
these
communities,

gas

with

light only,

are

PEOPLE'S

OTHER

158

small, several of them

where

States

the

The

operate.

the most

are

these

and

Great

Falls, Mont.;

Y.; Asheville

and

the

owned

or

Astoria, and
and

other

other

Raleigh, N.

St.

and

in

towns

other

Colorado

in

towns

Raleigh, N. C.

practically every

controlled
to General

to

the

by

Montana;

Springs

in

Colorado;

in fact

Racine

and

Hudson

one

or

several

and

selaer,
Rens-

Asheville
more

where

the water-power

purchase

in other

from

in

developed
In

thus

companies subject

influence,there

power

and

towns

by this group.
public-servicecorporations

corporations
public-service
that

in

community

Electric

are

Great

is controlled

power

addition

gas)

towns

Wisconsin;

; and

in

towns

Portland, Salem,

Y.; Detroit, Mich.;

N.

water

The

Oregon; Bellingham

Louis, Mo.; Milwaukee,

small

in

other

Washington; Butte,

and

Falls, Bozeman
Leadville

C., and

towns.

include

in

towns

are

Winona,

lighting plants (electricor

controlled

or

Racine, Wis.; Elmira,

relativelyless important
which

the

Wash.;

Louis, Mo.;

St.

in

railways

street

Ore.; Spokane,

and

Milwaukee

Minn.;
N.

Salem,

control,

own,

group

in

companies

companies

closely affiliated with, the

Portland

important

water-power

water-power

Electric

General

MONEY

the

are

numerous

municipalities
hydroelectric

BIG

MEN

AND

developments
General

controlled

Electric
which

Colo.,

"

which

namely,

Co.,

sells

of

the entire

city.

The

Denver,

the

lightand
to

In

in

concern

the

Pennsylvania

20,000 h.

power

the

discussed.

Gas, Electric Light "

controls

that

of

is true

water-power

159

affiliated with

or

already been

Power

Consolidated

BUSINESS

This

Electric group,

Water

by

Co.

has

Baltimore, Md.,
General

LITTLE

the

to

p.

Power

Co.,

business

power

all

operate

the

electric street

railway systems of Buffalo,N. Y.,

vicinity,involving a trackage of approximately

and

375
of the

Niagara

And
the

the

Falls Power

General

like influence

no

water

subsidiary

Co."

Electric

financing of public
a

is

miles,is suppliedthrough

Company,

service

through

companies,

in communities

where

cises
exer-

there

power:

has acquired control

"It, or its subsidiaries,
or

of

an

interest

public-service
corporations

cities where

numerous

connection,and
virtue

in the

of

network

of

there is

machinery

This
.

relationshipbetween

of the
and

stillothers

directors.

corporations through
directors

water-power

no

it is affiliated with

common

prominent

suppliesin
.

the

by

vast

hydro-electric

largestmanufacturer

highly significant.

of

officers

and

of electrical

United

States

is

OTHER

160

is

"It

Electric

Co.

not

this great financial

the

particular disadvantage of
is not

concern

power

such

THE

The

used

rival

any

to

water-

the fact that

as

be

might

SHERMAN

Trust

Money

allow

its power

break

the
its

at

power

used

so

at

effective

Sherman

Law

providing
and

be

by creating a
functions

When
taken

that
toward

restrictive
should

is

bear

industrial
feeders.

prevented.
be

to

in

done, another
securing the

alone
legislation
in mind

the

To

Those

are

which

creation
this end

of

the

both

by

judicial machinery,

commission
aid

The

trusts

supplemented

efficient

more

we

stop that

must

we

dissolved.

should

if

broken,

constantly augmented.

The

be

be

Trust,

source.

should

ones

be

Money

illegalshould

new

LAW

cannot

to

its most

among
are

that it

been

or

time."

any

To

Whether

has

power

important

so

exists and

power

through

place rivals

may

corresponding disadvantage.

directors,affords the General

advantage that

an

such

relationshipto

of strong financial concerns,

officers and

common

MONEY

this

possiblethat

largenumber

at

PEOPLE'S

with

tive
administra-

enforcing

the

law.

step will have

New

been

Freedom.

will not

admonition

But

suffice.
with

We

which

VIII

CHAPTER
CURSE

has

Bigness
rise

Big

of

the

Big

Big railroad

of

instruments

(in their letter of defence

the

urge

financial

for

what
is

of

needs

Big Business

"simply

further

result

call
of

handling great transactions";

obviously requires
banks,

but

demands
to

business";

and

that

would

mean

would

Atlantic

to

meaning
Leading

during

the

the

in

The
the

bankers

have
15

banks

162

shall

country's
along

phrase

bankers

this

progress

from

the

"great

apparently

security issues.

undoubtedly

years

country

industrial

Pacific."

large corporate

last

those

wage-earner

by

for

larger individual

every

is used

"the

step backward

halt

that

necessity

that

the

justification

efficiently the

"a
a

affect

transactions"
as

that

Co.

"cooperation"

the

that

also

perform

cooperate

line

only

not

"

declare

They

euphemistically

they

banks

Morgan

the

as

concentration.

panies;
com-

Pujo Committee)

the

to

the

systems,

Big

these

J. P.

companies.

trust

in

service

public

trusts, Big
as

factor

important

an

Trust:

Money

and
and

been

industrial

BIGNESS

OF

in

floating

cooperated
some

very

CURSE

OF

largesecurityissues,as

BIGNESS

well

as

163

small

many

ones.

But

made
relativelyfew large issues were
by great improvements undertaken
or
necessary
by industrial development. Improvements and
development ordinarily proceed slowly. For
where
the enterpriseinvolves
them, even
large
expenditures,a series of smaller issues is usually
This is
more
appropriate than singlelargeones.
particularlytrue in the East where the building
of new
railroads
has
The
practicallyceased.
"great" security issues in which bankers have
cooperated were, with relativelyfew exceptions,
of effectingcommade
either for the purpose
binations
or

as

the

Furthermore,
made

the

the

both

in most

we

main,

which

to laws

mended
recom-

sion,
Commis-

Commerce

which

it is

the
a

noxious

least, become

through

not

it

put.

was

And

and

concentration

they

against

told, is

are

which

or

either contrary

cases,

Interstate

financial

combinations
the

which

contrary to the laws of business efficiency.

or

So

combinations

existingstatute law, or contrary

by

tions.
combina-

large security issues

these

necessary

underwritingswere,
to

of such

consequence

served

have

crime.

by

But

or

it is size

the

in

Size,

size may,
of the

reason

attained

were,

interest.

public

the

at

means
uses

to

attained

by

nation^jnstead of

combi

Has"^ontributed
Let

which

growth,

so

largely to

our

financial

us

examine

few

cases:

and

centration.
con-

PACIFICS

Co., in urging the "need

"

Morgan

large banks

natural

HAREIMAN

THE

J. P.

MONEY

PEOPLE'S

OTHER

164

of

cooperation of bankers,"

the

said:
"The

the part of bankers

on

This
made

to

capital.

enable
On

the contrary

Pacific stock

disposedof

problem

what

"

the

with

Sherman

Law.

Southern

Pacific stock

of the

Court

It had

United

cease.
illegality

been

another

the

Pacific

This

had

proceeds?

that

the
of

amount

the

Supreme
that

illegalpurchase

same

years

"great transaction,"
"

Pacific

solely

violated

finallydecreed

occasion, twelve

$100,000,000 of Union

with the

the

and
illegally;
States

that

it had

when

necessary

acquired

secure

its Southern

confronted

to do

Union

to

guaranty

And

amount.

stock,it was

that

because

had

was

huge underwriting became

This

the

it

not

was

disposing of

in
that

to

$126,000,000."

Pacific

Union

the

succeed

it would

of

mitment
singlecom-

"commitment"

$126,000,000

serious

calls for

Pacific settlement

the Union

of

approval

Attorney-General's recent

the

bonds,

of
earlier,

issue

of

which

were

CURSE

OF

sold to

provide funds

Pacific

and

Bankers

other

The

Union

Navigation

issues of securities

$46,500,000

but the

for

the

Oregon

aggregating $375,158,183 (of

refunded

were

redeemed);

or

that raised the Union

additions
a

high

of

state

the

and

And

straightened,grades

were

rebuilt,heavy rails were

new;

note

additions

and

acquired, increasing

miles

of

line, and

betterments

were

how

the

great
Tracks

lowered, bridges

were

laid,old equipment
the

the

still other

made

from

were:

cost

of these

charged largelyas operatingexpense.

lines
added, new
equipment was
or

Pacific

efficiencywere

earnings

net

were

replaced by

or

extraordinary improvements

its railroads.

improvements

to supply

illegalcombinations

in

engaging

and

to

and

Railway

The

operation of

was

auxiliarylines (the

ending June 30, 1912,

years,

provided mainly by
the

its

speculation.

Railroad

law.

accomplish that.

largesecurityissues served mainly

funds
stock

also to

of

Oregon-Washington Railroad)

in the fourteen

which

violation

and

Line,
the

in

IMPROVEMENTS

Pacific

and

165

acquiring this Southern

stocks

PACIFIC

Short

Oregon
made,

for

"cooperated"
UNION

BIGNESS

and

system

was

Additional
were

by

built
3524

improvements and
charged to capital

PEOPLE'S

OTHER

166
account.

These

512,328.

