Avery Architectural and Fine Arts Library Gift of Seymour B. Durst Old York Library PCTC ■» .»■ *»■ ■■ ■ »■' LIBRARY OF J. PIERPONT MORGAN The building was in course of construction from 1903 to 1905, the architects being Messrs. McKim, Mead & White. In this structure, Mr. Morgan assembled many of his choicest manu- scripts, early prints, and other treasures. Several of the rooms, however, were fitted up for business purposes, and it was here that Mr. Morgan conducted most of his business conferences during the latter years of his life, the- most famous of them being those held during the panic of 1907 and at the time of the suspension of the Carnegie Trust Co., in 191 1. ffi THE PROGRESS OF THE EMPIRE STATE A WORK DEVOTED TO THE HISTORICAL, FINANCIAL, INDUSTRIAL, AND LITERARY DEVELOPMENT OF NEW YORK EDITED BY CHARLES A. CONANT AUTHOR OF "A HISTORY OF MODERN BANKS OF ISSUE," "THE PRINCIPLES OF MONEY AND BANKING," ETC. VOLUME I. NEW YORK STATE AND CITY PUBLISHED BY THE PROGRESS OF THE EMPIRE STATE COMPANY" NEW YORK 1913 3l^ \A Copyright, 1913 BY CHARLES A. CONANT Chapter IX. Specially Copyrighted by LOUIS WINDMULLER Ube ftnictterbocftec press, Hew Boris ADVISORY COMMITTEE AS CONSTITUTED AT THE INITIATION OF THE WORK *J. Pierpont Morgan. Alton B. Parker. Lyman J. Gage. * Cornelius N. Bliss. Morgan J. O'Brien. Perry Belmont. J. Van Vechten Olcott. Paul D. Cravath. * Isidor Straus. S. R. Guggenheim. Joseph French Johnson. * Deceased. m SUBSCRIBERS FORTHE "PROGRESSOFTHE EMPIRE STATE" Among those ordering copies of this work are the following: ORDERS IN BUFFALO Edward D. Adams American Bankers' As- sociation American Bank Note Company Frank B. Anderson *John Jacob Astor Jules S. Bache Perry Belmont ♦Cornelius N. Bliss N. F. Brady Joseph H. Bromley Irving T. Bush Henry W. Cannon James G. Cannon John Claflin *Grover Cleveland Louis A. Coolidge William E. Corey George B. Cortelyou Paul D. Cravath William A. Day M. S. Driggs H. B. Drought Henry W. Eaton Henry Evans Stuyvesant Fish Lyman J. Gage Frank S. Gannon German-American In- surance Company Alexander Gilbert Daniel Guggenheim J.J. Guile H.O. Havemeyer Estate Henry Hentz A. Barton Hepburn Myron T. Herrick Frederic B. Jennings A. D. Juilliard Walter Kutzleb Ladenburg, Thalmann & Company Gustav Lindenthal Littleford, James, Foster, & Porter Philip Lydig •Deceased since giving Franklin MacVeagh J. B. Martindale Eugene Meyer, Jr. Seth M. Milliken *D. O. Mills Mrs. John Murray Mitchell F. D. Mollenhauer *J. Pierpont Morgan James R. Morse Henry W. Munroe N. Y. Stock Exchange Walter G. Oakman Alton B. Parker George Foster Peabody George W. Perkins Henry Clay Pierce James H. Post A. A. Raven E. G. Richards Allan A. Ryan Thomas F. Ryan Russell Sage Estate Charles A. Schieren, Jr. Jacob H. Schiff Mortimer L. Schiff J. G. Schmidlapp Isaac N. Seligman *George P. Sheldon Theodore P. Shonts Samuel Sloan Howard C. Smith Elbridge G. Snow Samuel Spencer Estate Maurice M.Sternberger Willard Straight *lsidor Straus Alvah W. Sulloway Henry R. Towne H. H. Vreeland Paul M. Warburg Silas D. Webb William E. Wheelock Clarence Whitman Harry Payne Whitney Louis Windmuller order. Lewis J. Bennett Buffalo Historical Society Buffalo Public Library *S. M. Clement Inconge Clinton Walter P. Cooke William B. Cutter Robert S. Donaldson Mrs. F. H. Goodyear F. C. Gratwick Mrs. W. H. Gratwick Chauncey J. Hamlin William B. Hoyt E. H. Hutchinson Dudley M. Irwin Seymour H. Knox John D. Larkin Josiah Letchworth Franklin D. Locke Darwin D. Martin George B. Mathews *George E. Matthews Isidore Michael Adelbert Moot Charles J. North Eugene O. Roberts William A. Rogers John A. Scatcherd Hans Schmidt J. F. Schoellkopf Walter S. Schoellkopf *T. Guilford Smith Ansley Wilcox T. B. Crary Thomas R. Proctor M. B. Shantz Arthur G. Yates FOREIGN SUBSCRIBERS Gideon M. Boissevain, Amsterdam, Holland. M. L. Dorizon, Societe Generate, Paris. Sir Edward Holden, London City & Midland Bank, London. Mrs. Emil Oelbermann, Cologne. M. Charles Poirson, Union Parisienne, Paris. M. L. Van der Rest, National Bank of Belgium, Brussels. Yokohama Specie Bank. VI CONTENTS OF THIS VOLUME CHAPTER PACK 1. — Planting and Growth of the Empire State . . i By Ellis H. Roberts II. — The Influence of New York in National Affairs 51 By Perry Belmont III. — The Financial Development of New York . . 59 By Charles A. Conant IV. — New York and the National Finances . . . 109 By James G. Cannon V. — The Era of Industrial Expansion . . .147 By Alexander D. Noyes VI. — The Development of Industrial Combination . 187 By Jeremiah W. Jenks and William H. Lough VII. — The Crisis of 1907 ...... 227 By George B. Cortelyou VIII. — History of the New York Stock Exchange . . 261 By Sereno S. Pratt IX. — The Commercial Progress of Gotham . . .311 By Louis Windmuller X. — Development of the Periodical Press . . .381 By Elizabeth Jordan Index ......... 413 LIST OF PLATES IN THIS VOLUME FACING PAGE Library of J. Pierpont Morgan Ellis H. Roberts Theodore Roosevelt John Jacob Astor James S. T. Stranahan James A. Burden Silas D. Webb Cornelius N. Bliss . Lyman J. Gage . Perry Belmont William C. Whitney Charles A. Conant . August Belmont J. Pierpont Morgan Col. John Jacob Astor Thomas F. Ryan Samuel Sloan . Isaac N. Seligman . James R. Morse Bush Terminal Plant James G. Cannon A. Barton Hepburn . Frontisp tece. i •3 19 25 3' 35 39 45 5i 55 59 65 7> 77 81 87 93 99 105 109 115 LIST OF PLATES IN THIS VOLUME FACING PAGB John Claflin . Isidor Straus . John Murray Mitchell Irving T. Bush Alexander D. Noves Meyer Guggenheim . Stuyvesant Fish Theodore P. Shonts John Stanton . Home of Thomas F. Ryan William A. Day Jeremiah W. Jenks . Henry O. Havemeyer James H. Post . F. D. MOLLENHAUER . Anthony N. Brady . Daniel Guggenheim . Solomon R. Guggenheim George B. Cortelyou Augustus D. Juilliard Morgan Office Building Seth M. Milliken H. H. Vreeland Charles C Dickinson The New York Stock Exchange Russell Sage . Henry Clay Pierce . George W. Perkins . Jules S. Bache 123 129 137 '43 147 153 159 .65 171 •77 183 .87 193 199 205 209 215 221 227 233 239 245 251 257 261 267 273 279 285 LIST OF PLATES IN THIS VOLUME XI Samuel Spencer William A. Wheelock William E. Corey Smelting Plant at Garfi Louis Windmuller . Henry B. Claflin Clarence Whitman . Alfred Van Santvoord William B. Astor Emil Oelbermann Henry W. Eaton J. J. Guile William Astor . Woolworth Building Elbridge Gerry Snow Anton A. Raven E. G. Richards Elizabeth Jordan Edward P. Bryan Marshall S. Driggs Henry Evans . GUSTAV LlNDENTHAL George P. Sheldon ld, Utah FACING PACK 291 297 301 307 3i« 317 321 325 331 335 339 345 35" 357 363 369 375 381 387 393 399 403 409 INTRODUCTION THE purpose of this work is chiefly to record the prog- ress of the city and State of New York within the past generation. The foundations of this prog- ress date back to the settlement of New Amsterdam and the geographical position of the colony between the Eastern States and other portions of the Union. It is not the pur- pose of this work to ignore the part played by these events of our early history in building up the New York of to-day; but it is this story of to-day — of the present generation and of that which went before — to which it is chiefly devoted. Events have moved so rapidly within these generations that, from the industrial and financial point of view, out of the old New York have developed a new State and a new city. The history of the city and State of New York is in many respects an epitome of the history of the American people. From the political point of view. New York was a dominant factor almost from the beginning of the history of the Colonies. The Revolution could hardly have been brought to a successful issue without the cooperation of her loyal people, and it was their adhesion which made possible the Union of 1789. The finances of the nation could not have been put upon a sound basis and American credit raised to the level of that of other civilized peoples without the services of New York's foremost citizen, Alexander Hamilton, and of the moneyed interests which lent him sub- stantial support. And through the stress of civil war, it xiv PROGRESS OF THE EMPIRE STATE was largely the loyal hearts and open purses of the business men of New York that made certain the triumph of the Union. If Virginia in the early days was "the mother of Presidents," New York became by the strong character of her political leaders and her large population "the pivotal State" in presidential elections and so remained almost without interruption, from the days of Jackson to those of Taft and Wilson. It is principally with material and economic progress, however, rather than political, that this work will deal. The State of New York has, with slight variations, contained from the beginning of the Union from a twelfth to a tenth of the population of the country. This population grew in the case of the State from 340,120 in 1790 to 9,113,279 in 1910, while for the Union as a whole it grew from 3,929,214 to 91,972,267. New York was not the dominating factor among the States in population in 1790, however, which she has since become; for, while she possessed then, as now, about one twelfth of the population of the Union, the other eleven twelfths was in 1790 concentrated in less than twenty States instead of divided among forty-eight States, as at the present time. At the census of 1790, the popu- lation of Virginia was 747,610, or more than twice that of New York, and the Empire State was surpassed in the num- bers of her people by Pennsylvania, with 434,373 inhabi- tants; by Massachusetts with 378,787; and even by North Carolina, with 393,751. It was not until 1810 that New York attained second rank among the States in population, and it was not until 1820 that she surpassed Virginia and attained the first rank, which she has since securely held. The best proof of the position of the city of New York as the economic center of the United States is found in the flocking to the city of people of other States. Men of brains and large ideas have been drawn by an almost irresistible INTRODUCTION xv magnet to the city which has become the depository of capital, the center of exchanges, and the moving force in all the great enterprises which in America give form and sub- stance to civilized life. Of the population of 9,113,614 in the State of New York, in 1910 6,355,376 were born in the country, but only 5,647,063 in the State itself. More than half a million of her people are immigrants from other States, Pennsylvania alone furnishing 165,232, New Jersey 99,068, Massachusetts 60,900, Connecticut 43,882, Virginia 40,856, Ohio 34,913, and Maryland 17,360. The predominance of New York in the American Union at the beginning of our history would not have signified much in comparison with larger cities in other countries. When Wall Street marked the upper limits of the thickly settled portion of the city, and aristocratic farms were found in the neighborhood of Washington Square, New York was a negligible factor in the finance of the world. She was over- shadowed by London, Paris, Berlin, Antwerp, Amsterdam, Hamburg, Vienna, Frankfort, and other centers of the ten- century old civilization of Europe. To-day, only one city in the world surpasses New York in population; only two compete with her in the magnitude of their enterprises, the completeness of their commercial machinery, and the ac- cumulation of wealth which is reflected in their brilliant cosmopolitan life. The population of Greater London in 1904 was 6,907,756; of Paris in 1901, 2,714,068; and of Greater New York in 1910, 4,766,883. This increase, which has been going on in recent years at the rate of about 100,000 inhabitants per year, adding a new population the size of that of Boston or Baltimore every five years, explains in a measure the magni- tude of the local transportation problem and the part which it has played in the financial history of the city. The first subway had hardly been opened in the autumn of 1904 xvi PROGRESS OF THE EMPIRE STATE when traffic grew up to its increased facilities and within three years congestion again became acute. Some idea of the proportions of this traffic may be gathered from the fact that the number of passengers carried on the local trans- portation lines of the State in 1902 was 1,144,509,000, which was nearly one-fourth of the total number — 4,774,211,904 — carried on similar lines in the entire United States. On the local lines of New York alone were carried more passengers by more than 60 per cent, than the 649,878,505 persons who were carried on all the steam railway lines of the country. Rapidly as New York has grown in population, she has grown still more rapidly in wealth and in her control of the accumulated resources of the nation. Her total wealth, as computed by the Census Bureau, was #6,308,000,000 in 1880, and advanced to #8,576,701,991 in 1890 and to #14,769,042,207 in 1904. These figures, however, represent the visible physical property in the State and only partly in- clude the great share which New Yorkers have acquired in the control of property in other States. This control, which it must be left for later chapters of this work to set forth fully, is the natural result of the position of the State as the channel of commerce between the West and the outer world and the function of the city of New York as the center of exchanges. To that city which has been the gateway of commerce and the center of exchanges has come in all ages the control and distribution of the national wealth, whether to Nineveh, Tyre, Athens, or Rome in ancient times; to Venice, Florence, Lyons, Bruges, Amsterdam, or Novgorod in the medieval world; or to London, Paris, or Hamburg in the world of to-day. The city and State of New York have become, especially during the last two decades, a gateway through which passes the commerce of the nation. The commercial supremacy which the Erie Canal created, the railways have continued. INTRODUCTION xvn In round figures, more than one third of the exports of merchandise from the United States and more than half of the imports pass through the gateway of New York. Exports of merchandise from the United States for the fiscal year 191 1 were #2,049,320,199. Of this amount, $772,552,449 went from the port of New York. Imports of merchandise were $1,527,226,105, and of this amount $881,592,689 entered through New York. To these totals Buffalo, Champlain, Oswegatchie, Oswego, Genesee, and Niagara added about $104,000,000 in exports and $50,000,- 000 in imports. Inevitably, in order to finance such large operations, banking capital and enterprise have come more and more to be concentrated in the commercial capital of the Empire State. New York has gradually gathered within her strong hands the finances, the management, the control of most of the great enterprises of the country. Railway systems which formerly had their head offices in Boston or the West have come to New York. The resources of six great systems alone, amounting to nearly $7,000,000,000, represent more than half of the railway capital of the country. The head offices of most of the great industrial combinations are in New York. The transactions to which the country looks as a guide to values are those on the Stock Exchange of New York. The barometer of changes in financial condi- tions is found in the weekly statements of the Associated Banks of New York. The great engineering feats of the age— spanning the East River with great bridges, tunneling under the majestic Hudson, construction of subways of many miles, sinking the foundations of giant skyscrapers down into the bowels of the earth, and adjustment of sewerage, water, and lighting equipment to the congested needs of a city of four millions of people — have had their inception and their consummation in the city of New York. xviii PROGRESS OF THE EMPIRE STATE Even the great educational, literary, artistic, and charitable foundations which are the product of the ripened life of a people have received their richest dowry from the generosity of New Yorkers. It is within the past generation, almost within the past decade, that New York has forced her way into the front rank in international money markets. It cannot yet be said that she stands abreast of London or Paris in the inter- national character of her transactions. She is too much absorbed in home affairs. In some respects this is a sign of healthy life rather than lack of financial power. The capital produced in the United States is so urgently needed for the development of our own unbounded acres/and brings such returns when invested in American enterprises, that it does not need to seek foreign fields, like the accumulated savings of Great Britain, France, Belgium, the Netherlands, and other European countries. Hence, only a few foreign securities are dealt with on the New York market, and while the volume of her transactions gains steadily upon that of her great rivals in Europe, the Empire City has yet to become in the true sense of the word an international market. This fact, however, does not detract from the great prog- ress of the last few years. More and more as American commerce has expanded, it has choked and enlarged the gateway through which it has passed. From the greatest exporter of food products, the United States has (been forc- ing herself into the position of one of the greatest manu- facturing exporters of the world. Inevitably, such a volume of transactions carries with it the necessity for a great financial machinery. Invention followed invention in the field of labor-saving devices during the early years after the Civil War. Presently, invention and its products overtook and passed the old methods of conducting ex- changes — the local railway lines, the isolated individual INTRODUCTION xix banker. Invention, combination, enlargement, became vital in the financial field, as they had been in the field of farm- ing and manufacturing machinery, if the means of carrying on exchanges were not to break down under the weight im- posed upon them. Hence came that wonderful era of com- bination in finance which has excited so much criticism and which, like all great forward movements, coupled abuses and exaggerations with its tremendous services and benefits. It is the story of this growth which it is the purpose of this volume to tell. It is a story recorded nowhere else in complete form, because the work itself is largely the achieve- ment of yesterday rather than of a time long gone. To the service of recounting these achievements has been brought the services of many of the men who have borne the burden and heat of the day in the doing of them and of those also who have looked on as students and sometimes as critics. If their work has been well done, their story will be throb- bing with the pulsing life of the New York of to-day. The portraits which are presented will be those of men of ac- tion, not of talkers or dreamers, but of those whose achieve- ments justify the forceful words applied to the greatness of Grant, — that he was "Great in the arduous greatness of things done." ELLIS H. ROBERTS Writer and publicist born of Welsh parentage in Utica, N. Y., mber 30, 1827 - VT while a lad. In Yale College, took prizes for English composition, for Townsend prize essay, for Bristed scho] d by his classmates first editor of Yale Literary Magazine; graduated in 1850 second in merit in his class. Principal 1 Academy, 1850-1851; editor of Utica Herald, 1850-18- iber of New York atative in Congress, 1871-1875, serving on Committee of Ways and Mean. nl treasurer of resident of Franklin ■rial Bank, New York, 1893-1897; treasurer - States, 1897 [905. Married Elizabeth Morris 1 85 1, who died in, Washington, 1). ('., July 21, 1903. President Oneida Historical Society and Fort Schuyler ( a, X. Y.; president St. David's Society, Phi Beta Alumni, and Patria Club, New York; LL.D from Yale and Hamilton. Addresses delivered before American Bankers' Association and Bankers' Associations of many States. Author of Government Revenue and Planting and Growth of Empire State. 1 Progress of the Empire State CHAPTER I PLANTING AND GROWTH OF THE EMPIRE STATE BY ELLIS H. ROBERTS THREE nations of Europe in the early days claimed title to the domain now New York. The French, on the strength of the discovery of the St. Lawrence by Giovanni da Verrazano on the day of that saint in 1508, reached out to the sources of the streams flowing from the south into Lake Ontario as well as into that great river, and especially alleged that he visited New York Bay in 1524. The English grasped the Atlantic Coast from Nova Scotia to Florida and inland without limit, by virtue of the dis- covery of the continent by the Cabots in 1497. The Dutch frankly entered unoccupied lands "by deed of seizure," which hardly differed from the title of their rivals. The red men saw little choice between these suitors. Soon enough they felt the heavy hands of each of them. A fourth claimant might appear in Spain under the bull of Pope Alexander VI. who gave to her all America, but Charles V. was kept busy nearer the tropics. A map of 1529 styles the region about the bay the "Land of Gomez," 2 PROGRESS OF THE EMPIRE STATE because a Portuguese of that name discovered the bay in 1525 under the flag of the same Emperor. New York was to be fashioned by the struggles of Dutch and French and English with each other and with the red men. Her area, with shadowy limits at the start, was clipped by repeated excisions to 47,620 square miles, lying between north latitude 40 29' 40" and 45 o' 42" and longitude 71 51' and 79 45' 54" west. The extreme lines are 311! miles from north to south and 412 miles from east to west. Mountains, belonging to the Appalachian system, and between them rivers and lakes with their fertile valleys, are the main features. The single gateway from east to west is by the Mohawk Valley. A marked asset of the domain is its natural waters. Its boundaries are in great part lakes, of which 879 miles are navigable. A strait of the sea sets off Long Island, and the broad bay invites navigation. The inland lakes, varying in extent, are counted by hundreds. The streams, with a general course to the north and south, flow to all points of the compass. Some, as branches of the Mohawk and the Hudson, discharge into the ocean through the bay; many find their way by Lake Ontario and the St. Lawrence northeastward; and thither also Lake Champlain carries its affluents. The Susquehanna flows to Chesapeake Bay, and Delaware Bay receives many streams. Cattaraugus Creek finds its outlet in Lake Erie, while the Allegheny runs into the Ohio and thus into the Mississippi and the Gulf of Mexico. The factory and the electrician, as well as the artist, meet with no lack of waterfalls, while the islands in sea, lake, and river are abundant, and not the least among the gifts of nature. In the era of Columbus, and when the French and the Dutch came in, five nations of red men held the country inland and bore sway over minor tribes near the Hudson and PLANTING AND GROWTH OF THE EMPIRE STATE 3 the sea. They built cabins, tilled the soil, raising wheat and maize, kept orchards bearing several kinds of fruit, and their tribal organizations were joined in a confederacy. The French called them Iroquois. They numbered about twelve thousand. Their canoes were familiar on distant as well as near-by waters. They were noted hunters and collected furs from far regions. Their prowess in war carried terror to their enemies to all quarters. They impressed the early settlers by their skill in trade and their shrewdness in diplomacy, while as orators some of their chiefs have been ranked by critics with the classic masters. Not until one hundred and twelve years after Cabot's report, and eighty-five years after Verrazano's vision of the bay, did white men drop here the first seed of settlement. The domain lay barren for these generations. Jamestown had been planted in 1607. Plymouth was not to receive the Pilgrims of the Mayflower until 1620. Samuel de Champlain, the first governor of New France, was enticed by the red men about Montreal >to join them in a raid of revenge against the Iroquois, and in July, 1609, he and his allies gained transient triumph on the banks of the lake which bears his name. In another raid six years later, near Oneida, he was defeated and forced to retreat. Two months after Champlain's first invasion, the Half- Moon, flying the flag of the Netherlands, brought Henry Hudson, September 3, 1609, into the river which perpetuates his fame. The next year, the first settlers came under Dutch auspices. Champlain planted no acorn for the growth of an oak. Armies and missionaries came to harry and to teach the Iroquois; the soldiers, whatever their daring, hardly left a trail; the fathers of the Cross set up their faith, and their works do follow them. The Dutch put out bulb and nut, to grow into strength and beauty. 4 PROGRESS OF THE EMPIRE STATE The French king might respond to the appeals of the governors of Canada, and denounce the Five Nations as "perpetual and irreconcilable enemies," as he did in 1665, and order that war should be waged "even to their firesides in order totally to exterminate them." Tracy, Courcelles, Talon, De la Barre, Denonville, might march their trained European veterans into the forests to learn how quickly and how surely the red men could hide in their fastnesses. Even Frontenac, with skill, experience, and reputation won in Italy and Candia, might burn Schenectady, might threaten Albany, might surprise Indian castles at Onondaga and Oneida; but neither the complacence of Charles II. nor the grand schemes of Louis XIV. could secure New York for the French, nor crush the spirit of the Iroquois, to whom the wilderness offered escape from invaders, whatever their force and power to harm. The treaty of Ryswick in 1697, between England and France, brought peace to red men and French as well as to the English colonies which had been drawn into the war. Meanwhile the Dutch had planted settlements, had prospered and suffered, and then had put an end to their occupation by surrender to the English. Adriaen Block arrived in 1616 and came out again a year later, when, having lost one of his ships by fire, he built to take its place a vessel which he named the Onrust and so began marine construction here. A company of Amsterdam merchants, with a charter for exclusive trade to this region, entered into arrangements of amity with the red men, but soon com- petitors grasped a share in the traffic. Larger designs took shape when the West India Company started with its world- wide schemes. For this colony the first fruits were the landing in 1623 of immigrants, mostly Walloons, who built Fort Orange. The Dutch directors in course satisfied their land hunger by seizure or nominal purchase of large tracts, PLANTING AND GROWTH OF THE EMPIRE STATE 5 and the system of patroons arose in immense estates. William Kieft, whose rule of ten years as director ended in 1647, by stress of disastrous war with the Indians caused by his own folly, was forced to appeal for a council to help him. The Council of Eight framed a grave indictment against the director and appealed to the authorities in Holland. They held him guilty for the Indian war and for imposing taxes without authority; while they charged that he had falsely stated the resources and growth of the colony. His removal and a new policy were demanded. The home authorities accepted the conclusions of the Eight. He sailed for Amsterdam with a fortune of 400,000 guilders, large for those times, and with the hatred of the people, but the vessel was wrecked in the British Channel and he was drowned. The last and most picturesque of the Dutch director- generals was Peter Stuyvesant (1647), who had served in like station in Curacao. He inherited the quarrels of Kieft, but he was guided by new instructions, which ordered him to guard against encroachments on the borders, to preserve peace with the Indians, and to encourage the settlers to dwell in villages. He met with trouble inside the colony and beyond its borders. The West India Company, at first rich by capture of Spanish galleons, drifted into bank- ruptcy. Patroons and others became its rivals in trade with the Indians. The settlers grew hostile over its demands for tribute and its refusal of aid. English hamlets on Long Island were restive under the Dutch sway, and sought a voice in administration. Quarrels arose over the rights and tenure of clergymen. In the hope of relief, a popular con- vention met in New Amsterdam, December 10, 1653, to which four Dutch and four English towns sent ten delegates of Dutch birth and nine of English birth. This body adopted a remonstrance to the States-General against the 6 PROGRESS OF THE EMPIRE STATE conduct of the director and council in passing laws and appointing officers without consent of the people and in granting large tracts of land to favorites. At the same time, Indian outrages were perpetrated at many points, while the New England colonies were aiming to oust the Dutch authorities from New York. The city was helpless when an English squadron, sent in time of peace by the Duke of York to enforce his claims to the domain, blockaded river and bay, and its commander, Colonel Richard Nicolls, on August 29, 1664, demanded surrender. Long Island was in revolt, Massachusetts and Connecticut were ready to join in assault, the fort was untenable, the garrison was small and poorly equipped. What could Stuyvesant do? Clergymen and men and women urged him not to give pretext for bombardment by the fleet or attack by the soldiers. He could do nothing but surrender, and on September 8th the garrison was allowed to "march out with their arms, drums beating and colors flying, and lighted matches." The English bore sway in the province, which they named New York, for nearly nine years, until August 7, 1673, a Dutch fleet anchored off Staten Island and dis- covered that in the interval little had been added to the defenses of the city. The guns at the City Hall were spiked by the inhabitants. The Dutch commanders granted only half an hour's delay for answer to their summons to surrender, and opened their broadsides on the fort, killing and wounding some of the garrison. The defenders returned the fire and "shot the general's ship through and through." From the fleet six hundred men were landed and were joined by four hundred burghers. They were met with a message that fort and garrison would surrender with the honors of war. The Dutch resumed control and restored the former names and administration, with the successful Admiral PLANTING AND GROW III OF THE EMPIRE STATE 7 Colve as governor. The restoration was to be short; it was creditable, but it was the end of Dutch rule on this continent. By the treaty of Westminster, signed Feb- ruary 19, 1674, England and Holland, in making peace, agreed to restore to each other all lands captured during the war, and this domain became finally New York. When Major Edmund Andros took possession for James, Duke of York, of the lands in America granted to him by the King, the white inhabitants in Manhattan and Long Island and along the Hudson River did not number twelve thou- sand. The fur trade was a chief industry, but cattle and implements had been imported to broaden agriculture. A start had been made in simple manufactures. Commerce in American waters and with Europe was striving for more than mere existence. The neighboring colonies, now that all were under the British flag, no longer had pretext of race to threaten hostilities. The interests of New York ceased to be those of a foreign power, and its experience turned into the common channel of the continent. Yet the Duke of York and the governors who acted for him had a policy of their own. The period from the seizure in 1664 to the recapture in 1673 was marked by the promul- gation of the "Duke's Laws" — not illiberal in those days from a source claiming arbitrary power; by a change in the mode of government in the chief city; by the denial of any claim by Connecticut over Long Island; by the gift by the Duke of York of New Jersey to Lord Berkeley and Sir George Carteret, thus narrowing the borders of New York; and by refusal to allow a legislature to be elected by the people. Francis Lovelace, the second governor, ran into debt to the Duke of York and returning to England was arrested and his estate confiscated. While he was attending to troubles in New Jersey, Captain Manning was acting as governor at the time that the Dutch fleet restored the flag 8 PROGRESS OF THE EMPIRE STATE of the Netherlands, and when the English came into power again the captain was cashiered for the surrender and his sword was broken over his head. Andros set about his business with stern vigor. He required the Dutch burghers against their protest to take a strict oath of allegiance. One Jacob Milbourne, whom he arrested as a "mutinous person," gained in London a verdict of £45 against him. He landed a force on the Connecticut River to assert the Duke's title there, and soldiers were sent to Martha's Vineyard and Nantucket for a like purpose. At Pemaquid in Maine he built a fort and claimed the vicinage as a dependency of New York. He sought amity with the red men, and on a visit to them penetrated "nearly a hundred miles beyond Schenectady," to the sources of the Mohawk. In a conference with him in Albany the Iroquois expressed their good will. By a board of commissioners of Indian affairs, with Robert Livingston as secretary, he aimed to secure permanent peace with them. Starting with Andros, the colony lived under thirty- three governors, including lieutenants acting as such, before the Revolution. They were of various characters. Thomas Dongan (1683-1688) was prudent, well-meaning and effi- cient and less greedy than some of his successors. Lord Cornbury (1702-1708) was a spendthrift, wasteful and reckless, was imprisoned and removed, yet was to become Duke of Clarendon. Robert Hunter (1710-1719) strove for the common welfare, promoted immigration from the Palatinate and left a good record. William Burnet (1720 1728) added fuel to the strife over the appointment, powers, and salaries of judges. George Clarke (1736-1743) stands forth chiefly as conveying to England in emoluments the great fortune of £100,000. Under unwilling concession from the Duke of York, an assembly met October 17, 1683. In the "charter of liber- PLANTING AND GROWTH OF THE EMPIRE STATE 9 ties," that body declared that under the king and lord proprietor "the supreme legislative authority shall forever be and reside in a governor, council, and the people met in a general assembly. " James, when he became king, noted that this was the first mention of "the people" "in any constitution in America." The suffrage was given to all freeholders, and entire freedom of religion was enacted. Twelve counties were provided — New York, Westchester, Ulster, Dutchess, Orange, Albany, Richmond, Kings, Queens, Suffolk, within the present State, while Dukes County covered Nantucket with Martha's Vineyard and dependencies, and Pemaquid and adjacent territory formed Cornwall. Chief incidents of this period were disputes with Gover- nor La Barre of Canada over the boundary and with the red inhabitants, and a conference, July 30, 1684, with Lord Howard of Virginia and the Iroquois chiefs relative to the raids of their tribes to the south. A treaty of peace was signed at Albany. Governor Dongan relied on the Indians as the "bulwark" against assaults by the French, while he provided forts at Ticonderoga, Oswego, and Niagara. Sir Edmund Andros, returning as Governor-in-Chief and Captain-General of all the English colonies in America, came August n, 1688, from Boston, where he was the local governor, to New York, to assume the broader authority. After a brief visit here, he chose to reside in the former city. In his general council of forty-two, eight members represen- ted New York, but this colony was restive over the favors granted to its eastern neighbors, nor did the course of Andros in taking from New York all of its counties of Corn- wall and Dukes tend to allay the bitter feeling. Captain Francis Nicholson, acting as Lieutenant-Governor, rep- resented King James here when he fled and gave way to William and Mary as sovereigns of Great Britain. 