But

issues"

without

made

than

$1,000,000

paid six
rate

cent,

per

year

the

on

earnings and

on

the

For

while

year

SECURITY

about

the

PROCEEDS

available

redemptions)
bonds

stocks

WERE

the amounts

for

raising

SPENT

(except

to

so

further

purchases,

available

companies.

acquired

the

provemen
im-

ing
applied for refund-

were

of other

profits,providing
in stock

net

yielded,on

$13,000,000 required for

and

and

surplus

securityissues.

new

$375,000,000 securities

stocks

Cost

to

additions, without

The

and

that

(when

have

THE

of

have

$13,679,452

the

would

$12,750,982

more

securities for

charged

was

funds

and

average

after 1906

HOW

extent

pended.
ex-

have

still could

Equipment,

improvements
money

dividends

other

average,

wisely

could

of additional

average,

and

Road

additions

the company

adopted).

was

year,

of

and

issuingon

money," and

"new

the

capital thus

the

improvements

been

"large security

no

earnings from the operations

were
so
large that nearly all

net

railroads

of these

of

needed

it

The

these

expenditures aggregated $191,-

provide

to

MONEY

were

sums

sold
to be

to

And
at

buy
some

large

employed

The

CURSE

OF

BIGNESS

$375,000,000 Union

167

Pacific Lines

security

issues, therefore, were

not

fundg for Union

improvements; nor
for the improvement

these issues
of the

any

Pacific

supply

funds

companies

needed

in which

invested

(except

advanced

later to aid in

that

supply

to

the Union

certain

were

Southern

Pacific). They served, substantially,

no
to

from

one

set

Here
1.

purpose

transfer the ownership of railroad

save

are

of persons

stocks

to another.

of the

some

of

Pacific

amounts

financing the

did

principalinvestments:

$91,657,500, in acquiring and

financing the

Southern

Pacific.

$89,391,401, in acquiring the Northern

2.

stock

of the Northern

Securities

Pacific

and

Co.

3.

$45,466,960, in acquiring Baltimore

4.

$37,692,256, in acquiring Illinois Central

5.

$23,205,679, in acquiring New

6.

$10,395,000, in acquiring Atchison, Topeka

York

stock

" Ohio

stock.

stock.

Central

stock.
"

Santa

Fa

stock.
7.

$8,946,781, in acquiring Chicago " Alton stock.

8.

$11,610,187, in acquiring Chicago, Milwaukee

"

St. Paul

stock.
9.
10.

$6,750,423, in acquiring Chicago " Northwestern

$6,936,696, in acquiring Railroad
Central
(Illinois

The

Commission

stated
in

Co.

stock

stock.)

effect of these

immediate
as

Securities

stock.

by

the

1907, was

stock

Interstate

merely this:

tions,
acquisi-

Commerce

Harriman

"Mr.
from

to New

the

Francisco, across

San

to

by steamship
Orleans, thence by rail
journey

may

York

New

MONEY

PEOPLE'S

OTHER

168

Pacific

China, and, returning by another

States,may

United

rail

three

without

Omaha,
of

leaving

what

has further

directlynorth from the

Great
Lakes, parallel to
and
he

miles

thousand

two

the

controls

the Pacific

Gulf

that

the

of the

west

about

fiftythousand

in the

State

the

not

Oregon
and

the

developed.

companies
are

of

Oregon

Company,
is

taken

which

and

other

Line

be used

lines

of territory

by

Navigation
Company,

funds

of

for that

like the

the

pany,
Com-

Railroad

Pacific

the

in stocks

parallel to

miles

and

Southern
While

Mississippi

surrounded

Railroad

could

being invested

Central

Short

the

hearing shows

square

Oregon,

to

this

at

running

the Colorado

border.

testimony

dominant

MississippiRiver;

Coast, and running from

fines of the

without

of Mexico

"The

or

platform

Railroad

line of railroad

only

to the Mexican

River

City

or

to be

appears

Illinois Central

in the

control

deck

of

one

any

part of his journey.

duplicatingany
"He

the

Kansas

to

the

to

controls, and

he

which

carrier

thence

lines,and

to

route

Ogden by

to

go

Ocean

purpose

New

having only

those

York
remote

PEOPLE'S

OTHER

170

acquired control.
passed again into
Harriman's

Mr.

the

Supreme

the

Northern

Court

Pacific

Union

the

of the United

his

Pacific to reap

Union

in

transactions
Pacific

has

investments"
in

Stocks

which

cost

991.72, had
of

on

the

Union

November

Southern

only $87,851,500;showing

them, while held, was

only about

panies
com-

$129,894,-

15, 1913,

average

losses.

other

Pacific

the

held

large

and

of $42,043,491.72 and

illegal

stocks

entailed

Illinois Central

the

its

and

other

have

the

permitted the

Pacific

many

preme
Su-

dissolved.

largeprofitsfrom

But

the

ordered

Pacific merger

Northern

stocks.

Northern

death,

States

United

strange irony, the law

illegal,and

Company

after

declared

States

Pacific-Great

years

had

stock, because

Pacific

Pacific-Southern

Union

value

death

of the

Court

"as

Long before

Northern

Three

merger.

has

Marquette

receiver's hands.

Securities

the

dissolved

By

Pere

The

of its Northern

disposed

MONEY

market

shrinkage

income
4.30

from
cent,

per

their cost.

on

Kuhn,
bankers.

Mr.

Jacob

Loeb
It

was

H.

BANKEBS'
"

Co.

PAKADISE

were

in pursuance

Schiff

"

the

the
of

Union
a

senior

Pacific

promise which
partner

"

had

CURSE

given, pending
Harriman

in

and

bankers

and

their

Thereafter

combinations

and

were

there

for

associates

received

holds

have

"

the investment

for

the

Supreme

received
of

securities

the

commissions

controlled

thus controlled

were

have, of

after years,

decree

combination, these

perform

the

further

bankers

same

services

commissions

to

retained

them.

paid for floating

them.

while

"

of law

"

and

Finally when,
to

bankers
of

buy

holds to have

companies

is entered

ties
securi-

which

in violation

retained

course,

have

missions
com-

acquired

The

Court

The

which

underwriting the

illegallyacquired,and
bankers

been

with

centration
con-

the

stocks

them.

to raise the money

the stocks which

the

to have

retained

commissions

issued

receive

tudes
vicissi-

received

purchasing

Supreme Court

they

Mr.

of the Executive

speculations. But

illegally and

to

member

1897.

paid

The

171

prospered amazingly; and financial

abatement.
proceeded without

bankers

been

BIGNESS

reorganization, that

crumbled,

in stock

the

the

first became

Committee
grew

OF

end
are

the

illegal
hand

on

undertaker

"

and

for their banker-aid

enabling the law-breaking corporation to end

its wrong
doing and to comply with the decree of
And
the Supreme Court.
yet, throughout nearly
in

all this long period,both

before

and

after Mr,

PEOPLE'S

OTHER

172

Harriman's
Co.

death, two partners

directors

were

of

committee

in

Kuhn, Loeb

of the

members

or

responsiblewith

"

executive

Pacific;and

Union

the

be deemed

must

MONEY

such

as

others for the

acts.
illegal

bankers

Indeed, these
commissions

have

underwritingsof

for the

accomplished, though
commissions
underwrite
authorities
The

also for

would

on

J. P.

Morgan

"

"the

Attorney

General's

the

having

being

approval

never

Service

called for
of the

by

Union

became

effective;

Commission

of California

the terms

to approve

which

of settlement.

Union

been

ready

and

willing"to serve," should

opportunity arise:

commission
stock
of

as

to

Pacific,nevertheless,paid the
Loeb Syndicate a largeunderwritingfee for

Kuhn

the

the

accomplished.

refer

because

the

to be

Co.

settlement")
refused

which

part of bankers"

Pacific

But

transaction"

the

Public

ceived
re-

underwriting (that "single

$126,000,000

commitment

have

merely agreeing to

permit

not

received

transactions

illegal;they

"great

only

not

was

paid

and

another

when

underwriting

the Southern

Pacific

with the approval

finallydistributed,
the
Attorney General
McReynolds, under
was

Court's

Southern

decree.

Pacific

Thus

stock

the

illegalpurchase

of

yielded directlyfour

A
of

crops

CURSE

OF

commissions;

two

the

intervening period

Southern

Pacific

For

Committee

Pujo

marketed,

above

securities
Southern
between
The

and

and

1903

commissions

have

Union

Pacific

Co.

Pacific
of

securities

been

finds

"great";

that

Union
closed.
dis-

large; for

very

The

paid

is not

transactions

liberal.

were

with

connection

transactions

Commission

but

Interstate
bankers

not

the

merce
Com-

received

purchase pricefor buying

Pacific stock;
first 750,000 shares of Southern

about
the

"

of the commissions

Pacific

the

were

Loeb

the

to, $334,000,000

Central

in

It must

filed with

1911.

bankers

Pacific-Southern

only

the

to

aggregate amount

these

during

commissions

more

Kuhn,

referred

Pacific

And

illegallycontrolled

that

addition

acquired,

was

of.

the schedules

show

in

the

173

it

disposed

was

yielded many

bankers.

to the

to

it

when

two

and

when

BIGNESS

and

5 per cent,

the

on

the

underwriting commission

on

the

first

$100,000,000 Union Pacific bonds issued to make

that and other purchases was
$5,000,000. How
were
underwriting commissions
Pacific paid in effectingthe
the Union

the

large
which
severance

and

the

Furthermore

two

of this

illegal
merger,

bankers
the

have

both the company

declined

Interstate

to

Commerce

disclose.
Com-

MONEY

PEOPLE'S

174

OTHER

mission

while
showed, clearly,
Pacific's

Union

purchase

public far

bankers'

system of
involved

and

theretofore

The

subjectsor

passing of
1901,

thy

the

to

strikingexample
After
Pacific
the

the Union
stock

fine.

The

recognized

or

great

railroad

has
to

who

thereby

Money

Trust.

men,

associates,presents

Morgan

of this process.
Pacific

acquired

Northern
Union

the Southern

sought control,also,of
"

Quincy,
"

railroad,having then
that

in

Chicago, Burlington " Quincy,

in 1901, it

Great

tax

independence

satellites of the

Chicago, Burlington

prosperous

into

independent

loss of financial

the

heavy

profits. For

absorption

community, property

become

in

the

case

the

serious than

more

commissions

every

produce injury

combinations

railroad

Such

some

means

no

BURLINGTON

THE

nearly

by

to commissions.

confined

of

Chicago " Alton

of the

profitswere

stock, that the bankers'

to the

investigatingthe

and

7912

Northern

Pacific

control

most

miles

of

Pacific
of

the

exclude
them
from
of
much
Burlington would
Missouri, Wisconsin, Kansas, Nebraska,
Illinois,

Iowa, and

South

Dakota.

The

two

northern

CURSE

roads,
each

which

other

OF

with
for

purchased

175

already closely allied

were

and

BIGNESS

J. P.

Morgan

"

with

upon
Co., there-

$215,227,000, of

their

joint
4 per cent, bonds, nearly all of the $109,324,000
A
(par value) outstanding Burlington stock.
Pacific ensued
which
struggle with the Union
to "harmonious
yielded soon
cooperation." The
Northern

Securities

Company

formed

was

with

$400,000,000 capital,thereby merging the Great

the

Northern,
and
the
the
of

issue

of $215,000,000

was

Securities

for

in these

transfer stock from

And

the

of the

Northern

evil done

Burlington

had

Boston

"large

transactions."

remain

set

one

of securities

of

with

operation"
co-

the government
the dissolution
But

combination.

The

passed

in control.

ended

to

persons

Securities Company.

outlived

owners

stock

great railroad

interruptedby

proceedings,which

neither

four

resulting "harmonious

soon

with

improvements of,

sole effectof issuing $615,000,000

to

ton,
Burling-

the issue

joint4's,nor

of the

to, any

was

who

the

Obviously

dollar of funds

concerned

another.

the

and

Northern

$400,000,000

additions

systems
The

interests.

Morgan-Hill
the

Pacific

joiningthe Harriman, Kuhn-Loeb,

supplied one
or

Northern

the

forever
to

the

from

Morgan

pendent
its inde-

allies,

The

Burlington

He

was

of

wizard

at

America's
with

and

shipping

of

patience
broad

the

and

perseverance

the

courage

view

of the

he

of

chances,

to

success.

He

great

adventurer.

which

later
"

and

of

of

those

burdens

the

facturer;
manu-

the

sea-farer;and
Bold, but
of

other

due

never

people's
of

weighing

enterprisespromising
of the

sense

equipped,
those

term,
Forbes

Mr.

railroad

enterprises

developed into the Chicago, Burlington

of

Largely

friends

built these railroads

panic

in

own

upon

Quincy.

that

the

had

He

great

after

Thus

entered, in 1852,

connected

of

in the best

was

among

merchant;

statesman.

risk his

working
hard-

great

the

ready,

was

was

been

had

reckless; scrupulously careful

money,

trade

or

merchant

manufactures.

with

imagination

the

He

banker,

or

been

China's

when

business.

big

had

He

Forbes.

M.

simple,

was

man.

time

John

combiner,

He

finance.

business
in China

of

creation

builder; not

ments
finest achieve-

of Boston's

one

"

the

was

"

MONEY

PEOPLE'S

OTHER

176

'57, when
days
of

staggering under

with

who

his

confided

in

he

through

the

carried

the

"great banking
courage

struggling
financial

to

money

him,

and

lacked

them

own

houses"

assume

ill-constructed

difficulties.

the

line,

then

in

lacked

who

men

his

MONEY

PEOPLE'S

OTHER

178

builders, though

were

and

wisdom,

some

his character.

some

Her

capitalconstructed, in large part,

Pacific,the Atchison, the Mexican

enterpriseand
Union

the

railroads
these

in the

the

control

of

In

railroad

New

the

19

Beach

"

Lynn,
THE

The
another

in

is

left

West

the

begun
of

AlbanyMorgan

Morgan
control

control

of

NEW

rise of the New

HAVEN

and

Grafton

the

South,
line

"

"

Boston,

road

of

Upton
Revere

13 miles

long.

MONOPOLY

Haven

striking example

Boston's

of the railroads

to the

passenger

of

Railroad

Kentucky
her

"

acquired

the

of line and
"

into

transportation line in New

is limited

miles

Boston
"

"

out

railroads

Central,

nothing

long; and

had

later,another

Haven

Eastern

Massachusetts

York
years

dominion

except the

with

few

Now

England.

36 miles

one

Before

the

over

the

1900

other

every

railroad

by

passed

allies.

even,

to the New
a

nearly

railroads

Morgan

dominion,

property; and
"

One

surrendered, Boston

England.
leased

was

southern

the

was

lose her

New

South.

other

24

control; the greater part of them

Burlington
to

and

West

and

western

of Boston

Central, and

Wisconsin

Central, the

Monopoly presents
of

combination

as

developer

CURSE

of

OF

financial

illustrates also the

issues"
In

are

put.

1892,

when

Haven

BIGNESS
and

concentration;
to which

use

Mr.

179

"large security

Morgan

directorate,it

was

it

entered

very

the New
prosperous

littlerailroad with

paying

10

508

miles

had

grown

mileage
or

capitalliabilitiesof $25,000,000
cent,
dividends, and operating

per

of

line.

also grown

leases of other

later,in 1913,
Mellen
20

in

lines)to

when

Mr.

in

1899; but

those

to

of the

fourteen

died

Morgan

less than

business

the

had

the

years;

new

much

needed, also,

were

out

of

in
the

dividends

because

capital increase,over

expended
securities

in the
of

street

acquisitionof

some

121

other

largely
proved,
im-

was

tracks

the

Mr.

course

added,

for all

additional

than

more

Of

road-bed

and

needed;

and

grown

equipment purchased; and

capital was

years

bilitie
capital lia-

$425,935,000.

railroad

merger

1997, just

was

bridges built,additional
and

aggregate

Fourteen

mileage

increased

the

2017.

the

miles

capitalization

(mainly through

resigned,
had

the

the

1899

$80,477,600, but

to

had

By

issues

paid

company

it

But

earned.

$200,000,000
the stock

or

It

was

was

other

ships,
railroads,steam-

railway-, electric-light-,
gas-

water-companies.

this,

these

outside

and

proper-

ties,which

made

$67,000,000, 6
other

of those

cost,

year.

which

companies

121

the

tion
acquired had, prior to their absorp"
by it, been financed by J. P. Morgan

New

Haven

needs

The

Co.
Maine

Central

of

member

of the

those

companies.
the

"

New

York,

largestof

next

been

had

"

The

financed

banking

had

of Directors

Board

been

of

Ontario

"

acquired

the

in New

allies.

Morgan
now

had

The

combined
been

done

the

in the

financed

by independent

financing of

smaller

York,

New

street

but

mainly
York

in

New

by
roads,
rail-

land,
Eng-

Connecticut,

bankers.

railway companies

largely by individual

roads
rail-

of the

Connecticut
Central

of either

apparently entirelyindependent

persons

their

through

banker

investment

No

for

had,

"

Boston

through

and

Maine

group

mainly

or

houses.

Western

largest

met

stockholders

own

"

Boston

the

the

"

generations, been

been

on

BANKEES

HAVEN

NEW

have

equipment

as

For

improvements

only $10,000,000

THE

or

the

years

including new

Few, if any,

well

issue, as

expensive security issues.

the average,

on

discussed

much

bond

cent,

per

fourteen

the railroad

the

necessary

large and

these

in

MONEY

PEOPLE'S

OTHER

180

The
had

financiers,or

CURSE

by

small

or

cities where

the

and

BIGNESS

independent
the

street

these

Haven

and

tributary to

independent
satellites.

in the

been

Some

these

121

in

companies,

corporations, was
"

Morgan

Co.;

eliminated

were

and

violation

or

Act

will

either

the state

of

Enforcement

doubtless

'

of

in

result

or

the

the

became

or

this

of both.

law,

by

panies
com-

financialconcentration
proceeded with, although practically every
of these 121 companies was
acquired by the
Haven

of

system, the financing

other

J. P.

bankers

And

states

financed

railroads,steamship

railways,

made

had

absorption of

into the New

all

bankers

through independent bankers.

some

the result of the

of

181

companies operate.

steamship companies

their owners,
As

OF

was
one

New

federal

Sherman

dissolving this

combination.
unwieldy illegal
THE

of the

Proof
railroads
of

F.

control
well

as

the

by
on

"

the

ubiquitous presence

the

Board

of Directors

Jersey Central,

Western

nearly all

anthracite

the

Lehigh, the Erie,and

Susquehanna

as

Baker

Reading,
the

MONOPOLY

"cooperation" of

is furnished

George

of the

COAL

the

the New

wanna,
Lacka-

York,

railroads,which
the unmined

the actual tonnage.