10 PROGRESS OF THE EMPIRE STATE The change in the succession to the throne threw the colonies into excitement. Governor Andros was arrested in Boston and a committee of safety took his place. With his chief under arrest, it was claimed that the authority of the lieutenant in New York ceased. Nicholson could get no advice from Andros, and his own wisdom went only so far as to declare that "it was most safe to forbear acting till the minds of the people became better satisfied." But men whose minds are stirred up will not "forbear" at the behest of a royal agent. Because King William was a Dutchman and had been a friend of New Netherland, a party arose relying on his support, as Nicholson did not recognize the great revolution in England. Jacob Leisler, a captain of militia, refused to pay duties to the collector, and Fort James was held by the recusants. Nicholson demanded its surrender, and on refusal, angrily said to the officer in charge, "I would rather see the town on fire than commanded by you." These words were interpreted as a threat to burn the city and massacre the inhabitants. It led to the calling out of the militia, to whom he gave up the keys of the fort. Leisler and five other captains with four hundred men issued a proclamation that they awaited orders from the "power that now governeth in England," while Nicholson abandoned his post and sailed for home. Into this vacuum in administration Leisler stepped boldly. He summoned a popular convention to which only a part of the towns elected delegates (1689), and the body constituted itself a committee of safety. This com- mittee designated him captain of the fort and soon after raised his rank to that of commander-in-chief with full discretion, which he wielded despotically. He called a second assembly and all the counties except Queens and Suffolk chose delegates, who met April 24, 1690, to provide a PLANTING AND GROWTH OF THE EMPIRE STATE II revenue, and again in September, when it clothed Leisler with power almost unlimited. Upon his invitation the first Congress of the American Colonies was held in New York, May i, 1690, for the purpose of organizing a joint expedition against Canada. The results were meager. Before the arrival of Henry Sloughter to be governor, Major Richard Ingoldsby landed (September 10, 1690) with two companies of soldiers. Upon refusal of his summons for surrender of the fort, a collision occurred March 17, 1691, when Leisler's militia lost six killed, while of the soldiers two were killed and several wounded. Only two days later Sloughter came, to whom Leisler gave up the fort, and with his chief supporters was put in prison. Charged with trea- son and murder, they were the next month put on trial before a court framed out of their known enemies by the new governor and his council. Eight were convicted, but in time all were discharged, except Leisler and Milbourne. In their behalf, petitions for pardon or mitigation of sentence were of no avail. They were hanged May 16, 1691, and have the distinction of being the only persons in this State or in the Union to suffer death on the charge of treason. In 1695 the British Parliament reversed the attainder of Leisler and his associates and annulled their convictions; Leisler's appointment by the Assembly was expressly recognized, while Ingoldsby's demand for the fort was pronounced "without legal authority." Leisler had the faults of arbi- trary power ; he had the virtues of courage, zeal, public spirit, and his death is a stain on the escutcheon of the colony. The burdens of expeditions against Canada led to re- peated issues of paper money. In 1738 a provision was embodied in an act authorizing £48,350 that £40,000 of the sum should be apportioned to the counties to be loaned on mortgage in amounts not less than £25 nor more than £100, at 5 per cent. For the French war from 1755 to 1759 further 12 PROGRESS OF THE EMPIRE STATE issues were voted to the amount of £193,000. The Assembly all the while was watching the revenue and outlay and finally insisted on specific grants for one year only. It denied time after time the right of the British Parliament to levy taxes on the colony, and rested its own powers on the "free choice of the people." The Attorney-General reported to the Lords of Trade (1729), "Most of the previous and open steps which a dependent province can take to render them- selves independent at their pleasure are taken by the assembly of New York. " The administration of William Cosby (1732-1736) is memorable for the legal assertion of the liberty of the press. Burnet started the New York Gazette (1725) as an official organ, from the press of William Bradford, the first printer in the colony. The other party set up the New York Journal as a rival (1733), under the control of John Peter Zenger, who waged war in such fashion that he was the next year arrested for libel and put on trial by the Attorney-General on information. The jury found a verdict of not guilty, on the plea that the publication was true. The doctrine was far in advance of any other legal utterance of that period in behalf of freedom of debate in print. The annals of 1741 are blotted by the popular passion over an alleged negro plot to burn New York City. A fire in the chapel and barracks at Fort George on the Battery, was attributed to the blacks, and it was charged that Spaniards had emissaries in the work of destruction. The forms of justice were observed, but madness sat on the bench. A preacher named Ury was hanged protesting his innocence; Hughson, a tavern-keeper of the lower sort, with his wife and servant went to the gallows. Thirteen blacks were burned at the stake, eighteen were hanged, and seventy transported, for a conspiracy which had no existence, even if some were guilty of sporadic crimes. THEODORE ROOSEVELT Ex-Presiden1 of Lhc United States; bom in New York City, October 27 on of Theodore Roosevelt (merchant and philanthropist) and Martha (Bullock) Roosevelt; graduated Harvard, A.B., 1880; received degree of LL.D. from Columbia, 1889; Yale, 1901; University of Pennsylvania, 1905; Harvard, 1909. Elected 1881 and reelected 1882 and 1883 member New York State Assembly; Republican nominee for mayor 1886, but defeated by Abram S. Hewitt; appointed member United States Civil Service Commission, 1889, but resigned that office in 1895 to accept presidency of Police Commission under administration of Mayor Strong. Assistant Secretary of the Navy, 1897. Re- signed, when war with Spain was declared, and with Dr. Leonard Wood, organized in 1898 the First Regiment United States Volunteer Cavalry, recruited from the West and popularly known as the "Rough Riders." Elected in 1900 Vice-President of the United States; succeeded to Presidency on death of President McKinley, September, 1901; elected President in 1904. Author, History of the Naval War of 1812, 1882; The Winning of the West, 1889, 1896; The Strenuous Life, 1900, and many other works. Made trip to Africa, 1909-1910; candidate of Progressive party for President of the United States, 19 12. PLANTING AND GROWTH OF THE EMPIRE STATE 13 The air in the ten years in which George Clinton was governor (1743— 1753) was surcharged with storm. The British government, resenting French aggression in America and with other grievances, was purposing to renew hostilities, and the horrors of border raids fell on New York. The governor wanted to control expenditures for peace and war; the Assembly held firm grip over the finances and the militia. For a movement against Canada, out of a population of 61,586, a force of 1600 men was kept in the field by bounties and impressment. Six block houses were built between Saratoga and Fort Stanwix, and New York Harbor was put in better state for defense. But Saratoga was burned: set- tlers were killed at Schenectady and Herkimer. Colonel Wil- liam Johnson began his career, and a letter is extant in which he asks for money to pay for twenty-nine scalps and prisoners brought in by his scouts, for he tolerated Indian methods. The British government was lax in its promised aid for the war; Clinton lost the friendship of the Iroquois; his quarrels with leaders added flame to his differences with the Assembly, which he said "had no authority to sit but by the King's commission and instructions "to him. The popular life grew in vigor; schools and churches multiplied ; the common- wealth in spirit as in resourceswasreachingoutforself-control. The French war forced local strife into the background. James De Lancey held sway as lieutenant-governor (1755— 1760), with two nominal governors for brief periods. To enlist the Iroquois and to combine the colonies, a congress was held in Albany, June 14, 1754. New England, Penn- sylvania, and Maryland, as well as New York, were repre- sented, and a form of union of the colonies was adopted, but it was never put into operation. A conference of governors in Virginia the next year proposed four expedi- tions against the French, and De Lancey was present for New York. One was to seize Fort Niagara; another was 14 PROGRESS OF THE EMPIRE STATE to retake Crown Point. The defeat of General Braddock made interior New York the main theater of conflict, and the advance against Niagara stopped at Oswego. On the eastern border, the French confronted the colonial forces under Colonel Johnson at Fort Edward where a battle was fought, and the invaders were defeated, with a loss of 400 killed and wounded among the French, 312 to the colonists, and 40 to the Iroquois. A grave evil befell the colony when Parliament decided to keep a permanent army in America and to quarter its regulars on the inhabitants, for they were only a grievance and not a defense. The Earl of Loudon as commander-in- chief arrived in July, 1756, and had 10,000 men subject to his orders. Montcalm with his red allies was more active and efficient than were the British, and ravaged on Lake George and the Mohawk to Rome as well as along Lake Ontario. By the final defeat and death of Montcalm at Quebec, Canada became British, New York was saved from further invasion from that quarter, and amity with the In- dians on its soil was restored. The colony had poured out men and money freely for defense. With a population in 1756 of only 83,233 whites and 13,542 blacks, it had kept a force of 2680 in the field and incurred a war debt above £300,000 with a tax levy of #40,000 a year. Governor and judges sought to have the judicial tenure run "at his Majesty's pleasure," while the Assembly would pay salaries only if the commissions were during good behavior. Lines of political division were drawn between Episcopalians on one hand and Presbyterians and other dis- senters on the other. Over the judiciary and taxation, over the restriction of trade, manufactures, and immigration, peti- tions and addresses to the King, to the Lords of Trade, to the Governor, to Parliament, reciting abuses and calling for remedy, grew in number, in vigor, in eloquence, in 1763 and PLANTING AND GROWTH OF THE EMPIRE STATE 15 1764. They demanded "exemption from the burthens of ungranted involuntary taxes as the grand principle of every State," and prophesied "the tragical consequences to the crown, the mother country, the colony and to posterity" of the denial of rights and of the wrongs endured. New York by its assembly October 18, 1764, clothed a committee with power to "correspond with the several assemblies or committees of assemblies on this continent, on the Sugar Act, the act restraining bills of credit from being a legal tender; and the several other acts of Parliament with relation to the trade of the northern colonies; and also on the impending dangers which threaten the colonies of being taxed by laws to be passed in Great Britain." Thus began official action look- ing to American union for the assertion of American liberty. Cadwallader Colden, as lieutenant-governor, wielded the executive authority from 1760 to 1765, although Robert Monckton for a while held the title of governor. Colden came into conflict with the Assembly by an attempt to enforce an appeal from the verdict of a jury by extending admiralty jurisdiction. The assembly vigorously reiterated the popular demands. In a colonial congress, without dele- gates from Virginia and Georgia, which met in New York, this colony took part by its committee. A petition to the King by Philip Livingston, and a "declaration of rights and grievances" by John Cruger, both of New York, were adop- ted. October 31, 1765, the day before the Stamp Act went into effect, the merchants appointed a committee to agree on a general policy of resistance. Mobs burned Colden's carriage and hanged him in effigy and scuttled the house of the commandant at Fort James. When the stamps arrived, the acting governor was com- pelled to hand them over to the patriot mayor and cor- poration. Less violence, but a like temper, was shown in Albany. The Sons of Liberty, a club dating from Zenger's 16 PROGRESS OF THE EMPIRE STATE trial, declared they "would venture their lives and fortunes effectually to prevent the Stamp Act. " Joy at the repeal of the act was turned into grief by a demand by the London authorities that the assembly should provide quarters, fire- wood, drink, soap, and candles, for as many soldiers as might be sent. The assembly temporized, but opposition was strong among the citizens and collisions occurred between them and soldiers. Sir Henry Moore, who had become gov- ernor, tried in November, 1765, to force the asssembly to vote the required provision, but two prorogations led only to refusal. Parliament (1767) forbade the assembly to pass any acts until it had complied with the demand for care for the troops, and this suspension lasted for two years. Meanwhile, in 1768, a conference was held at Fort Stan- wix in which Sir William Johnson for New York, with dele- gates from New Jersey, Virginia, and Pennyslvania, met thirty-two hundred red men of the Six Nations, the Dela- wares, and the Shawnees. By formal treaty a boundary line was fixed, land and concessions were granted to the crown, and £2000 was paid to the Indians. A new assembly in 1769 appropriated £2000 for the Brit- ish troops by a majority of one vote, and was denounced for it by a meeting in New York City of fourteen hundred citi- zens. By strict adherence to a policy of non-importation New York lost five sixths of its trade, which thrifty neigh- bors gathered in. In 1770, tea only was excluded from import here. British soldiers tried to saw down a liberty pole set up on the repeal of the Stamp Act, and on a third attempt cut it into billets. They were denounced at a meeting in the city park, and three of them were seized while posting a scurrilous handbill. A rescue squad of soldiers was resisted by a party of citizens, but was reinforced. On Golden Hill, January 18, 1770, blows were dealt, several were wounded on PLANTING AND GROWTH OF THE EMPIRE STATE 17 both sides, and the next day a sailor was pierced through the body unto death. The soldiers were finally driven to their barracks, while a new pole was erected to celebrate the popu- lar victory, won by irregular fighting against British troops and colored by the first blood in a contest to broaden into the Revolution. A public meeting in "The Fields" resolved that no tea should be imported, duty or no duty (December 16, 1773), and when some arrived in April, 1774, it was cast into the river. The assembly January 20, 1774, provided for a com- mittee for correspondence with the other colonies. When a general congress suggested by New York gathered in Phila- delphia September 5, 1774, John Jay and Philip Livingston of this colony were placed on the committee to report the Decla- ration of Rights. The New York assembly refused to approve, even to consider, the action of that congress, but the Tory majority so brought the assembly to an end. It gave way (April 20, 1775) to a provincial convention. The initial steps toward the Revolution were bold and rapid, although wealth was timid and the Episcopal Church was loyal, and later the British army with its headquarters in New York won no little social support. In the long and trying war for independence, the first forts taken, the first British garrisons captured, were on the soil of New York. The evacuation of its chief city signaled the actual dawn of peace. Ticonderoga, Crown Point, Long Island, Fort Washington, Oriskany, Saratoga, Stony Point, belong to national history, as do the flank attacks on the interior settlements by Indians and Tories and their dire punishment by General Sullivan's campaign. So, too, the proceedings of the Continental Congress are the affairs of all the colonies. In the session of May, 1775, New York, through George Clinton, Robert R. Livingston, John Jay, and James Duane, asked counsel relative to the proper 18 PROGRESS OF THE EMPIRE STATE action toward British troops seeking to enter the harbor, and received advice not to oppose them by force. In the Continental army Philip Schuyler was appointed a major- general, Richard Montgomery a brigadier-general, and Alexander McDougall as first colonel in New York's quota. When in the autumn of 1776 disaster compelled Wash- ington to abandon New York, the British made the city the base of their military operations and held it until Novem- ber 25, 1783. They created traffic; but they brought the ills of a garrison town and they had here their land prisons and their ships for detention of captured patriots, redolent with scandals and horrors. The Convention of the Representatives of the State of New York was the style adopted by a body which met in its chief city July 9, 1776. It pledged support of the Declara- tion of Independence, and a form of government, reported by John Jay as chairman, to go into effect when the military operations permitted, was adopted April 20, 1777. The Con- stitution was for its day liberal and judicious. John Jay was appointed as chief justice, Robert R. Livingston as chan- cellor, and John Morin Scott was named as chairman of a committee of safety to serve until the legal machinery could be set in motion. At the first election George Clinton was chosen governor, with Pierre Van Cortlandt lieutenant- governor. Clinton was to be seven times elected to the same high office and was to become Vice-President of the United States. New York approved the Articles of Confederation February 6, 1778. The hanging of Nathan Hale as an American spy and of Major Andre as an aid to Benedict Arnold's treason gave a tinge of personal tragedy to the period, while Newburg was the scene of an attempt by some officers to intimidate Congress, which was checked by the sagacity of Washington. In framing the treaty of peace Jay was an active factor, as Alexander Hamilton, another JOHN JACOB AS TOR. JOHN JACOB ASTOR Merchant and capitalist; w i , near Heidel- berg, Germany, Jnly 17, 1763. When sixteen yea went to London and worked for four years in the piani 1 his uncle, . of the firm of Astor & Braid Going to America, trade, which he learned thoroughly in the service of a Quaker furrier. He th< out for himself , made favorable arrange- ments with fur hou idon, and soon became chief com- petitor of the Hudson Ray Company in the London market. The settlement of Astoria was founded in 181 1 at the mouth of the Columbia River. Mr. Astor organized the American Fur Co., which built up an international tri ading to China and other Asiatic count: invested in government securities during the Civil War, when I :ig at from 60 to 70 cents on the dollar, and made s investments in real estate in New York I ting from time to time handsome structures on the land acquired. He fell in with the proposition of Washington Irving for a public library for New York, and left $400,000 for the foundation of the Astor Library. He made many bequests to charitable institutions during his life and by his will. He died March 29, 1848. PLANTING AND GROWTH OF THE EMPIRE STATE 19 New Yorker, was one of the architects and advocates of the national Constitution. The State hesitated and was slow in ratifying that docu- ment. Parties divided on the question. The opposition argued that too much power was given to the new govern- ment. Ratification was voted finally by a majority of thirty against twenty-seven in the convention. Five amendments recommended by New York were added to the Constitution and are vital parts. The State had been stunted in its growth by the long and varied hostilities on lakes and rivers in the interior, and be- tween patriots and tories, and peace brought its natural opportunities. Folly ruled to the last in the treatment by the commonwealth of its immense domains. The Dutch gave lands away by the thousands of acres to governors, patroons, and favorites. During the life of the British Colony official greed was rampant, and estates were seized greater than principalities. It was left for a commission with Governor Clinton at its head to sell 5,542,173 acres for $1,030,433, of which 3,635,200 acres went to Alexander McComb, who paid for much of it only eight pence an acre. In 1786, by an adjustment with Massachusetts, this State acquired 6,230,000 acres in the middle and western counties. These lands passed into the hands of the Holland Land Company and gradually were sold to settlers. As settlements pushed into the new lands, roads were constructed from the Mohawk to the interior lakes, while postriders and stages began their regular trips from Albany to the several points of the compass. Agriculture, manu- factures, schools, churches, kept pace with growing popu- lation, while foreign commerce rapidly expanded; in the meantime the fur trade with its profits passed away. The Continental Congress December 23, 1784, chose New York for the national capital, and there the first session 20 PROGRESS OF THE EMPIRE STATE under the Constitution was held, beginning March 30th and April 6, 1789, but the city ceased in December, 1790, to be the seat of the central government. New York failed to vote for President when Washington was first elected, because of disagreement between the sup- porters of Governor Clinton and the party led by Alexander Hamilton, in due time to be Secretary of the Treasury. They held divergent views over the constitutional procedure in the two houses of the Legislature. At the initial election for State officers, while Clinton was retained as governor, the Federalists secured a majority in both the Senate and assembly. Contest over the returns in 1792 closed with a certificate for Clinton over John Jay for governor, but the Legislature was in accord with Clinton and gave him the votes of the State in the electoral college in an unsuccessful canvass for Vice-President. Jay was made governor in 1795. The cauldron of politics boiled more fiercely when Aaron Burr arrayed himself against Clinton and joined Hamilton as a Federalist. He was sent to the Senate of the United States in 1791, and became a candidate for Vice-President in 1796. He took active part against the Jay treaty, and when he wanted to return to the Assembly in 1799 was de- feated chiefly on account of a charter which he secured for the Manhattan Company, ostensibly to furnish water but really a bank. In 1800 Burr organized a movement for Jefferson for President, with himself for second place. Elec- tors were chosen on that basis. The complication which fol- lowed when Jefferson and Burr received each seventy-three votes in the electoral college led to serious results. Hamil- ton turned the scales, making Jefferson President and Burr Vice-President. The quarrel grew until Hamilton was killed in a duel, and Burr entered on a career which rendered him a fugitive, to die at last in 1836 in obscurity and loneliness. The rivalries of Hamilton and Burr are typical of in- PLANTING AND GROWTH OF THE EMPIRE STATE 21 fluences less tragical which have kept down the share of New York in national affairs. The State has been so large that the factions in each party have been as powerful as the regular parties elsewhere, and they have often shut the door on the ambitions of each other. Sometimes the factions have divided on matters of principle; more often they have been arrayed on personal grounds. Probably also the great prizes in the professions and in business, as the common- wealth developed, turned many master minds away from public affairs. This personal jealousy De Witt Clinton had to meet. Senator of the United States in 1802, Mayor of New York City in 1803, he aspired to the Presidency in 1808, but the opposition at home was virulent and fatal. His uncle, the Vice-President, was also ambitious for the first place, but in the electoral college received only six votes. In 1812, elec- tors in favor of De Witt Clinton were secured from New York,whiIethe Federalists in other Statesmade himtheparty candidate. But Daniel D. Tompkins, who had been chosen governor in 1807 by an alliance with Clinton, had schemes of his own, and other former local friends gave no aid, so that in the electoral college Clinton secured only 89 votes against 128 cast for the renomination of Madison. The services of Clinton were to be devoted to his own common- wealth. The Embargo Act of 1807 struck a heavy blow at the com- merce of New York, and the State became earnest for repeal and in favor of the non-intercourse policy of 1809. The British orders in council, the decrees of Napoleon from Ber- lin and Milan, and the impressment of seamen by Britain touched the vital interests of the State and threatened their ruin. But knowledge of its own perils, with harbor and borders open to attack, led to deliberation when war clouds gathered. However, the moment the second conflict with 22 PROGRESS OF THE EMPIRE STATE Great Britain actually began New York put forth every effort for the nation and for its own defense. Tompkins continued as governor by successive reflections, as his energy and self-sacrifice deserved. On Lake Ontario and the St. Lawrence, on Lake Champlain and its affluents in the sum- mer and autumn of 1812, attack and counter-attack followed each other on land and water, but General Dearborn who commanded the American forces fell under criticism for lack of zeal. The campaign of 1813 on the northern frontier was full of incident, but General Wilkinson who was in chief com- mand became ill. All dreams of advance against Montreal proved futile, and new sufferings were added to the record of New York. In the next year (1814), General Winfield Scott won the battle of Chippewa July 5th and was success- ful at Lundy's Lane July 25th, as was General Jacob Brown August 15th before Fort Erie, but the last gain was lost under other leadership in October. On the Saranac and in Plattsburg Bay Commodore MacDonough with General Macomb repelled an invasion of 12,000 British by their dash and skill. Rumors of attack on New York City were rife in August, 1814, from the sea and even down the Hudson. Privateers were sent out; on the fortifications everybody was set to work, while a levy of the entire militia of Oneida, Lewis, and Herkimer called out the mass of the citizens. But the Americans warded off attacks at the north, and Commodore Decatur in the Sound and near-by waters inspired confidence. The popular response was prompt and generous, although frontier settlements were almost ruined and their inhabitants impoverished, and in the chief city business was for the time in large part destroyed. New York performed its full duty in the crisis. The treaty of Ghent, ratified early in 1815, gave the desired change from the tasks of war to the privi- leges of peace, — to broader manufactures, to revived com- PLANTING AND GROWTH OF THE EMPIRE STATE 23 merce, to the extension of the policy of improving the natural waterways and of adding to them. As early as 1768 Governor Moore suggested a canal to avoid the rapids in the Mohawk at Little Falls, for that river was used by boats of divers sorts. Men's minds for two score years were pondering better facilities. Gouver- neur Morris and De Witt Clinton with others asked for national aid for a canal to join Lake Erie with the Hudson, but could get no favorable response. They estimated (181 1) that the cost would be #5,000,000 and the freight carried within a century would amount to #100,000,000 a year. In fact that value was #305,301,920 in 1867 but was only #66,331,817 in 1904. Nothing could be done for this work during the war with Great Britain, although grants of lands were offered by private holders to the extent of 107,632 acres. On estimates that the Erie Canal could cost #4,571,813 and the Champlain Canal #871,000, an act was passed in 1817 authorizing their construction, and providing for a board which might borrow money, not over #400,000 in amount annually for this use. Under this law ground was broken July 4, 1817, at Rome, in the presence of De Witt Clinton as governor. His election to that place was due to the resig- nation of Tompkins to assume his duties as Vice-President of the United States. Both he and Rufus King aspired to the presidency in 1816, and the latter received the Federalist vote, 34, in the electoral college, while the former accepted the second place under James Monroe and was again chosen in 1820. De Witt Clinton had large projects for the improvement and extension of the waterways in and beyond the State. He was urgent in pressing the construction of the Erie and Champlain canals. In the autumn of 1819 navigation was opened between Utica and Rome and on the Champlain, and the next year boats passed from Utica to the Seneca 24 PROGRESS OF THE EMPIRE STATE River. Navigation from Lake Erie to the Hudson was achieved October 26, 1825. In the interval party strife was keen and vociferous over the alleged use of Federal patron- age in the State and not less over personal rivalries. Clinton was denounced for approaching the "very verge of treason," and the storm arose to such height that he chose not to be a candidate for reelection in 1822 and was removed by the Legislature from his place on the Canal Commission in 1824. On appeal to the ballot-box in that year he was again chosen governor. As a Clintonian, John W. Taylor was elected Speaker of the House of Representatives of the United States in 1820 and again in 1825, the only New Yorker who was ever chosen to that position except that Theodore M. Pomeroy had that honor for a single day at the close of the session in March, 1859. The leader of the opposition to Governor Clinton was Martin Van Buren, with Tammany Hall at his back. United States Senator by election in 1821 and again in 1827, he ac- cepted the portfolio of Secretary of State in 1829 in General Jackson's Cabinet, was elected Vice-President in that Presi- dent's second term in 1832, and President in 1836, and en- joyed a long career as head of his party until he broke with the pro-slavery leaders. The cost of the Erie Canal as adjusted was $7,143,789. Plans for enlargement were adopted in 1835, but scandals led to a stoppage of the work in 1842. In 1847 the enlarge- ment was resumed and was completed in 1862, bringing the outlay on the canal up to $52,491,915. Governor Clinton advocated the construction of lateral canals, and ten were opened to navigation in the years from 1831 to 1850 at a cost of $27,554,422. The Crooked Lake, the Chemung, the Chenango, and the Genesee Valley were after trial abandoned as unprofitable. There remain canals with their feeders 638 miles in length: the Erie, 361 miles; the Champlain, (X) . ^«, . ^K/>-o— «- — aJU-^x-XZZ^> JAMES S. T. STRANAHAN ipitalisl ; born in i unty, N. Y., April 25, [808; < itute. Wa ng and wareho . being pre founder of the Atlantic Docks, president of [yn Bridge ad president of the (Jnio iberof the Board of Aldermen, a candidate for the State Assembly and mayoralty, and member of Congress as a Republican, [855-1857. Was a charter member of the ('. ■ Brooklyn National City Bank for forty us; director of the South Brooklyn Savings Bank for forty-eight years; di 1 Life Insura the Kings County Trust Co. Was a memb York Cham . member of the Produce ■ :nge; and of many clubs and educational organizations in Brooklyn. Was a member of the first metropolitan police com- mission in 1858; president of the Park Com having much to do with the development of Broo system; preside 1 uittee; delegate Republican national conventions of i860 and 1S64; el at large from the State of New York, 1888. Died September 3, 1898. PLANTING AND GROWTH OF THE EMPIRE STATE 25 81 miles; the Black River, 89 miles; the Oneida Lake, 7 miles; the Oswego, 77 miles; and the Cayuga and Seneca, 23 miles. Their maximum tonnage was reached in 1872 at 6,467,888 tons. All tolls were abolished by popular vote in 1882. The claim was made that the earnings of the can- als had repaid all outlay for them and given to the State be- sides #42,000,000. If the natural channels which have been improved are added, the artificial waters of the State are found to be 907 miles. Aid from public funds was granted to the Delaware and Hudson Canal between Honesdale, Pa., and Newburg, N. Y. Horatio Seymour in 1844, as chairman of the Committee on Canals in the Assembly, became the leading champion of the enlargement of the canal and later of the abolition of tolls, and the success of the policy was due largely to him. Speaker of the Assembly in 1845, defeated for governor in 1850, but elected in 1852 and once more in 1861, he won the confidence of his party and general admiration as a citizen. Nominated for President in 1868 against his protest, after his defeat he adorned private life by his graces and virtues and by the eloquence of his occasional addresses. The constitutions of the State have been four. After the original draft of 1801, a complete revision was approved by the people in 1822 and another was perfected by the con- vention of 1846. This stood until the adoption of the pres- ent constitution in 1894. A multiplicity of amendments has been submitted for popular approval; many were rejected; many became parts of the fundamental law. A complete project submitted by a convention duly called was rejected at the polls in 1869 and only one of its provisions was adopted. The tendency has been on the whole to increase direct control by the people, and to place restrictions on expenditure and debt. Not for the first time nor the last the politicians in this 26 PROGRESS OF THE EMPIRE STATE commonwealth were charged with bad faith in the presiden- tial canvass of 1824. The friends of William H. Crawford, Democrat, blamed Martin Van Buren with unfairly taking from him the electoral votes of New York, of which he received only five, while the supporters of Henry Clay, Whig, were aggrieved because only four electors were for him. Twenty- six were for John Quincy Adams, whose name was thus placed among the highest three candidates and he became eligible for the election to the presidency which was con- ferred on him by the House of Representatives. Chaos prevailed in politics, for divisions asserted themselves on questions of the canals, of Freemasonry, of the ambitions of De Witt Clinton, of the alleged intrigues in Washington of Martin Van Buren. Albany became a center of power, with Edwin Croswell of the Argus at the head of the Democratic "Regency," and the Journal, directed by Thurlow Weed, putting men up or down on the other side. To the people living remote from the canals the burdens involved in their construction seemed heavy, while the im- petus given to immigration, traffic, and industry spent its main force along the route of the chief waterway. In the same public spirit State aid was granted to the New York and Erie Railroad, by a loan of #3 ,000,000 ; of smaller sums to the Canajoharie and Catskill Railroad, which were never repaid; and of $500,000 to the Ithaca and Oswego, of which only $184,300 was returned. Loans were made to five other railroads to assist in construction and in due time repaid. Later a policy prevailed for towns and cities to subscribe for stock in railroad enterprises, some of which proved profit- able, while others were a partial or total loss. The greater lines were always private corporations, and several are consolidations of parts originally local projects. The first charter granted for a railroad was between Albany and PLANTING AND GROWTH OF THE EMPIRE STATE 27 Schenectady in 1826, but cars were not run until 1831 ; the road is now a link in the New York Central system. New York cast its electoral vote in 1832 for General Jackson for a second term as President, under the manage- ment of Martin Van Buren, who was the candidate for Vice- President on the same ticket. The bankers of the chief city were adroitly arrayed by hostility to the competition there of a branch of the United States Bank, while the party was brought to a discipline rare in those days. Van Buren's nomination for President in 1836 was followed by a popular majority for him of nearly ten per cent, of the vote cast in the State and by his election as the first New Yorker to be made chief magistrate of the republic. His defeat in 1840 in a canvass for reelection was quite as signal in his home State as in the nation. In 1848, the Democratic party became divided and Mr. Van Buren was nominated for President by the free-soil element, in revolt against the regular candidate, Lewis Cass. This action gave the electoral vote of New York to the Whigs with Zachary Taylor for President. This period was marked by much activity in politics in the commonwealth. Enos D. Throop succeeded Van Buren as governor and was followed (1832-1838) by William L. Marcy, who had been chosen United States Senator in 1831, and became Secretary of War under Polk and Secretary of State under Pierce; he believed that the nomination for President in 1852 was within his reach but it was snatched away by a faction in his home State led by Daniel S. Dickin- son. Marcy was defeated for reelection as governor in 1838 by William H. Seward, who entered the State Senate in 183 1 and had given proof of his ability and his skill in statecraft. For advocating the allotment of a share of the school funds to the Catholics, he was beaten at the polls for a third term as governor and William C. Bouck won the position. 28 PROGRESS OF THE EMPIRE STATE Relations with Canada along the New York border have often involved peril, and for a while at the close of 1837 and during 1838 the acts of agitators on the American side threat- ened to involve the United States and Great Britain. In both the upper and lower provinces insurrection was organized against the Canadian authorities by William L. Mackenzie and Joseph J. Papineau, who called for allies in northern and western New York. These allies seized Navy Island in Canadian waters, and for communication with the Ameri- can mainland had a steamboat called the Caroline. This was left on the night of December 29, 1837, with its crew asleep, moored at a landing on the New York bank, whence a squad from Canada under Colonel MacNab cut the vessel loose, having set it on fire, and let it drift down the rapids. All on board were killed, drowned or wounded. Our na- tional government resented the invasion of American soil, and set competent army officers for the defense of the fron- tier. Talk of invasion of Canada was passionate south of the St. Lawrence, and trifling raids were risked. November 11, 1838, a party landed at Prescott; and two days later a collision occurred at Windmill Point, with a loss to the in- vaders of eighteen killed and wounded and to the Canadians of eighty-two. After four days the authorities arrayed so strong a force as to compel surrender of the invaders. They were held as prisoners and treated with scant mercy. Only four were Canadians; five were foreigners, while 170 were mostly from the northern counties of New York, not a few of them boys under seventeen. The leader and seven others were hanged, some were shipped to Van Diemen's Land, some imprisoned, some released, and a few acquitted. The affair took a new phase in 1842 when on the arrest of Alexander McLeod in this State for taking part in the burning of the Caroline and the murder of its crew, the Brit- ish government assumed the responsibility as an act of war, PLANTING AND GROWTH OF THE EMPIRE STATE 29 and demanded his release. The government at Washington refused to give him up and insisted on his trial. He was found innocent and proved to have indulged in drunken swagger of his alleged share in the incident. For a long period popular feeling along the northern frontier was kept in a ferment over the treatment of the men captured at Windmill Point, the folly of the rebel leaders in Canada, and the attitude of the authorities of the Dominion. Signs were not lacking that serious divisions were shattering parties and threatening national peril over the extension of slavery and the power of the champions of that institution. As early as 1834 in New York City, meetings in favor of the restriction or gradual abolition of slavery were broken up and citizens mobbed for advocating that cause. A mob drove an anti-slavery convention out of Utica in 1835. The position of extremists marked the cleavage at hand. Silas Wright, who was elected governor in 1844, opposed as a United States Senator (1833-1844) the annexa- tion of Texas, and felt the hostility of the Polk administra- tion and its friends as a candidate for a second term in 1846, when he was defeated by John Young. His influence was potent in creating and promoting free-soil sentiment among voters still clinging to the Democratic party; but the con- trol of that organization in the nation and in this State was with those who held other views. The Whig party here as elsewhere was disintegrating more rapidly than its antagonist. William H. Seward was the favorite of the young and ardent who claimed that slavery meant disunion. Even in private life his counsel was of the first account, and with Thurlow Weed and Horace Greeley his triumvirate was forceful and far-reaching. He stood in the front of the advocates for the restriction of slavery and early foresaw the "irrepressible conflict," al- though like others he did not appreciate its magnitude. In 30 PROGRESS OF THE EMPIRE STATE State affairs he had favored public improvements and a lib- eral canal policy; his friends were zealous in developing street railroads in New York City under special charters with broad privileges; and some men close to him pleaded that such franchises might fairly be granted for partisan services. Personally one of the purest men, basing his ar- guments in the United States Senate (1849-1861) on the highest moral grounds, he was presented for the presidency in i860 by a united delegation from his State to the Repub- lican National Convention, but was set aside when Horace Greeley, a former ally, acted as a bitter foe. He gave his best aid for the election of his successful rival, Abraham Lincoln, and became a mainstay of his administration as Secretary of State. The feudal tenure on which the patroons and other great landlords permitted tenants to cultivate their soil, and the onerous conditions which they exacted from purchasers, led to prolonged disagreements and to legislation with a view to remedy the evils. In 1836 the grievances were asserted in Chautauqua and Genesee counties against the Holland Land Company, by mobs and violence. In Rensselaer and Albany, on the great Van Rensselaer estate, resistance to legal processes to enforce the demands of the landlords in 1839 took the form of armed forces in disguise, who aroused terror in the vicinage. Governor Seward called out several military companies and compelled observance of the law. The sore was not healed. Columbia, Delaware, and Scho- harie became the theater of agrarian outrages in which hun- dreds of men took part. They drove Governor Wright to call out the militia, by whose help many arrests were made. Over fifty-four culprits were convicted, but were in time pardoned by Governor Young. In the constitution of 1846, provisions were embodied to limit leases and prevent cruel conditions, and in 1852 the Court of Appeals so construed the / C?^£C JAMES A. BURDEN Iron manufacturer; horn in Troy, N. Y., January 6, 1833; edu- cated Sheffield ool at Yale, and Rensselaer Poly- technic Institute, Troy, N. Y. Was president, and director of the Burden Iron Co. of Troy, and director of the United National Bank, of Troy. Was Presidential elector on the Republican in 1880 and 1888. Was member of the Iron and Steel Institute of Great Britain, Society of Civil Engineers, Society of anical En ad American Mining Engineers; mem- lamber of Commerce; president of the Engi- \c\v York; president of the Society of New York Farmers; member of the Metropolitan, Union, Union League, and other clubs of New York. Died at 908 Fifth Avenue, September 23, 1906. PLANTING AND GROWTH OF THE EMPIRE STATE 31 statutes as to remove the discontent. Once again, in 1866, aimed force was called out to check violence on the part of tenants. The controversy soon disappeared from politics and from outrage, and was confined to private litigation. After New York in 1844 cast its electoral votes for James K. Polk against Henry Clay by a plurality of 5106, with 15,812 ballots for James G. Birney of the Liberty party, division among the Democrats of the State grew broader and more bitter. The administration of President Polk was charged with ostracizing Governor Wright and his friends, while the latter, headed by Preston King in the House of Representatives and sustained by the New York Legislature, arrayed the members of Congress in both Houses, except Daniel S. Dickinson in the Senate and one Representa- tive, against the annexation of Texas and for the Wilmot Proviso forbidding slavery in the territory acquired from Mexico. The Whigs took advantage of these conditions to elect as governor in 1848 Hamilton Fish, whose term closed with credit and who was succeeded by Washington Hunt elected in 1850, — the last governor of New York furnished by the Whig party before its death. By the sort of compromise by which the Vice-President has often been nominated, Millard Fillmore was named in 1848 for that position by the Whigs on the ticket with Gen- eral Taylor. He belonged to the conservative wing of the party, the "Silver-Grays," and was not a favorite with the free-soil element led by Mr. Seward. By the death of the President, the succession fell to Mr. Fillmore July 9, 1850. He sustained the compromise measures of that year, in- cluding the Fugitive Slave Law, and hastened to remove from Federal places those who had voted for him but did not favor that policy, and appointed those who did. When in 1852 he sought the nomination for President, he led all competi- tors in the National Convention on the first ballot by one 32 PROGRESS OF THE EMPIRE STATE vote, but on the final ballot Winfield Scott was nominated for what proved the empty honor of the last Whig candidacy for chief magistrate of the republic. New York took its stand in the electoral college for Franklin Pierce. Movements for the organization of the Republican party began in New York. A call was issued in Albany about July i, 1854, for a State convention in Saratoga on August 16th. Delegates were chosen in the various counties by mass meet- ings, who denounced the Nebraska Bill and the aggressions of the slave power and adjourned to meet in Auburn, Sep- tember 26th, when organization was perfected under the name "Republican" and a full State ticket was nominated with Myron H. Clark for governor, who had also been desig- nated by a Whig convention. Prohibition of the liquor traffic was advocated in the platform. Mr. Clark was elected by a plurality of 305 over Horatio Seymour, while 122,282 votes were returned for Daniel Ullman, candidate of the American party. The Legislature enacted a rigid prohibitory law, which was declared unconstitutional by the Court of Appeals in March, 1856. The policy of license for the sale of liquors has since prevailed under statutes of varying stringency. Millard Fillmore was in 1856 put in nomination for President by the American party; he received in this State 124,604 votes, in the Union 25 per cent, of the total cast, but in the electoral college only the eight ballots of Maryland. The New York return showed 276,057 for John C. Fremont, and 195,878 for James Buchanan, who by the vote of other States was placed in the presidency. John A. King was chosen governor, to be succeeded by Edwin D. Morgan for two terms (1858-1862). To him, therefore, the task fell of organizing the forces of the commonwealth for the war for the Union, and it was performed with loyalty and efficiency. The citizens of New York in i860 by a majority of 50,136 gave the potent voice of the commonwealth for Abraham PLANTING AND GROWTH OF THE EMPIRE STATE 33 Lincoln for President. In the hope of averting collision, delegates were sent to the peace convention held in Wash- ington February 4, 1861, while the Legislature had already (January 11), by a vote nearly unanimous, tendered to the national government whatever men and money it might need to maintain its authority. Other views found expres- sion in memorials to Congress and in mass meetings. In Albany a resolution was passed that"civil war will not restore the Union, but will defeat forever its reconstruction." Yet the Legislature when the first gun was fired appropriated #3,000,000 for war purposes and gave the governor full pow- ers to enlist men for two years and to equip regiments. The Secretary of the Treasury reported that of #260,000,000 first raised by loans to the nation, #210,000,000 came from this State. The men opposed to the war won allies at the polls in 1862 from those who did not approve of the way in which it was conducted. They elected Horatio Seymour governor, who in the canvass proclaimed the duty of maintaining the Union by arms. The draft for men for military service ordered by the national government was met by protests at several points and by riots, arson, and bloodshed in the chief city on Monday, July 13, 1863. Colored people were abused, a colored asylum was burned, and several of the race were killed. Out of fifty marines called to enforce order, several were killed and others bruised. Governor Seymour de- clared the city in a state of insurrection, for business was stopped, the lives of citizens were put in peril, and fires which were set by the mob destroyed much property. Fed- eral troops were called in, whom the rioters fought against. After four days the authorities gained control, but in that period at least a thousand persons were killed or wounded, and #2,000,000 worth of property was destroyed. Less seri- ous riots occurred in Brooklyn, Troy, and Jamaica. By the 34 PROGRESS OF THE EMPIRE STATE draft only 2557 conscripts were obtained in the State for the army, while in the same year nearly 50,000 volunteers went into the field. The Legislature and the counties and towns offered liberal bounties for recruits, and by the close of 1864 New York had to its credit an excess of 5301 above its quota. Charges were made in high quarters that fraud and vio- lence were to be used to control the presidential election in 1864. Raids from Canada were apprehended; the recent draft riots suggested the type of danger liable to befall New York City, and rumors of plots to burn Northern cities as acts in the war were circulated. The State officials did not favor Federal interference, but the President and Secretary of War deemed it necessary to send an army of 7000 men to keep the peace and safeguard the polls in the city. Order prevailed when the votes were cast and counted, and the ballots of soldiers in the field were for the first time included. New York electors were recorded for Mr. Lincoln for his sec- ond term. At the same time Reuben E. Fenton was chosen governor, and he was to be reelected in 1866, and to be transferred in 1869 to the United States Senate. He was diligent and sagacious, a master of organization, and well versed in knowledge of men. The War Department credited New York with 448,850 men for the war for the Union sent into the field for periods from three months to three years, and with 18,197 who paid commutation, or a total of 467,047. Bounties to recruits, paid by the State, counties, and towns, amounted to #86,629,228. Private gifts for the war were on a like scale of munificence. In the presidential election of 1868 New York was not the controlling factor that it had often been before and was to be again. Horatio Seymour counseled his personal friends that the Democratic party could hope for success in the can- SILAS D. WEBB Came to New York to engage in business in 1857; went to China in 1865 and remained there for fifteen years engaged m the Oriental trade with Ameriea. He returned to the United States in 1880; was for many years vice-president and afterwards president of the China and Japan Trading Co. Mr. Webb has been for many years a member of the Chamber of Commerce and the Merchants' Association, in both of which he has served on important committees. He is a member of the Executive Com- mittee of the American Asiatic Association and of the Downtown Association. PLANTING AND GROWTH OF THE EMPIRE STATE 35 vass only with a candidate who could draw outside support; but the nomination was forced upon him only to verify his prediction. He carried his own State, but General Grant was elected. This new President summoned to be Secretary of State Hamilton Fish, who had been Governor of New York and United States Senator. From 1869 to 1877 at the head of the State Department, he commanded confidence and favor at home and abroad, and the treaty of Washington is a monu- ment to him in the world's diplomacy. John T. Hoffman was chosen governor in 1868 and secured a second term in 1870. Corruption was exposed in the metropolis and the Legislature, and in 1871 two justices of the Supreme Court and a judge of the Superior Court of the chief city were impeached for official malfeasance. The last and one of the former were removed from the bench, and the third resigned to escape trial. The canvass for President in 1872 was rendered spectacu- lar by the choice of Horace Greeley, editor of the New York Tribune, as a candidate first by the new liberal party and then by the Democrats. He sought support by appealing to the sections to "clasp hands across the bloody chasm" of the war. New York at the polls pronounced in favor of the continuance of General Grant in the presidency and the majority of the States sustained that verdict. For governor John A. Dix was designated and elected. He had sat in the United States Senate (1845-49) ar) d in December, i860, was summoned by President Buchanan to take up the port- folio of Secretary of the Treasury. As such he gave the order to the commandant of a revenue cutter at New Orleans: "If any man attempts to haul down the American flag, shoot him on the spot." He was appointed Major-General of Volunteers in May, 1861. As governor he aimed at reform in political affairs and aggrieved some of the leaders; a veto of an act for local option relative to the liquor traffic 36 PROGRESS OF THE EMPIRE STATE lost him friends. When renominated in 1874, he was not successful at the ballot-box. The management of the canals, and a system of repairs on them by contract, developed waste and fraud. By a convention and by the Legislature, abuses were condemned and remedies demanded, and by new laws as well as through the courts, vigorous action was taken. Samuel J. Tilden waged bold war against corruption in the city of New York where it had become monstrous, and he enlisted heartily in the fight against the "canal ring." He had served in the Assembly and in two Constitutional conventions. Elected governor in 1874, he pressed the crusade with skill and en- ergy, while he organized his party with tact and adroit force, such as it had not known since the days of Van Buren. So, naturally, while Tammany Hall opposed him, the National Democratic Convention selected him in 1876 as candidate for President on the pleas of "national regenera- tion and reform." His State cast its electoral vote for him, but the commission appointed by Congress on the contested States awarded the presidency to his Republican antagonist, Rutherford B. Hayes. Mr. Tilden rejected the counsel of some of his friends to protest the decision in the courts, or by armed force as urged by the extremists. Mentioned for nomination again in 1880 and in 1884, he declined to enter the canvass. Roscoe Conkling, who was prominent 'in both houses of Congress during his service there, was presented to the Republican National Convention of 1876 by a majority of the delegates from the State, and the first ballot showed 99 members in his favor. With Mr. Hayes the second place was bestowed on Wil- liam A. Wheeler of this State, eminent as State Senator, president of the Constitutional Convention of 1867, and as Representative in Congress. President Hayes selected his PLANTING AND GROWTH OF THE EMPIRE STATE 37 Secretary of State from New York in the person of William M. Evarts, a leader at the bar but not a practical politician; rather a scholar and statesman. He was chairman of the New York delegation at the ;Republican National Convention of i860, was counsel for President Johnson in the impeach- ment trial, and for Mr. Hayes before the Electoral Commis- sion. He argued the American case in the Alabama Claims, and was Attorney-General under President Johnson. He served in the national Senate from 1885 to 1891. Factional fights arose in the State over federal patronage immediately on the inauguration of President Hayes, who had not followed the advice of local leaders. The Repub- lican State Convention rejected an amendment declaring his title perfect and approving his policy, while it adopted unfriendly resolutions. Lucius Robinson was elected governor as a Democrat in 1876, but three years later Tammany delegates, resenting his nomination, organized a separate convention and nomi- nated John Kelly, making easy the transfer of the executive chair to Alonzo B. Cornell, Republican, who had been Speaker of the Assembly in 1873, and who took an active part as trustee in the management of the University founded by his father. The presidency was the occasion in 1880 of fresh strife and bitter dissension in New York. The Republican State Convention instructed the delegates from the districts as well as those at large to "use their most earnest and united efforts to secure the nomination" of General Grant for a third term. Several of them refused to obey these instruc- tions and joined with the majority in the national body in naming James A. Garfield. The vice-presidency was con- ceded to Chester A. Arthur of New York. The appoint- ment to the post of Collector of the Port of New York of William H. Robertson, the leader of the minority in the dele- 38 PROGRESS OF THE EMPIRE STATE gation which aided to nominate President Garfield, led to the resignation from the Senate of Thomas C. Piatt and Roscoe Conkling, and of Thomas L. James as Postmaster General. Excitement rose to fever heat, and ;the Senators struggled hard to be returned as a rebuke to the President. The Legislature, after six weeks of balloting, preferred to send Warner Miller and Elbridge G. Lapham. By the murder of President Garfield by the assassin Gui- teau, Vice-President Arthur was promoted to the chief magis- tracy September 20, 1881. He reconstructed the Cabinet and adopted a policy of his own, which did not win the full approval of either faction in his party. He took as his Secre- tary of the Treasury Charles J. Folger of New York, who had earned distinction in the State Senate and resigned as Chief Justice of the Court of Appeals to go to Washington. He be- came a candidate for governor in the canvass of 1882, and was regarded as the special representative of the national admin- istration. Alleged frauds in the use of proxies in the State Committee controlled the organization of the convention and incited popular revolt. His defeat by the immense plural- ity of 192,854 was no imputation on his worth as a citizen or his integrity as a statesman, but was one of the thunder storms which at intervals clear the political atmosphere. It produced results in national affairs which the chief actors in the revolt did not seek. The beneficiary was Grover Cleveland, who was nomi- nated by the Democrats and received the support of the dissenting Republicans. He became the logical candidate of his party for President in 1884, although some of the dele- gates from the State in theNational Convention did not favor him. In the canvass a diversion was attempted by the National Greenback party for Benjamin F. Butler, while the Prohibitionists were zealous and urgent. The official returns were needed to prove the decision in the State; they CORNELIUS N. BLISS Merchant; born in Fall River, Mass., January 26, 1833. Began drygoods business in a Boston house; later partner of commission firm of John S. and Eben Wright & Co. Head of branch house opened in New York, of Wright, Bliss & Fabyan, subsequently reorganized under name of Bliss, Fabyan & Co. Delegate to various state and national conventions. Chairman New York State Republican Convention, 1887. President of Protective Tariff League; treasurer National Republican Committee, 1892, 1900, and 1904. Secretary of Interior in President Mc- Kinlcy's Cabinet, 1897-1898. Director Fourth National Bank, Equitable Life Assurance Society, Home Insurance Co.; trustee Central Trust Co. and American Surety Co. President Union League Club in 1892, 1893, and 1894. Vice-president Chamber of Commerce, and president of New York Hospital. Died October 9, 191 1. PLANTING AND GROWTH OF THE EMPIRE STATE 39 finally gave a plurality of 1077 to 1149 for the electors fav- oring Mr. Cleveland, and the potent voice of New York be- stowed upon him the presidency. In his behalf were arrayed the advocates of free trade, the citizens who believed radical reform was needed in national affairs, and the personal and factional enemies of the opposing candidate, James G. Blaine. Some of the local Democratic leaders resented Mr. Cleveland's independence, but he was nominated for a second term in 1888, by his own State and the National Convention, to find a plurality of 13,002 against him at the polls here, while in the electoral college the record was 168 for him and 233 for Benjamin Harrison of Indiana. The scales changed in 1892. Although the Democrats in State Convention instructed their delegates in favor of David B. Hill, the National Convention preferred Mr. Cleveland. New York pronounced in his favor by 45,513 plurality and restored him to the chief magistracy of the republic. After his retirement he made his home in his native State, New Jersey, but he owed his political elevation to this commonwealth, to which his two terms as President are due and of whose annals his fame is a part. In the Republican party Chester A. Arthur sought the nomination in 1884, to succeed himself. He was not supported, however, by a majority of the New York delegates to the National Convention who aided in mak- ing Mr. Blaine the candidate. In 1885 David B. Hill was elected Governor, in continuance of service as Lieu- tenant-Governor following the transfer of Mr. Cleveland to Washington; he was chosen again in 1888, and was also made United States Senator in 1891. There he did not generally support Mr. Cleveland's policies. He was the head of a wing of his party, recognized as an adroit manager, a trained lawyer, and a powerful influence in politics. He was able to secure the delegation from his State for President 40 PROGRESS OF THE EMPIRE STATE in 1892 and was suggested again in 1896, but was not to grasp the great prize. His last appeal to the people was in 1894, when in the face of a Republican tidal wave he led a forlorn hope for governor. Once again, in 1888, the vice-presidency came to New York. Levi P. Morton gave strength to the ticket of Ben- jamin Harrison and to his administration. As Minister to France he had a creditable record. He was chosen governor over Senator Hill in 1894, rendering such excellent service that the Republican State Convention called for his promo- tion to the presidency in 1896, but the current for William McKinley carried all before it. The governorship in 1891 went to Roswell P. Flower, who had been a merchant in Watertown and became a banker in New York engaged in large affairs. He combined an attractive address with ability in organization. His plu- rality was 47,937, and his services as chief magistrate led his friends to deem him of caliber fitted for the presidency. With General Harrison in his second canvass was associ- ated Whitelaw Reid. Editor of the New York Tribune, Minister to France where he strove for reciprocity, he served as special ambassador to Great Britain both at the jubilee of Queen Victoria and at the coronation of King Edward; he gave strength and wisdom to the commission which framed the treaty of peace with Spain ; he graced the post of ambas- sador to Great Britain, while his name as a scholar and diplo- mat ranks with the highest; when in 191 2 he died in London the expressions of grief in Great Britain were general and impressive. Public as well as private honors were paid to him in all parts of the kingdom, and his remains were sent to New York in a British battle ship. His immediate predecessor as ambassador to Great Brit- ain was Joseph H. Choate who had served as president of the Constitutional Convention of 1894. His prosecution of PLANTING AND GROWTH OF THE EMPIRE STATE 41 the Tweed crimes called out his force and ability as a lawyer, conspicuous also in other celebrated cases. He has added new chapters to the history of American oratory, while as a humorist he has created a school of his own for banquets and popular assemblies. Appointed to the diplomatic serv- ice by President McKinley in 1899, he won the warmest praises in the country to which he was commissioned, while retaining the admiration of his native land. With him was associated in the Constitutional Conven- tion Elihu Root, one of the delegates at large. Designated as chairman of the Committee on the Judiciary, his talents and learning in the law made him a leader in important work to the advantage of the commonwealth. On President Mc- Kinley's invitation he took up the portfolio of Secretary of War, returning to his profession, only to be summoned by Mr. Roosevelt to the higher station of Secretary of State. He justified the choice by broad views and energetic services. By an official visit to the republics of South America he extended the influence of this country and set in motion en- during forces for peace and for the extension of the commerce of the United States. In 1909 he was elected to the national Senate and promptly took rank with the foremost members. In the exciting convention which renominated President Taft in 191 2, Mr. Root was temporary chairman and held the gavel firmly over the excited heads of the supporters of the two rival candidates. With reputation as Representative in Congress and for brave work against election frauds in Troy, Frank S. Black was elected governor in 1896 by a plurality of 213,052. In his message he recommended action to render the civil service rules practical, rebuked the scandals of waste in the man- agement of the Capitol, the use of the #9,000,000 appropria- tion for the canals, discussed the excise laws, and suggested improvements in the conduct of prisons and charities. He 42 PROGRESS OF THE EMPIRE STATE was friend of the libraries and of the university of the State. He labored successfully for the preservation of our forests, and the Adirondack park is in large measure due to him. Theodore Roosevelt passed early to the center of the national stage. Trained in the New York State Assembly, on the United States Civil Service Commission and the Police Commission of New York,as Assistant Secretary of the Navy, with laurels fresh from the war with Cuba, he was chosen Governor in 1898. As executive of the State he denounced frauds on the canals, recommended changes in the methods of taxation, dealt with corporations and their franchises, with charities and education, with the labor laws, gave promi- nence to regulation of the civil service, and urged publicity as a cure for abuses in trusts. In 1900 he was nominated to be Vice-President. The weapon which murdered Mr. McKinley lifted him to the chief magistracy September 14, 1901 . Mr. Roosevelt is the ninth Vice- President selected from New York, and the third to ascend to the executive chair by the death of his predecessor. He is the third New Yorker to be elected to the chief magistracy of the republic, one of the three having served two terms. In 1900 Benjamin B. Odell, Jr., was elected governor by 111,000 majority, and came to the executive chair after two terms of influential service in the national House of Repre- sentatives. For reelection in 1902, he had a close fight with Bird S. Coler, Comptroller of the City of New York, and won by only 9752 votes. A goodly share of the credit for the barge canal belongs to him, for he advocated it with energy and tact. He devoted himself to radical changes in methods of taxation, especially the removal of burdens from land. His successor as chief magistrate was Frank W. Higgins, elected in 1904 by a plurality of 81,607. When, in 1893, he PLANTING AND GROWTH OF THE EMPIRE STATE 43 waselected to the Senate of the State, he was engaged in vari- ous extensive business enterprises, including groceries, which he ran on a cooperative basis. In his messages he recom- mended the repeal of the tax on the surplus of savings banks; he labored also to reduce the cost of gas, and to meet the abuses in life insurance he called for the investigation by the Legislature which resulted in the new laws of 1906. New York furnished in 1904 the candidates of both the great parties for the presidency. The strength of his administration and the lusty prosperity of the country made Mr. Roosevelt invincible at the polls. His antagonist, Alton B. Parker, was well versed in politics, but his reputation was in largest measure derived from his ability as a lawyer and his learning and fairness on the bench of the highest courts of the State. He resigned the post of chief judge of the Court of Appeals to enter the canvass, and at its close returned to the practice of his profession, to be conceded a rank with the foremost in the metropolis. Mr. Roosevelt's plurality in the State was 175,552, and in the electoral college he received 336 votes to 140 for Mr. Parker. Because of the scandals which broke out in the great life insurance companies, an investigation into their manage- ment was ordered by the Legislature, and Charles E. Hughes, a young attorney of New York City, was appointed counsel of the investigating committee. He conducted the exami- nation with such earnestness and keenness as to earn the public confidence and admiration. As a result he was nomi- nated by the Republicans for governor in 1906 and elected by a plurality of 57,897, and chosen in 1908 for a second term by 69,479. On his urgent recommendation, betting on race tracks was prohibited after a sharp contest. He urged, by official message and on the popular platform, provision for direct nominations for office under legal forms, but the Legis- lature failed to enact his measures. More success attended 44 PROGRESS OF THE EMPIRE STATE his plans for commissions to oversee public utilities, and much benefit has been secured by them in the work of transportation, telegraphs, and telephones. President Taft appointed him a justice of the Supreme Court of the United States, and to accept that high station he resigned as gover- nor in October, 1910; Horace White, the lieutenant-gover- nor, by constitutional requirement filled the vacancy for the remainder of the year. In 1908, on the nomination of William H. Taft for Presi- dent, the Republican Convention turned to New York once more for a Vice-President. James S. Sherman had won rank in the House of Representatives as wise counselor and an adept parliamentarian. From 1886, when he became a member, he was reckoned among the most influential and most popular of the representatives. As president of the Senate he had the duty of settling ties on votes of vital sig- nificance, and compelled respect for his sagacity and courage. The canvass of 1910 began with a spectacular strife for chairmanship of the Republican State Convention. The State Committee, according to custom, had named a chair- man and proposed Vice-President Sherman for the posi- tion. Ex-President Roosevelt became a candidate and was supported with heat and persistence. The controversy de- veloped some temper and Mr. Roosevelt was chosen and his partisans controlled the nominations. For governor Henry L. Stimson was presented. The Democrats drafted John A. Dix to head their ticket and he was successful at the polls by a plurality of 67,401. Mr. Stimson entered Presi- dent Taft's Cabinet as Secretary of War in May, 191 1. The election gave the Democrats control of the 'Legislature as well as of the executive departments. James A. O'Gorman was sent to the United States Senate. Mr. Dix in the can- vass had called for honesty in the administration, and de- LYMAN JUDSON GAGE Ex-Sccrctary of the Treasury; born in De Ruyter, Ma County, N. Y., June 28, 1836; son Eli A. and Mary (Judson) Gage; removed to Rome, N. Y., 1848; educated Rome Academy; LL.D., Beloit, 1897; New York University, 1903. At age of seventeen entered Oneida Central Bank ; served as office boy and junior clerk until 1855, when he went to Chicago; clerk in planing mill until 1858; bookkeeper, 1 858-1 861, and cashier, 1861-1868, Merchants' Loan & Trust Co.; became, in 1868, cashier, in 1882, resident, and in 1891, president, First National Bank of Chicago; Secretary of the Treasury in Cabinet of Presidents McKinley and Roosevelt, 1897-1902; president United States Trust Co., New York, 1902-1906; retired, 1906. Was first president board of directors Chicago Exposition; three times president American Bankers' Association; first president Chicago Bankers' Club; twice president Civic Federation of Chicago; trustee Carnegie Institution, Washington. PLANTING AND GROWTH OF THE EMPIRE STATE 45 nounced extravagance, insisting that unnecessary taxation is confiscation. The Legislature sat for nearly seven months and then took a recess until September. For the first time in over five years a direct tax was levied, which was estimated to produce #8,000,000. Sharp controversy arose over direct nominations and betting on race tracks, a land tax was re- newed and marked changes were made with reference to the National Guard. On other matters Governor Dix used the veto power with much freedom. The Democratic State convention in 191 2 passed re- solutions highly commending the'administration of Gover- nor Dix, but nominated to take his place William Sulzer, who having served as a young man in the Assembly at Albany had won rank and experience by twenty years in Congress where he attained the chairmanship of the Com- mittee on Foreign Affairs. Mr. Sulzer was elected Governor by a plurality of 205,454 over J 0D E. Hedges, republican, his chief competitor. Into the presidential election a novel factor was injected, when Theodore Roosevelt became a candidate and asked for a third term. In the Republican National Convention bitter strife developed. Mr. Taft was nominated by the votes of 561 delegates, while Mr. Roosevelt received 107 and 344 were not recorded. The New York delegation was divided, 76 members supporting President Taft, with 8 for Roosevelt and 6 not voting. The dissentients followed Mr. Roosevelt in a diversion, and named him as the candidate for president of the Progressive party. The democrats, inspired by lively hopes, presented Woodrow Wilson for chief magistrate, and with less than a majority of the popu- lar vote, he received in the electoral college, 435 votes; Roosevelt, 91; and Taft, 8. For Vice-President, without effort on his part, James S. Sherman was renominated, the first of his party to receive that distinction. The national 46 PROGRESS OF THE EMPIRE STATE convention cast 597 votes for him, while 4 were scattering and 352 were not recorded. : In the State of New York the returns of the balloting gave Wilson 647,253; Taft, 452,745; Roosevelt, 382,709; Debs, 63,381 and Chafin, 19,427. On October 30, at the climax of the campaign, Vice- President Sherman died at his home in Utica. His impaired health had forbidden him to take his usual leading part in party councils and to stir by his forceful addresses the large audiences which were wont to greet him. His physical forces were worn out in his public labors and his extensive business enterprises, and he passed away in the midst of his activities, in the very presence of the people. His funeral at Utica was attended by the President of the United States, Justices of the Supreme Court, many mem- bers of both Houses of Congress and notables from all parts of the country. Among the many hundreds of men who have represented New York in the two houses of Congress and as heads of bureaus in the departments in Washington, not a few have been eminent for ability and success in their service. Frank Hiscock in both the House and Senate proved himself a shrewd and painstaking legislator. Chauncey M. Depew has a wide reputation as an orator and man of affairs, enhanced on the floor of the Senate. Francis E. Spinner, Treasurer of the United States during the war for the Union and after- wards, honored his State and the nation. Sereno E. Payne gave his name to the tariff of 1909, which he reported from the Committee on Ways and Means. Other names are numerous of men who in legislation and administration have helped to prove that this commonwealth does its full share of the work of the republic. Governor Van Twiller in 1633 brought Adam Roelandsen from Holland to be the first schoolmaster in New Netherland. PLANTING AND GROWTH OF THE EMPIRE STATE 47 This was the first seed of public education in this domain. The schools of New York within a generation drew pupils from as far away as Virginia and the Carolinas. An act, passed in 1722, for free schools was a promise which did not at once bear fruit. King's College, established in 1746, grew into the Columbia University. The Regents of the uni- versity date from 1784, and from them the public schools and higher institutions of learning have been fostered and developed. The first appropriation by the Legislature was granted in 1795 in the sum of #50,000. By 1910 the total cost of the schools of all grades in the State had risen to #76,695,317, while the pupils in them numbered 1,840,409, with 50,958 teachers. In that year 8837 students were graduated from the high schools; 1935 from the academies; and 2536 from the normal and training schools. While New York has had its full share of political agitation, it has lacked no element of material, moral or intellectual development. Its industries have spreadj and multiplied, its facilities for transportation of commodities, persons, and thought have taken on the latest devices of science and mechanism ; all that the race has learned to make home attractive is applied here; the march of wealth has been gigantic; and the flower and fruitage of art, culture, charity, and religion have blessed the people, as museums, libraries, hospitals and churches demonstrate. In the closing years of the nineteenth century and the first decade of the twentieth, enterprises of vast magnitude went forward. The railroads constructed immense termi- nals in the metropolis and added to station and freight facili- ties in the interior cities. Tunnels were pierced under the Hudson and East rivers. The underground railroads were extended, and in 191 1 plans for further development to cost #275,000,000 were adopted. The barge canal, to float boats of 1000 tons from the Great Lakes to tidewater, was put 48 PROGRESS OF THE EMPIRE STATE under contract for fourfifths of the route, and a third of the work was done by midsummer of 191 1. The total cost is estimated at $101,000,000. Canals have for a century been a prominent factor in the politics as well as the business of the commonwealth, while the railroads have multiplied both their freight and passenger traffic. To satisfy the counties distant from the waterways, $50,000,000 was voted to im- prove the country roads; these extend over 80,000 miles, of which 2850 are macadam while 13,000 have under the new policy been laid in stone. In 191 2 the expenditure of $50,000,000 additional was authorized. Public parks have been liberally set apart by State laws aided by private munificence. Recent additions are on a broad scale. The conservation of natural resources has received popular and legislative attention. Forethought has been devoted not only to present demands, but to the needs and well- being of increasing millions of population. Not until the census of 1820 did New York take the first rank in the Union in population and have the right to the title of the Empire State. During the two decades preceding, it gained 783,761 inhabitants, which was a greater number than dwelt at the close of the period in any other State save Pennsylvania and Virginia. In the next two decades New York added 1,056,109 — more than the total of people in 1840 in any other State except Ohio, Pennsylvania, and Virginia. By 1910 this commonwealth had 9,113,614 inhabitants. In the twenty years from 1890 to 1910 the population increased by 3,1 10,490 and this number was exceeded by the census of but four States, — Missouri, Massachusetts, Ohio, and Penn- sylvania. The rate of increase in New York in the first decade of the twentieth century was 25.4 per cent., while in the next preceding decennial period it was 21. 1 per cent. This gain was greater than anywhere else east of the Missis- sippi, except in Florida, New Jersey, and West Virginia. PLANTING AND GROWTH OF THE EMPIRE STATE 49 Since 1790 up to the thirteenth census New York State multi- plied its population twenty-seven times and New York City ninety-six times, while the increase in the continental United States during the same period was twenty-three times. For 1909 the assessed valuation in real estate was $9,266,628,484 and in personal property $555,623,070, upon which in 1910 the State tax collected was $345,476 and the county, town, and school tax $147,817,461. Cities made their own levies in addition. The liquor tax produced $18,102,822 and the corporation tax $9,123,738. The expen- ditures from the general fund were $34,791,576 and from the canal fund $16,443,100. The canal debt is $41,230,660 and that for highway improvement $16,000,000. The tons moved on the canals in 1910 were 3,073,412. In manufactures, New York stands at the head, and its growth continues to be rapid in its many branches. In 1900 the value of products was $2,175,726,900, having more than doubled in twenty years and being more than 16 per cent of the production of the entire Union. The capital here employed in manufactures was multiplied more than threefold in the same period — to $1,651,210,220, or 17 per cent of that for the whole country, while the wages paid amounted to $408,855,652, or nearly 18 per cent of those of the nation. Such development the commonwealth has achieved in less than three centuries. In the first, it scattered seeds of settlement by the sea and beside the rivers, with much trial and many hardships. With the growth of youthful fiber, the second brought sterner conflicts, not free from fire and bloodshed. Its third century was two decades old before the State showed its rounded form and stalwart sturdiness. Although proud to be a member of the American Union, it is worthy in itself alone to be compared with the great 50 PROGRESS OF THE EMPIRE STATE powers of the earth — not with provinces or principalities or dependencies. In Europe only seven nations, and in the western hemisphere only Brazil and Mexico, have more or even so many inhabitants as New York, and its rate of increase exceeds that of any one of them. PERRY BELMONT Bom New York City, December 28, 1851; eldest son of late August Belmont, financier; graduate of Harvard University, A.B. (special honors in history and political economy), 1872; took course in civil law, University of Berlin, then at Columbia Law School; LL.D. knitted to bar, 1876; practised law until 1 1 Congress as a Democrat from 1st New York Distri asecutive terms, 1881-89; chairman Committeeon Foreign Affairs, 1885-88; United States Minister to Spain, 1888- 89; In reneral with rank of Major, First Division, Second Army Corps, U. S. V., 1898. Director of several corporations; member Chamber of Commerce, and member Metropolitan, Knickerbocker, University, Union, and Manhattan Clubs of York; Metropolitan, Army and Navy, and other clubs, Washington, D. C. CHAPTER II THE INFLUENCE OF NEW YORK IN NATIONAL AFFAIRS BY PERRY BELMONT FORMING the strategic center of the patriotic lines in the War of the Revolution, the State of New York early took a position of leadership in the Federal Union which has rarely been relinquished during a century and a quarter of national life. The history of all the States justifies the claim that each, according to its geographical position and the relative importance of its population, has had its individual influence upon national affairs; but from the moment political parties assumed definite form, New York became a pivotal State in presidential elections. There have been only four elections for the presidency in which the vote of New York has not been cast on the winning side. On two of these occasions its vote was given to New Yorkers— to De Witt Clinton in 1812 and to Horatio Seymour in 1868. In 1876 the vote of the State was not cast for Mr. Hayes, the successful candidate, but it remains true that its electoral vote was given to the candidate, a New Yorker, who received the largest popular vote and who carried the doubtful Northern States. Almost in every instance, excepting when the country, by an overwhelming majority, went one way, as it did in 1912, the electoral vote of New York may be said to have decided presidential elections. In the first contest following 51 52 PROGRESS OF THE EMPIRE STATE the retirement of Washington, John Adams, with one vote to spare, would have been defeated without the twelve votes of New York. In 1801, the twelve votes of the State were cast the other way, for Jefferson and Burr, and turned the scale by a vote of seventy-three to sixty-five against Adams. Then came the long period of Democratic ascendancy, dur- ing which the country voted so overwhelmingly for Jeffer- son, Madison, and Monroe that New York only swelled the majority, excepting on the occasion, already mentioned, when the electoral vote of the State was cast for De Witt Clinton. Later, in 1836, when there were again two well-organized political parties, the vote of New York contributed to make up the 170 which elected Van Buren, against an opposition vote of 148. At the next election New York joined the Whig reaction which followed the panic of 1837 and brought about the election of Harrison; but in 1844 the State re- turned to the Democratic column and gave Polk the votes needed to win. Again in 1848, when Taylor was elected, New York cast its thirty-six votes for the successful Whig candidate and gave him a plurality of exactly thirty-six over the Democratic candidate — partly, no doubt, as the result of the nomination of Fillmore of New York for Vice- President on the Whig ticket. The return to Democracy, however, was so sweeping the next election that New York's vote was not needed, although it joined in the great majority given to Franklin Pierce. Then occurred, in 1856, the vote which, in view of the State's position as a reflex of the public opinion of the country, was perhaps the most significant ever cast by New York. It might have been accepted by the upholders of the slave power as the handwriting on the wall, decreeing its final downfall. New York gave its vote to John C. Fremont and on the losing side for the only time when one INFLUENCE OF NEW YORK IN NATIONAL AFFAIRS 53 of its sons was not a candidate. It was the prophecy of what was to take place among thevoters of the North in i860. In that year the votes of New York were given to Abraham Lincoln. Without them he would have fallen seven votes short of a majority. New York voted with most of the other Northern States for Lincoln in 1864, but in 1868 gave its electoral votes to Horatio Seymour, its popular governor and Democratic leader. In 1872 the revolt against Greeley gave the vote of New York to Grant, but in 1876 the State returned to her Democratic allegiance with a large popular plurality for Governor Tilden. In 1880 the sentiment which elected Garfield carried the electoral votes of New York into the Republican column. Without them Garfield would have lacked six votes of election. In 1884 another Democratic governor, Grover Cleveland, received the thirty-six votes of New York and with them secured a majority of eighteen in the electoral college. In 1888 the return to Republican policies gave the vote of New York to Harrison, who would have been beaten by seven votes if it had been cast on the other side. In 1892, New York swelled the popular majority for Mr. Cleveland, although its vote was not strictly necessary to have given him a majority. Again, in the three succeeding elections, the Republican majority was so overwhelming that, while New York was on the dominant side, its vote was not needed in a mathematical sense to make a majority. But the great influence of the State extended to the neighboring States of New Jersey and Connecticut and into all parts of the Union affected by its vast interests. As a result of its numerical importance in the electoral college and its political importance in a general sense, New York, after the termination of the Virginia regency, became the State to which both political parties constantly turned for the selection of candidates on the presidential and vice- 54 PROGRESS OF THE EMPIRE STATE presidential tickets. Even before the dominance of Virginia had come to an end, Aaron Burr of New York had been named by the Democrats as Vice-President with Jefferson. When his treasonable conspiracy brought his political career to an end, George Clinton, of New York, became the Demo- cratic Vice-President for two terms, and after an interval of a single term was succeeded by another New Yorker, Daniel D. Tompkins, who also served for eight years. Martin Van Buren, of