These

gether
to-

anthracite
roads have

OTHER

182

been
the

an

PEOPLE'S

Trust.

They

are

with

fundamental

of the Sherman
the

of

railroad

indirect.

Nearly

in the

by

years

of the

anthracite

trade, any

of these

any

or

The

railroads

roads
rail-

in connection

been

of combination.

act

some

prohibits a

interest,direct

an

(except the Erie), has

with

Commodity

large issue of securities

every

last 14

of the

interstate

it has

the Department

violations

Act, which

carrying,in

in which

charged by

and

Law

Hepburn

from

commodity
made

development of

factor

of Justice

clause

in the

important

Money

both

MONEY

to

tion
combinathe

suppress

construction,through the Temple Iron Company,

of

coal

competing

the

illegal
by
States.
Kanawha
Court

has

combination

Chesapeake

"

already

Court

bituminous
the

"

Appeals

has

Supreme

the

District
of

similar

in

And

road,

field

coal

recently

decreed

Ohio, and

Lake

the

the

"

States

the

clared
de-

of the United

United

by

been

Circuit
that

Shore, the

Hocking

Valley,

be dissolved.

OTHER

The
Haven

cases
are

RAILROAD

COMBINATIONS

of the Union

typical
"

historypresents
security issues made

not

Pacific and

of the New

exceptional.
instances

numerous

wholly

or

mainly

Our
of
to

road
rail-

large
effect

CURSE

combinations.
been

of

Some
as

proper

feeders
them

have

Thus
Island

of main

and

14,000 miles

have

been

by

But
the

have
natural

far

more

desire

the

by

with

of

and

San

line is

to

by

mistaken

size.

combination

St. Louis

over

lines.

greed; or

or

monstrous

the

securing

dictated

efficiency
grows

the

183

potential competition; or

or

personal ambition
belief that

of

means

been

active

BIGNESS

of these combinations

extensions

or

suppress

OF

of the Rock
Francisco

recognized

with
to

now

obviously inefficient. It was severed

have
voluntarily;but, had it not been, must
crumbled

of

result
Both

of

from

soon

defects,if

proceedings under

systems
this

inherent

combination;

Sherman
from

sufferingnow

are

unwise

the

the

expressive of

Rock

Island

the

"

law.
effects

in

penalty

name

efficiencyand

railroad

as

Frisco, itself
the

greatly overcombined, has paid

receivership. The

not

once

stability
"

and
has, through its excessive recapitalizations
football of speculators,
combinations, become
a
and

of great

source

investors.

Hamilton

The

and

led to several
There

which

combination

of the

and

the PSre

Dayton,

to

confiding

Cincinnati,

Marquette

receiverships.

are,

have

apprehension

not

of
been

course,

other

disastrous

to

combinations
the

owners

of

OTHER

184

PEOPLE'S

railroads.

the

combination

But
has

the

is

power

burden

be

placed
For

of

those

instance,

Railroad

Railroad
of

system

acquisition;and

which

twice

as

those

The

legality of

largeas

investigationby
has been

Milton

the

After

been

Coast

Line

"

ville
Nash-

years

many

wise

Smith

had

before the

earnings nearly

gross

combination

Senator

Interstate

the

Coast

Line.

has

been

Lea;

Commerce

and

an

mission
Com-

ordered.

reports from

1898

H.

of the Atlantic

this

THE

is not

has

ties
$50,000,000 of securi-

has

recently challenged by

railroad

should

miles, which, under

of President

inquirywhether

combination

of the Louisville

prospered continuouslyfor

The

of power,

widely extended, self-sufficient

"

combination

as

Atlantic

to issue

5000

management

and

public good

acquire control

to

not

seek to effect it.

by allowing the
Company

does

concentration

who

what

railroad

evil of the concentration

justifyinga

upon

subserved

The

such

that

disastrous

obvious;

necessarilyinvolves
the

fact

been

not

necessarilyjustifyit.
of

MONEY

PENNSYLVANIA

the

Pennsylvania suggest the

this generallywell-managed
even
sufferingfrom excessive bigness.

it, too, bought,

in

large amounts,

MONEY

mines; and it is intimated

coal

of other

itself also
the

PEOPLE'S

OTHER

186

Cambria
of

business

extended
stock

which

include

to

not

in

companies (like
to

the

policy should

be

extraneous

of

dispositionalso

the

Pacific

and

the

all

" Western,

(likethe Norfolk

railroads

Southern

are

Company)

railroading. This

in other

the

holdings

Steel

it will divest

that

New

Haven)

part of the Pennsylvania System.

RECOMMENDATIONS

Six years

ago

after

the

Commerce

investigating the

above

transaction

Interstate

referred
the

legislationto remedy

mission,
Com-

Union

Pacific

to, recommended

evils there

disclosed.

Upon concluding recentlyits investigationof

New

the

Haven,

Commission

the
and

repeated

amplified those recommendations, saying:

"No

doubt

student
that

been
to

the

the

railroad

problem

can

of financial
prolificsource
complication to railroads in the past
most

disaster and
has

of

the

desire and

engage

in

abilityof railroad

enterprisesoutside

the

agers
man-

mate
legiti-

operation of their railroads,especiallyby

their
acquisition of other railroads and

securities.

The

evil which

results,first,to

investing public, and, finally,to

be corrected after the
public,cannot

the

the

general

transaction

has

taken

CURSE

OF

place; it

prohibited.

In

lie at the

BIGNESS

be

187

easilyand

effectively
our
opinion the followingpropositions
foundation
of all adequate regulation
can

of interstate railroads:
1.

interstate

Every
from

railroad

spending money

should

be

hibited
pro-

incurringliability

or

acquiringproperty not in the operation of its

railroad or in the legitimateimprovement, extension,
or
development of that railroad.
or

interstate railroad should

2. No
lease
the

stocks
to

nor

the

stocks

No

in

the

price at

be
which

stocks and

two

by

the

an

tioned
sanc-

and

preceding paragraphs,

unwise
and

the

attempt

approval of

may

be issued and
realized

to

the

those

railroad

the

for which

it is

they

expenditure of

purpose."

recommendations
with

specifythe

disposedof;but

confine

to that

to

in which

manner

safe to define the purpose

and

the money

to

securities shall be

easy

accord

be issued

government.

It may

These

should

be issued without

should

federal

bonds

government.

railroad except for the purposes

interstate

none

or

railroad,

indirectly,

or

of the federal

acquire

to

other

directl

same,

approval

permitted to

nor
railroad,

securities of any

or

guarantee the

without
3.

other

purchase any

or

be

adopted

are

by

in
the

substantial
National

PEOPLE'S

OTHER

188

of

Association

MONEY
Commissioners.

Railway

be enacted

into law.

supplemented by

amendments

should

of the

Clause

Hepburn
will be

1. Railroads

they should be

And

of the

Act,

They

Commodity

that:

so

prohibited from
effectually

products
owning stock in corporations whose
they transport;
2. Such
corporations will be prohibited from
owning important stockholdingsin railroads;and
3. Holding companies will be prohibited from
road
controlling,as does the Reading, both a railand

corporations

whose

it

commodities

transports.
If laws

such

international
from

escape

the

like

potent

shall,by
in

will
find

units

will

needs

without

And

But
such

financial

what

duly

recurrence

of

domestic
and

of

shall also

We

is attendant

is far

portant,
im-

more

remove
legislation,

concentration.

begin. The

liberated

centrali
Desmaller

in financing their
difficulty
lords.
bowing the knee to money
no

long step will have

attainment

Alton,

which
inefficiency

size.

factor

and

like the Frisco.

that

we

Haven,

Chicago

ones

excessive

upon

New

and

enacted

are

protected from

the

tragedies like

scandals

these

shall be

enforced, we
of

as

of the

New

been

Freedom.

taken

toward

CHAPTER
THE

FAILURE

There
from

OF

is not

of Mellen.

BANKER-MANAGEMENT

moral, but

one

the Decline

IX

of the New

That

history

sermons.

It illustrates

the

Curse

of

the

Pitfalls of

investors

was

to

gave

attention

that

J. P.

the

perhaps
teach

to

CONTROL

"

Morgan
New

Co.

of the

the

were

For

Haven.

other

to any

meetings

cal
fisMr.

years

He

Company.

when

Mr.

director.

Morgan

of other
But

it
189

of his many

interests.

rarely interestingor

are

indeed

few

meeting
was

But

and

property probably closer personal

important; and
occasions

Monopoly,

banker-management.

the director

than

Stockholders'

the Fall
for many

it should

that

lesson

agents of the

Morgan

of

Evils

Law-Breaking.

is the failure of

years

and

offers texts

the

BANKER

For

Haven

Bigness, the Futility of Lying,

impressive

most

to be drawn

many,

must

have

attended

his

any

the

holders'
stock-

in which

he

habit, when

in

companies
was

been

OTHER

190

America,

be

to

In

Haven.

expansion

first

was

the

policyof monopolistic

challenged,and

its sanction

merger),
large

the

Mr.