New York, was Vice-President from 1833 to 1837. William A. Wheeler, of New York, was Vice- President from 1877 to 1 88 1, and Levi P. Morton from 1889 to 1893. Of the 120 years under the Federal Consti- tution, men of New York have held either the presidency or the vice-presidency for terms aggregating sixty-four years. While only four of these terms have come to men from New York actually nominated for President — Cleve- land having served two terms and Van Buren and Roosevelt one each — three other almost complete terms have come to New Yorkers by the death of the President: to Fillmore, from 1849 to 1853; Arthur, from 1881 to 1885; and Roose- velt, from 1901 to 1905. This record, however, of Presidents and Vice-Presidents actually elected does not include the defeated presidential and vice-presidential candidates who have been citizens of the State. Horatio Seymour was the Democratic candidate in 1868; Horace Greeley and Charles O'Conor the two Democratic candidates in 1872; Grover Cleveland was the Democratic candidate in 1888, the year of his defeat; Reid was the Republican candidate for Vice- President in the campaign of 1892, when Cleveland and Stevenson were elected; and Judge Alton B. Parker was the Democratic candidate for President in 1904. The holding of important places in the Federal Govern- ment by New Yorkers is but the superficial evidence of the State's share in national affairs, the inevitable result of the t^/Kl£3>y WILLIAM COLLINS WHITNEY Publicist and financier; born in Conway, Mass., July 15, 1841. His father, James S. Whitney, was a1 one tirn of the Port of Boston and in [860 a delegate to the Chari Convention. William ('. Whitney was gr; a1 Yale in 1863 and Harvard Law School 1865; continued the study of law in New York City. Took active part in politics as a Democrat and was a supporter of Mr. Tilden in his movement against the 1 ring. Was appointe unsel of New York City in. 1 875, 1 > 7 < > , and 1880. Was made Secretary of the Navy l>y Presi eland on March 5, id laid the found the modem American nav; d actively upon large financial enterprises after retiring from public life, having much to do with the consolidation of the tra tern in New York and being a director in the Morton Tru and other banks and companies. Was largely instrumental in securing the nomination of Mr. Cleveland for President in 1*02, but declined further public office. Died February 2, 1904. INFLUENCE OF NEW YORK IN NATIONAL AFFAIRS 55 imperial greatness and resources of the State itself, and of the fact that its metropolis is at the gateway of commerce and is the center of exchanges. The great names in the public affairs of the country have been associated with the Department of State. Under the Confederation, John Jay, of New York, was Secretary of Foreign Affairs and, at the request of Washington, continued at the head of the Department of State until Jefferson arrived in New York; during the Virginia regency, Jefferson, John Marshall, Madison, and Monroe; in the middle period of the nineteenth century, John Quincy Adams, Henry Clay, Daniel Webster, John C. Calhoun, William L. Marcy, James Buchanan, Edward Everett, and Lewis Cass; in the later period, Seward, Fish, and Evarts, all three of New York. During several of the most critical periods of the nation's history, its foreign policy was directed by men of New York, through the Department of State: by Van Buren for two important years ending in 183 1; William L. Marcy was Secretary of State during the whole of the administration of Pierce, from 1853 to 1857; William H. Seward during the Civil War and Reconstruction, from 1861 to 1869; Hamilton Fish for nearly two terms of President Grant, and William M. Evarts succeeded him under the administration of President Hayes. There was then a gap of twenty-four years in the supremacy of New York in the Department of State, during which, however, its representatives sat in the presidential and vice-presidential chair; but upon the death of Secretary Hay in the summer of 1905, Elihu Root, of New York, succeeded him in the Department of State. Without reference to the more recent instances, men of New York have been given other important Cabinet positions in recognition of the State's influence in national affairs. The most important creative force in the Treasury Depart- 56 PROGRESS OF THE EMPIRE STATE ment was Alexander Hamilton, who first held the office of Secretary of the Treasury. Other men of New York who occupied that position were John C. Spencer (1843-44); John A. Dix, for a brief time in 1861; Charles J. Folger, under President Arthur; Daniel Manning and Charles S. Fairchild, under Cleveland's administration, from 1885 to 1889. John Armstrong (1813-18), Peter B. Porter (1828-29), John C. Spencer (1841-43), William L. Marcy (1845-49), Daniel S. Lamont (1894-97), and more recently Elihu Root and Henry L. Stimson have been Secretaries of War. The New Yorkers who have been Secretaries of the Navy are Smith Thompson, James K. Paulding, William C. Whitney, and Benjamin F. Tracy. Francis Granger, Thomas L. James, Nathan K. Hall, Wilson S. Bissell, and George B. Cortelyou, have been Postmasters-General. Benjamin F. Butler, Edwards Pierrepont, William M. Evarts, and George Wickersham, have held the position of Attorney-General. Cornelius N. Bliss and Oscar Straus are other New Yorkers who have held Cabinet places. New York is described as the financial and commercial center of the country, and the great States of the Middle West, Ohio, Illinois, and Indiana, are regarded as constituting its political center. But New York's tendency to conserva- tism is not to be regarded as mere commercialism. While Alexander Hamilton remains the personification of New York's constructive conservatism in finance, its adherence to American political ideals finds expression in the popular ma- jorities so often given in support of the party of Jefferson, ever broadening the basis of suffrage. New York's ideals have often prevailed over financial or commercial interests. If viewed without regard to party considerations, perhaps the most significant and conclusive vindication against the INFLUENCE OF NEW YORK IN NATIONAL AFFAIRS 57 charge of being controlled by such interests, in its relation to national affairs, was the attitude of the State at the time of the Civil War. Far-reaching as were the interests of New York in the Southern States, great as was its sym- pathy with the people of those States during the heart- rending tragedies of civil war, no State poured out blood and treasure more freely in the defense of the Union. The first steps to strengthen the credit of the government were taken by men representing the financial interests of New York. Had their advice been followed, specie pay- ments might never have been suspended, public credit would have remained comparatively unimpaired, and the long period of stagnation and depression, beginning with the panic of 1873, would have been mitigated, if not entirely avoided. Unerring devotion to sound financial policies has been the distinguishing trait of the majority of the people of New York. This was to be expected of a State which approved and upheld the constructive work of Hamilton and supported Marcy and Seward in their policy and measures for the extension of national commerce. Men of all political parties in New York, having the advantage of being at the center of exchanges, and therefore enabled more easily than those farther removed from it to appreciate any dangers that might threaten the national credit, have at times overruled those less informed and more impatient in seeking remedies for recognized evils. On those occasions of which the firm and, at times, unpopular adherence of President Cleveland to the gold standard is a conspicuous instance, the voice of New York has expressed the maturer judgment of the American people. In the two great political parties the leaders from New- York are often a controlling force in questions other than those affecting national finances or commerce. Though the 58 PROGRESS OF THE EMPIRE STATE city of New York is the financial and commercial center of the country, and while the States of the Middle West may be considered its field of greatest political activity in a national sense, and the Southern States remain the great nursery of national statesmen, the seat of the Federal Government is at the national capital, Washington. There the vast organism of all the departments of the government is centered. There is concentrated the executive power, which is constantly expanding with the growth and develop- ment of the country, and the inevitable and continual extension of the authority of all branches of the Federal Government has had the effect of centering in the national capital the political interests of the country. The ever- improving facilities of intercommunication between Wash- ington and the metropolis have brought about the closer relations of neighborhood and increased the political in- fluence of one upon the other. New and greater oppor- tunities for influencing national affairs have brought about corresponding responsibilities to the City and the State of New York. It may be confidently expected that the tradi- tional patriotism of the people of New York will require them to view questions of national policy from the stand- point of national rather than of local interests, and that the closer association with the national capital will result in promoting the welfare of our country. e/^J^ a^. £r~n~ CHARLES ARTHUR CONANT Financial specialist; horn Winchester, Mass., July 2, 1861 ; grad- .) High School, 1879. Was newspaper work f< >r al iou1 twenty years, beginning at Boston, 1880. Associated with Executive Committee of Indianapolis Monetary Convention, icSyy, and sugge: al provisions of the Gold Standard Law of March 14, 1900. Appointed by Secretary Root Special Commissioner to the Philippine Islands in summer of 1 90 1, for the purpose of investigating coinage and banking conditions there, his report being the basis for the Coinage Act of 1903, from which the new coins became popularly known as "Conants." Visited Mexico in 1903, on invitation of Mexican Government to confer with a commission regarding reform of Mexican currency. Appointed 1906 on special commission of the New York Chamber of Commerce on Reform of the Currency, whose report was adopted by the Chamber, November 1, 1906, and was among the first formal indorsements in America of a central bank of issue Was in 1 910 and 19 12 delegate of United States to International Conference at The Hague on Bills of inge. Author of A History of Modem Banks of Issue. and The Principles of Money and Banking. Director National Bank of Nicaragua, Manila Railway, and Credit Clearing House W York; member Chamber of Commerce of State of New York, American Asiatic Association, Socidte' d'Economie de France. CHAPTER III THE FINANCIAL DEVELOPMENT OF NEW YORK BY CHARLES A. CONANT THE history of New York is in a large sense an epitome of the history of the country. This is preeminently true in the field of finance. In certain manufactures, in agriculture, and in some other fields, the primacy of the Empire State may be contested by sister States, but as the center of financial operations there is none in America to dispute the supremacy of the State of New York, and her chief city. This supremacy, however, was not undisputed in the early days of the Republic. On the contrary, Philadelphia was an important center, partly because it was the seat of the Continental Congress and the Federal Government, partly from the existence there of large fortunes and enter- prising financiers. Robert Morris, who was the financial bulwark of the Revolution, was a Philadelphian and carried on important enterprises in Philadelphia after the peace. The first incorporated bank under the Confederation, the Bank of North America, was founded in Philadelphia in 1781. It seemed natural that the Bank of the United States — both under the first charter and under the later one, which Jackson overthrew — should have its head office at Philadelphia. The name of Nicholas Biddle, the presi- dent of the bank, ranked in his time with that of the modern captain of finance. Stephen Girard — closing up a slow 59 60 PROGRESS OF THE EMPIRE STATE account with the Barings by taking their stock in the United States Bank and then buying out the assets of the in- stitution in full and making it the basis of a new and stronger bank — was a prototype of the powerful financier of to-day, who infuses new capital into a decadent enterprise and makes it again a power in the world of business. Evidence of the predominance of Philadelphia, even in the field of speculation, is afforded by the promptness with which news from abroad was transmitted to the Quaker City as soon as it reached New York. Thus, Gouge relates how on April 9, 1825, seven expresses arrived at Phila- delphia with news of a great rise of prices in the markets of Liverpool and London. " The effect was electric. Twenty- seven cents were offered for Upland cotton, and refused, though the holders would, a week before, have been happy to obtain 20 cents." 1 New York, however, bore her full part in the bank mania, which broke out at about the same time. According to the author just quoted : "The infatuation, if we may be permitted to call it by so mild a name, was most violent in New York. The specu- lators of that city, not content with such privileges as their own Legislature could bestow, prevailed, by means of bo- nuses, on the Legislature of New Jersey to establish a string of small moneyed corporations along the shore of the North River; and, in defiance of the statutes of Pennsylvania, took possession of coal lands within her limits, under the color of charters granted by another State. Their own Legis- lature they besieged in every possible form. During the session which commenced in January, 1825, application was made for charters for new Banking, Insurance, and other companies, with nominal capitals of the amount of fifty-two million dollars. "Money was never more abundant, if a judgment could 'Gouge, Paper Money and Banking, p. 180. THE FINANCIAL DEVELOPMENT OF NEW YORK 61 be formed from subscriptions to the stock, of such companies as succeeded in their applications for charters. Three million dollars were subscribed in one day, in January, to the stock of the New Jersey Lombard and Protection Com- pany, though its capital, as fixed by law, was only three hundred thousand dollars. Nine million dollars were sub- scribed in April to the New York Water Works Company, and by some contrivance its script was raised in the market to thirty per cent, above par. Thirteen millions were sub- scribed in May to the stock of the Delaware and Raritan Canal Company. Between the 5th and the 16th of Febru- ary, the stock of the New York Gas Company advanced 28 per cent., and was sold at 178." It was just about this time (1825) that the coming pre- eminence of New York began to be recognized. Fulton had made an important contribution to the future of his city by the application of steam to water transportation on the Hudson in 1807. It was the harbinger of tendencies in transportation which were to give commercial supremacy to a seaboard city with a well-protected harbor and a deep- water channel. At the moment, however, it was another event relating to water transportation which seemed to turn the scale in favor of the future metropolis. This was the opening of the Erie Canal in 1825. The commerce of the lakes was thus brought to New York, which became the natural center of the export trade in the growing products of the West. Then, when the railway era began, after 1830, the chief lines centered in New York. It needed only the quarrel between Jackson and the Bank of the United States, the removal of the public deposits from the bank and the lapse of its charter, to take away the crown of financial leadership from Philadelphia and fasten it firmly upon the brow of the chief city of the Empire State. To deal intelligently with all the elements of the financial 62 PROGRESS OF THE EMPIRE STATE development of New York within the limited space of a single chapter is a task of difficulty. From a narrative point of view it might be approached in three ways — chronologically, topically, or from the side of personal leadership. Chronologically, the evolution of New York finance would represent a long procession of great trans- actions, some interwoven with the political progress of the nation and nearly all the others with its economic progress. But such a narrative, if complete, would almost overwhelm the reader with its mass of details, some of which, impor- tant in their day, have been overshadowed by greater events in later times. From the topical point of view it would perhaps be possible to single out those events which have been most conspicuous and which have borne most directly on the de- velopment of the New York money market as it is to-day — typical cases of stock market speculation; the development of railway finance, with its #16,000,000,000 of capital; the evolution of the traction system of the country, which now absorbs more than #3,000,000,000 of capital; or the relations of the New York market with the Government — both in periods of national stress when Wall Street came to the rescue of the country, and in periods of monetary stress when the Government reciprocated by coming to the aid of Wall Street with its surplus funds. From the standpoint of great personalities might be woven perhaps a story more romantic than the measured narrative of economic tendencies. The figures of Jacob Little, John Jacob Astor, Daniel Drew, Jay Gould, Commo- dore Vanderbilt, and Jay Cooke have become the centers of legends as romantic in the field of finance as those of the great figures of chivalry in the storied days of knighthood. In dealing with these great names, moreover, as well as with the more modern group, like Villard, Morgan, Ryan, Still- THE FINANCIAL DEVELOPMENT OF NEW YORK 63 man, Baker, Schiff, and Harriman, it would be necessary to recognize wide differences not in personal character only, but in the character of the work performed — in some cases the constructive work of building up the railway and in- dustrial structure of the country, in others the application of profound insight and great ability to the more delicate fluctuations of values on the Stock Exchange. In dealing with a series of problems so vast, the topical method will be that chiefly pursued in this chapter, but the narrative will be illustrated by reference to those prominent personalities whose names cannot well be severed from the achievements of which they were a part. It will be necessary, however, while taking a general survey of many fields, to limit the scope of this chapter as far as possible to what may be called the history of constructive finance. Special chapters in this work are devoted to the fluctuations of values and great events on the Stock Exchange; the evolution of banking in New York as a distinctive pro- fession; the details of the industrial combinations whose finances are now chiefly centered in New York; and to many other subjects which in some of their aspects fall within the field of finance. As already indicated, the financial supremacy of New York dates essentially from the opening of the Erie Canal in 1825 and railway construction on a serious scale. The Mohawk & Hudson River Railroad was completed in 1831 and was the first railway security listed on the New York Stock Exchange. By 1840 the aggregate railway equipment of the country had reached 3049.79 miles. It has been largely in railway securities that the chief storms have raged in the New York stock market, down to a very recent date. The panic of 1837, following the removal of the public deposits from the United States Bank, found New York still sub- ordinate in some degree to Philadelphia, or at least not yet 64 PROGRESS OF THE EMPIRE STATE paramount. The crash of that year was due largely to speculation in Western lands and the sudden check to such inflation by the policy of President Jackson. In these particulars the crisis did not directly concern New York. The financial stringency in England, however, naturally re- acted upon the New York market and the banks of the city were compelled to suspend specie payments on May ioth. The New York money market suffered, in common with that of Philadelphia, from the efforts of President Biddle of the United States Bank to corner cotton. Biddle drew bills on England against cotton for £3,000,000 and expected to get the benefit of the difference between the rates at which he loaned money in the United States — five and six per cent. — and the English rate of two per cent. But the United States Bank no longer controlled the supply of commercial credit, as when it had a Federal charter, and the fabulous profits which Biddle appeared to have within his grasp stimulated the creation of local banks all through the cotton belt, which made advances to the planters and undertook to sell cotton on their own account in Europe. The rise of the discount rate at the Bank of England cut off these profits and compelled the Bank of the United States to go to the rescue of the smaller banks in order to maintain the price of cotton. The task was too great, even for Biddle's resources. Reserve stocks of cotton came upon the market, stocks in the hands of manufacturers were allowed to run down, mills reduced their output, the house of Hottinguer of Paris protested Biddle's paper, the Hopes of Amsterdam broke off relations with him, and the price of cotton collapsed. All these incidents, while they affected keenly the market for foreign exchange which had been developed in New York, still bore the impress of Philadelphia speculation; but the AUGUST BELMONT Financier; born in Alzey, Hesse-Darmstadt, in [816; was edu- cated in Frankfort and spent several years in the employ of the Rothschilds there and in Naples. Came to New York in 1 8^7 as the Rothschild agent. Was Austria Consul-General to York from ,H 44 to 1850, but resigned because of dissatisfaction at the treatment accorded by Austria to Hungary. Was United States Charge- d Affaires at The Hague in ,853 and became Minister in 1854. Resigning in ,858, he returned to the United States and engaged in banking. He took an active interest in public affairs, was a delegate to the Democratic National Con- vention of i860, and from that year until ,872 chairman of the Democratic National Committee. He married a daughter of Commodore Matthew C. Perry, for whom his eldest son Perry was named. He was instrumental in erecting a bronze statue of Commodore Perry at Newport, and was an active patron of the arts and of American sports, being for twenty years president of the Amencan Jockey Club. Died in New York City, November 24t 1889. THE FINANCIAL DEVELOPMENT OF NEW YORK 65 collapse of the United States Bank, after several vain efforts to restore its credit, practically decided the transfer of financial supremacy to the chief city of the Empire State. The crisis of 1857 found New York occupying this posi- tion of supremacy without dispute. The two most con- spicuous features in this crisis were the outpour of gold from the Californian and Australian mines, which seemed for the moment to afford the prospect of perpetually ex- panding prices, and the frenzy for railway construction. The railway mileage built in the United States in 1856 was 3642 miles and construction for the nine years ending with 1857 amounted to 21,000 miles. Although these figures seem small in comparison with the 240,000 miles of the present day, they represented an enormous investment for that period. In England only about 8000 miles had been constructed up to 1857, at an expense of #750,000,000. In the United States the new construction of nine years absorbed a lesser average amount per mile, because of lighter construction and lower cost of roadbeds, but demanded a total of #700,000,000 in new capital. Private wealth was already attaining proportions quite as alarming, no doubt, to the croakers of that time as the somewhat larger accumulations of more recent times. A list published by the Sun in 1845, of property owners whose resources were valued at #100,000 or more, contained several hundred names, many of which foreshadow the lead- ing families of to-day. John Jacob Astor led the list with a fortune put at #25,000,000 to #50,000,000, an estimate prob- ably much too high for that time. William B. Astor was credited with #5,000,000; the Stephen Van Rensselaer estate, #10,000,000; Stephen Whitney, #10,000,000; James Lenox, #3,000,000; Peter B. Stuyvesant, #2,500,000; Mrs. Jacob Lorillard, #1,500,000; Gouverneur Morris, #1,500,000; and others who were allotted #1,000,000 each were: Henry 66 PROGRESS OF THE EMPIRE STATE Brevoort, Jr.; William B. Cosby, Maltby Gelston, Harper and Brothers, Jonathan Hunt, Peter Lorillard, Jr., and Anson G. Phelps. Commodore Vanderbilt was at that time credited with only #250,000, but within a short time was to prove his ability to win much more. So rapid was the development in every branch of American financial progress that, in the language of Pro- fessor Von Hoist, "It was more and more lost sight of, that even in the age of steam, time must remain an essential factor in every process of development." Immigration lent its aid to the natural growth of population and the expansion of trade, and the American people, under these combined influences, to quote again from Von Hoist, "worked themselves deeper and deeper into the delusion that the fancy could scarcely keep pace with the reality, and were thus led to mold the reality in their minds in accordance with what imagination pictured to them." 1 The blow which started the collapse of the house of cards built up by excessive speculation was the failure of the Ohio Life Insurance & Trust Company on August 24, 1857, with liabilities reported at #7,000,000. This big bank- ing and investment institution did a large business in New York as well as Cincinnati. A panic followed on the New York Stock Exchange, stocks fell acutely in market value, and desperate appeals were made to the banks for aid. The latter, however, with specie depleted to less than 10 per cent, of loans, had already reached the limit of expansion. The loan account was reduced from #122,077,252 on August 8th, to #97,245,826 on October 17th, and four days before the latter date the New York banks, with specie reduced below #8,000,000, suspended specie payments. The Phila- delphia banks had preceded them by eighteen days — on September 26th. One of the impelling influences of the sus- 1 Von Hoist, Constitutional History of the United States, vi., p. 104. THE FINANCIAL DEVELOPMENT OF NI \\ YORK 67 pension was the gradual decline of deposits, from #67,372,941 on August 8th to #42,696,012 on October 13th, as merchants, unable to obtain their usual accommodations, were com- pelled to draw upon their reserve funds. Even at this early date, before the redeposit system of the national banking law had been thought of, attention was attracted by the withdrawal from New York of ''country deposits." A writer of the time declares: "An important fact must be stated in connection with the fall of deposits .between August 22d and September 26th, viz., that of the #7,322,608, full three-fourths was drawn out by the country banks; so that the amount with- drawn by the individual dealers was, at most, not above two millions of dollars. Thus, the consequences of holding a treacherous country fund on interest, and treating it as bank capital, fell ultimately on our city merchants. 1 So serious was this loss that, by the Clearing House Committee which reported on the panic, it was attributed in large measure to the telegraph, which "new medium of communication filled our banks with imperative orders for the immediate return of their deposits, in specie." How vastly this little instrument was to extend the influence of the market of New York, by putting "a girdle round the earth," escaped for the moment the attention of these conservative gentlemen, but is indicated in a measure by the modest figures with which they then dealt compared with the great transactions of to-day. Loans then " reached the unprecedented height of #122,000,000 on the eighth day of August, " 1857, and the country deposits were estimated at about #15,000,000. On September 14, 1912, the loans and discounts of the New York Clearing House banks were #2,010,803,000 and deposits of country banks were probably not less than #400,000,000; but under the national banking 1 Gibbons, The Banks of New York, p. 355. 68 PROGRESS OF THE EMPIRE STATE law cash reserves in New York are no longer permitted to drop to 10 per cent., but must equal 25 per cent, of all deposit liabilities. The beginning of the Civil War found New York the financial center of the Union, with the Clearing House eight years old, and a large and active stock market in govern- ment and railway securities. The New York market of that time differed, however, in many respects from the market of to-day. It was isolated from the markets of Europe by the lack of the ocean cable, which came only in 1866. The principal banks were State banks. They were better organized in New York than in almost any other State, except Ohio, Indiana, Louisiana, and New England; but they did not have the legal status as reserve banks for the entire country, which was conferred on the national banks of New York by the National Banking Act of 1864. It is interesting to note the comment of an observer of that time in regard to the small part which the note issues of the banks played in the fluctuations of the market. Gibbons declares: "The Superintendent of State Banking in his report for 1857, in view of the fact that the New York City bank cur- rency was contracted but a million and a half during the panic, says : 'This would seem clearly to demonstrate, that whatever may lead to a suspension of specie payments, the currency of our banks, properly secured, is not an ele- ment in its production.' " It was in i860, seven years after the organization of the Clearing House, that Clearing House certificates were first resorted to in New York to meet the scarcity of money and the reduction of bank reserves. A Clearing House certificate is, in substance, a combination of the cash reserves of all the banks, in order that the institution whose reserves are impaired may not be driven to the wall by the heavy de- THE FINANCIAL DEVELOPMENT OF NEW YORK 69 mand for cash to make their Clearing House settlements. The certificates were issued by a committee, upon the deposit of approved securities by the banks taking out certificates, and were employed in the settlement of balances of the banks at the Clearing House. This enabled banks taking out certificates to settle their obligations without drawing upon their cash. The first issue of such certificates was on November 23, i860, when the approach of war compelled much forced liquidation. The certificates then issued, which reached a maximum outstanding of #6,860,000, were all canceled by March 9, 1861, but a new issue was made on September 16, 1861, which reached a maximum outstanding of #21,960,000. Final cancellation was attained on April 28, 1862. Two other issues were made during the war and the same device was resorted to again in 1873, 1884, 1890, 1893, and 1907. The war brought radical changes in the New York market by the appearance of the Government as a large borrower and by the issue of paper money, which led to the suspension of specie payments. The flood of government obligations which was poured upon the market naturally divided the speculative interest which had recently centered in railway securities. All through the war, however, and during the period of reconstruction, speculation raged furi- ously in railway shares, stimulated and encouraged by the fluctuations in the public credit and the resulting in- fluence upon the popular conception of values. It was the period of Cornelius Vanderbilt, Daniel Drew, Jay Gould, and "Jim" Fisk. It was during this period that Drew and Vanderbilt executed their famous corners in Harlem, in Hudson River, and in Erie. 'The Commodore," as Vander- bilt was familiarly known, was seeking to develop the Hud- son River property when he found it assailed by a large bear element. Immediately taking command of the situa- 70 PROGRESS OF THE EMPIRE STATE tion, he tricked his opponents into the belief that his position was weak and induced them to increase their out- put of short stock. ■ Getting practically all the real stock in existence into his possession and accepting contracts for additional amounts from the short interest, he soon had the market absolutely in his hands. From 112 the stock rose in a few days to 180. The shorts, unable to find stock to make the deliveries which they had contracted for, begged for mercy, and the stock was sold back to them at a handsome profit. Much more complicated and daring were the operations of Daniel Drew, Jay Gould, and Fisk in Erie. The story of their use of the Erie is worth outlining, if only to illus- trate methods which in the financial world of to-day would no longer be tolerated or possible. In July, 1868, the Erie Railway became the personal property of Fisk and Gould. The board of directors held no meetings; the executive committee was never called together. The Erie offices were moved to a white marble "palace" on the corner of Eighth Avenue and Twenty-third Street, which was fur- nished with vulgar ostentation, contained an opera house, and was connected with the private apartments of Fisk. Just before this (in 1866) Drew had operated his famous plan of loaning money to the Erie on the security of stock and convertible bonds and converting the bonds into stock to meet his short contracts. It was the acquisition by Commodore Vanderbilt in 1867 of the New York Central Railroad which brought him into conflict with Drew and Gould. 'The Commodore" desired to acquire Erie. To guard against the trans- formation of more "convertible bonds" into stock, he employed the services of Frank Work to obtain from Judge Barnard an injunction, restraining Drew from payment of 'Vide Clews, Twenty-eight Years in Wall Street, p. 108. . .A Brits JOHN PIERPONT MORGAN Ban 1 mius Speni i nt in paternal line of Captain Miles Morgan, a n came, via Bristol, EngL i in 1637. Gi English High School, B( rsity of Gottingen. Began busin- in the hanking house of Duncan n&Co.;iii and attorney in I * George 0., of London (hi 1864, juniorrm m of Dab- ney, Morgan & Co., and ! he eventually became head under the name of J . 1'. Morgan The house, under his person;;! .0,000 ! Administration, which ates from a silver i many of tl 1 United States 1.00,000,000. His b ' equipping 50,000 o the New York Trade Schools; and $500,000 toward the b the Cathedral of St. John the Divine. Died at Rome, Italy, March 31, 1913. THE FINANCIAL DEVELOPMENT OF NEW YORK 71 interest on #3,500,000 in bonds, pending an investigation of his accounts as treasurer of the railway. But Drew was equal to the emergency. Under a statute authorizing any railroad to create and issue its own stock in exchange for that of a leased line, he and his associates issued against an insignificant property, worth perhaps #250,000, the amount of #2,000,000 in Erie stock. Deals and counter-deals, and injunctions to restrain injunctions, did not prevent Fisk from seizing the enjoined stock certificates by force nor Drew from throwing 50,000 shares on the market and break- ing Vanderbilt's attempted "corner." While new stock was thus being put out, Fisk is said to have summed up the purposes of his clique towards Vanderbilt in the remark, "If this printing press don't break down, I '11 be d — d if I don't give the old hog all he wants of Erie." Vanderbilt was credited with spending #7,000,000 and it was the wonder of his friends that he was not ruined. It is not surprising that such manipulations did their share in unsettling legiti- mate business and adding to the severity of the panic of 1873. The panic was the natural result of the destruction of capital which took place in the previous decade and of the encouragement given to speculation by a fluctuating paper currency. The money markets of the world had to reckon not only with the enormous destruction of property in war in the United States, but with the similar fruits of two other recent wars — that between Germany and Austria in 1866, which was crowned by the victory of Germany at Sadowa, and the great war between France and Germany, for which France was compelled to pay to Germany an indemnity of a thousand millions of dollars. The direct cost of the Ameri- can war, exclusive of pensions, has been estimated at more than #5,500,000,000, and the cost of the Franco-Prussian War at #2,700,000,000. An enormous amount of capital also was absorbed in the ten years prior to 1873 in the V PROGRESS OF THE EMPIRE STATE building of railways. New construction in the United States in 1870 was 5690 miles; in 1871, 7670 miles; in 1872, 6167 miles; and in 1873, including a part of the period of panic, 3948 miles. In Russia a system of 12,000 miles of railway had been almost entirely created since 1868 and in South America nearly #200,000,000 in English capital had been borrowed, mostly for railway enterprises. It was at about this period also that the substitution began of Bessemer steel for iron as the material for rails. The severity of the panic in the United States, as well as in Austria, was heightened by the state of the currency. There had been up to the climax of the Civil War an almost uninterrupted decline in the value of the paper money issued by the American Government and a corresponding rise in paper prices. With the close of the war, these movements were reversed. There started in a rise in the value of the currency and a decline in prices. This decline in prices spelt ruin to many who had bought real estate or merchandise in the expectation of its rise in value and imposed paralysis even upon the more conservative, who had correctly read the downward tendency of values expressed in paper money. The specific cause usually assigned for the panic of 1873 was tne failure of the great house of Jay Cooke & Company, as the result of tying up its resources in the Northern Pacific Railway. The incident was, however, only typical of the times, and if Cooke had never lived the story would have differed chiefly by the substitution of an- other name for his. The House of Jay Cooke & Company had grown to power and prestige by the clever and original methods employed by Mr. Cooke in borrowing money for the Government during the Civil War. Cooke was a true child of the new America — the first or nearly the first baby boy born, as he was fond of boasting, in Sandusky, Ohio. Through political and social connections, he entered THE FINANCIAL DEVELOPMENT OF NEW YORK 73 a Philadelphia banking house during the period of hazardous financing and State banking before the Civil War, and had made enough by 1859, while still under forty years of age, to contemplate retiring from active business. But his was not a nature for inactivity. The close relations established by his father and brother with Salmon P. Chase, the new Secretary of the Treasury, obtained Cooke a hearing in the floating of the early war loans. He quickly realized that if the Government was to obtain the money necessary to carry on the war, it must be by educating the people to the value of the war bonds and the necessity of taking them as a patriotic duty. It was a wonderful campaign of advertisement, of can- vassing the post-offices, of manipulating the press, and of removing opposition, which Cooke carried on in floating hun- dreds of millions of the five-twenties, the ten-forties, and the seven-thirties. The later flotations, however, which came after the war, required perhaps as much skill as the earlier ones, because they involved persuading the people to retain their public funds while accepting considerable reductions of interest. Inevitably Cooke's success drew competitors into the field. When the question of refunding arose, a com- mittee representing other New York banking houses ap- peared in Washington to demand a share in the operation. The composition of this committee is of interest because it was practically the first appearance on the stage of public finance of J. Pierpont Morgan, then a young man of thirty-five. He, with Governor Levi P. Morton, who had established the banking house of Morton, Bliss & Company, and had enlisted the aid of the Rothschilds, appeared in Washington in January, 1873, and demanded and obtained from Secretary Boutwell a share in the new issues. The methods of the syndicate had little of the "go" of the old Cooke methods and already J:he tightening of the money 74 PROGRESS OF THE EMPIRE STATE market was making itself felt. Where subscriptions of #600,000,000 had been expected for the new loan, they amounted after several weeks to less than #50,000,000, and the entire operation was ultimately suspended by the out- break of the panic. The lack of money to subscribe for the government loan was a warning of conditions prevailing in the money market generally. Jay Cooke, swept along by the great success of his methods in disposing of the war loans, believed it possible to perform the same miracle with the bonds of the Northern Pacific. It was his calculation that he could sell bonds as fast as he was called upon for money for the work of con- struction, and it was distinctly provided in the contract with the road that the advance in excess of bonds sold should never exceed #500,000, which itself \vas secured by the deposit of the company's bonds at 50 cents on the dollar. During the summer of 1872, however,.with the presiden- tial campaign at its height, sales of bonds fell to a few hun- dred thousand dollars a month, while the drafts of the treasurer of the railway company were running at about #1,000,000 per month. Inevitably the balance of floating indebtedness by the railroad to the banking house began creeping up, until it stood near the close of August at #1,583,000. Ex-Secretary McCulloch, who had become head of a London branch, and other associates of Cooke, were quick to realize that the house was getting into deep water and that further uncovered advances must be stopped. It was much easier to lay down this rule, however, than to carry it out. Already there were complaints along the line of construction that wages were not being paid promptly and that men were being laid off. Smaller railway enterprises in hands less strong were going to the wall from similar causes, and in October, 1872, the coupons were defaulted on THE FINANCIAL DEVELOPMENT OF NEW YORK 75 the St. Paul & Pacific road, in which a controlling interest was owned by the Northern Pacific. The year 1873 was thick with omens of disaster for the new railway enterprises. The Boston fire, in November, 1872, while not so disastrous as that in Chicago the year before, caused another crash in the stock market. Grave frauds were disclosed in the management of the Erie Rail- road; General John C. Fremont failed conspicuously in an effort to raise money for the Southern Pacific system in France; and at last the grave exposures broke out in connec- tion with the Union Pacific Railroad which resulted in the Credit Mobilier investigation and its long train of scandals. A traveler in Germany wrote home in August that an American railway bond, "even if signed by an angel in heaven, would not sell." So desperate was the situation becoming that Henry Cooke, brother of Jay Cooke, put his chief dependence, in a letter to his brother, on "an unfailing confidence in the God in whom we put our trust." "I do not believe, " he said, " He will desert us. " But the Lord did not intervene to prevent the results which seemed to the profane an inevitable outcome of economic laws. Jay Gould was still manipulating a power- ful gold pool in the late summer and early autumn, when on September 8th the first rude blow was given to the card house of the New York money market. The New York Warehouse & Security Company suspended, followed five days later by a firm with which Daniel Drew was associated. When Mr. Cooke reached his Philadelphia office on Sep- tember 1 8th, he found a dispatch announcing that the New York office had been closed by his partners in that city. The news spread like fire on one of the Northern Pacific's own dry prairies. Other houses fell the same day or the next day, stocks dropped from twenty to forty points, money could hardly be had at any price, and the Stock Exchange 76 PROGRESS OF THE EMPIRE STATE Committee closed the Exchange, in the language of the vice- chairman, "to save the entire Street from utter ruin. " While ultimately the assets of the failed house proved to be amply adequate to meet its liabilities, the career of Mr. Cooke as a financier was ended. Facing cheerfully for a time the prospect of extreme poverty, his fortune was partially recouped six years after the panic by an almost forgotten mining investment. Repurchasing his old home in the suburbs of Philadelphia, he lived on there, content with the society of his children and grandchildren, his farming and fishing, almost forgotten by the present gen- eration of Americans, until his death in 1905 at the age of eighty-four. In his great cape cloak and his wide-brimmed light gray soft felt, set over a gentle face adorned by a long white beard, his patriarchal figure was long familiar on the streets of Philadelphia — a very different type from the shrewd, grasping men who speculated in their country's fortunes in the New York gold-room. The disorder and discouragement caused by the panic did not make easy the return to a sound monetary system. The corner was turned at last, however, with the re- sumption of specie payments on January 1, 1879. Almost from that moment prices began a slow recovery and wages began to advance. The advance of wages now had more significance than during the war time, because it was an advance in gold wages and not a mere advance in paper, which only partially offset the decline in the gold value of paper. The tendency to advance in prices, however, was concealed to a large degree by the improvements in labor- saving machinery, which greatly increased the output of the average laborer and the single machine. A moderate degree of prosperity reigned from 1879 to 1890, — interrupted only slightly by the failures of 1884, which carried down the celebrated house of Grant & COLONEL JOHN JACOB ASTOR Capitalist; born "Fcmcliff," Rhinebeck, N. V., July 13, I son of William and Caroline (Schermerhorn) Astor, and grai of William B. Astor: educated at St. Paul's School, Concord, N. H., and Harvard University. Principally engaged during mature years in management of inherited estate; completed that part of Waldorf-Astoria Hotel known as the "Astoria," 1897; com pl : i 1 St. Regis, 1905, and Hotel Knickerbocker, 1906. oloncl on Governor Morton's staff; commissioned inspector- general, with rank of lieut.-col., U. S. V., May 15, 1898, gave a fully equipped battery of artillery' to the Government on breaking out' of war with Spam; served in Cuba, including siege and sur- render of Santiago de Cuba. Inventor of pneumatic machine to remove worn-out material from roads before new stone is laid down, which received first prize at World's Columbian Exposi- tion, 1893; of a practical turbine engine, and of other practical mechanical devices. Author of A Journey in Other Worlds: A Romance of the Future. Was director Astor Trust Co., Illinois ral Railroad, Mercantile Trust Co., National Park Bank, Plaza Bank, Niagara Falls Power Co., Western Union Telegraph Co., etc. Member Chamber of Commerce, New York Academy of Sciences, Society Colonial Wars, Military Order of Foreign Wars, etc. Went down on the Titanic, after putting his young wife safely aboard a life-boat, April 15, 191 2. THE FINANCIAL DEVELOPMENT OF NEW YORK 77 Ward. The years following the silver purchase law of 1890 were years of rapid expansion, until the panic of 1893 came, with its demoralizing check to nearly every branch of activity. The history of that crash belongs so largely to the history of the foolish silver legislation of 1890, which was succeeded in 1896 by the efforts to carry the country to the silver basis, that most of the details may properly be left to the competent writer of the chapter on the relations between the New York money market and the Government. In some respects the crisis of 1893 was one of the most severe tests to which the financial structure of New York has been subjected, because the stability of the currency was seriously threatened. The Baring crisis in London in 1890, followed by the breakdown in Australian finance in 1893, had already produced their reaction upon the American market. Early in 1893 rates for money stiffened, American exports of merchandise declined by #185,000,000, loans were called, and two big bank failures occurred in Chicago. Up- on these conditions of unstable equilibrium came the sus- pension of silver coinage by the Government of British India. Silver declined in four days from 36d. per ounce in London to 30>^d. on June 30th, and grave fears arose that the Treasury of the United States would not be able to main- tain the parity of the silver dollar. Net exports of gold in the three years ending June 30, 1893, were #156,132,423, and railway net earnings fell for the next year by #147,000,000. On July 26, 1893, rates for call money rose to 75 per cent, and the break in prices of securities was so violent that it was again proposed to close the Stock Exchange, as in 1873. Failures throughout the country increased from 10,270, with liabilities of #108,500,000 in the calendar year 1892 to 15,560, with liabilities of #402,400,000 in 1893. r 1 A detailed account of the panic of 1893 will be found in the author's History of Modern Banks of Issue, fourth edition, G. P. Putnam's Sons, New York, pp. 668-697. 78 PROGRESS OF THE EMPIRE STATE It was out of the storm and wreckage of the panic of 1893 that modern financial New York emerged, taught by many severe lessons how to guard against similar disaster in the future. It was necessary to wait until after the specter of free silver was laid in the elections of 1896 before a return of confidence could even be expected. Upon that event there was an outburst of financial and industrial activity, which waxed greater from year to year until 1906. The consolidation of railways, the merging of industrial enter- prises, and the sudden acquisition of large amounts of free capital by the men who surrendered control of private plants created the conditions for unfettered industrial expansion and for excessive speculation on the Stock Exchange which marked the history of the years from 1897 to 1906, and ultimately brought on the panic of 1907. The city of New York prospered greatly with the revival of industry at the beginning of the twentieth century, because she had become the center upon which converged the surplus savings of a prosperous country. The concentration of important financial operations in New York is a natural sequence of consolidation in many lines of industry and in railway and banking control. Among the special influences which have contributed to this concentration are the rapid growth in banking resources and security issues, the large assets of the life insurance com- panies, the accumulation of reserve funds by railways and industrial companies, and the rapid increase in savings de- posits. Through these instrumentalities the savings, which the people of the entire country are realizing from increased production and improved trade, are poured into the New York money market almost as promptly and directly as a current of oil through one of the Standard Oil Company's pipe-lines or a stream of water from a vast storage basin through mammoth supply pipes. The control of these vast THE FINANCIAL DEVELOPMENT OF NEW YORK 79 sums, in the form of deposits and money for investment, has placed power in the hands of the men at the head of New York finance such as has seldom been possessed by the financiers of any country. The banking resources which have accumulated in New York constitute about 30 per cent, of the total banking resources of the United States. Among the national banks, those of the State of New York had resources in June, 191 1, of #2,383,294,277, or a little less than a quarter of the re- sources of all the national banks of the country, which were #10,383,048,694. Of the resources of loan and trust com- panies, a much larger proportion is concentrated in New York. Of such companies reporting to the Comptroller of the Currency in 191 1, with total resources of #4,665,110,868, the proportion belonging to New York was #1,711,599,061 ; while of State banks with total resources of #3,747,786,296, the proportion falling to New York was #608,030,388. Evidence of the large share of New York in the wealth of the country is afforded by the statistics of corporations domiciled and paying the corporation tax in the Empire State. The total of corporate security issues in the United States on June 30, 191 1, was reported at #57,886,430,519 in capital stock and #30,715,336,008 in bonded and other in- debtedness. This aggregate of about #88,600,000,000 can- not, however, be accepted as representing tangible assets without several qualifications. The most important quali- fication is the ownership of the securities of one corporation by another, which results in a duplication of securities without a corresponding duplication of wealth. Figures for such intercorporate holdings are obtainable only for railways, banks, and a few other classes of corporations, but it is certain that the deductions would reduce the net wealth in corporate form to #65,000,000,000 or less, which would be about half the total wealth of country. 8o PROGRESS OF THE EMPIRE STATE The share of New York in the outstanding capital of corporations paying the tax, on June 30, 191 1, was #14,532,108,376, while the bonds and other indebtedness of such corporations amounted to #7,529,120,943, the two items representing one quarter of the total for the entire country. The net income of New York corporations was stated at #689,414,892, or more than 20 per cent, of the reported net income for all corporations, which was #3,360,250,642. Upon the basis of the tax of one per cent, upon net income levied by the law, the amount paid by New York corporations was approximately #7,000,000. With the concentration of capital in New York, in- evitably came concentration of banking power. Banks of small capital and limited resources were incompetent to cope with the financial problems presented by the merger of institutions like the steel companies and the tobacco com- panies, or to command the resources abroad which were occasionally employed to meet unusual demands upon the New York money market. With the increased concentra- tion of banking resources came also concentration of power in a new group of men, who controlled these resources and brought into the circuit of their influence other institutions dealing in large amounts of money, like the railways and the insurance companies. Evidence that the generation which followed the Civil War had completed its work was afforded by the passing away of its leaders. August Belmont, Sr., chairman of the Democratic National Committee, as well as financier, died on November 24, 1890 . Two years later passed away, on December 2, 1892, Jay Gould, the great organizer of corners and spectacular market moves, who belonged really to the generation of the war rather than that which came after it. William H. Vanderbilt had already died on December 8, 1885, his death bringing to an end the stock (MfowT> 77. ityfa^ THOMAS F. RYAN Financier; born in Nelson County, Va., October 17, 1851. Went to Baltimore at age of seventeen and worked in drygoods commission house of John S. Barry until 1870, when he went to New York City. Became member of New York Stock Exchange, 1874, and soon became indentified with corporate interests relating especially to consolidating and extending the street railway and lighting systems of New York, Chicago, and other large cities, being associated in and having active charge of enter- prises of the late William C. Whitney for nearly thirty years. Went to London, in 1902, to take charge of fight which the American Tobacco Co. was then making against the Imperial Tobacco Co. for a division of world territory for the tobacco trade, and in a few weeks established harmonious relations with the British corporation. Was a leader in reorganization of Richmond & Danville system into present Southern Railway; formed and executed the plans for the Central of Georgia Railroad & Banking Co. ; purchased a controlling interest in the stock of the Equitable Life Assurance Society of the United States, in 1905, which was placed in the hands of trustees. Director of the Guaranty Trust Co., American Tobacco Co., and many other corporations. THE FINANCIAL DEVELOPMENT OF NEW YORK 8l market boom of that year. Another figure long known in the market, Russell Sage, shrewd reader of men and wizard of money, lingered much longer on the stage, active to the last. Mr. Sage died on July 22, 1906, and his great fortune was distributed in many important new foundations and other benefactions by his widow. Cornelius Vanderbilt, who had succeeded William H. as the financial head of the family, died on September 12, 1899. Conspicuous among the younger group of men who came to be the arbiters of nearly everything financial in New York at the beginning of the twentieth century were J. Pierpont Morgan, William C. Whitney, Thomas F. Ryan, James Stillman, E. H. Harriman, the sons of Jay Gould, Henry H. Rogers, and the Rockefellers. The preeminence of Mr. Morgan dated back farther into the nineteenth century than that of some of his associates. Born and brought up with the most scholarly tastes and love of the beautiful, Mr. Morgan nevertheless entered a banking-house in youth and bent his energy in middle life to the consummation of some of the greatest financial enterprises of the time. Mr. Morgan's first appearance in a conspicuous manner was characteristic of his character as one who always sought to build up values rather than to pull them down. At a time when the New York Central and the Pennsylvania were competing against each other, in 1885, until New York Central dividends had been reduced from eight per cent, to two per cent., and the West Shore line was cutting rates recklessly, Mr. Morgan called upon George B. Roberts, president of the Pennsylvania Railway. He unfolded a plan by which the warring lines might come to an agreement and the West Shore should be absorbed by the New York Central. The plan was accepted, the West Shore was leased to the New York Central from January 1, 1886, and the latter never afterwards ceased to pay a respectable 82 PROGRESS OF THE EMPIRE STATE dividend. Mr. Morgan again showed his capacity as a peacemaker when he called a meeting of prominent rail- way presidents at his house in January, 1889, to form "The Gentlemen's Agreement" for maintaining published rates. This agreement remained in force for many years and relieved the railway situation of many uncertainties. Mr. Morgan rescued the Government from specie sus- pension by the syndicate contract to control exchange in the spring of 1895. This achievement alone made him one of the most conspicuous men of his time, as well as one of the most abused by noisy demagogues and jealous rivals. Other important banking operations were crowned, however, by the creation of the United States Steel Corporation, the largest corporation in the world, formed from fourteen large steel companies, controlling about 60 per cent, of the great output of steel in the United States, and having capital liabilities of more than #1,325,000,000. Probably no cor- poration ever formed had so many shareholders or became a subject of such general interest among small investors. Mr. Morgan suffered somewhat in prestige when the stock market break of 1903 carried Steel common stock down from 40 to 10 and preferred from 89^ to 49K. But the early suspension of dividends on common stock contributed to the accumulation of the great surplus planned to meet just such emergencies in the future, and with the resumption of business activity in 1904 the foresight and conservatism of the great financier were in a large measure vindicated. With this achievement Mr. Morgan rested to some extent upon his laurels, devoting himself to obtaining for Ameri- can art galleries some of the most precious work of the old masters and accumulating in his magnificent library in the heart of the city some of the rarest and choicest examples of the bookmaker's art, from the illuminated handwork of early times down to the invention of printing and the most per- THE FINANCIAL DEVELOPMENT OF NEW YORK 83 feet examples of modern binding. But in the panic of 1907 he again came to the front as the one man in whose dis- interestedness and skill the entire community trusted — the one safe pilot for riding out the storm and saving the financial craft from shipwreck. Mr. William C. Whitney won his first laurels in the field of politics. As a friend of Samuel J. Tilden, he had a share in breaking up the Tweed ring. As a friend of Grover Cleveland, he became Secretary of the Navy and had much to do with laying the foundations of that great arm of the service which now counts more battleships and cruisers than there are States of the Union. When Mr. Whitney came back to New York in 1889 it was realized that he would be a power in the world of finance. He at once took hold of the traction problem and began the organization of the great system which was to replace the confused network of inde- pendent lines with which New Yorkers were then served. Without some such guiding hand as his, the transportation service must utterly have broken down with the increase of population. So rapid has been this increase, from im- migration as well as births, that probably not fifty per cent, of the existing inhabitants of New York recall the time when through competing and independent lines there were neither free transfers nor continuous transportation for any con- siderable distance; when horses were only gradually giving way to cable and electric power, and a line on Broadway was secured only in the face of tremendous opposition. It was out of this chaos that Mr. Whitney created the Metropolitan Street Railway system, with transfers gen- erously given at every connecting point where the efficiency of the service permitted and with continuous runs for a single fare longer probably than are accorded in any city of the world. Mr. Whitney was active also in the or- ganization of new banks and their gradual consolidation 84 PROGRESS OF THE EMPIRE STATE into institutions capable of competing successfully with their rivals. Associated with Mr. Whitney in most of these ventures was another man, who usually preferred silence to loquacity and quiet self-effacement to publicity. But when in June, 1905, this man suddenly rescued the financial situation from disaster by the purchase for $2,500,000 of a controlling in- terest in the stock of the Equitable Life Assurance Society, the figure of Thomas F. Ryan loomed large upon the na- tional horizon. Men in New York familiar with Wall Street already knew that Mr. Ryan wielded a power and had con- structive genius similar to those which Commodore Vander- bilt or Mr. Whitney possessed while living and which Mr. Morgan had demonstrated in the formation of the Steel Corporation. To the general public, however, the fact that these great names had a competitor in the person of a retir- ing, silent man from Virginia was comparatively unknown. Coming from the South, Mr. Ryan was naturally a Demo- crat and wielded a forceful influence upon the destinies of his party. When the National Convention of 1904 was on the point of breaking into revolt against the gold telegram of Judge Parker, it was Mr. Ryan, as a delegate from Vir- ginia, who quietly drew one leader after another into con- ference and brought them to the conviction that there was no hope for the party except in cordial acceptance of Judge Parker's position. To no man in the financial world, perhaps, can be attri- buted more important constructive work than to Mr. Ryan. Greatest of all, perhaps, was the gradual weaving into a compact body of the scattered tobacco interests of the country (more fully described elsewhere), until the Ameri- can Tobacco Company came to control eighty or ninety per cent, of the business of the United States and was able to dictate terms in regard to the trade of the world to the THE FINANCIAL DEVELOPMENT OF NEW YORK 85 Tobacco Trust of Great Britain. The work of consolidating into the American Tobacco Company several large com- panies previously organized, which was accomplished in the autumn of 1904, involved the exchange of securities to the amount of over #600,000,000 — the largest transaction of the kind in financial history. Already in the autumn of 1903, when Mr. Ryan, having acquired control of several national banks, united them with the National Bank of Commerce with a capital of #25,000,000 and a surplus of #10,000,000, it was pointed out that the interests represented had resources of more than a thousand millions of dollars. Within the sphere of influence of Mr. Ryan and his immediate associates were gathered the reserves and surplus of the Mutual Life, the Equitable Life, and the Washington Life, having ad- mitted assets of more than $800,000,000; the deposits of the National Bank of Commerce, amounting to nearly #200,000,000; and the resources of the Morton Trust Com- pany, the Guaranty Trust Company, the Mercantile Trust Company, and the Equitable Trust Company, amounting to about #200,000,000 — a total of #1,200,000,000, or more than the ransom which France paid to Germany for the lib- eration of her territory in 1870, or Japan sought to exact from Russia in 1905. At the head of another financial group of great power stood another man of eloquent silences — James Stillman, president of the National City Bank. Descended from an old English family, he showed early in his career the quiet reserve power, the ability to listen to what others said and then with unerring judgment to sift the wheat from the chaff, which mark most of the men who have become power- ful in finance. When the City Bank increased its capital first to #10,000,000 and then in 1902 to #25,000,000, there were many who believed that it was Mr. Stillman's ambition to create the dominating banking institution of the country. 86 PROGRESS OF THE EMPIRE STATE This belief was not impaired by the prominent part which was taken by the bank in the flotation of Amalgamated Copper, with its capital stock of #155,000,000 — which brought the bank into even closer relations than before with another silent man of action, Henry H. Rogers — nor by the enlistment of the services as vice-president of Frank A. Vanderlip, who had made a remarkable record as Assistant Secretary of the Treasury with Secretary Gage. Gradually within the circle of influence of the National City Bank was brought a powerful group of banks, trust companies, and industrial corporations representing many hundreds of mil- lions of dollars, of which not the least was Standard Oil, with a capital issued at #100,000,000, but worth in the market over #500,000,000. A name scarcely known in the financial world prior to 1898 suddenly became the most talked of in American finance when the directors of the Union Pacific Railway, in August, 1906, announced a dividend at the rate of ten per cent, on the common stock — six per cent, from earnings on operations and four per cent, from investments. Startling and somewhat disturbing as the announcement was from a stock market point of view, it told in eloquent figures the result of ten years of silent, systematic labor. For thirty years up to 1896 the Union Pacific had dragged along under varying fortunes, weighted by a heavy debt to the Govern- ment, until finally it went into the hands of a receiver. The competition of the Southern Pacific had been one of the causes of this decline, and to bring this to an end a controlling interest in Southern Pacific was acquired and put into the treasury of Union Pacific. Then came the wonderful physi- cal development of both roads, which discarded outworn rails, equipment, bridges, and even terminals and parts of the roadbed, and raised them to the efficiency of modern tools of transportation. Gross earnings of Union Pacific leaped SAMUEL SLOAN Railway president and capitalist; born in Ireland, December 25, 1817; came to America and graduated at Columbia College Grammar School in 1831; married Margaret Elmendorf. Presi- dent of the Hudson River Railroad from 1855 to 1865; president of the Delaware, Lackawanna &• Western Railway from 1867 to 1 899; officer and director in many other corporations. Died, 1907. THE FINANCIAL DEVELOPMENT OF NEW YORK 87 from #19,811,641 in 1899 to $59,324,948 in 1905, and net earnings — in the face of greatly increased charges, bravely assumed to obtain new capital — increased from $9,388,208 to $33,958,993. It is not surprising that achievements like these brought Mr. Edward H. Harriman into the circle of the half-dozen group of capitalists who, with the aid of foreign and home bankers, shape the policy of the great railway systems of the country. Six of the railroad groups, according to the cal- culations of Mr. Sereno S. Pratt in The Work of Wall Street, represented in 1903 $6,766,000,000 — or about one half the railway capitalization of the United States. The Vanderbilt group, representing the New York Central and its connecting lines, stood for $1,157,000,000; the Penn- sylvania group, under the far-sighted leadership of Mr. A.J. Cassatt,$i, 341,000,000; the Gould group, $810,000,000; the Morgan-Hill group, controlling the Northern Pacific and other roads which were pooled in the Northern Securities Company, $1,398,000,000; the Morgan group proper, in- cluding the Reading and Southern, $1,014,000,000; and the Harriman group, which raised to a dominant position the Union Pacific, $1,046,000,000. With the growth in the demands upon New York as a financial center naturally occurred the extension of the machinery for carrying on exchange, both by the expan- sion of old parts of the mechanism and the creation of new parts. As the creation of such instrumentalities went on in a measure pari passu with the demand for them, they contributed their share towards making the city of New York the undisputed center of exchange in America. Among the parts of the mechanism con- tributing to this result which deserve some notice here may be named the reserve requirements of the national banking system; the extension of the functions and re- 88 PROGRESS OF THE EMPIRE STATE sources of trust companies ; the operation of powerful foreign banking houses; the perfection of organization of the Clear- ing House, the Stock Exchange, and the Stock Exchange Clearing House; and the extension of the mechanism for gathering news of mercantile credit. All these agencies have worked in harmony towards drawing surplus resources and the financial operations of the country from smaller cities, once important, to New York. While, even before the Civil War, considerable deposits were kept in New York by country banks, growing out of the import and export business and necessary operations in foreign and domestic exchange, it was the National Banking Act which consecrated by law this tendency towards keeping surplus funds in the metropolis. This act authorized na- tional banks to count as a part of their lawful reserves money kept on deposit with national banks in New York. The banks of reserve cities were allowed to keep half of their re- quired reserve of 25 per cent, in New York, while the country banks were permitted to keep three fifths of their reserve of 15 per cent, in national banks in any reserve city. Hence was given definite legal sanction to the prin- ciple of the redeposit of surplus funds in the financial cen- ter, and the creation of a system of relationships similar to that between the country banks, the joint stock banks, and the central bank of issue in England, except that in New York there was lacking the central bank of issue with such special powers as are found in the Bank of England. For many years the reserves kept by country banks in New York were only such as were required to meet the many demands made upon them for drafts on New York in the course of current business and such additional amounts as might afford a reserve resource in case of emergency. The New York banks paid from one and a half to two per cent, in- terest on such deposits, which added something to the disposi- THE FINANCIAL DEVELOPMENT OF NEW YORK 89 tion of the country bank to increase them at such seasons of the year as there was no active demand for capital at home. With the formation of the large industrial combinations, however, the tendency was accentuated to increase such deposits. Such of these new corporations as were financed upon a sound basis found it no longer necessary to borrow on their commercial paper to the same extent as the private partnerships and smaller corporations from which they had been formed. They were at once able to carry on their transactions, to a larger extent than formerly, without re- liance upon credit, and also felt under the necessity, in view of the magnitude of their operations, of keeping their funds either directly in New York or with the banks in other reserve cities with which they did business. In many cases, also, industries located far from New York and previously concerned only incidentally with New York banks found it convenient to establish their financial headquarters in the metropolis. Hence came about the rapid increase, after the business revival of 1897, in the deposits of outside banks with the national banks of New York. The gross amount of such deposits early in 1890, as appears in the table be- low, was about #181,000,000. It had grown in 1900 to $337,000,000 and in 1905 to $574,000,000. This was the maximum point for several years in the gross amount of such deposits, but the total did not materially decline. It came to include, not only large reserve deposits from country banks under the national banking law, but similar deposits from State banks and trust companies away from New York, made in many cases under the sanction of State laws regard- ing reserves similar in character to the law regulating national banks. Deposits of this character for representa- tive years appear in the following table ' : 'As the table indicates, obligations of national banks to trust companies and sav- ings banks were not separately stated prior to 1901 . They were included for the most 90 PROGRESS OF THE EMPIRE STATE Obligations of New York National Banks to Other Banks _ „ , _. Due to Trust Due to Other Due to State and Companies and Date. National Banks. Private Banks. Savings Banks. Feb. 28, 1890 $132,153,883 $48,789,916 Mar. I 1, 1892 180,790,947 67,239,327 Mar. s, 1895 137,164,947 63,296,138 Feb. 28, 1896 123,230,639 57,641,674 Feb. 18, 1898 240,843,341 93,457,882 Feb. 13, 1900 228,962,669 108,462,938 Feb. 5,1901 285,094,297 76,379,527 £115,666,821 Feb. 25, 1902 280,143,382 78,631,486 113,809,652 Feb. 6,1903 267,800,429 72,116,870 114,648,379 Jan. 22, 1904 269,619,228 72,971,618 135,514,319 Jan. 11,1905 290,468,525 83,757,041 199,823,107 Jan. 29,1906 285,815,239 88,840,306 148,202,909 Jan. 26, 1907 309,315,507 84,548,146 126,541,010 Feb. 14,1908 275,829,880 71,708,337 166,389,115 Feb. 5,1909 364,338,302 94,074,497 225,457,661 Jan. 31, 1910 306,912,760 95,118,322 199,218,678 Jan. 7,1911 329,301,120 93,589,388 182,858,268 Sept. 4,1912 345,018,691102,677,619 197,339,597 These banking reserve deposits are an important factor in the recent expansion of the resources of New York banks, but they are only one of several factors which indicate the manner in which New York has gathered to herself the financial primacy of the United States. The resources of national banks in New York have not grown at a rate much part under the head of "Amounts Due to State and Private Banks, "as is shown by the shrinkage in the latter item when the items were separately stated. It is not improbable, however, that some of the obligations to trust companies and savings banks were lumped with individual deposits prior to 1901, so that the growth in the two items after they were separately stated may appear to be somewhat greater than the actual fact. A qualification of this kind, however, detracts little from the com parative value of the figures. THE FINANCIAL DEVELOPMENT OF NEW YORK 91 more rapid than those of the national banks of the country, but New York has undoubtedly gained over formerly strong rivals and a part of the gain for the rest of the country has been spread out laterally over sections formerly undeveloped. The growth of resources of national banks affords only a partial index, however, of the increased banking power put at the command of New York captains of finance within the past decade. A new weapon has been forged in the trust company, which sometimes antagonizes national and State banking interests, but more often supplements and aids them. The trust company was organized primarily to supply the need for greater system in dealing with trust obligations. Even down to the present time, the trust company has not become important in Europe, where rail- way mortages and similar obligations are in the hands of individual trustees. The formation of new railway corpora- tions and the issue of new securities by old corporations in the process of combining and reorganizing after the panic of 1893 made it of the highest importance that issues of securities for such purposes should be carefully supervised. Acting as trustee, as registrar, and as transfer agent, the trust com- pany afforded a security to the public which was not afforded by the old system of individual trusteeship and of registra- tion and transfer at the office of the corporations issuing securities. Hence arose an important function which could not well be assumed by national banks. In respect to private trusts also, the trust company was found more satisfactory in many respects than individual trustees, because of its continuing corporate obligation, its office force and vaults especially created for this service, and the greater security and uniformity of methods to which such an organization contributed. Very quickly after their organization, however, trust companies added to their strictly trust functions various 92 PROGRESS OF THE EMPIRE STATE forms of banking activity. Receiving at first deposits in trust, in accordance with their nominal purpose, upon which they paid interest, they became attractive to depositors for any funds which were not in daily use. Hence arose the certificate of deposit for a fixed term, upon which interest was given at rates ranging as high as three and occasionally even four per cent. From receiving these more or less permanent deposits, it was an easy step to receiving accounts which were more active. The stronger trust companies of the city of New York, however, did not as a rule compete either for active deposit accounts or for commercial loans. The fact that they paid interest on deposits absolved them from the obligation to accommodate their depositors with loans, which is tacitly assumed by a national jbank dealing with mercantile clients. The trust companies, therefore, employed the funds at their disposal to a large extent in loans secured by the deposit of stocks and bonds. In this respect their policy did not differ from that of national banks, except that many of the stronger trust companies limited their operations to this type of loans and did nothing in commercial paper. Only by such machinery as that of the New York Clear- ing House would it have been possible to carry on the great transactions of the period of prosperity which followed the depression of 1893-97. The clearing system is a develop- ment of a principle of a Roman commercial law known as compensatio — the setting off of a debt which one owes to another by a claim against him. This principle became familiar in merchandise transactions at the great fairs of the Middle Ages, but was not applied definitely to modern banking until the foundation of the Edinburgh Clearing House in 1760 and that of London about 1775. London banks down to about the latter date sent out clerks daily to collect from other banks the notes and other obligations of o^yh ISAAC NEWTON SELIGMAN Banker; horn Staten Island, N. Y., July 10, 1856; son Joseph and Babette (Steinhardt) Scligman; brother of E. R. A. Seligman of Columbia University; A.B., Columbia, 1876; married Guta, daughter of Solomon and Betty Loeb, 1883. Was member of the victorious Columbia "eight," which defeated Harvard, Yale, and other crews on Saratoga Lake, 1874. In banking business since 1876; member firm of J. & W. Scligman & Co., bankers, New York, siii' rustee Munich Life Insurance Co., Russia Life Reinsurance Co., United States Savings Bank, Lincoln Trust ' int Morris National Bank; treasurer and director City & Suburban 1! . vice-president of United Hebrew Charities, St. John's Guild, National Child Labor Commission, Chamber of Commerce (tax commission), Legal Aid Society, City Club; treasurer Citizens' Union; treasurer Hudson-Fulton Memorial Commission; vice-president and treasurer Andrew H. Green Memorial Association; vice-president and treasurer Carl Schurz Memorial Committee; Member Academy Political and Social Science. THE FINANCIAL DEVELOPMENT OF NEW YORK 93 such banks which had fallen into their hands. This re- quired each bank to keep a large amount of money and led the bankers to determine upon a common meeting place for their clerks for the settlement of balances. A similar plan was proposed in New York by Albert Gallatin in a pamphlet published in 183 1, but no definite action was taken until 1853. The number of banks in New York had increased from twenty-four in 1849 to sixty within four years. At first it was sought to obviate the difficulty and expense of having sixty porters on the move daily from bank to bank by permitting weekly settlements on Friday mornings, but this arrangement was taken advantage of by some of the weaker banks, to borrow of the larger ones by drafts during the week, which were paid only on the eve of the settlement. Finally, after much confusion, a clearing house arrangement was made which took effect October 1, 1853- The economy in the use of money realized by the clearing system has been in New York about 95 per cent, of the volume of transactions. Greatly as their aggregate has grown since 1863, the average daily balances over a year which have been paid in money have not been higher than 6.71 per cent (in 1895) nor lower than 2.99 per cent, (in 1869). The variations have undoubtedly been greater for single days, and are subject to the accidents of exceptional balances for or against particular banks. The aggregate of clearing transactions is greatly influenced by the state of trade. Clearings at New York were reduced in volume be- ginning with 1892 by the creation of the Stock Exchange Clearing House. Making some allowance for this influence, the variations in average daily clearings under different busi- ness conditions may be deduced from the following table 1 : 1 This tabic is adapted from the author's Principles of Money and Banking, vol. ii., p. 243. 94 PROGRESS OF THE EMPIRE STATE Variations in Clearings at New York (Year ending September 30.) Year. Average Daily ] Clearings. Per Cent. Balances to Clearings. I87O. . . •£90,274,479 372 1873... •115,885,794 415 1874 ... • 74,692,574 5.62 l88l... •159,232,191 3-66 I885... . 82,789,480 5-12 I89O. . . .123,074,139 4-65 I894... . 