Of

which

he

course,

President

Mellen

before

statement

while

Prouty,
York, Westchester
terminal

New

Haven

"
in

the

this

in

Commerce

New

the

"

York,
a

mile

New

railroad

which

out
with-

cost

"I

in

the

acquire, and

to

costing it, in operating deficits

to run:
charges,$100,000 a month

interest

his

missioner
Com-

then

was

was

discussing the

Boston

$1,500,000

mously
unani-

will

His

"

moved

were

indicated

Interstate

wisely
un-

attended

important directors' meetings.

the

Boston

himself

Morgan

at

had

the

to

of stock

increases

voted.

law.

again

(afterMassachusetts

1909

accorded
Maine

MONEY

present at meetings of the New

1907, when

in

meeting

PEOPLE'S

and

embarrassing position,Mr.
chester
Commissioner, regarding the New
York, Westam

"
or

immediate

very

Boston.

at all

for

was

our

company

future; but

wise and

indeed, I
much

been

never

optimistic of its being

greater confidence
it

I have

don't

difference

than

in the

tic
enthusias-

ment
good invest-

present,

or

people in whom
I have

in the
I

had

in

myself thought
I yielded my
desirable;
judgment;
know
whether

that
I

it would

yielded or

have
not."

made

BANKER-MANAGEMENT

BANKERS'

THE

Bankers

in the

force
that

RESPONSIBILITY

credited

are

191

with

being a
The

community.

tradition

they are preeminently "safe

yet, the

railroad

managed

fault

"

losses

to

that

supposed

New

this

And

bankerness
reckless-

already brought heavy

of

small

investors

bankers

for whom

stocks

In

have

the New

Maine

dividends

record

of

after

of the

unbroken

an

generations

munity
com-

ments,
invest-

and

Haven

are

for generations

absolutely safe

deemed

passing of

"

of

guardians.

natural

been

dividend

has

its railroad

where

the

sane."

its financial

England

be

to

been

thousands

many

throughout

Boston

has

lingers

and

grievous fault

most

conservative

as

comes

disaster.

disaster is due

This

mainly

to

side
enterprisesout-

legitimateoperation of these railroads;

has equaled the New
railroad company

the
for

no

Haven

in the

outside

enterprises. But

that
any

neither
other

of Directors.

should

the

manager

without

the

of its

extravagance

it must

remembered,

be

the New

could

Haven

engage

nor

in such

sanction

of the

Board

directors,not

Mr.

Mellen,

the

It is the
bear

and

presidentof

railroad

transactions

who

quantity

responsibility.

scrutinyof

Close

make

Not

discloses

merely

the

gravity of
in mad

the financiering

in

engage

which

of

found

guilty; for perhaps

too

of directors

curb

calm

by

ambitious

from

right to expect
judgment
have

in

right

to

important

most

the

test

the

conclusions
zeal

excessive
while

have

we

from

matters;
them

prudence,

straightforwardaccounting.

And

it is

lack

New

Haven

to

Interstate

qualitiesin
which

Commerce

the

no

do

we

and insistence
reasonably good financiering,

of these

of

exceptionallygood

business

expect

be

the

bankers

ordinary

errors

should

But

managers.

to

directors

is to

counsel

pay

worth,

enterprises,are

conservative

no

function
and

grossly unwise

To

it is

what

times

of

pursuit

monopoly; but the financial judgment,

itself,was
conspicuously bad.
several

errors

travagant
recklessly ex-

were

made
acquisitions

for property

no

contrary, scrutiny serves

clear the

more

committed.

transactions

the

the

justification.On
only to

MONEY

PEOPLE'S

OTHER

192

the

criticism

severe

Commission

is

upon

just the
agement
man-

of

the

particularly

directed.

Conmissioner
increase

Prouty

calls

attention

to

the

of

years

capitalization.During the nine

beginning July 1, 1903, the capital of the

New

York, New

vast

Haven

"

Hartford

Railroad

convertible

stock

into
issue

to

eager

at

J. P.

cent,

underwriting
"

be

financieringto
the

Indeed,

it committed
of

market

their

to

due

not

to

180,364; by June
to

in 1913
of

rate

to

largely.

very

And

improvements

Boston

"

Maine

either to pay

money

sell at par

to

of the

tem
Sys-

notes
amount

these

on

loans
loans

of

were

two

only $10,had

grown

course

the

increased

also

were

represent, in
the

New

Railroads,but

for stocks

or

30, 1912, to $45,395,000;

the

on

unnecessarily. They
not

"tight"

$70,000,000. Of

over

for

error;

They

short-term

30, 1911, the

interest

an

30, 1910, the

June

$30,759,959; by June

and

larly,
particu-

unexpected emergencies

On
in

owed

companies

"tight"

40-year bonds.

conditions.

monetary

gradual growth.

such

borrowings

huge short-time

bad

very

for the

it had

cent.

per

long expected?

in the

one

per

not

to

money

management,

1907-1908, when

were

it

per

as

1/2

True,

been

avoided

have

$39,000,000 of its 6
These

had

similar

is

Haven's

to

Co.

unprepared

so

New

ought

But

which

market

money

"

so

into stock

commission.

then.

tight"

was

$67,500,000 of its

Morgan

to

share, was

convertible

agree

pay

$150

at

par

20-year bonds

cent.

MONEY

PEOPLE'S

OTHER

194

in other

incurred
the

main,

Haven

or

money

borrowed

on

the

companies which

BANKER-MANAGEMENT
these

dividends

pay

which

In five years
Railroad
in

could

companies

had

its

of the

excess

if proper

for

charges

steamships had

last three
had
the

latter
of

excess

been

control

of

out

in

earnings

that

paid

into

in

facts

can

have

few

integrityof

pursuitof
"The
fact

dividends

the

annual

much

larger

which
the

In each
the

dividends

Haven

"

Boston

before

the

of the

New

Maine,
much

so

in

April, 1913,
had

earlier years

the

been

least, an

at

ordinary
extra-

prudence.

banker-

failure

of

the

Haven

be

explained?
few

questioned the ability;a

made

to

the

the

Prouty

Commissioner

bankers.

Company's

transportationmonopoly.

reason,"

itself.

Company

the

the mistakes

attributed

Haven

FAILED

of the New

management
A

made.

BANKER-MANAGEMENT

how

Now,

earned.

been

show,

lack of financial

WHY

to

or

deficit.

Surely these

buy,

depreciationof equipment

surplus accumulated
converted

have

during

years,

absolute

been

not

year's earnings;and
would

of

to

showing, paid

own

deficits disclosed

and

afford

not

of the last six the New

out

has, on

195

The

started

says

he, "is

as

apparent

present management
out

with

the

purpose

as

of
of

the
that
con-

PEOPLE'S

OTHER

196

transportation

trolling the
In

England.
must

bought

be

paid.

what

be traced

it still remains

But
bad

in

management
out

the

in

monopoly

the

by

Company's
The

For

in

Haven

which

cannot

there

of the

It

natural
and

policy of
the

detail which
the

passing

ultimatelyimpaired

the

be

comings
short-

not

was

result

of

business

banker
for which

This

as

of the

detachment

should
he

explained
The

the

as

failure

the

not

was

exceptional.

confusing

It

was

functions

of

man.

UNDIVIDED

The

were

banker-management

individuals.

accidental.

banker

carrying

credit.

of

the

banker-

eminent

adoption. Indeed, it was

failure of the

New

cial
finan-

of the

cause

and

execution

the

and

what

attempted

of these

of
aggregation of important errors
compelled first the reduction, then
of dividends

pose
pur-

paid

its

the

entering upon

in its

as

and

find

policy of monopoly.

errors

grave

to

exercised

judgment

of that

and

one

every

New

derelictions."

and

misfortunes

be had

must

this purpose

To

can

facilities of

accomplishment

the

it

execution

MONEY

LOYALTY

be

detached

from

the business

performs the banking service.

is

in
desirable,

the

first

place,

BANKER-MANAGEMENT
in order

avoid

to

conflict of interest.

of banker-directors

they finance

197

has

been

The

lation
re-

corporationswhich

to

cism.
subject of just critiTheir conflicting
interests necessarily
vent
presingle-minded devotion to the corporation.

When

railroad
then

banker-director
that

man

sells them

price

which

at

railroad

of

it shall issue

they

suffer

from

to the

sellingthem

it is

For

than

company

director

best

bargains

best

not

the

rest

ought
at

of

not

through
to be

price less

have

Even

for

of

when

made

are

the

issued,

obtained.

banker-

the

not

importance of

The

company.

buyer and

seller

different persons.
AN

ESSENTIAL

does

perhaps mainly, upon

avoiding divided loyalty. A

detachment

in

conduce

objectionto banker-management
wholly,

poration
cor-

succeeded

would

suing
is-

favorable

been

if he

relation

interests

DETACHMENT

But

interests

suffer both

"

should

himself.

representedby

are

is

judge impartially between

to

being impartial,the
the

the

ordinarily impossible

and

to

there

taken,

danger that

may

and
securities,

be

to

as

banker, fixingthe

as

are

of securities which

and

railroad decides

to himself

necessarilygrave
the

or

of the banker

from

the

the
plete
com-

corpo-

PEOPLE'S

OTHER

198

is necessary

ration

railroad

for

judgment;

of

financial

clearest

be

will

judgment

participation in

by

the

policy actually pursued.

cial
It is outside finan-

advice

needs.

is his

it

ago

is

Similarly,it
to

or

obscured

is not

the

credit

to refuse

or

and

concerns;

The

customers.

demands

that
from

are

to

proper

the

the

under

to

function

banker

concern

enterprises.
is to

other

to

other

to

of this function
be

wholly

credit

consideration.

to

securities from

should
whose

give

concerns;

sell securities
exercise

of the

roads,
operate rail-

or

purchase

of

self-interest.