79,704,426 6-54 I896. . . • 96,232,442 6.28 I899... . l89,96l,029 5-37 I90I . . . •254,193,639 4-56 I9O4... .195,648,514 5.20 I905 . . . .302,234,600 4-33 ' I906. . . .342,422,773 3.69 1 I907... •313,537,570 4.00 1908. . . .241,413,023 4-63 I9O9. . . .326,505,468 4.22 I9IO. . . .338,461,911 4.09 Remarks. Great business activity. Industrial depression. Renewal of railway building. Results of bank panic. Business expansion. Depression following panic. Free-silver panic. Renewed confidence and ac- tivity. Culmination of industrial flo- tations. Diminished Stock Exchange operations and business ac- tivity. Renewal of business activity and speculation. Reaction from panic of 1907. The settlements in New York are made nominally in money, but actual transfers of coin and legal tender cur- rency have been reduced to a minimum within the last few years. United States currency certificates, issued by an Assistant Treasurer of the United States in denominations of not less than $5000, upon the deposit with him of United States notes, were largely used at one time, but authority for their issue was repealed in 1900. After the completion of the THE FINANCIAL DEVELOPMENT OF NEW YORK 95 new Clearing House on Cedar Street, early in 1896, gold certificates issued by the Clearing House upon deposits of gold coin made in its vaults came into general use. The certificates are used only between banks, and may be pre- sented at any time for redemption in the gold which they represent. The rapid expansion of the business in foreign exchange has naturally brought wealth and importance to the houses carrying it on. Early in the nineteenth century London bankers began to establish branch houses in Wall Street. In 1825 the existing house of Brown Brothers & Company was established as an offshoot of Alexander Brown & Sons of London. In 1837 August Belmont, the senior, was ap- pointed representative of the Rothschilds in New York, and this connection has ever since been maintained. Mr. Belmont became not only a financier whose views were always sought on business questions, but a figure of first importance in the civic life of the city and the affairs of the nation. For many years his position as chairman of the Democratic National Committee gave him an influence which, while the country was passing through severe financial storms, was steadily exerted on the side of conservatism and sound money. Of the three sons of August Belmont two became active in public affairs, while to August Belmont, Jr., was left the practical management of the great banking house. Mr. August Belmont, Jr., rendered perhaps the greatest service to the city when he staked his financial reputation upon the construction of the first subway. Mr. Belmont already represented large interests in the Manhattan elevated lines and when the subway was proposed recognized the fact that the two systems might be dangerous competitors. When the Rapid Transit Commission first proposed their com- prehensive program for the construction of the subway 96 PROGRESS OF THE EMPIRE STATE and the tunnels under the East River, capitalists were timid about entering upon a project so large and uncertain. But Mr. Belmont, with that foresight which characterized so strongly the European founders of his house, the Rothschilds, assumed the risks of the work and soon united the elevated and subway systems by guaranteeing interest at the rate of seven per cent, upon the Manhattan Elevated stock. The important house of the Belmonts thus became closely identified with the civic life of New York and the prosperity of the nation. This was equally true — at least on the broader side of the subject — of the other great houses which dealt in foreign exchange. Their ordinary exchange business, based upon commercial bills, was given volume and variety by the relations established with European bankers for the flotation of railway and industrial loans and the temporary transfer of funds to take advantage of differences in interest rates or for the relief of the money market. Among the strongest of the other foreign banking houses may be named, as typical of the rest, Kuhn, Loeb & Com- pany, J. & W. Seligman & Company, Speyer & Company, and Ladenburg, Thalmann & Company. Kuhn, Loeb & Company, founded in 1869, became one of the largest deal- ers in railway bonds, establishing close connections with large lines or systems, like the Pennsylvania, the New York Central, and the Union Pacific. Mr. Jacob H. Schiff, the present head of the firm, is one of New York's foremost citizens, not only as a financier, but as an advocate of many important public measures and a generous supporter of charities and philanthropic work. Mr. Paul Warburg, another member of the firm, is a well-known expert in monetary science and was one of the first to recommend the introduction upon the New York market of the system of acceptances, so widely in use in Europe. The house of Seligman was founded by Jesse Seligman, THE FINANCIAL DEVELOPMENT OF NEW YORK 97 the eldest of eight brothers, who was educated at the Uni- versity of Erlangen in Bavaria and came to America in 1838 at the age of nineteen. After some mercantile ven- tures, he was attracted by the possibilities of banking offered by the Civil War and in 1862 founded the house of J. & W. Seligman & Company as it still exists. The parent house in New York was presided over by Mr. John Seligman, assisted by his brothers James and Jesse. Leopold and Isaac assumed charge of the house established in London; William became resident partner of the branch in Paris; and Henry and Abraham were resident partners at Frankfort- on-the-Main. Branches were also established in New Orleans and at other points. The first notable enterprise of Jesse Seligman was the introduction of United States bonds to the people of Germany. This was accomplished in the year 1863, when the National credit was in its most uncertain condition, but was crowned with gratifying success — not only in securing money but foreign sympathy, of which the nation then stood sorely in need. These services were recognized by the Government by designating the Seligman house in London as the authorized European depository of the State and Navy departments. Mr. Seligman was active in the formation of the syndicate which refunded the "five-twenty" bonds in 1871 and 1872, and the government reports deal- ing with these operations are full of dispatches between the Secretary of the Treasury and the Seligmans. When Jesse Seligman died on April 25, 1880, the Secretary of the Navy, the Hon. Richard W. Thompson, addressed a letter to the House recounting the services which Mr. Seligman had rendered the Navy Department in the summer of 1877 by accepting navy drafts when the appropriation had been exhausted, in the belief that they would be paid from the appropriation for the next year. 98 PROGRESS OF THE EMPIRE STATE The founder of Speyer & Company was Mr. Philip Speyer who came to New York in 1837, and in connection with the importation of English goods developed a business in foreign exchange. A few years later was formed the firm of Philip Speyer & Company, and this name was used until 1878, when the death of the founder led to the change of the name to its present form, Speyer & Company. This firm also was largely instrumental in making a market for United States bonds in England, and, in view of their great rise after the Civil War, with substantial profits to their clients, paved the way for the introduction of other types of securi- ties. During the creative period of Amerian railroading the firm was successful in placing in England, Germany, and Holland the bonds of the Central Pacific, Southern Pacific, Illinois Central, St. Paul, Pennsylvania, Baltimore & Ohio, and many other of the best railway securities. The present head of the firm is Mr. James Speyer, a son of Gustavus Speyer and nephew of the founder of the house. When trust companies assumed in a measure the banking functions which it was felt by the national and State banks belonged exclusively to themselves, some antagonism arose between these different institutions. It was not so acute in some respects as it might have been if many of the strong- est trust companies had not been closely associated, through community of ownership and control, with the largest nat- ional banks. Thus, the National City Bank was in close alli- ance with the United States Trust Company, the Farmers' Loan and Trust Company, and the New York Trust Com- pany; while common interests held stock in the National Bank of Commerce and in the Guaranty, Mercantile, and Equitable trust companies. Notwithstanding this com- munity of interest, however, the active managers of the banks secured the adoption of rules by the Clearing House on February 11, 1903, requiring trust companies which cleared tmLt_ JAMES ROLLAND MORSE Merchant and foreign exporter; born near Ripon, Wis., Janu- ary i, 1848; educated in the publii Spent many years in the Orient in organizing import and export business with America and largely interested in the American Trading Co., of which he is president. Is also director of the International Contr • Is a member of the Yokohama United Club of Tokio, Japan, the Tokii shanghai Club, and New Engl ind director of the American Asiatic iciation. THE FINANCIAL DEVELOPMENT OF NEW YORK 99 through a clearing bank to maintain cash reserves equal to 15 per cent, of their deposits. This action failed for the moment of its intended effect. The trust companies withdrew from the Clearing House and for several years checks upon them were collected by the primitive method of messengers from every 'institution having checks against a given trust company presenting them for payment over its counter. A law was passed at Albany in 1906 requiring trust companies to keep reserves against demand deposits of 15 per cent., of which one third must be in cash, and one third might be on deposit in national banks and one third in approved securities. It was under this law that the trust companies met the panic of 1907, and were compelled, like the national banks upon which they leaned, to suspend or greatly limit their payments of currency to depositors. The panic was followed by the law of 1908, raising the requirement of actual cash against demand deposits to 15 per cent., and carefully defining what constituted such deposits. While this requirement was a great improvement over the earlier law, it left still open the breach between the trust companies and the Clear- ing House banks. It was under these conditions that several events occurred which might have invoked a new panic, but for the leadership of the same resolute figure which had stayed the panic of 1907. Early in January, 191 1, a notice was posted on the doors of the Carnegie Trust Company that it had been closed by the State Banking Department, pending examination of its condition. The record of the company had been more or less stormy since its foundation. Heroic efforts by its founder, the brilliant and versatile Charles C. Dickinson, had failed to maintain its prestige. The spectacular performances of a former Secretary of the Treasury, under whose presidency large sums were lent to 100 PROGRESS OF THE EMPIRE STATE an irresponsible promoter, were followed by the sale of the controlling interest to a group of speculators, some of whom later were convicted in the courts as the result of their questionable financial performances. Mr. Dickinson him- self, worn down by the effort to save the institution from discredit, died suddenly under peculiar circumstances in iqio, and the company failed to recuperate, even with the aid of deposits of city money transferred to its custody by a city chamberlain, who in his turn was convicted in the courts. The announcement of this disaster, with the impending failure of two or three minor companies which were in close relation with the Carnegie Trust Company, brought a gathering on the evening of January 8, 191 1, of the financial leaders of New York in the library of Mr. J. P. Morgan. With memories of the trying days of 1907 fresh in their minds, there came together on that memorable evening such men as Henry Phipps, Paul D. Cravath, Otto H. Kahn, James G. Cannon, Walter Frew, A. Barton Hepburn, and representatives of other strong banks and banking houses. A statement was given out that the Madison Trust Company, which was closely related to the Carnegie, would be absorbed by merger with the Equitable Trust Company, which was under the resolute presidency of Mr. Krech, and that the financial needs of the Nineteenth Ward and the Twelfth Ward Banks would be provided for by the firm of J. P. Morgan & Company. The danger of panic was thus stayed, but the financial leaders determined that the time had come to bring to an end the discord existing between the Clearing House banks and the trust companies. The controlling spirits in a majority of the larger trust companies agreed to conform to the Clearing House ruling requiring 25 per cent, cash reserves against demand deposits, and were welcomed back to the Clearing House. Thus was brought to an end a THE FINANCIAL DEVELOPMENT OF NEW YORK IOI condition which had Hong been a weakness in the New York financial world, and the leading banking institutions of the city were knit together as closely as was practicable under the American system of isolated banking units. Incidental to the house-cleaning which followed the return of the trust companies to the Clearing House was the institution of a system of regular examinations of the Clearing House banks by an examiner appointed by the Clearing House Committee and under instructions to report to them any irregularities or reckless and irresponsible banking. Gradually, the smaller and weaker banks and trust companies were eliminated by absorption with the stronger ones. Of thirty-three companies which were actively com- peting for business in 1902, twenty had been merged before the year 1913 with other companies or had gone into liquid- ation. Among companies which thus disappeared — some of them institutions of large resources and successful management — were the Atlantic, Bowling Green, Central Realty, Bond & Trust, City, Colonial, Continental, Fifth Avenue, Holland, Knickerbocker, McVickar, Manhattan, Mercantile, Merchants', Morton, North American, The Trust Company of America, The Trust Company of the Republic, and the Van Norden. Some new companies had taken their places, so that in Greater New York there were still in operation thirty-four companies, of which fifteen were in the Clearing House. The trust companies which towered above all others in the magnitude of their resources were the Bankers' Trust, the Guaranty Trust, the Farmers' Loan & Trust, the Equitable Trust, and the City Trust Company. Among bank mergers, one of the most interesting, from an historical point of view, was the absorption in the spring of 1912 by the Hanover National of the Gallatin National Bank. While the Gallatin had become a relatively small in- stitution, it had been founded by Albert Gallatin, Jefferson's 102 PROGRESS OF THE EMPIRE STATE great Secretary of the Treasury — second only to Hamilton among those who built up and protected the national credit — and its charter dated back to 1829. The bank gained addi- tional prestige in its later career from the presidency of Frederick D. Tappen, who served from 1869 until his death in 1902, and took a leading part in guiding the financial world through the panics of 1873 and 1893. Closely connected with the development of American banking relations in foreign countries has been the expansion of commercial business with Latin America and the Orient. Several strong banking houses do business almost exclusively with the Latin-American countries and have endeavored to aid merchants in those countries during periods of dis- turbance and bad crops by extending long-term credits. This system of credits has not obtained so firm a footing, however, among American exporters as among those of Great Britain and other European countries. In the Orient, American enterprise obtained an early footing. Even be- fore the romantic days of Perry's opening of Japan, the house of Russell & Co., in which the Forbes family of Boston had a share, was doing a large Oriental business. While many changes in methods and personnel have occurred in half a century, some of the best traditions of the early traffic are still preserved by the China and Japan Trading Co. and by the American Trading Co. Men like Silas D. Webb of the former company and James R. Morse of the latter passed many years in Eastern trade and brought back their ripe experience for the conduct of their business in New York. The beginnings of the China and Japan Trading Co., of which Mr. Webb is president, lay in the business established in the year 1847 under the style of Fogg Brothers in Boston, Mass., and H. Fogg & Co. in Shanghai, China. In 1852 the American house was removed to New York, and in i860 the name of the American firm was HIE FINANCIAL DEVELOPMENT OF NEW YORK 103 changed to William H. Fogg & Co. Both the American and Chinese houses were absorbed by the Trading Company after its incorporation in 1876. The business has, therefore, been a continuous one since 1847 and the company and its predecessors have conducted business with China under the protection of various treaties between the United States and the Chinese Empire for the encouragement of commerce and the regulation of trade. This business has covered a wide field, but has been concerned largely with extending the market for American cotton goods in the Orient and bring- ing back silks and tea. The American Trading Co., of which Mr. Morse is president, has a capital of #2,500,000, and is engaged in the business of exporting American products and manufactures of all kinds and in importing into the United States the natural products of the Oriental countries. The company has expanded its relations to include not only China and Japan, but the Philippine Islands, Cuba, Venezuela, and other Latin-American countries, and even Africa and Australia. The exports made by this company from the United States reach #20,000,000 per annum, without counting the sub-trade carried on by the company's houses in the East and in South America. The business of the American Trading Co. was first established in 1877 and absorbed later the large business formerly done by Flint, Eddy & Co. One of its special features is the maintenance of a regular engineering department devoted to the sale of American machinery. Inevitably, with the expansion of the trade of the Empire City of the country came the need for harbor improvement and terminal facilities. The rapid growth in length and draft of transatlantic liners led to the cutting of Ambrose Channel and the demand for larger piers. It became obvi- ous, with the close of the nineteenth century, that even these 104 PROGRESS OF THE EMPIRE STATE improvements would not meet the growing business of the city, if it were attempted to handle it all on Manhattan Island. Out of this realization developed a comprehensive new system of handling both foreign and domestic freight. A young man who had inherited a great fortune, but who preferred to render public service to spending a life of leisure, conceived the idea of acquiring the low-lying and apparently worthless flats of Brooklyn for a great freight terminal, which should relieve Manhattan Island from a large share of the freight handling, warehousing, and distribution which caused so much congestion along the water front. Out of the foresight of this young man, Irving T. Bush, grew the Bush Terminal Co., which practically created a new city under the shadow of the Statue of Liberty. Started as a private enterprise in 1895, two large piers were completed in 1903, and the subsequent history of the company has been one of constant expansion. The Bush Terminal plant occupies two hundred acres of land; has seven modern extension piers, each nearly a quarter of a mile long; has 130 warehouses and railway yards, and trackage for two thousand freight cars. It possesses its own locomotives, tugboats, car floats, lighters, barges, and all the other equipment necessary to the movement of freight. At these piers are anchored vessels from every quarter of the world. Apart from the big Atlantic liners, run chiefly for passenger service, a larger number of vessels with greater tonnage arrive from foreign ports at the Bush Terminal than at all the piers of the mainland. Incoming freight is loaded directly on the cars by automatic machinery, while outgoing freight is transferred from the cars directly to the vessels which are to carry it to Europe, India, South Africa, Australia, and other remote parts of the world. By the system of tugs and car floats, freight which is not to be consumed or distributed on Manhattan Island no longer THE BUSH TERMINAL PLANT This presents a general view of the scope of this large freight terminal, with its facilities for docking ocean-going vessels and loading and unloading freight directly from cars to vessels and cars to warehouse. The plant occupies two hundred acres; has seven extension piers, each nearly a quarter of a mile long; one hundred and thirty warehouses; and railway yards and trackage for two thousand freight cars. It possesses its own locomotives, tug boats, car floats, lighters, barges, and automatic equipment. THE FINANCIAL DEVELOPMENT OF NEW YORK 105 congests the streets of the city, but the cars are taken from the New Jersey and New England terminals direct to the Bush Terminal plant. Even manufacture for export is carried on in buildings specially designed for this business, with ample light and air, and with quick telephone and transit communication with offices in New York. The radical reconstruction of New England railway connections, bringing traffic across Long Island Sound directly to the Bush Terminal, is another measure which has relieved the congested streets and rail- way terminals of Manhattan. Ultimately, as the enter- prise grew in magnitude, Mr. Bush transformed his private venture into a stock company, whose securities stand high in the market. The capital stock of the Bush Terminal Co. is #5,300,000 actually issued, while bonds are outstanding to the amount of a little less than #10,000,000. The total assets on July 31, 1912, were #18,768,433. So essentially is the enterprise a part of the necessary equipment of modern New York that negotiations have been going on for the acquisition of the great plant by the city. Modern means of communication are an important factor in the mechanism of New York business transactions. The volume of business which is now done, both on the Stock Exchange and in the offices of captains of finance, would have been impossible before the development of the ocean cable, the telegraph, and the telephone. While American stocks were the subject of speculation in London even before the development of railways, and the bonds of the Camden & Amboy Railroad were listed there as early as 1838, it was only with the installation of the cable in 1866 that it became possible to keep quotations approximately level in both markets. The outbreak of the Civil War found New York separated by about two weeks from London and by a still greater time from other foreign markets. It 106 PROGRESS OF THE EMPIRE STATE was said that New York brokers were paying as much as $1,000,000 per year for London dispatches with the instal- lation of the first working cable in 1866. Twenty words to London then cost $100, as compared with #5 to-day. At present it is the estimate of cable officials that fully ninety- five per cent, of all messages sent are in code and that one thousand messages come from the financial district daily. On land the electric telegraph has contributed its share in bringing together the markets of the world. The system of stock tickers, now installed in nearly all the brokerage offices and in leading hotels and other places where men gather to discuss prices, has made the news of transactions on the Stock Exchange as nearly instantaneous as the advance of present-day science permits. In addition to Stock Exchange quotations, which are carried to nearly two thousand tickers in Greater New York and Jersey City, there are one hundred machines reporting the grain and produce quotations, and there are additional hundreds in Chicago and other leading cities of the country. Many brokers lease wires to connect their Wall Street offices with branches in other parts of the city and country, pay- ing large sums for this service. The telephone has doubled and perhaps trebled the working efficiency of all those classes of men who decide important questions by a word and leave the details to their subordinates. Mr. Morgan, or Mr. Ryan, sitting in his office, was able to direct his secretary to get in communication with any other financial leader and perhaps in a talk of two minutes decide what, before the invention of the telephone, would have required a special visit or a long exchange of letters. On the Stock Exchange alone business aggregating over $100,000,000 per day is transacted by telephone. In the last analysis some of the great fortunes which have been accumulated during the closing years of the nineteenth THE FINANCIAL DEVELOPMENT OF NEW YORK 107 century and the opening years of the twentieth century have probably been augmented — perhaps in some cases actually made possible — by the quickness of communication and the ability to do a great deal in a short space of time which the telephone service affords. An auxiliary part of the mechanism of exchange is the news bureaus, which issue every few minutes, for distri- bution in banking and brokerage offices, printed slips contain ing the latest news from all over the world which is likely to affect in any way market conditions, to stimulate confi- dence or to arouse anxiety. Not stock quotations alone or quotations on the produce and cotton exchanges appear on these slips, but reports about the crops, railway gross and net earnings, increases or suspension of dividends, anticipa- tions of Treasury reports and presidential addresses, and even happenings in foreign cabinets and financial markets. JAMES GRAHAM CANNON v., 185* q; educat schools; married in New York City, Charlotte B. Bradley Engag inking in New York City from 1 dent Fourth National Bank of New York until 1910; president V "- ust ■ ' ' < « Agricultural Credit Co. of New York- Land Co., Hankers 1 Trust ( :luc Bank ' United States Mortgage & Trusl Co., Transatlantic Trust Co., Standard' M.llmg Co.; trustee Associated Simmons Hardware Companies Franklin Savings Bank, United States Casualty Co., and y; chairman of the executive committee of the York Chamber of Commerce; president board of tru Hahnemann Hospital; member International Commitl ( . A. ; vice-president and director Packard Commercial & treasurer and director Woodlawn Cemetery. CHAPTER IV NEW YORK AND THE NATIONAL FINANCES BY JAMES G. CANNON THE connection of New York with the finances of the government has been long and intimate, as the natural result of the concentration of financial operations in the metropolis. The first name which suggests itself almost inevitably as representing the participation of New York in national finance is that of Alexander Hamilton. Although Hamilton was not a born New Yorker, his arrival in the city as a youth to make his fortune, and his marriage at the age of twenty-four to Miss Elizabeth Schuyler, daughter of General Philip Schuyler, identified his career with the Empire State. As early as 1781 Hamilton was suggested to Washington by John Sullivan for head of the Treasury Department, which had just been created by the Continental Congress. Washington replied that "few of his age have a more general knowledge, and no one is more firmly engaged in the cause, or exceeds him in probity and sterling virtue." Robert Morris, an older man, obtained the place at the time, but Hamilton opened a correspond- ence with him which showed much constructive ability and established a warm friendship between the older and the younger man. The brilliant career of Hamilton in organizing the finances of the young nation when he became the first Secretary of the Treasury under Washington, belongs to 109 HO PROGRESS OF THE EMPIRE STATE the history of the Union as much as to that of the Empire State. When Hamilton assumed this position, after his brilliant fight to persuade New York to ratify the Consti- tution of 1789, he was only thirty-two years of age. It was not the ordinary functions of a Minister of Finance to which he was called. The whole work of organizing a department, establishing the national credit, creating a national bank, providing a coinage system, framing a scheme of taxation, and unsnarling the financial tangles left by the Revolution, lay before him. To describe this work in detail would go beyond the limits of this sketch. It was not until September 2, 1789, five months after the inauguration of Washington, that the Act was passed establishing the Treasury Depart- ment. Washington at once sent in the name of Hamilton for Secretary of the new Department, and ten days after his appointment Congress requested him to prepare a report on the public credit. Then came calls for reports on the collection and management of the revenue, estimates of receipts and expenditures, the regulation of the currency, the mint, the post-office, the navigation laws, and the public lands. When Congress met in January, 1790, Hamilton sub- mitted his report on public credit, which has long stood out as one of the master state papers of American history. Read in the light of the economic progress of more than a century, its conclusions still bear analysis as being far in advance of his time and in the main sound and clear. In 1790 political economy as a science had hardly been born, and the work of Adam Smith, although about fourteen years old, was probably known to but few in America. Hamilton in his report gathered up the scattered threads of the disordered finances of the Continental Congress and of the States and showed how they could be woven into a band of strength and symmetry, holding together by the NEW YORK AND NATIONAL FINANCE ill motive of enlightened self-interest all parts of the new Union. Hamilton recommended planting the public credit upon firm foundations by resolutely assuming not only the obligations of the Continental Congress, but also assuming the debts of the several States incurred for the purposes of the war. The latter step tended to equalize the burdens which had been assumed generously and in large measure by some of the States, and reluctantly and in small measure by others, but Hamilton insisted that the war debt was a national obligation, and that so far as it affected the people of the Union, no greater revenues would be required if the provision was made for it wholly by the United States or partly by the States separately. He pointed out that the control of the entire matter by the Federal Government would secure uniformity of treatment for public creditors and would prevent competition between the Union and the States for sources of revenue. Hamilton found the public debt to be #54,124,464.56. This included the foreign debt, amounting to #10,070,307, with arrears of interest amounting to #1,640,071.62; the domestic debt of #27,383,917.74, with arrears of interest amounting to #13,030,168.20 and the unliquidated debt of about #2,000,000. The amount of the State debts he estimated at #25,000,000, making the total amount to be dealt with something more than #75,000,000.' The effect of Hamilton's report was so stimulating to the public credit that it led to serious complaints that speculators, as soon as they knew its contents, had seized the occasion to buy out at low figures all the outstanding certificates of the debt which they could obtain. The entire funding project was approved in committee, but when it was taken up in the House on March 29, 1790, the opposi- 1 Vide Conant's Alexander Hamilton, ch. iii., Houghton Mifflin & Co., Boston. 112 PROGRESS OF THE EMPIRE STATE tion was swelled by the arrival of the members from North Carolina, which had just entered the Union. They suc- ceeded in recommitting the project for the assumption of the State debts. It was after the final vote against the funding project on April 12th, when it was rejected by a vote of 31 to 39, that the famous arrangement was made be- tween Hamilton and Jefferson by which the national capital was fixed at Washington in return for Southern votes for the funding project. The next session of Congress witnessed the presentation by Hamilton of his report in favor of the first United States Bank, with a capital of #10,000,000, which became law on February 25, 1791. The bill was passed only after resolute resistance by the strict construc- tionists of the Constitution, of whom Jefferson was the head. Even after its passage by the two Houses, the Cabinet divided on the question, and each member submitted his opinion to Washington in writing before he affixed his signature. It was to New York that Hamilton, after his distin- guished services for his country, came back to build a home, to rear his children, and to practice his profession. It is somewhat difficult to realize that the site he selected for a home, far from the city's madding crowds, is now part of a closely-built section which extends several miles farther north. At that time stage-coaches ran but three days in the week to the point which now corresponds to Forty- second Street and Broadway. Hamilton, after some search, found a tract to his liking in the neighborhood now bounded by St. Nicholas Avenue and Tenth Avenue and extending from 141st to 145th Streets. The whole of this area and more, extending on the west to the Hudson River, was acquired in one piece. The Albany and Bloomingdale Road, which has long since disappeared, passed diagonally through it, dividing the part on which the house stood from NEW VORK AND NATIONAL FINANCE 113 the farm on the easterly side. It is interesting to read the brief, business-like letter to Ebenezer Stevens, a prosperous merchant who had a country place in the vicinity, in which Hamilton stated the terms he was willing to offer for the property 1 : "25th of October, 1799. "If the owner of the ground adjoining you will take Eight Hundred pounds (£800) for sixteen acres including a parcel of the woodland, and lying on the water the whole breadth, you will oblige me by concluding the bargain with him, and I will pay the money as soon as a good title shall appear. If he will not sell a part at this rate, I request you to ascertain whether he will take Thirty pounds an acre for the whole tract and let me know. "If I like it, after another view of the premises, I shall probably take the whole at this price. But I can only pay one-half down, a quarter in six months and the remaining quarter in a twelve month. He shall be satisfied on the score of security if he desires. "Yrs with regard, "A. Hamilton." It was from this home that Hamilton went forth on the fateful morning of Wednesday, July 11, 1804, to the duel with Aaron Burr; but his death occurred, after he was brought back across the river, in the city house of his friend William Bayard, situated at 82 Jane Street, which has long since disappeared. It was the first President from New York, Van Buren, who contributed somewhat perhaps to the financial suprem- acy of the city by securing the adoption of the sub- Treasury system of dealing with the public funds. The 1 This letter and the essential facts are taken from Dr. Allan McLane Hamilton's Intimate Life of Alexander Hamilton, Scribners, 1910, pp. 336-339. 8 114 PROGRESS OF THE EMPIRE STATE contest between Jackson and the second Bank of the United States was followed by the panic of 1837, which left the business and finances of the country in such a heap of ruins that an extra session of Congress was called by Van Buren to deal with the situation. In a long special message of September 4, 1837, he pointed out that it was not possible to carry out the authority given by Congress in the preced- ing year, — to discontinue the use of such banks as deposi- tories as should at any time refuse to redeem their notes in specie, and to substitute other banks. The general and almost simultaneous suspension of specie payments, Van Buren declared, "rendered the per- formance of this duty imperative in respect to those which had been selected under the act, and made it at the same time impracticable to employ the requisite number of others upon the prescribed conditions." The Treasury was still further embarrassed by another provision of law, providing that it should satisfy all demands in specie or its equiva- lent, and prohibiting the offer of any bank note not con- vertible on the spot into gold or silver at the will of the holder. To remedy these conditions Van Buren recom- mended that the government should create an independent Treasury to take care of its own funds, and that it should collect its own revenue and make its own disbursements. A bill was introduced into the Senate on September 14, 1837, which after being considerably amended became law on July 4, 1840. The sweeping victory of the Whigs in the next elections caused the repeal of the independent Treas- ury law August 13, 1 841, and it is probable that if President William Henry Harrison had lived, a third United States Bank would have been established. 