by

banker

from

The

soundness

industrial

of the

who

man

client."

proper

in

engage

"a

is that

easily

withhold

other

this

for

function

proper

purchase

fool for

construct, purchase,

to

to

recognized that

was

reason

judgment

The

the railroad

lawyer has

own

banker

by

or

which

essential

His

or

tached
de-

ties
securi-

decision

to

withhold

credit,to purchase or not

purchase securities,involves passing judgment

grant

or

on

soundness
to

the

responsibilityfor

Long

to

the

for

secure

ultimate

management

or

to

banker's

the

necessarily clouded
the

order

in

benefit

the

MONEY

occupy

to

the

of
efficiency

of the
a

the management

enterprise;and

positionwhere

in

he
so

or

ought
doing

he

the
not

is

BANKER-MANAGEMENT

passing judgment
does
The

banker

just as
loans

to

his other

his

sense,

of
of his
Such
banker

its affairs

But

the

own

client.

plans

banker

customers

securities.

the

"

The

are

small

an

investors

proper

do

of

their

not, and

judgment

offered.
furnished

of

with

of his

corporate
stands
in

And
the

as
even

the facts
to the

buy

who

which

if these

small

the

certain
as-

to base

ties
of securi-

investors

lack

our

the

cannot,

cases
on

of

on

The

soundness

facts,they

tion
posi-

women,

bankers.

in most

ward
to-

fullyrecognized.

securities, commonly

for themselves
a

interest

proportion
ever-increasing

recommendation

pacity
ca-

part of the

customers

be

any

man.

banker

should

legal

be, in

the

the

its

as

the wisdom

purchasers

of his

to have

not, in the

the
investors,
particularly

holding

corporate

in

railroad

upon

on

make

to

not

railroad

investment

of trust, which
The

as

also

large part

full knowledge.

does

should

attitude

is demanded

other

knowledge,

as

should

He

acts

or

detached

full

ought

banker, pass judgment

own

knowledge.

undertakes

customers

of

knowledge

adviser.

who

of

only with

act

tachmen
de-

course

purchase securities from

or

for sale to
full

should

banker

with

only

act

Of

lack

imply

should

The

himself.

on

not

lawyer

199

were

business

OTHER

200

PEOPLE'S

essential

experience

have
unbiased

advice;
where

the

and

sale
Is

to

it

the
the

securities

Haven

the

expended,

management?

that

have
with

clouded

by

of

be

the
in

participated
are

their

cannot

part

which

to

the

biased
un-

tion's
corpora-

the

tion
crea-

subject

of

investor.

conceivable

would

as

entitled

obviously

advice

banker,

ment.
judg-

proper
are

and

the

has

and

advice,

management,
of

need

bankers'

the

forming

to

investors

Such

MONEY

aided

the

great

in

providing

hundreds
if

its

participation

house

of

the

millions

judgment

had

in

New

the

of

gan
MorNew

so

not

wisely
un-

been

Haven's

PEOPLE'S

OTHER

202

of

limitations:

human

the

at

First,that

masters; second, that

two

serve

time

same

do

There

Of

are

course,

have

time,

because

they
to

have

oneself,has

give, and

can

bear."

And
of

success

with

by
the

test

of

a
a

for

it

even

such

where

one

before
difficult
has

the

advantages privilege
all the

competitive

traffic will

the

business

ness
long-established,
well-organizedbusiwidely extended good-will,must continue
considerable

intertwined

time; especiallyif

tressed
but-

relations

preference over
efficiencycomes

when

charges

sold

or

natural
which

service

railroads

managed
to

shorter

constantlygiving
real
competitors. The

the

goods

for

It is not

"charge
in

ones.

long time,

attained

impetus

all the

may

struggled for; when

limit

the

to

properties

public; some

large net income,

field to

of

for

some

banker-managed.

were

real

banker-managed

of the

expense

cannot

man

relatively few

prosperous;

the

at

can

seeming exceptions

many

been

man

SUCCESSES

numerous

rules; and

no

things well.

many

SEEMING

these

MONEY

test, and

have

may

has

success

legal conditions

or

be

rendered.

made

Our

recently been

they

have

to be

for

the

banker-

subjected

failed to pass

it.

THE
"It

is

OLIGARCH

only," says

INEFFICIENT

Goethe,

limitations,that

"when

the master

WHY

203

working

within

is disclosed."

OLIGAKCHY

FAILS

Banker-management fails,partly because the

of judgment
private interest destroys soundness
and

undermines

because

banker

(and
location

directors

often

fails

It

loyalty.

led

are

even

by

from

the

partly, also,
by their occupation

the

fact of their

mere

operated properties)
to apply a false test in making their decisions.
Prominent
in the banker-director
mind
is always
this thought: "What
will be the probable effect
of

our

upon

is

so

remote

action

upon

stock

and

stock

value

bonds,

indeed, generally

exchange

much

life,that

the market

part

he

values?"
of

stock

market

with

the
to

decisions

best

such

in the

the
of

stock market

affected

disinterested

street"

Facts
or

often

often

are

by

are

effort to prevent

led

this
be.

may

investors.

intentions,directors

influences

deferred

by

he

to

ceptible
sus-

unwise

tions.
misinterpreta-

Thus, expenditures necessary

for the ultimate
good of
or
are

pany's
com-

investment-banker's

is sensitive.

misinterpreted "by
And

the

The

help being

cannot

consideration, however
The

or,

of the

for
a

tenance,
main-

property

by banker-directors,because

of

belief

the

MONEY

PEOPLE'S

OTHER

204

that

the

of

making

them

now,

(by showing smaller net earnings),create

even
false,impression on the market.
a bad, and
Dividends
are
paid which should not be, because
would

suspension would
in

judgment

that

is best in the

of which

of his

reason

But

is

there

banker-management

The
cannot

banker,

with

and

the

mind

study

of

judgment

why, ordinarily,

TIME

multiplicityof interests,
time

essential to proper

acquiring that knowledge

to the

who

superintends,governs
in any

can

his environment.

exercise

Century Dictionary

is "one

man

whose

distortion

OF

his

to

the facts necessary

no

is,

fail.

must

ELEMENT

supervision and

Director

sound

banker-director

reason

ordinarilygive the

The

of

for the company

The

such

to

further

THE

And

long run

occupation

or

value

excerise

function

director?"

am

peculiarlyliable

by

To

innocently,from

diverted,however

of,"what
is

the market

upon

operation.

successfullyperform
is

reduction

difficult affairs of business

the

delicate

best,a

at

have

securities.

company's

the

it is believed

effect which

of the

business

of sound
tells

directs;one
and

who

manages."

in which

us

of

ment.
judgthat

guides,
Real

conditions

ficienc
efare

THE

OLIGARCH

changing

ever

measure,

INEFFICIENT

ultimately depend,

must

the

upon

problems

of the

correctness

from

exercised,almost

205

day

they

as

to

large

judgment

day,

arise.

in

on

And

the
how

portant
imcan

leading bankers, necessarilyengrossed in the

vast
problems of their own
private businesses,
the

get time

and

to know
so

other

many

Besides,they
When

created

the

Mr.

Perkins
is the

industry, on
who

do not

New

complex

cerning
con-

businesses?

signed which
of the lawyers (as
Steel Trust, one
ture
signafrankly tells us) said: "That
last paper

the

last
a

one

necessary

was

put the

to

large scale,into the hands

know

AVOCATIONS

The

the facts

usually with ignorance of the

which
they are supposed to

start

particularbusiness
direct.

correlate

to

Haven

anything about
OF

THE

System

of

Steel
men

it."

OLIGAECHS

is not

railroad,but

agglomeration of a railroad plus 121 separate

of which
acquired
was
corporations, control
after that railroad attained
Haven
by the New
miles of line. In
2000
its full growth of about
erties
administering the railroad and each of the proparate
formerly managed through these 122 sepcompanies, there must arise from time to
the directors
which
difficult questions on
time
an

should

of
decade

were:

Baker,

and

F.

Morgan

head

of

the

world.

Mr.

of

Yet

years.

Each

of his

vast

own

Board

of

besides

business,and

rectors
Di-

(the

Standard

advanced

well

was

in

feller
Rocke-

Mr.

of the

of these men,

each

house

dent
1909, Presi-

and

1911, President

Company.

Oil

1913, the

leading banks

York),

of New

until

was,

the

of

of America's

National

in

until

was,

Chairman

one

Rockefeller.

largest banking

the

the

Pierpont Morgan,

William

Baker

then

during

system
J.

rectors
di-

managing

until his death

was,

perhaps

and

First

Haven

New

of its decline

George
Mr.

the

real

The

judgment.

pass

MONEY

PEOPLE'S

OTHER

206

in

the duties

important private

interests, undertook

to

"guide, superintend,

and

not

only

govern

but

manage,"

also the

of

which
48

following other

at

least

insurance

of

least

158

Mr.

gan,
Mor-

subsidiary

line; 3 banks

15

industrial

Baker,

Mr.
railroad

and

trust

or

48

porations,
corpanies,
com-

and
and
porations,
cor-

corporations,

and
subsidiaries,

track; 18 banks,
15

100

companies;

including
at

corporations,some

of

16,000 miles

public-servicecompanies.
with

Haven

corporations,including40 railroad
and

or

New

similarly complex:

were

with

trust

the

37,400 miles

insurance

public-servicecorporations

and

panies;
com-

in-

THE

dustrial

OLIGARCH

INEFFICIENT
Mr.

concerns.

including 23
least

at

miles

207

Rockefeller,37

railroad

tions,
corpora-

corporations

with

117

subsidiarycompanies, and 26,400

line;5 banks, trust or insurance companies;
public service companies and industrial

of
9

concerns.