1 The Democrats were again returned to power in 1844 and a new measure for creating the independent Treasury 1 Dewey, Financial History of the United Slates, New York, 1903, p. 240. A. BARTON HEPBURN Hanker; chairman of I rial Hank, New York City; born in Colton, X. Y., July 24, [846; son Zina Earle and Beulah (Gray) Hepburn; A.B. M [871; (LL.D D.C.L. University, 1906; LL.D. Colun m; LL.D. Will ge, 1911; mar- [attie A. Fishi 1 to, 1873; 2d, Emily L. Eaton of Montpelier, Vt., July 14, 1887. Was instruc- tor mathematics, St. Lawrence Academy; principal Ogdenslmrg itional Institute; practis Colton, N. Y.; member New York Asseml superintendent of Banking itment, State of New York, 1 880-1 883; United States Bank Examiner for Xew York, 1 888-1 892; Comptroller of the Currency, 1892-1893; president Third Xational Bank, New York, 1893-1897; vice-president Xational City Bank, New York, 1897-1899; president Chase National Bank, New York, 1899- 191 1. Director, Chase National Bank, Bankers' Trust Co., Columbia-Knickerbocker Trust Co., First National Bank, First Security Co., Maryland Trust Co. (Baltimore), New York Life Insurance Co., and other corporations. Author, History of Coinage and Currency, and Artificial 1! and Commercial Development. Member New York Chamber of Commerce, New England Society (president), St. Andrew Society, and others; officer Legion of Honor, France, 1912; chairman Currency Com- mission, American Bankers' Association, since its creation, 1906. NEW YORK AND NATIONAL FINANCE 1 15 was enacted in August, 1846, in almost the same terms as in the act of 1840. Treasury notes, however, were added to gold and silver among the classes of currency receivable for public dues. Provision was made for vaults and safes in the Treasury Building at Washington, at the mints, and at the custom houses. The principal centers of deposit were to be New York, Philadelphia, Washington, Charles- town, New Orleans, and St. Louis. The new system natu- rally began its career with the opposition of the banks, and inadequate provision for the care of funds of disbursing officers scattered throughout the country led to abuses in the loaning of public money by these officers for their own profit. These evils were partially remedied by increasing the number of depositories and by giving authority to disbursing officers to make payments by Treasury drafts. The system was a natural consequence of the uncertainty and abuses of ill-regulated banking, and while serving a useful purpose in guarding against these evils, led to arbitrary changes in the stock of money in circulation, which have imposed unusual obligations and functions upon nearly every succeeding Secretary of the Treasury, especially in times of panic. In the absence of adequate revenue and of friendly cooperation with the banks, Treasury management was not brilliant in the years immediately preceding the Civil War. The result of the elections in the autumn of i860 gave a severe shock to credit, both public and private; Southern banks withdrew their balances in the North; and loans were contracted. President Buchanan obtained authority by the act of December 17, i860, to sell Treasury notes at such rates of interest as might be offered by responsible bidders, and was compelled on a large part to pay from 10 to 12 per cent. With the beginning of the year 1861, although seces- sion was becoming an accomplished fact, the appointment of u6 PROGRESS OF THE EMPIRE STATE a New York man, John A. Dix, as Secretary of the Treasury, with other changes in the Cabinet, tended to restore some degree of public confidence, and resulted in more resolute measures to stem the tide of financial demands which set in with the outbreak of civil war. 1 Upon the bankers of New York fell most of the burden of providing funds for carrying on the war. Had their advice been followed from the outset, a very different system of finance would have been pursued from that adopted by Secretary Chase. When the Secretary stubbornly refused, however, to accept their views, the bankers, although they foresaw suspension of specie payments and the decline of public credit, patriotically provided the funds as rapidly as possible under the policy which Mr. Chase laid down. When the war broke out, notes of State banks formed a large part of the circulating medium, but they were not accepted in payments to the government, and the aid of the bankers was not sought in making transfers, in keeping public funds, or in placing loans. This, at least, was the theory of the independent Treasury, although, in fact, the absence of adequate depositories still led many officers to deposit their funds temporarily in the banks at theirown risk. The government was compelled almost at the outset to abandon the idea that it could do without the help of the banks. It was obvious that the system of placing small loans by public subscription, which had been employed during the administration of President Buchanan, could not be relied upon for obtaining great sums quickly. They could be obtained only from the banks, which in the nature of things had the keeping of the transferable capital of the country. Secretary Chase held a conference in New York on August 9, 1861, with representative bankers of New York, Philadelphia, and Boston. They agreed to advance 1 Dewey, Financial History of the United Slates, New York, 1903, p. 272. NEW YORK AND NATIONAL FINANCE 1 17 to the Government #150,000,000 in gold, to be secured by three-year notes bearing interest at 7.30 per cent., to be reimbursed as the proceeds of the sale of bonds were covered into the Treasury. This union of the banks of what were then the three chief cities of the country in support of the public credit was one of the most important events of the war and committed the conservative business element con- clusively to the side of the Union and the policy of coercion of the seceded States. Had the bankers of the North been niggardly or reluctant in aiding the government, the prob- lem of President Lincoln in dealing with the seceded States would have been even more difficult than it proved in fact. The banks of the three big Eastern cities had an aggre- gate capital of $120,000,000, a circulation of $16,964,749, deposits of $125,617,207, and coin reserves of $63,165,039, the latter being equal to 45 per cent, of demand liabili- ties. They had already made an agreement in November, i860, when secession compelled them to contract their business and prepare for a period of stress, for issuing clearing-house certificates and making the specie of all the banks available as a common fund. Congress passed an act on August 5, 1861, relaxing the provisions of the sub-Treasury law so far as to permit the Secretary of the Treasury to deposit any money obtained from loans in such solvent specie-paying banks as he might select. The banks accepted this law as authority for the employment by the Treasury in its transactions of the ordinary means of commercial exchange bank notes, checks, and drafts. They recommended to the Secretary, therefore, that he should make use of the proceeds of the advances made by the banks by drawing checks and drafts upon the banks in favor of public creditors. They sug- gested that this would not only prove of great practical convenience, but would diminish the uneasiness and con- Il8 PROGRESS OF THE EMPIRE STATE sequent hoarding which would take place if the banks reduced their reserves by paying out their coin. Secretary Chase, to the surprise of nearly every financier, declared that the act of August 5th had no such meaning or intent and that he should require payment of the advances by the banks in coin. The subject was warmly discussed between the Secretary and the bankers, but the Secretary's position was unshaken and the banks yielded rather than break off negotiations so important to the maintenance of the public credit. The bankers of New York objected earnestly to the issue of the new Treasury notes to circulate as money. They succeeded in persuading Mr. Chase to delay the issue for a time, but the Secretary did not long respect his assurances. The banks, faithful to their pledges, had begun to pay coin into the sub-Treasury at the rate of about #5,000,000 in every six days. This coin was disbursed by public officers, and through the channels of circulation found its way at first back into the banks, so that their specie had not been materially reduced after the payment of the second installment. If the Treasury notes had not been forced into circulation, this process of paying coin upon loans to the Government and receiving it back, when disbursed, through the deposits of contractors and others, might have gone on continuously and, with the assistance of the banks in the distribution of loans, the country might not have been driven to the suspension of specie payments. But the issue of the Treasury notes shook confidence in the future of the currency, and after the banks had informed Secretary Chase that they could not receive the notes at par with coin, it was decided to suspend specie payments. The date of suspension was Monday, December 31, 1861. The managers of the associated banks of the East believed that this suspension would not have been necessary but NEW YORK AND NATIONAL FINANCE 119 for the infusion into circulation of government paper which the Treasury had no means of redeeming in gold. The hankers pointed out that transactions to the amount of #3,000,000 were settled daily in New York through the Clearing House, without coin or even hank notes, and that the settlement of an additional #1,000,000 or #2,000,000 per day for the government could be easily effected by the same machinery. In the matter of taxation as well as currency the bankers of New York were more far-sighted than the Secretary of the Treasury. The latter attempted to rely too much upon loans and too little upon the willingness of the country to bear increased taxation. At the special session of Congress in the summer of 1861, the recommendation of Mr. Chase was to raise only #80,000,000 by taxation and #240,000,000 by loans. Of the amount raised by taxation #65,000,000 was required for the ordinary expenses of the peace establish- ment and #9,000,000 for interest on the new debt. Several important bodies in the beginning of 1862 protested against restricting taxation within such narrow limits. When the House of Representatives passed a resolution on January 15, 1862, with only five dissenting votes, declaring in favor of an annual revenue of #150,000,000, its favorable influence was reflected in the advance of six per cent, bonds from 90 to 107. The New York Chamber of Commerce on April 24, 1862, adopted a memorial to Congress declaring that "the masses of the people are ready and desirous to con- tribute their quota to the ordinary and extraordinary revenues of the country" and that conditions demanded an annual revenue of at least #250,000,000. These monitions of sound finance went unheeded, and upon a representative in Congress from the State of New- York, the Hon. Elbridge G. Spaulding of Buffalo, was finally forced, by the irony of fate, the desperate expe- 120 PROGRESS OF THE EMPIRE STATE dient of the creation of the greenback. The idea of issuing government paper to carry on the war had already been partially sanctioned by the issue of the demand notes, which contributed to the suspension of specie payments. It was suggested by Secretary Chase, in his report to Con- gress on December 9, 1861, that the issue of these notes might be extended to an amount equal to the average circulation of the country, and that the notes of the State banks might be forced out of circulation by a moderate tax. The Secretary strongly preferred, however, the system of substituting bank notes based upon bonds for the direct issue of paper currency by the government. Events moved too fast, and the necessities of the govern- ment were too urgent to await the enactment and execution of a plan for bringing the banks of the country promptly into a new bank-note system. In the House of Representa- tives the chairmanship of the Committee onWays and Means was held by Thaddeus Stevens, but Mr. Spaulding was chairman of a sub-committee on the national currency bill and other means for carrying on the war. With him were associated Samuel Hooper of Massachusetts and Erastus Corning of New York. This sub-committee proceeded promptly to consider the report of Secretary Chase with a view to determining the best measure for meeting existing requirements. The Secretary was not yet ready to recom- mend the issue of legal-tender government paper. After resuming the arguments for and against such an issue, he said in his annual report: "The hazard of panics, precipitating demands for coin, concentrated on a few points and a single fund ; the risk of a depreciated, and depreciating, and finally worthless paper money; the immeasurable evils of dishonored public faith and national bankruptcy: all these are possible conse- quences of the adoption of a system of government circula- NEW YORK AND NATIONAL FINANCE 121 tion. It may be said, and perhaps truly, that they are less deplorable than those of an irredeemable bank circulation. Without entering into that comparison, the Secretary con- tents himself with observingthat,in hisjudgment, those possi- ble disasters so far outweigh the probable benefits of the plan, that he feels himself compelled to forebear recommending its adoption." In accordance with these views, Mr. Spaulding set about the preparation of a currency bill which was to permit the State banks to issue notes secured by government bonds. On December 24th he wrote a letter to Mr. Corning, his New York associate, who was then at Albany, requesting him to forward a copy of the New York Free Banking Law of 1838, for the use of the committee. Mr. Corning com- plied with this request, but expressed his own opinion in the sentence, " This matter, as recommended by Secretary Chase, will not, in my judgment, meet the approval of our State; hence I think much care should be had in drawing up the bill." 1 Mr. Hooper rendered assistance in perfecting the bill, which was completed soon after Christmas. Mr. Spaulding had come to the conclusion, however, that it could not be passed and made available quickly enough to meet the needs of the government. He therefore drafted a section providing for the issue of legal-tender Treasury notes, which he intended at first to make a section of the bank bill. This he introduced as a separate measure, in the following terms: "That for temporary purposes, and until the circulating notes authorized by this act shall be issued and put in circulation by corporations and associations to the aggregate amount of #i(X),ooo,ooo, the Secretary of the Treasury be, 1 Spaulding, History of the Legal Tender Paper Money Issued during the Rebellion, p. 12. 122 PROGRESS OF THE EMPIRE STATE and he is hereby, authorized to issue #50,000,000 of Treasury notes on the faith of the United States, payable on demand, without specifying any place of payment, and of such denominations as he may deem expedient, not less than #5 each, which shall be receivable for all debts and demands due to the United States, and for all salaries, dues, debts, and demands, owing by the United States to individuals, corporations, and associations within the United States; and such Treasury notes shall also be a legal tender in payment of all debts, public or private, within the United States, and shall be exchanged at any time at their par value, the same as coin, at the Treasury of the United States, and the offices of Assistant Treasurers in New York, Boston, Philadelphia, St. Louis, and Cincinnati, for any of the coupon or registered bonds which the Secretary of the Treasury is now, or may hereafter be, authorized to issue; and such Treasury notes may be reissued, from time to time, as the exigencies of the public service may require. Such Treasury notes shall be signed by the Treasurer of the United States, or by some officer of the Treasury De- partment designated by the Secretary of the Treasury, and shall be countersigned by the Register of the Treasury, or by some officer of the Treasury Department designated by the Secretary of the Treasury for the Register. And all the provisions of an act entitled 'An act to authorize the issue of Treasury notes, approved the 23d day of De- cember, 1857/ so far as the same can be applied to the provisions of this section, and not inconsistent therewith, are hereby revived and reenacted." Grave doubts were expressed in many quarters as to the constitutionality and economic soundness of the measure. The leading New York papers generally opposed making the notes legal tender, and a committee from the banks of New York, Philadelphia, and Boston hurried to Washington JOHN CLAFLIN chant; bom in B July 24, 1850; sun Hi Brigha aduated College City ol al., June 27, 1890, 1 )unn. Entered drygoods house of H. B. Claflin & ( is father in 1843) as elerk, October, the house on death of fai; 1 corporation, The H. B. Claflin Co., Jvu its president; house gdods basin, extensive traveler in outh America, Europe, and Asia; made notable trip in sin 1 Peruvian n at lat. 10' S., and with single white inent, reaching the Atlantic at mouth 1 a. Is director in many financial institutions; pn United Drygoods Companies, and president of tb irk Chamber of Commerce. NEW YORK AND NATIONAL FINANCE 123 to prevent the passage of the bill. The New York delegates were Messrs. Coe of the American Exchange Bank, Vermilye of the Merchants' Hank, Martin of the Ocean Hank, and Gallatin of the National Bank. An important conference was held on Saturday afternoon, January II, 1862, in the office of the Secretary of the Treasury, at which the members of the Finance Committee of the Senate and of the House Committee on Ways and Means were invited to be present. The principal speech against making the notes legal tender was made by James Gallatin, lineal descendant of the great Secretary of the Treasury who had reduced the debt and maintained the public credit during the administration of Jefferson and the early years of Madison. The citizens' committee, on behalf of the bankers of the three leading cities and members from boards of trade associated with them, proposed a substitute plan, for raising at once #125,000,000 by other taxes than the customs; the issue of $100,000,000 in two-year Treasury notes, to be receivable for public dues; the suspension of the sub-Treasury act; the issue of six per cent. 20-year bonds, without restriction as to the price at which they might be sold by the Secretary of the Treasury; and temporary loans upon the security of the bonds. These recommendations were objected to by Secretary Chase, who was present, by Mr. Hooper, and by others. Mr. Spaulding "objected to any and every form of 'shin- ning' by government through Wall or State Streets to begin with; objected to the knocking down of government stocks to 75 or 60 cents on the dollar, the inevitable result of throwing a new and large loan on the market, without limitation as to price; claimed for Treasury notes as much virtue of par value as the notes of banks which have suspended specie payments," and finished with "firmly refusing to assent to any scheme which should permit a 124 PROGRESS OF THE EMPIRE STATE speculation by brokers, bankers, and others in the govern- ment securities." 1 The bank delegates and others remained for several days in Washington, consulting with Secretary Chase, and finally reached an agreement with him which was under- stood to make the issue of legal-tender demand notes unnecessary. The committee of the Senate and House, however, did not give their assent to this agreement, because it was not deemed by them adequate to the crisis. A majority of the Committee on Ways and Means adhered to the legal-tender bill. They hesitated to pass it, however, without the approval of the Secretary of the Treasury, which had been withheld in his annual report. Secretary Chase was permitted to suggest several amendments, and finally, in a letter to Mr. Spaulding of January 22, 1862, concluded as follows: "Regretting exceedingly that it is found necessary to resort to the measure of making fundable notes of the United States a legal tender, but heartily desiring to cooperate with the Committee in all measures to meet existing neces- sities in the mode most useful and least hurtful to general interest, I remain, with great respect, "Very sincerely yours, "S. P. Chase." In spite of the protests of the financial interests, the bill was reported favorably to the House, and called up for discussion on January 28, 1862. A letter was read on Monday, February 3d, still further committing the Secre- tary of the Treasury to the bill, in the following terms 2 : "It is true that I came with reluctance to the conclusion that the legal-tender clause is a necessity, but I came to it decidedly, and I support it earnestly. I do not hesitate 1 Report in New York Tribune, January 13, 1862, quoted by Spaulding, p. 21. 1 Spaulding, p. 59. NEW YORK AND NATIONAL FINANCE 125 when I have made up my mind, however much regret I may feel over the necessity of the conclusion to which I come. . . . Immediate action is of great importance. The Treasury is nearly empty. I have been obliged to draw for the last installment of the November loan; so soon as it is paid, I fear the banks generally will refuse to receive the United States notes. You will see the necessity of urging the bill through without more delay." The bill passed the House on February 6th and passed the Senate, after an exciting debate, on Thursday, February 12,1862. The vote in the Senate was 23 in the affirmative and 21 in the negative. It was in vain that Preston King, Senator from New York, moved to strike out the legal-tender clause and declared himself decidedly against the measure. Some amendments were made in the Senate, however, looking towards adherence to the policy of paying interest on the public debt in coin and authorizing the sale of bonds at the market price. Against these amendments, when the bill came back to the House, Mr. Spaulding set his face, but the voice of another New Yorker, Theodore M. Pomeroy of Cayuga, was raised vigorously in their favor. "We cannot," he declared, "make Treasury notes money until we can change by act of Congress a promise into a performance, and Almighty power alone can do that." His view prevailed to the extent that payment of interest on the debt in coin was agreed to, 88 to 56, and was retained, with some modifications, in the draft which became law. Among the yeas on this important amendment appear the names of Roscoe Conkling, Mr. Corning, Mr. Pomeroy, and William A. Wheeler, afterwards Vice-President of the United States. It was indeed upon the motion of Mr. Conkling, then serving his second term in the House as a young man of thirty-two, that the yeas and nays were ordered. The bill became law on February 25,1862. 126 PROGRESS OF THE EMPIRE STATE The government, thus committed to the issue of irre- deemable legal-tender paper, did not long keep the promise made in the debate — that the amount should be strictly limited. Having once entered upon the slippery path, the descent became as easy as the fabled slopes of Avernus, and the country soon found itself with a currency depreci- ated at its low point to about 40 cents on the dollar, and marketing its securities for the same depreciated currency. The price of gold advanced, with only occasional inter- ruptions, until in 1864 it touched 285. Wholesale prices of nearly all articles mounted upward with the gold pre- mium, and retail prices in many cases advanced still more, increasing the paper cost of every contract for carrying on the war. A computation of the proceeds of #2,565,233,591 in currency received from the sale of public obligations during the forty-five months ending September 30, 1865, put the gold value received at #1,705,347,632, repre- senting a loss to the government by its depressed credit of #860,000,000/ Important as was the part played by Mr. Spaulding in the adoption of this policy, it is possible that a similar policy would have been adopted in any event, in view of the straits in which the government was placed and the rudi- mentary knowledge of financial devices which then existed at Washington. Mr. Spaulding himself declares, on the first page of his book giving an account of the legislation, that: "The fundable legal-tender currency was the most available form of credit which the government could use in crushing the rebellion. It was at once a loan to the govern- ment without interest, and a national currency, which was so much needed for disbursement in small sums during 1 Conant, History of Modern Banks of Issue, New York, G. P. Putnam's Sons, p. 401. NLW YORK AND NATIONAL FINANCE 127 the pressing exigencies of the war. It was indispensably necessary, and a most powerful instrumentality in saving the government and maintaining the national unity. Experience has proved that, notwithstanding it was a forced loan, the end justified the means, and that no parties were materially injured by being compelled to receive this currency, so long as they could fund it at any time in six per cent. 20-year bonds." While thus resolutely defending the issue of the green- backs under the conditions of the time, Mr. -Spaulding did not believe in them as a permanent currency. In an address at the Centennial Exposition in Philadelphia in 1876, he said 1 : "Unfortunately, eleven years after the close of the war, the temporary 'war currency' issued in the form of greenbacks, still lingers as an evil element, and is declared by law to be 'lawful money,' so that the banks can and do redeem their circulating notes in this depreciated greenback currency. This is practically no redemption at all." In a preface to his Financial History of the War, written in 1875, Mr. Spaulding went further and declared that the legal tender act should be repealed, which would "leave the business of free banking where it belongs, open to all citizens, to be carried on upon a gold basis, under proper legislative restrictions." The numerous issues of bonds which the government put forth to meet the expenses of the war were always generously subscribed for by New York bankers up to the limit of their resources. Conspicuous in services rendered in this respect were the foreign houses, like August Belmont & Company, the representative of the Rothschilds; the Seligmans and Speyers; Morton, Bliss & Company; and 1 John J. Knox, History of Banking in the United States, New York, Bradford Rhodes & Company, 1900, p. 293. 128 PROGRESS OF THE EMPIRE STATE Jay Cooke & Company. The latter, when all other resources had failed, inaugurated the system of inviting popular subscriptions for the bonds through every post- master throughout the United States. They also succeeded in the rather venturesome policy of manipulating quotations when it was desired to make a broad market for new bonds. Of the character of these operations an interesting glimpse is afforded by Jay Cooke's biographer 1 : "Once this policy had been undertaken there was almost no end to the need of intervention to serve some object, important, if not vital, to the management of the Treasury Department, and in these movements there was still none who had his skill and facility. The necessity would continue so long as the government had funding operations in hand, and there were two currencies, one founded upon the value of gold and the other of the chang- ing greenback. Indeed Mr. Cooke had scarcely a day of freedom from responsibility for the behavior of the market from the panicky times in March, 1865, induced by the fall of the Confederacy, until the end of the year. On August 1 8th Fisk and Hatch told Mr. Cooke that their purchases of 7-30S for that day for government account had been nearly $1,500,000, all at 99^. They had got nearly the same amount the day before at 99. The surplus which could not be sold in the course of the operations was turned over to Assistant Treasurer Van Dyck (who had been ap- pointed to succeed John A. Stewart), to be held for a more favorable market. The next day the price was again advanced and Fisk & Hatch wrote that 'nobody smelt the rat,' 'the strength of the great 7-30 loan' being 'the subject of general comment and congratulation.' "Once more the editors were 'primed' and the news- • Jay Cooke; Financier of the Civil War, by Ellis Paxson Oberholtzer, Philadel- phia, 1907, vol. ii., pp. 2-3. -^SL//// ISIDOR STRAUS Merchant and an; born u Bavaria. nited States in 1854, with his mother, and settled in Ta ollinsworth and was preparing to enter the Military Academy at West Point when he was p : by the outbreak of the Civil War. Mr. Straus went to New York in 1865, where, with his father, he organized the firm of L. Straus & Son. Entered rm of R. II. Mary & Co. in 1888, and of Abraham Straus, of klyn, in 1893. Had an important interview with President Cleveland in the summer of 1893 on the necessity for an extra •n of Congress to repeal the Sherman silver purchase law. Was elected to Congress as a Democrat at a special election on January 30, 1894. Became intimate friend of William L. Wilson, the Democratic leader, and aided him greatly in the contest for sound money and the Wilson tariff law. Was long an active member of the Chamber of Commerce, serving as vice-president, and on important committees, including the special committee on currency reform in 1906, which made the first formal recom- mendation for a central bank. Mr. Straus was a director in various banks, trust companies, and charitable institutions; president of the Educational Alliance, and vice-president of the J. Hood Wright Memorial Hospital. He went down bravely on the Ti- tanic on April 15, 1912, Mrs-Straus refusing to leave him, both preferring to end their lives together. NEW YORK AND NATIONAL FINANCE 129 papers, practically in unison, proclaimed the great worth of 'governments.' Secretary McCulloch had offered to take #5,000,000 and on August 21st #3,275,000 had been delivered to Van Dyck. Fisk and Hatch were anxious that the authority should be extended to ten or fifteen millions. Jay Cooke, acting through his brother Henry at Washington, persuaded Mr. McCulloch to agree to an extension to seven millions, which led to a long statement by Fisk & Hatch that to take proper care of the market, correct the evils of a too rapid absorption of the loan, remove it from the hands of large holders whose demands were urgent, and place it with legitimate investors, authority should be at hand to sell at least ten or twenty millions. They (Fisk & Hatch) could make more money dealing in seven-thirties at the low price, but they did not wish to see the loan 'buffeted about in that way.' On this letter Jay Cooke wrote: 'These are my sentiments also,' and it was sent to Henry Cooke, who took it to Mr. McCulloch. The result of the interview was that the Secretary left 'the whole matter' to Jay Cooke's 'discretion.'" When the time came after the war for restoring order to the finances of the country, the bankers of New York naturally took the lead in urging the resumption of specie payments upon a gold basis. During fifteen years of agitation, in which the South and West repeatedly returned to Congress great majorities for paper inflation and the free coinage of silver, the business community of New York, without distinction of party, held up the hands of the President and the Secretary of the Treasury, who could usually be relied upon to support the principles of sound money. How closely the government and the business com- munity worked together, even when differences of opinion arose, is graphically set forth in Mr. Hackett's memoir of Secretary Richardson. It was on Saturday, September 20, 130 PROGRESS OF THE EMPIRE STATE 1873, only two days after the Jay Cooke suspension, that President Grant telegraphed the Secretary from Long Branch to meet him the next morning in New York at the Fifth Avenue Hotel. The scene is thus described by Mr. Hackett 1 : "Arrangements had been made for the interview with the President on the part of the bankers and business men. Ten o'clock was fixed upon as the hour. They had come to the hotel in great numbers. It was Sunday, but the hotel was crowded, and so were the streets in the neigh- borhood. A prominent Republican Senator, one of the foremost statesmen of the country, was there, as a guest of the hotel, and to judge from competent testimony he was the most frightened man on the premises. He seemed to be bewildered, and really knew not what to do. "Reverdy Johnson was also present, consulted by the bankers, whom he furnished with a legal opinion, taking the curious ground that under the law the President and Secretary had no power to issue the greenbacks, but that if he were in the President's place he would feel it his duty to issue them; and that in his opinion the country would sustain the President in so doing. "At the appointed hour, the President and the Secretary took their seats at a table in one of the large parlors, and the bankers, with others, came in. Among those present were Commodore Vanderbilt, Henry Clews, the Seligmans, George P. Opdycke, Isaac H. Bailey, William Orton of the Western Union Telegraph Company, William L. Scott, Robert Lenox Kennedy, H. B. Claflin and Mr. Vail, of the Bank of Commerce. "The excitement ran high. Many speeches were made, some of them almost violent in tone, calling upon the Presi- 1 A Sketch of tlie Life and Public Services of William Adams Richardson, by Frank Warren Hackett, Washington, 1898, pp. 93-95. NEW YORK AND NATIONAL FINANCE 131 dent at once to issue the whole forty-four millions reserve. The speakers said if the panic were not stopped, we should see the worst mob in New York the next day that had ever been known in that city; that already the streets were full of men, and in the morning the situation would be worse. "It seemed to have occurred to no one to point out how the reserve could be issued, or to designate the manner in which it could be put into circulation. The President sat perfectly calm. At last he said that anything to be sub- mitted to him must be in writing, so that he could know exactly what they thought should be done." The request for the issue of the entire greenback reserve was refused, upon the ground that there was no law which permitted the President to lend government money; but public funds were disbursed for the purchase of #12,000,000 in bonds, and clearing-house certificates were issued by the banks. During the entire period from March, 1873, to January, 1874, about #26,000,000 was expended in this manner. When finally the Resumption Act of 1875 was enacted, requiring the redemption of government notes in gold at par on and after January 1, 1879, tne New York banks took every measure to aid the government in avoiding a drain upon the gold fund which Secretary Sherman by the sale of bonds had laboriously built up. The banks of the country held more than #125,000,000 in government notes, of which nearly one third was in New York City. If the banks had acted upon a narrow policy, they could have greatly reduced the gold fund by the presentation of these notes. On the contrary, a committee was appointed to confer with Secre- tary Sherman to agree upon a common course of action to sustain the public credit. The Assistant Treasurer at New York was invited to become a member of the Clearing House, and balances between the banks and the Treasury 132 PROGRESS OF THE EMPIRE STATE were to be settled through the Clearing House. The banks decided voluntarily to decline receiving gold as a special deposit, to abolish special exchanges of gold checks at the Clearing House, and to receive and pay balances with- out discriminating between gold and legal-tender notes. This action dissipated all serious fear of the success of re- sumption, and on December 17, 1878 — two weeks before the date legally set — gold sold at par in the gold room of the New York Stock Exchange. The banks, in the language of Mr. Bolles, at the beginning of the war, "parted with their gold to aid the government, and now, when resumption was accomplished, they were content to take whatever it desired to give." 1 When the necessary measures for refunding the public debt at a reduced rate of interest were being carried out in London by representatives of most of the large houses of New York, it was represented repeatedly to the President and Secretary of the Treasury that these negotiations must fail if the United States took a step toward free silver and away from the gold standard. When the two Houses of Congress (in February, 1878) passed, over the veto of President Hayes, the Bland Silver Act, requiring a fixed amount of silver coinage per month, the syndicate handling the loan gave notice that they would be unable to carry out the provisions of the agreement which had been proposed, but they were still ready to negotiate the bonds of the government abroad under the most favorable conditions which could be obtained in view of the blow struck by Congress at the public credit. It was not only under a New York President, Chester A. Arthur, but under a New York Secretary of the Treasury, Charles J. Folger, that recognition was finally given by Congress to the $100,000,000 limit for the gold reserve held 1 Financial History of the United Slates, vol. iii., p. 301. NEW YORK AND NATIONAL FINANCE 133 for the redemption of the greenbacks. In the act of July 12,1882, extending the charters of national banks, provision was made for the issue of gold certificates against deposits of gold coin with the Treasury and it was provided that the issue of such certificates should be suspended whenever the gold held against outstanding United States notes should fall below #100,000,000.' These certificates, being issued at first chiefly in large denominations, were employed to a considerable extent by the banks in advancing funds to their clients for the payment of customs duties, and it was the drying-up of this stream of gold and the substitution of silver certificates which sounded the alarm as to the weak- ened condition of the Treasury in 1892 and led a little later to the automatic application of the law against the issue of gold certificates. 2 In the act of 1882 was contained another provision, probably not very acceptable to Secretary Folger, that no national bank should be a member of any clearing house in which silver certificates were not received in settlement of clearing-house balances. This provision was directed against a rule of the New York Clearing House, which aimed to protect the gold standard by discriminating against silver as a money of ultimate settlement. The New York banks felt that, as custodians of the ultimate banking reserve of the country and the channel through which balances with foreign countries were settled on the gold basis, they could not allow their vaults to become congested with the new silver dollars. To permit such an occurrence would send gold to a premium and send the country to the silver standard. 3 1 Cf . The Contest for Sound Money, A. Barton Hepburn, New York, 1903, p. 243. 2 Vide Conant, A History of Modern Banks of Issue, Fourth Edition, New York, 1909, pp. 687-688. J Cf. the admirable discussion by A. D. Noyes, Forty Years of American Finance, New York, 1909, pp. 77-81. 134 PROGRESS OF THE EMPIRE STATE The maintenance of gold payments was several times threatened during the last two decades of the nineteenth century by the agitation for the free coinage of silver. On all occasions the bankers of New York stood firmly by the government and several times parted with gold volun- tarily in order to strengthen the reserve held in the Treasury against the greenbacks. When a Democratic administra- tion succeeded a long line of Republican Presidents who had completed the work of the Civil War, the bankers of New York without distinction of party stood as resolutely by President Cleveland in his monetary policy as they had stood by Presidents Grant, Hayes, Garfield, and Arthur in theirs. It was the resolute stand of Mr. Cleveland for the gold standard and in opposition to free coinage which drew the business community of New York so largely to his support and secured his renomination and election in 1892. It was by the skillful management of William C. Whitney as a representative of this sentiment that opposition was smoothed away in the Democratic National Convention of that year and party leaders were convinced that Mr. Cleveland was the one man, with whom they could appeal with confidence to the American people. When the country began to pay the penalty of many years of incompetent financiering in 1893, New York bankers formed a combination, and within a few days, with the help of leading members of the profession in Boston, Baltimore, Chicago, and Philadelphia, increased the govern- ment gold reserve by #6,500,000. But such measures were only palliatives. The enactment of the Sherman silver purchase law of June 14,1890, against which Eastern bankers and business men were all but unanimous in their opposition, soon invoked a crisis. Gold exports began in large volume the month the law was approved. The theory of Gresham's law, that the departure of gold denotes the presence of a NEW YORK AND NATIONAL FINANCE 135 poorer currency behind the gold, expelling it from the country, was verified by the manner in which the gold went out as the new Treasury notes were pumped into the cir- culation at the rate of #4,500,000 per month . The Treasury notes issued under the law up to June 30, 1893, were #147,190,227; the net gold exports from the United States from June 30, 1890, to June 30, 1893, were #156,132,423 ; and the reduction of the aggregate gold in the Treasury during the same period was #133,156,991. Other causes than the mere addition of the notes to the circulating medium doubtless contributed to the expulsion of gold, but the coincidence of these three items — the loss of gold by the Treasury, its export from the United States, and the issues of notes — is at least striking. Commercial failures began to multiply with alarming rapidity; the banks, warned by the Baring failure in London, began to curtail their loans and strengthen their specie holdings; and weak banks throughout the West began to suspend payments. When upon the heels of these condi- tions came the suspension of silver coinage in British India and the sudden drop in the price of silver by iod. within three weeks, the injurious results of the silver policy became apparent to the country. The Treasury was almost empty and President Cleveland received the applause of the busi- ness community when he called an extra session of Congress for August 7th. It was this special session which reversed and ended the policy of unnecessary purchases of silver for coinage purposes, and marked the beginning of the great contest for sound money which resulted in 1900 in the enactment of the Gold Standard Law and in 1908 in the creation of the National Monetary Commission for the reform of the banking system. In this long, continuous struggle, men of New York, in Congress and the Cabinet as well as at home, bore a conspicuous and loyal part. 136 PROGRESS OF THE EMPIRE STATE Foremost among these men was the man twice chosen President of the United States — Grover Cleveland. Mr. Cleveland showed an independence in expressing his antago- nism to free silver or to increased issues of full legal- tender silver dollars which even to some of his friends often seemed so audacious as to imperil his political future. One of his first acts, before taking office in 1885, was to write a vigorous letter to the Democratic members of Congress, urging that the further purchase of silver and the coinage of silver dollars under the Bland law should be brought to an end. On every occasion when an issue was raised Mr. Cleveland was frank to express his opposition to silver inflation. It mattered not whether it was on the eve of an important convention, where his opposition might adversely affect his chances for votes; it mattered not how earnestly even his sound-money friends urged that it would be politic to keep quiet for the time being. In February, 1891, almost on the eve of the contest for delegates to the National Convention of 1892, Mr. Cleve- land wrote a vigorous letter expressing his hostility to free silver. Then, after his election in 1892, came the crisis of 1893, tne special session of Congress to repeal the silver purchase law, and the long, bitter fight which is elsewhere referred to. It is significant of Mr. Cleveland's firmness in this contest, that when Senator Gorman of Maryland and other sound-money leaders were willing to yield a little in order to accomplish the immediate passage of some sort of repeal bill, Mr. Cleveland put his foot down like a rock and refused to accept anything from Congress but the absolute, unconditional suspension of further purchases of silver for coinage into full legal-tender money. Under such a chief it is not surprising that other New York men made honorable records as supporters of sound finance. Mr. Manning as Secretary of the Treasury from ~- JOHN MURRAY MITCHELL Lawyer and member of Congress; born at 60 West Ninth Street, New York City, March [8, 1858; graduated fro Columbia College, 1877, with the degree of A.B.; although the youngest member of his class, was made valedictorian; completed a course in Columbia Law School in 1879, receiving the degree of LL.D.; was admitted to the bar immediately thereafter. Mr. Mitchell was nominated by acclamation for Congress as a Re- publican in 1894, in a district usually Democratic, and although defeated on the face of the returns, was seated on a recount by a vote in Congress of 162 to 39. He was reelected in 1896 and 1898, being a member of the Committee on Banking, where he rendered valuable service on the subcommittee of three which prepared the McCleary bill. Died May 31, 1905. NEW YORK AND NATIONAL FINANCE 137 March 4, 1885, to his death in 1887, repeatedly urged upon Congress the suspension of further purchases of silver. His annual reports were as emphatic upon this subject as those of any of his Republican predecessors in the Treasury. Cordially supporting him with weighty judgment and clear voice was Conrad N. Jordan, then United States Treasurer, and under Mr. Cleveland's second administra- tion, Assistant Treasurer at New York. Mr. Jordan probably gave greater prominence to the two offices which he held than any other man who has occupied them in many years. After Mr. Manning had laid down his life under the pressure of his exacting duties, Mr. Charles S. Fairchild became Secretary of the Treasury. Formerly Attorney- General of New York and Assistant Secretary of the Treasury under Mr. Manning, Mr. Fairchild was far from being of the usual type of the active politician. He was a scholar, a philosopher, and a reformer. Having to deal with the great problem of an accumulating surplus, he dis- tributed the money among the banks, in order to keep it at the command of commerce. For this he was vigorously assailed by Mr. James G. Blaine in the Presidential campaign of 1888, but Mr. fe Fairchild replied in a luminous speech, on the steps of the New York Sub-Treasury, in which he maintained that under the condition in which the Treasury was placed by the imposition of taxation beyond its needs he had taken the only feasible course to avert dangerous pressure in the money market. In Congress the New York delegation of both parties could usually be relied