SUBSTITUTES

It has

burdens

been

urged that in view

which

the

leaders

of finance

directingBusiness- America,
of

be

refrain from

and

error

deterred

from
A

public service.
said

report
"It

is believed

and
fill,

Indeed

will have

be

to

them
in

being
But

American

daily

on

some

the board

there

is

people

wreck:

the

more

paid

in

McChord's

New

Haven
make

quite undesirable

it may

no

have

even
a

the leaders

respectableBoston

frequency will

and

patient
this

that

director
more

be

should

lest
criticism,

Haven

some

in

continuing to perform

very

the North

on

of railroad

men.

we

heavy-

assume

days after Commissioner

few

repeated with
to

of the

avoided

degree for

the part
and

hard

by responsible

become

substantial

pillory

so

that

salary to

men
pensate
com-

the risk involved

of directors."
occasion
as

for

little need

alarm.
of

The

oligarchy

in business

of

the

New

better

and

because

performed
task

the

Mr.

time

which

under

done

give

its difficult

to

with

than

business

Americans

us

that

Athenians

were

neighbors;

but

while

strength

the

no

when

tion
atten-

demand.

And
be

could

dered
ren-

nesses.
important busi-

our

the

they,
There

Liberty is the greatest developer.

tells

sessing
pos-

singlenessof

is great

problems

guide

Mr.

average

conditions.

There

to

more

competent

the

better

proper

only.

to

of thousands

otus
Herod-

tyrants ruled, the

better

fightersthan their
freed, they immediately
If industrial democracy

surpassed all others.

true
cooperation should
"

absolutism, there

"

be

substituted

would

be

no

for industria
lack

of

leaders.
England's

big

business

England, too, has big business.

business

and

though

ability,even
have

master

one

industrial

of

Morgan.

For

strength in serving

having

tens

did

than

would

working

purpose

stockholders

native

man

is great

have

could

Rockefeller.

Mr.

less
business

who

thousands

are

guides, superintends, governs

manages,"
Baker

MONEY

politics.There

Haven

"who

one

in

as

in America

men

for

in

PEOPLE'S

OTHER

208

is the

But

Cooperative Wholesale

her

big

Society,

mark

Sweden.

and

between

It
and

Continental

and

property

of these

one

respectivelines

its

manufactures

scattered
is at

all

over

England;

libertyto buy
it

from

chooses;

or

not,

the

Cooperative Wholesale

This

as

the

in

tive
Coopera-

purchases, and

order

but
the

and

each

supply

to

societies

local

society

wholesale

society,

they buy

only

sells at market

Cooperative actually does;

able besides to return

its

The

its

petition
com-

in their

cooperative
distributive,

local

1399

products,

in

concerns

Britain.

Society makes

Wholesale

the

in Great

the

Every

is conducted

efficient

the most

it insures

its members.

departments

with

It has

English ports.

of

person

plying

steamers

owns

important banking department;

an

on

MONEY

PEOPLE'S

OTHER

210

to the local

and

if

prices.
it is

fair dividend

purchases.
INDUSTRIAL

Now,

how

are

the

DEMOCRACY

directors of this great business

by England's leadingbankers,
other notabilities,
or
supposed to possess unusual
wisdom; but democratically,
by all of the people
interested in the operations of the Society. And
the number
of such persons
who
have directlyor
indirectlya voice in the selection of the directors
of the English Cooperative Wholesale
Society is
chosen?

Not

THE

OLIGARCH

2,750,000.
Society are
1399

For

INEFFICIENT

the

elected

directors

by

the

of the

vote

retail societies.

of

And

the

local
the

on

regardlessof

delegates of

Note

kind

what

"

executive

Not

but

who

have

of

confidence

elected for

year

only; but

W.

Society continuously for

two

directors

the

business

thirty-two is less
in

single executive
directors

these
each

for

The
is the
But

of

the

similar

years.

Thirty-

manner.

Each

that

wholesale

whole

of many

corporations;for

$1500

largest of

rarely

aggregate salaries

American

about

are

president of

Society his

than

Cooperative Wholesale
and

is

England's big business

salary of

oldest

service

directors

was

21

of

respect and

director

in this

of the

attention; and

and

time
of

the

to

selected

are

The

Mitchell

the

gives

their dummies,

the ranks

the

won

fellows.

J. T.

unseated.

vote,

democrats

or

risen from

their

one

sumers,
con-

of their vast

control

local societies have

in the

the

who, by conspicuous

cooperation; men

the

capitalcontributed.

all-wise bankers

organization.

the

bers
mem-

one

man,

these industrial

men

select to exercise

one

of

amount

of

men

the

by

societies; that is,by

principleof

the

Wholesale

delegatesof

retail societies are, in turn, selected

of the

211

serve

year.

Society of England
these

institutions.

societies exist in 15 other

OTHER

212

countries.

The
has

Maxwell
for

PEOPLE'S

thirtyyears

week)

year.

has

at

REMEDY

of Reviews

the

Shoe

Society forced

this memorable

in

presented a
wholesale

ago,

Dr.

Those
eyes

Hans

Minister
the

were

lighted up,

hand,

(compelling
crowns

Switzerland

the

dissolution of the

the

He

tells also

international

an

by

which

of State
was

delegate,

international

an

be created.

movement,

congress

Swiss

Muller, a

societyshould
of

who

at

resolution

zatti,Italian
member

in

how

incident:

years

Cremona,

Sugar Trust;

Association.

Manufacturers

Swedish

lost 2,300,000

how

the

Review

the

Combine

having

struggle);and

"Six

how

the

Margerine

dissolve after

Wholesale

Secretary of

tells in the American

Society curbed

it crushed

$50,000,000

TRUSTS

April, 1913,

for

Wholesale

the

than

more

FOE

Cooperative League,

in

of

Sonnichsen, General

Albert

it to

President
as
efficiently
exceeding $38
salary never

most

turn-over

William

Society (which

Scotch

served

MONEY

Luigi Luz-

and
in

an

the

ardent
chair.

present say Luzzatti

paused, his
then, dramaticallyraising his

he said: 'Dr. Muller

proposes

to the assem-

THE

bly

OLIGARCH

great idea

trusts, the

INEFFICIENT

that

"

of

Rockefellers

opposing

of the

America
able to

grapple with

Michigan,

to

its members

high

recent

interest

about

cost

and

reports that
is

In

affiliated.

other

the

or

ment
move-

states, many

through

and

are

City

There

Minnesota,
the zealous

his associates

83

in

of the

some

ways

organizations

federated

central

the

seat

In

into the

of Northern

Alliance

California,long

cooperative work,

already

The

in

John

Cooperative League.

Cooperative
In

and

progressing.

Jersey the societies have

Jersey.

The

years.

have

we

Northwestern

York

New

affiliated with

American

23

cooperative stores

Tousley and

of Mr.

in dividends

societies.

organizedby

were

some

Tamarack

cooperativemovement;

Right RelationshipLeague

New

it has

livinghas greatly stimulated

federation

100

over

of which

are

But

distributed

local distributive

350

Wisconsin

work

of

Brooks

toward
are

Cooperative Society

$1,144,000 in

in the

Graham

has

so

' "

the trusts.

which

wide
world-

AMERICA

Wholesale

no

great

shall become

like the
strong retail societies,

very

of

has

IN

the

to

world,

cooperative alliance which

powerful as to crush the trusts.
COOPERATION

213

New

of effective

management

com-

MONEY

PEOPLE'S

OTHER

214

progressiveWisconsin

is developing. And

mittee

wisely to develop cooperarecentlylegislated

tion
throughout the state.
Among our farmers the interest in cooperation

has

has
The
federal government
especiallykeen.
ment
just established a separate bureau of the Departopment
of Agriculture to aid in the study, develis

introduction

and

cooperationin

of
and

in

working

to

in which

complete
America's

credits

farm

Continental
and

success,

to

direct

German

banking.

to

now

field of cooperation
has

Europe
which

David

has, among

savings

farmer

The

"

is

achieved

Lubin,
Institute

others, done

attention.

our

people's
The

farms, in buying,

the International

delegateto

Agricultureat Rome,

much

of

methods

best

specialattention

and
distribution;

being given

of

the

of the

has

banks

achieved

democratic

13,000 little cooperative credit

associations,with

membership of
about
90 persons,
are
truly banks of the people,
by the people and for the people.
First: The
banks' resources
are
of the people.
These

aggregate

an

about

average

$500,000,000.

Of

this

$375,000,000 represents the farmers'

savings deposits; $50,000,000,the farmers' curamount

THE

OLIGARCH

INEFFICIENT

215

deposits; $6,000,000, the farmers' share

earned
and
capital; and $13,000,000, amounts
placed in the reserve.
Thus, nearly nine-tenths

rent

of these
that

large resources

is,to the members

Second:
that

"

The

banks

is, the

share

up

of the

The

committees

of the

and

farmer

The

6 per

borrowers

the

of

the

that

so

the

of

officers.

often

(and
:

$5 per

amount

elect the

pay

paid-

regardless

vote

or

even,

the

penses
ex-

about

average,

is loaned
low

by

the

rate

same

their
are

The

to

the

(usually4

per

receiving,

shareholders

cent.);the

on

people.
farmer

of interest

rate

pay

the

for

are

of all farmers

resources

people
membership is

one

on

are,

their shares, the

on

has

trustees

banks

money

at
to

cent,

the

1909, less than

without

banks

"

year.

Third:
farmers'

in

by

amount

members

These

treasurer)serve

And

of his shares

number

deposits.

$150

managed

the average

member

Each

his

the

are

capitalwas,

member.

farmers

of the banks.

members.

easilyattained;for

to the

belong

of interest that

made

farmer, for productive purposes.

rural banking is
This democratic

the

Thus

loans.

available

to

each

to

Germany.

book

on

As

Henry

cooperativebanks:

W.

Wolff

not
says

confined
in his

PEOPLE'S

OTHER

216

MONEY

by

their

little people's cooperativebanks

have

themselves

"Propagating
Germany,

Italy,Austria, Hungary,

Belgium.

Russia

is

France
of

Canada
its

have

has

credit.
made

Africa

is

has

bank.'
full of

more

Only

on

Ireland

own.

the road

has

substantial

economic

sowings.

way

to

discovered

the

necessity

by

even

India

promise.

has
And

and

the

the

side

made
even

Raffeisen.

girdled with
the

United

ring

States

The
of

and

to

Jamaica, have

even

same

of

of

Lord

cultural
'agrining
begin-

in far

China, people are trying to

perfected organizations

Delitzsch
seems

their

pet creation,the richly endowed

Cromer's

and

groping its

cooperative banks,

the

and

of her

show

goal. Egypt

in

possession

credit

such

first start.

first-fruits to

and

for the

scored its first success

their

"South

countries;

Servia, Roumania,

acquisition. Cyprus,

made

overspread
Switzerland,

those

followingup

strivingstrenuously

cooperative

Bulgaria

is

merits,

own

Japan,

acclimatize
of

Schulze-

entire

world

cooperative credit.
Great

Britain

still

lag lamentably behind."

BANKEKS'
The
contrast

saving banks

SAVINGS

BANKS

of America

to these democratic

present

banks.

Our

striking
savings

MONEY

PEOPLE'S

OTHER

218

citizens.
extent, public-spirited

them

Among

(at least in the larger cities)there is apt

Thus

directors.
of

Boston

those

Of

directors

the

these, 52

have

exceed

together

81

bankers

or

banks

Massachusetts

in other

bank

deposits

investment

are

largestsavings banks

three

(whose aggregate
other 18 banks)

of the

trustees.

bankers, and

of investment

predominance

be

to

trust

or

companies.
Second:

The

funds

(whether stock
the

for

allowed

interest

In

the

all the

in these

reservoirs
of

productively persons
the

deposits.

earners,

salaried

tradesmen's
used

The

savings

the

persons

rare,

small

used

classes

banks

would

needs

are

moneys

of

seldom

would,

the

be

any

aid

make

of

small
is

money

for the

instances

the

loaned

to

vance
ad-

depositor class.
able

to

it is doubtful
in

to

largely wage

it is used
are

mately
ulti-

money

who

members

or

indeed,

required security;and

their

is not

Staticallythe

productivelyone
Such

the

Dynamically

capitalist.For
when

But

depositors are

families.

for them.

the

people,

receive

they

are

cent.).

3 to 4 per

earnings.

net

used

not

are

depositors

(usuallyfrom
savings banks

mutual

gathered

The

people.

banks

savings

our

purely mutual)

or

mainly

of

provide
whether

event, receive

OLIGARCH

THE

consideration.
mutual

In

savings

1912

banks

savings
for

INEFFICIENT

"

which

bank

America

of

the

largest of Boston's

the

Provident

is the

Savings,

pioneer

invested

was

$53,000,-

in bank

banks

($20,764,770)

estate

($7,566,612)
security; and

the

loaned

was

Obviously,

$54,830.

among

the

large-scale

investments

do

individual

depositor

not

conspicuous

bank

pays

than

the

its

Savings Bank
the
are

in

the

people's

national

These

money

banks.

for

rate
our

serves

catch-basins

effect

Even

system

capitalist.

"small

sources
re-

loans

man"

borrowers;
not

of

the

of these

and

even

the

for

of interest

admirable

is
these

serve

especially well;

depositors

average.

the

real

personal

on

of each

average

the

on

of

One-seventh

$52,569.

was

of

amount

average

"

in national

loaned

were

the

telephone

Two-fifths

the

and

mortgages;

loan

was

deposited

was

or

companies.

trust

or

resources

stock;

of

in bonds

state, municipal, railroad, railway and

and

mutual

one-half

Nearly

($24,262,072)

resources

tion
Institu-

managed

"

of people's money.

000

219

this
lower

Postal

productively mainly

postal saving

stations

which

collect

merely,
distribution

among

the

MONEY

PEOPLE'S

OTHER

220

PROGRESS

Quebec,

has demonstrated

associations

of the

man

impressed
not

were

people. Many

with

branches

and

savings bank,
three

chanced
He

of

read

to

and

in

For

in

loans

averaging $120

had

not

1/2
met

the

seven

"

the people

rural banks.

idea

for

there

years

this

he

in

use

the

first

watched

little bank.

accumulated

in

It had

resources.

to

out

had

union

loans

rate

deposit

thinking,he

European

operations of

period $80,000
its

much

established

1900

carefully the
pioneer

the

work

to

"credit-union."

The

of

Levis

postal savings bank,

After

served.

proceeded

Levis;

in

incorporated"loaners"; but
not

were

the

people productively

located

ordinary banks

of three

mutual

people'ssavings

aid the

then

were

he became

ago

the

primarily to

There

the

on

of

years

the fact that

utilized

least

at

Quebec, is a
Desjardins himself is

inhabitants.

city of 8,000

to

Levis,situated

opposite the City

St. Lawrence

cooperativecredit

that

communities.

of

Province

applicable, also,

are

urban

some

Levis,

of

Desjardins

Alphonse

made

that
2900

members, aggregating $350,000; the

per

cent.

with

in amount,
In

and

the interest

all this time

singleloss.

Then

the

bank

Desjardins

THE

OLIGARCH

concluded

that

other

and

of

later

in

the

Province

also

credit-unions
his

aid; and

last

the

Province

in

of

merely the

not

was

through

the

121; and

to

grown

established

jardins

In

credit-unions

has

Quebec

have

after year
this

small

that

aid

has

who

means,

lives
And

mechanic.

has

it is

without

government
services

his

given

having

expenses

been

the

in

now

Year

him.
without

pay

the

as

and

nary
ordi-

noteworthy that this

of cooperative credit-

established

been

All

large family

simply

as

rapidly extending system

banks

of

Des-

established

from

given

man
public-spirited

been

Ontario.

been

been

of

have

19

applicationsare

24

the

years

pioneer.

requesting like assistance

hand

221

banking was
cable
appliproceeded to establish

he

credit-unions.

number

by

democratic

Canada;

to

INEFFICIENT

in Canada

wholely

aid, Desjardins having

his
free, and
travelling

paid by

those

seeking his

assistance.
In

1909, Massachusetts,

guidance, enacted
credit-unions.

The

law

and

then
the

names

25

other

for the

first union

in 1910, was
Springfield,
Myrick" a strong advocate
Since

under

named
of

unions

of the unions

Desjardin's

incorporationof
established
after

in

Herbert

cooperativefinance.
been
have
formed;
and

of their officers

disclose that
and

11

Italian

is

that

and

will

and

wage-earners

the

have

"

Massachusetts, where

35

years,

their

salary-earners,who
in many

have

they
has

success

been

number, in 1912, being 162, and

Thus

farmers, workingmen,

learningto
to

help

and

notable

for
the

"

their aggregate

not

one

to

another

instead

of

the great bankers

be themselves

to

and

expect that when

will learn

how

to

help

another, and

thus

for all?

When

learn this

from

their

ings
sav-

And

cooperative

farmers

and

and

over

ing,
keepmay
ment
movefacturers
manu-

working-

themselves

joinin

by helping one
dom
attainingthe New Free-

merchants

lesson,money

swollen

are

for safe

exploited.
the

clerks

turning

develops in America, merchants

and

states.

existed

their little capitaland

use

their money

men

ship
owner-

nearly $75,000,000.

assets

we

the

aged
manassociations,

prospered

In

United

For

joined togetherfor systematicsaving and

of houses

mocracy
dethese

that

succeed.

loan

the

financial

spread rapidly in

they

that

to believe

reason

cooperativebuilding and
by

for

unprepared

will

people's banks

indication

strong

"

There

States

Jewish, 8 French-Canadian,

are

is not

immigrant

MONEY

PEOPLE'S

OTHER

222

fortunes

and

kings
may

manufacturers

will lose

subjects,

shrink;but industries

OLIGARCH

THE

will

because

flourish,

liberated

and

Wilson

country

originated

the

faculties

of

will

men

does
of

have

its

lie

not

men

in

now

It

prosperity
class.

controlling

enterprises.

in

the

depends

of

unknown

unknown
men,

Every

men.

of

of

the

already

men,

not

and

ambitions

is renewed

country

unknown,
famous

the

upon

the

upon

out

powerful

THE

END

of

out

the
in

The

brains

control

of

of
the
the

upon

...

inventions

be

wisely:

to

small

body

said

afford

America

small

great

has

can

by
of

treasury

the-

223

developed.

President
"No

INEFFICIENT

originations
of

unknown

of

the

ranks

control."

ranks
of

the