upon to vote solidly against any proposition to increase the output of silver and in favor of strengthening the gold standard. While the Repub- licans, except for their unfortunate vote to enact the Sherman silver purchase law of 1890, were able usually 138 PROGRESS OF THE EMPIRE STATE to give a larger and more constant number of votes than their opponents, the leading Democrats who were for the gold standard were conspicuous by their coura- geous opposition to a large element in their party. Among them none was more steadfast and energetic than Gen- eral Charles Tracey, who for ten years represented the Albany district. A gentleman of wealth and cul- ture, who had served in the Papal Guards when the Italians forced their way into Rome in 1870, General Tracey possessed that equanimity of temper and perfect fairness towards opponents which held their respect and friendship at the very moment when perhaps he might be standing out alone against a defined party policy. So determined was he that the party and Congress should not go on record for unsound financial legislation that he was almost constantly in his seat, watching even the reading of the journal and ordinary formal motions in order to guard against a trap. Many times his watchfulness was rewarded by checking some concession to silver on the part of the majority, or by drawing enough votes away from his own party to offset the silver defection in the ranks of the other party. Supporting General Tracey and exercising an important influence upon party policy in Congress were several other New York Democrats. Governor Roswell P. Flower, during his short service in the House, was from his very position a sturdy supporter of sound money. Isidor Straus, the great New York merchant, was a close friend of William L.Wilson, the Democratic leader in the Fifty-third Congress, and influenced Mr. Wilson's clear mind in favor of the posi- tion which he constantly maintained, in support of President Cleveland and the stoppage of further purchases of silver. In keeping back the great wave of silver inflation which carried Mr. Bryan on its crest in 1896 so near to the Presi- NEW YORK AND NATIONAL FINANCE 139 dency of the United States, it goes without saying that the influence of the bankers and business men of New York, with their heavy contributions to the cause, was felt throughout the Union and had a large share in turning the scale in the doubtful States. There was, of course, never a doubt that New York would roll up the largest majority in her history against the party which declared for unsound finance. The great parade of merchants, brokers, clerks, and laborers a few days before election, in favor of McKinley and sound money, was perhaps the most remarkable demon- stration ever held in New York, not only because in the ranks marched men with enormous interests at stake, who rarely took part in political demonstrations, but also because a large proportion of them, if not the majority, had previously voted against the party whose candidate they now supported. Out of the election of President McKinley came the administration of another New Yorker at the head of the Treasury. Lyman J. Gage, although appointed from Chicago, where he had passed his mature years as the leading banker and financial authority of the West, was, nevertheless, born in the interior of New York, and learned his first lessons as a banker under the New York State banking system. It was perhaps his New York training which contributed something, apart from his native inde- pendence, to his outspoken declaration, soon after taking office in 1897, that it was his purpose to fasten the gold standard more firmly upon the country. It was still the fashion with some of the politicians, even after the verdict of 1896 against free silver, to be mealy- mouthed in using the word "gold." Mr. Gage sounded the keynote of the new order of things. He rendered great services in putting the gold standard firmly upon the statute books and in educating the country to a sound 140 PROGRESS OF THE EMPIRE STATE theory of banking. Again and again his annual reports recommended that the gold reserve should be segregated from the current funds of the Treasury, that the greenbacks should be payable specifically in gold, and that gold should be held, if necessary, for the redemption of the great mass of outstanding silver dollars. He had the fortune which does not always come to those who are in advance of their time, that a measure embodying nearly all these principles be- came a law and was put into operation under his administra- tion. It was March 14, 1900, when President McKinley affixed his signature to the Gold Standard Act and it became possible for the United States to take its place in the ranks of nations whose obligations were payable in a fixed quantity of gold. It was an original New Yorker also who came to the head of the Treasury, after the erratic five years of Leslie M. Shaw, and held the rudder firm during the crisis of 1907. This son of New York, George Bruce Cortelyou, was a product of the city schools and a striking example of what an American can accomplish by his own unaided abilities. Picked out as stenographer to President Cleveland for merit, made Private Secretary to President McKinley and successively the first head of the Department of Commerce and Labor,Chairman of the Republican National Committee, and in 1907 Secretary of the Treasury, Mr. Cortelyou rose on every occasion to the level of his duties and oppor- tunities, and when the crisis of October, 1907, broke out, New York financiers knew that they could rely upon cool judgment and effective cooperation from the new head of the Treasury. In the office of Comptroller of the Currency served strong men who eventually became New Yorkers, even if they were not at the time of their appointment residents of the State. Foremost among these was John J. Knox, Comp- NEW YORK AND NATIONAL FINANCE 14 1 troller from 1872 to 1884, whose name was forever anathema among the silver men because he framed the careful revision of the statutes discontinuing the coinage of the silver dollar, which they were pleased to denominate "The Crime of 1873." To the constructive genius of Mr. Knox the country owes not merely the codification of the coinage laws, but many improvements in the administration of the National Banking Act. The successor of Mr. Knox was Mr. Henry W. Cannon, who was soon called to the presi- dency of the Chase National Bank, which he relinquished only when ill health followed his exacting labors. Then came Mr. A. Barton Hepburn, a native New Yorker, who had won his spurs as Superintendent of Banking in the State and as one of the national bank examiners. Mr. Hepburn was too valuable a man to remain long in government office, and after serving for a time as Vice-President of the National City Bank, he succeeded Mr. Cannon in 1905 as President of the Chase National Bank and ultimately became President of the Clearing House and the Chamber of Commerce. During all the years of his service in New York, however, Mr. Hepburn was an active worker for sound money. He was an officer of the Sound Money League, which contributed powerfully to the election of President McKinley and the enactment of the Gold Standard Law. Finally, when the battle had been won, he rendered an important service to the literature of finance by his work entitled The Movement for Sound Money. Mr. Hepburn's service as Comptroller ended in 1893, after which the place was held by three Western men for fifteen years, but finally the pendulum swung back to New York in the appointment in 1908 of Lawrence O. Murray, under whom many important ad- vances were made in methods of bank examination and in the administration of the Comptroller's Office. The battle which resulted in the enactment of the Gold 142 PROGRESS OF THE EMPIRE STATE Standard Law of 1900 was initiated by Mr. Hugh H. Hanna of Indianapolis, but found always its strongest support in the business community of New York. It was from New York that Mr. Hanna took for members of the Monetary Commission Charles S. Fairchild, who had proved his mettle as Secretary of the Treasury, and Stuyvesant Fish, the broad-minded railroad man who had made the Illinois Central a part of the domestic life and progress of the Mississippi Valley. It was still another New Yorker, L. Carroll Root, who assisted in perfecting the report of the Monetary Commission, which remains to-day one of the most clear and forcible presentations of the monetary and banking problem in the United States. When the work of this commission came before Congress, a New Yorker was one of a subcommittee of three who prepared the draft of a measure adapted to conditions in the House of Representatives for bringing order into the monetary and banking system. This man was John Murray Mitchell, a young lawyer of much strength of character, who in 1894 as a Republican carried a Democratic district for the first time in its history. Again elected in 1896 on the crest of the wave against free silver, Mr. Mitchell took a keen interest in putting into law what his city and State had decreed by such an overwhelming majority. In his handsome house at Nineteenth and I Streets, in Washington, graced by his young bride of a year, the three members of the subcommittee worked over the details of the McCleary bill, named for the chairman of the committee, which became one of the steps in the evolution of the Gold Standard Law of 1900. The enactment of the law came finally through the appointment of a special committee, representing the Republicans of the House of Representatives, which met at Atlantic City in April, 1899. This committee was not made J IRVING T. BUSH Capitalist and terminal export; bom in Ridgeway, Lenawee v, Mich., July 12, 1869; son of Rufus T. and Sara M. (Hall) Hush; educated at the Hill School, Pottstown, Va. Presi- dent of the Bush Terminal Co., which has done much for solving the problem of freight congestion in New York; director of the Bush Terminal Co., Bush Land Co., Bush Terminal Railroad, and member advisory board of the Title Guarantee & Trust Co. Mr. Bush is a member of the Merchants' Association and the Chamber of Commerce and has taken an active part in the movement to secure the reform of the currency system, having been chairman of a committee of the Merchants' Association on this subject and an officer of the National Citizens' League for the promotion of a sound banking system. -In pursuit of this work he has made several public addresses and appeared before com- mittees of Congress. He is a member of the Union League, New York Yacht, Downtown Association, and other clubs. NEW YORK AND NATIONAL FINANCE H3 up from members of the banking or coinage committees of the House, but of the representative leaders of the party. Among them appeared Sereno E. Payne, Chairman of the Committee on Ways and Means, representing one of those up-country districts of New York where the follies of paper and silver inflation had scarcely a mouthpiece. It was from the labors of this committee, with those of the Senate Committee on Finance, that finally emerged the law of 1900, one of the most important acts in the financial history of the country. It is not necessary here to give the details of the act, except to say that it made gold unques- tionably the standard of value in the United States, estab- lishing a permanent gold reserve of #150,000,000 for the redemption of the greenbacks, and distinctly providing that this fund, if impaired, was to be restored by the prompt sale of bonds and was in no case to be applied to current expenditures, as had been done with the gold reserve during the trying period of 1894. The fact that the law was finally passed in a form satisfactory and definite in these respects was due very largely to the constant watchfulness of Mr. Hanna and the experts associated with him on the Indian- apolis Committee. The passage of the act opened a new era in the history of the American money market and made it practicable to carry on exchange operations with European financial centers upon a much broader scale than had been possible while there was doubt whether New York was a free market for gold. The enactment of the Gold Standard Law was regarded, however, by the banking interests of New York as only a step towards the final restoration of the currency to sound conditions. The Indianapolis Monetary Commission, the Sound Money League, and other organizations, did not relax their efforts to secure a change in the basis of bank-note circulation, which should give greater elasticity to the 144 PROGRESS OF THE EMPIRE STATE currency and adapt it to the growing needs of commerce. Lyman J. Gage, as Secretary of the Treasury, strongly seconded in his annual reports the wishes of the business community. Many bills were introduced into Congress, and several reports were made looking to an improvement in the existing system. The prosperity of the country during the period from 1900 to 1905 diminished somewhat the pressure for new legislation. In the autumn of 1905, however, call rates for money in New York reached an alti- tude of 125 per cent. Mr. Jacob H. Schiff, a well-known international banker, introduced a resolution in the New York Chamber of Commerce, which was adopted at the December meeting, providing for the appointment of a special committee of the Chamber to frame a currency measure. 1 This committee, after many sessions and after conferences by one of the members with the heads of leading foreign banks, made a report which was adopted by the Chamber of Commerce on November 1, 1906. This report constituted something of a landmark in the progress of monetary discussion by making the first recom- mendation coming from an important public body in favor of the principle of a central bank of issue. It was proposed that such a bank should be under the direct control of a body of governors, appointed, at least in part, by the Presi- dent of the United States, and that it should perform most of the essential functions of note issue and rediscount possessed by similar institutions in Europe. At that time, public opinion in favor of a central bank was so restricted that an alternative plan was proposed by the Committee, for the issue of notes by the local banks upon their general assets, with the security of a safety fund.' 1 The members of this committee were John Claflin, Frank A. Vanderlip, Isidor Straus, Dumont Clark, and Charles A. Conant. 3 This narrative is based largely upon the summary of the measures taken to NEW YORK AND NATIONAL FINANCE 145 Within a few days before the adoption of this report by the Chamber of Commerce, the Annual Convention of the American Bankers' Association created a new committee of fifteen members, to succeed previous committees on the subject, for the purpose of framing a currency measure and consulting with representatives of the Committee of the New York Chamber of Commerce and other bodies. This committee met in Washington in November, 1906, with the Hon. A. Barton Hepburn, President of the Chase National Bank of New York, as chairman. A plan was prepared which did not differ materially in principle from that of the New York Chamber of Commerce. A bill containing some of the features of this plan was favorably reported to the House of Representatives by the Hon. Charles N. Fowler, Chairman of the House Committee on Banking, who had long been an advocate of the currency reform. At the Annual Convention of the American Bankers' Association held at Atlantic City in September, 1907, the report of this committee was indorsed by a large majority and the Committee was directed to continue its functions and to make such modifications in its plan as might seem desirable. Within a few weeks occurred the panic of October, 1907, the almost universal suspension of currency payments by the banks of the United States, and the natural rise of foreign exchange several points above gold parity. Interest was stimulated anew in the subject of a radical change in currency conditions, and a strong report was made to Congress by the Hon. W. Barret Ridgley, the Comp- troller of the Currency, urging the principle of a central bank. The same method of meeting future panics was recommended by others who had made a special study of currency matters. In spite of the marked growth of the secure currency reform given by Conant, A History of Modern Banks of Issue, New York, G. P. Putnam's Sons, 1909, pp. 437-447. 146 PROGRESS OF THE EMPIRE STATE sentiment for central banking among those best informed on the subject, the project was so new to the majority of the people that it was not possible to secure immediate action of so radical a character in Congress. The necessity of some measure to avert another disgraceful suspension of currency payments in time of peace was so strongly impressed upon Congress, however, that a temporary measure was enacted, to expire on June 30, 1914, to permit special issues of currency by the banks in periods of stress. In perfecting this emergency measure a member from New York, Mr. Edward B. Vreeland of Salamanca, took a leading part. Mr. Vreeland was not at the time Chairman of the Committee on Banking, but was given the position in the next Congress because of his active interest in promot- ing currency legislation and his tact in reconciling conflicting views. The bill which became law on May 30, 1908, was known as the Aldrich-Vreeland law, from Senator Aldrich of Rhode Island, Chairman of the Finance Committee, and Mr. Vreeland. More worthy of consideration with a view to the future than its provisions for emergency currency were the final sections of the law of 1908, which authorized the appoint- ment of a National Monetary Commission to report "what changes are necessary or desirable in the monetary system of the United States." This commission was made up of nine Senators and nine members of the House, Senator Aldrich and Mr. Vreeland being appointed the leading members. It has been largely from the reports of this commission, after unbiased investigations of European sys- tems by its members, that the movement has gained such momentum for the establishment of a central bank of issue in the United States, having the capacity to coordinate the scattered banking units of the country into an efficient and mutually helpful body. ALEXANDER D. NOYES ontclair, \. J., December 14, 1862; son< A - M " l88 ' Fork Tribune, 18S3 ! ' i;i1 stalT ;er, 1884-1891; " nan > 1891 ; trustee The Forum since '902; has Harvard University, Uni- >rk Univei Commerce ociation, : ior of 77n>/v Fear* 0/. 1 merican F, ■ 1S98; Forty Years of American Finance, 1909. Wrote: 77/c Free ich two million copies were circulal I896, and various other monographs on the financial question. In charge of editorial treatment of financial and economic sub- in the Evening Post and frequent contributor to the Atlantic Monthly and other magazines. CHAPTER V THE ERA OF INDUSTRIAL EXPANSION By ALEXANDER D. NOYES THE narrative of the events which followed the year 1896 makes a remarkable chapter in American finance. It is a chapter which, so far as regards its general tendencies, may possibly be said merely to have repeated history; but which, when judged by the dramatic change in the country's financial condition, and by the portentous character of the phenomena of the day, stands quite by itself. What we have to consider in our review of the five or six years which followed 1896 is such reversal of its position by the United States that, instead of the crippled industrial and financial state of 1894, w ith the country's principal industries declining, its great corpora- tions drifting into bankruptcy, and its Government forced to borrow on usurious terms from Europe to maintain the public credit, there was presented, in the short space of half a dozen years, a community whose prosperity had become the wonder of the outside world; whose productive indus- tries had developed such strength that the "American invasion" was discussed abroad as threatening ruin to our European competitors; whose corporations, when properly capitalized and managed, had grown so profitable that the •This chapter is based in part on the author's Forty Years of American Finance, with the kind consent of the publishers, Messrs. G. P. Putnam's Sons. 147 148 progress of the empire state strongest financial interests of the world were struggling to buy possession of them ; whose banking-houses subscribed in important sums to new English and German Government loans, not to mention the public bond issues — $100,000,000 in all, within seven months — of Cuba, Japan, and Mexico. The startling ups and downs of fortune which have occurred in other communities are familiar. It is, however, the fact of a complete revolution in this country's position, not only as regards its own enterprises, but in its relation to other industrial states, which challenges attention, and it is this which we shall now examine. It is a popular impression, with perhaps the majority of people, that industrial revival was immediate and con- tinuous after the election of November, 1896, and to this belief have been partly traceable some singular Stock Ex- change phenomena at subsequent elections. The belief is erroneous. That the defeat of the free-coinage demonstra- tion, at what was apparently the psychological moment promising best for its success, was an event of great import- ance in the country's economic history, there can to-day be little doubt. The outcome of the election certainly con- tributed to the later return of full financial confidence and industrial activity. But confidence and industrial activity were by no means an immediate sequel. The rise in stocks, which had begun before election, lasted barely forty-eight hours after November 4th ; then heavy realizing sales began, and in the sequel, financial depression prevailed again until far into 1897. During November, fully 700 manufacturing establishments resumed work or added to their working force. This was taken as reflecting reassurance in the busi- ness community over the election verdict on the currency. But the rush of activity ceased, in a month or two, as sud- denly as it had begun. Instead of immediate and continuous revival, the first half of 1897 was a period of financial uncer- THE ERA OF INDUSTRIAL EXPANSION 149 tainty and depression. The first half of 1896 had been regarded as hard times; yet the checks drawn on all the country's banks in the similar period of 1897 showed de- crease of $570,000,000, or 2]/+ per cent. In the second quarter of 1897, liabilities involved in commercial failures throughout the country were $3 ,000,000 greater than in 1896. In July, 1896, there had been in blast in this country 191 iron foundries, with a weekly output of 180,500 tons, and with 815,000 tons piled up in their yards. This was then called a very unfavorable showing; yet in July, 1897, the number of furnaces in blast had further decreased 46, to 145, weekly output had fallen 16,000 tons, to 164,000, and the idle stock of iron had risen nearly 200,000 tons, to 1,004,000. All such considerations were soon dismissed from the public mind of 1897, by a turn of events which repeated, on a larger scale and in an equally extraordinary way, the story of 1879. Although the Indian wheat crop failure of 1896 made a great hole in the world's supplies and caused an immediate rise in the price of wheat, nevertheless Europe itself raised in that year a crop of good proportions. What happened in 1897 was, first, that a scorching drought in France cut down the season's wheat yield in that country 93,000,000 bushels from 1896; next, that a wet harvest reduced the Russian crop nearly 80,000,000 bushels; and, finally, that a season of storms flooded so disastrously the Danube Valley that Austria and the Balkan States gathered less wheat by 127,000,000 bushels than in the preceding year. The whole European crop fell below the yield of 1896 by 350,000,000 bushels, — a loss of no less than 30 per cent. Had the American harvest of 1897 remained at the figures of the year before, a great disaster would have befallen Europe. This country's fortune had, however, stood it in good stead. The high price of wheat in the autumn of 1896 had encouraged farmers, the country over, to plant more 150 PROGRESS OF THE EMPIRE STATE wheat in the ensuing spring. This increase amounted to nearly five million acres. Weather conditions in the United States were favorable throughout the season. The resultant crop ran 103,000,000 bushels ahead of 1896, and was, with one exception, larger than any previously harvested. Under the circumstances, it was sold at extraordinarily good prices. By August "dollar wheat" was touched again on the Chicago Board of Trade, for the first time since 1891 ; and the price was maintained throughout the ensuing season. At this price, consuming Europe, with its supplies already depleted by the Indian failure of the year before, bought our wheat in quantities quite unprecedented. During the twelve months after the harvest of 1896 the United States exported, in grain and flour, 83,000,000 bushels of wheat. In the same period, after the 1897 harvest, the export was 150,000,000. The value of the season's exported grain increased no less than #122,000,000. One result of this notable trade incident was the import, during the same twelve months, of #120,000,000 gold, — the first natural movement of the kind in this direction since the autumn of 1891. Directly, this inflow of gold, which was lodged with the Treasury in exchange for notes, caused a rise in the Government's gold reserve from the #44,500,000 of February, 1896, and the #137,000,000 at the end of 1897, to the handsome figure of #245,000,000 in the middle of 1898. We have seen how the export of our wheat to famine- stricken Europe piled up our export trade and reversed our situation on the international market. The wheat was the primary influence; but scarcely less important was the revival in general trade. It was not until the close of 1897 that people began to hear, by way of Europe, of "the Ameri- can invasion." This matter came to the front as a topic of discussion, in a remarkable speech delivered at Vienna, THE ERA OF INDUSTRIAL EXPANSION 151 that December, by the Austrian Minister of Foreign Affairs, Count Goluchowski. It was asserted in this speech that "the destructive competition with trans-oceanic countries required prompt and counteracting measures, if the vital interests of the European people are not to be greatly com- promised." "European nations," the Austrian statesman concluded, "must close their ranks and fight shoulder to shoulder, in order successfully to defend their existence." Directed, as it obviously was, at the United States, what did this singular diatribe mean ? Certainly, neither Austria nor Europe at large could have been protesting against the "American invasion" of Europe's grain market; for that, in 1897, was Europe's only alternative to famine. It did not require long to discover that Count Goluchowski had his eye on our export of manufactures. The volume of these exports was practically stationary in the eight years between 1882 and 1890, and it increased very slowly after that. In the hard times after 1894, however, when there seemed little hope in a domestic market, our manufacturers began to look abroad. As we have seen in noticing the iron trade figures, even as late as 1897, great stocks of unsold goods had piled up after every effort to stimulate home pro- duction. But we have learned also that, while our own markets were passing through that period of despondency, Europe's were reviving rapidly; by 1897, their recovery had assumed the dimensions of a "boom." It has been shown what was our own manufacturers' position. Prices were low, wages were low, material was abundant, the struggle for profits had sharpened the eye for improvements and economies. The one thing needed was an expanding market. At home there was none as yet; but here, in foreign States, had suddenly arisen a demand for manufactured goods so urgent that at the moment English and German manufacturers could hardly fill it. Our people 152 PROGRESS OF THE EMPIRE STATE would scarcely have shown themselves possessed of Yankee shrewdness had they neglected the opportunity; and they did not neglect it. They were, in fact, in a peculiarly favorable situation to take advantage of it. The raw material lay almost at the doors of the factories. Skilled laborers, chafing after their four-year period of partial idleness, could be had at once and in quite sufficient number, and orders from home consumers were so light that scarcely half the producing capacity of well-equipped mills was being used for the domestic trade. Our manufacturers took foreign orders for prompt delivery which the English and German mills were simply unable to accept. We sold our goods, not only in the so-called neutral markets, but in the markets of Continental Europe. The result was that, between 1893 and 1899, our export of manufactures actually doubled. They were $158,000,000 in the one year, and $339,000,000 in the other; and they increased a hundred million more in the fiscal year 1900. It is easy to see why, under such conditions, our total export trade, crossing the billion-dollar mark in the fiscal year 1897, should have risen to $1,200,000,000 in 1898, to nearly $1,400,000,000 in 1900, and to not quite $1,500,000,000 in 1901. Stimulated by this great outside demand, our trade activity and our industrial profits rose to extraordinary figures. The first task of this era of returning prosperity was the task of financial reconstruction. After the panic of 1893, not only was 61 per cent, of the outstanding shares of Ameri- can railways receiving no dividend whatever, but one fourth of that stock represented roads in the hands of bankruptcy courts. As late as the middle of 1895 receivers were opera- ting 169 railways, with 37,855 miles of track — more than one fifth of the country's total railway mileage, and represented on the markets by no less than $2,400,000,000 stocks and bonds. MEYER GUGGENHEIM Was the founder of the Guggenheim fortune in Ami from Switzerland, where the family me of the first I sh famUiei ! there in the early days of 'ian Republic: Bi in mines in Leadvilli ' was thereby drawn into the mining and smelting b which he ultimately brou] Gave all his sons a practical bus n under his immediate direction. Became interested in mining in Mexico and formed ultimately the firm of M. I Retired from active business, and died in 1905. THE ERA OF INDUSTRIAL EXPANSION 153 In the hard times of 1894, no rehabilitation of these wrecked corporations was possible; the achievement called for abundant confidence and abundant capital; and it was only with the returning sign of promise in the next three years that substantial progress was made. In December, 1895, the Erie was taken out of the receivers' hands; in the same month, the Atchison, Topeka & Santa Fe emerged from bankruptcy; in September, 1896, the Philadelphia & Reading was placed on its feet. Foreclosure was in each case followed by purchase of the properties in behalf of former shareholders, who, as a condition to their partici- pation in the new company, were assessed pro rata to raise the needed cash resources, the bondholders submitting to lower interest rates, usually receiving stock in the new corporation as a solace. Naturally, this process of rehabilitation grew more gen- eral as the return of prosperity became assured. In 1893, railways with #1,781,000,000 stock and bonds were placed in receivers' hands; in 1896, railways with $1,150,377,000 were sold under foreclosure; for each process, these were totals exceeding by nearly a billion dollars those of any other year on record. But as against the 169 insolvent railroads of 1895, with 37,856 miles of track and $2,439,000,000 capital liabilities, existing receiverships in the middle of 1898 covered only 94 roads, with a mileage of 12,745 and a capital of $661,500,000, and in 1900 only 52 roads, with mileage of 4178 and capital of $351,000,000. By 1900, net earnings of all American railways had increased 50 per cent, over 1895, and actual dividends paid out were nearly doubled. This expansion of financial and industrial activity had presently to endure some rather crucial tests. The United States declared war against Spain in April, 1898, and this for a month upset all financial markets. Our situation on 154 PROGRESS OF THE EMPIRE STATE international exchange, however, was so strong that the very first thing the country did, even before war had been declared, was to draw #60,000,000 gold from Europe to protect its bank position. The war was quickly over. Admiral Dewey destroyed the Spanish fleet at Manila on the first of May; Cervera's fleet was annihilated July 3d, outside Santiago harbor; on July 26th, Spain asked for terms, and on August 12th, the protocol to the treaty of peace was signed. In several ways, the war served to demonstrate the new financial resources of the country. A #200,000,000 3 per cent, war loan, offered at par to inves- tors in July, elicited subscriptions for #1,500,000,000; it was taken by home subscribers, the separate allotments numbering 320,000, and it went to a premium of 6 per cent, within three months. In April, 1899, our Government paid Spain a #20,000,000 indemnity for the Philippines, and the #20,000,000 export of gold, caused by the operation in exchange, did not prevent a continuous increase in the Treasury's own gold reserve. Partly in connection with the war, wheat went to a price — #1.85 per bushel at Chicago, on May 10th — never but once exceeded in the thirty preceding years. This was a corner, which broke down as corners usually do; but it was unlike many corners, in that it occurred when the American farmer still had plenty of wheat to sell, and when he received the benefit of the corner prices. Our wheat crop of 1897 was the second largest ever harvested in this country. The crop of 1898 exceeded all precedent, and that of 1901 was 10 per cent, larger still. In the fiscal year 1893 our imports exceeded exports by #18,700,000. In 1897 the excess of exports was #286,000,000. The next year it was #615,000,000. This abnormal accumulation of foreign credits had some strange results. First, the pressure of domestic capital THE ERA OF INDUSTRIAL EXPANSION 155 on our home investment markets raised prices to unexpected heights. As a result, foreign holders of our securities sold them back; and Europe was practically drained of Ameri- can stocks and bonds. Then, for the first time in our history, we began to lend to Europe. President Kriiger of the Transvaal Republic declared war on England in October, 1899. Transvaal mines had in 1898 produced $75,000,000 gold — more than one fourth of the whole world's output of the year — and exactly that amount was received in London, from South Africa, during 1899. But with hostilities begun and the Transvaal frontier blockaded, production sank at once to insignificant proportions; then, when the Boer authorities placed an embargo on the mines, it ceased entirely. From April, 1900, to April, 1901, inclusive, scarcely an ounce of gold was mined in the Transvaal, and in the whole year 1900, England received only $1,800,000 gold from South Africa; less by $7,000,000 than the sum which it had to export to the banks of Cape Colony. As a consequence of this sudden curtailment of supplies, coming with trade and speculation abnormally active throughout Europe, the great state banks began to bid for gold. The Bank of England's official discount rate went in December, 1899, to 6 per cent., a height not reached since the panic of 1890; the Imperial Bank of Germany fixed 7 per cent., the highest rate in its history. In the face of this confusion of the markets, and of several defeats which foreshadowed a long campaign, Eng- land placed its war loans. Before the war was ended— and that was not until May 31, 1902 — England had issued $795,000,000 in new government securities; the whole cost to England of this little conflict was no less than $1,085,000,000 — or, since the fighting lasted two years and nine months, almost exactly one million dollars per day. Inevitably, the collapse in foreign markets, at the 156 PROGRESS OF THE EMPIRE STATE end of 1899, disconcerted our own financial markets also; London's panicky recall of capital from New York sent the Wall Street call-money rate up to 186 per cent, on December 18th. Yet it was in this very situation that the American market came to Europe's relief. New York took $28,000,000 of the British Exchequer loan of August, 1900; applied for $150,000,000 of the loan of May, 1901, and secured $100,000,000; it subscribed for $80,000,000, or one half of the loan of April, 1902. In two of these loans, American banking houses dealt directly with the British Exchequer, something wholly new in financial his- tory. These were not all our foreign investments of the period. The German Government sold us $20,000,000 of its new bonds in 1900, and we lent some $10,000,000 more to Continental cities. Yet the "foreign balance" con- tinued to accumulate. At the close of 1900 it was esti- mated by international bankers that this country still had a credit fund of at least $200,000,000 outstanding on Europe's money markets. It was a very common query at that time, in financial circles, what was to be the outcome of this unprecedented situation. Some people predicted that it would mean in- vestment of our overflowing capital, on a rapidly increasing scale, in foreign enterprises. It was then that the prophecy was heard that New York was destined to displace London, if it had not already displaced it, as the financial center of the world. On the other hand, the Wall Street com- munity, which took the speculator's view, predicted that the price of outstanding American securities, under this pressure for investment, would rise to unheard-of heights. Neither of these things happened exactly as was predicted, but what did happen was, as we shall presently see, quite as startling as either of them. The situation in which the American community found THE ERA OF INDUSTRIAL EXPANSION 157 itself, in 1901, was one which arises at intervals in all pros- perous modern states; but its characteristics were empha- sized, on this occasion, by the unusual incidents of the period. Such a situation has invariably, on all previous occasions, resulted, first in readiness of people at large to embark, in all sorts of enterprises, the wealth whose extent they have suddenly come to realize, and next in a rush to speculation. I have shown to what extent the prosperity of the United States, and its rapid accumulation of new capital, had pro- gressed. We have seen how this capital, gathering confidence and pressing on all investment markets, had not only raised prices of our own securities to unexpected heights, and bought back from Europe the bulk of American investments in foreigners' hands, but had overflowed into such quarters as British consols and German Treasury bonds. But after all this, a huge credit fund was still left uninvested on home and foreign markets. At such times, people always wonder what is to be the outcome, and the outcome is always the same. The public has the money, and is eager to invest it; the banking community provides new securities as a field for such investment. These securities may be good or bad, sound or fraudulent. They may be new enterprises or old enterprises recapitalized. All of these applicants appeared on the scene in 1899 and 1900. But the great banking houses, with their hand on the public pulse, concluded that this was a mere trifling with the resources at command. The reservoir of American capital seemed inexhaustible; it filled up on one side faster than it could be drained into these various enterprises on the other. It was then that the scheme of recapitalizing American industry was conceived. Industrial trusts were not new in American financial history. But the movement had languished after 1890; hard times, low profits, and distrust on the part of invest- 158 PROGRESS OF THE EMPIRE STATE ment capital prevented further progress between 1893 and 1897; the financial embarrassment of some of the trusts already in existence threw doubt on other propositions of the sort. But the prosperous trade, abundant capital, and overflowing confidence which prevailed in 1899 na d created a new situation. The promoter — a name which now grew suddenly familiar on all American markets — asked the owners of a dozen or more competing plants, in a given industry, to name a selling price. Naturally, as their own retirement from business was involved, the price the owners fixed was high. A banking syndicate would be formed, however, to provide the money requisite for the purchase and for a handsome payment to the middleman. Thus acquired, the manufacturing plants would be combined and incorporated. As it turned out, and as the bankers had expected, the public was in exactly the mood to respond to the invitation. The shares were readily absorbed; other combinations followed. Still, the investment fund showed no symptoms of exhaustion. Presently the more venturesome spirits among promoters began to combine these already large industrial combinations into a single company, and to sell the stock of that, at inflated valuations, to the public. This would have been a step too far, but for the fact that profits of manufacture, notably in the steel and iron trade, went on increasing faster than promoters could turn their expectations into stock. How far this movement of incorporation went may be judged from the following figures. In the first three months of 1899 new industrial companies, with a total capitalization of no less than $1,586,000,000, were incorporated in this country. During the full year 1899 the total rose to $3,593,000,000, of which respectable sum $2,354,000,000 was the common stock, which, by frank confession of pro- f &uJi/^ STUYVESANT FISH Hanker and railway ofl „ in Ncw y . If SmSSSS Co at London, becoming later managing clerk- March 6 x,f darted director Illinois Central RailroS^^rvT^ f^ 7 J president- April 2 rSS, „: ; J anuar >' 7, 1883, second <-, April 2, i88 4i vice-president: Mav 18 rxs- * = l# ssa corporafcoos; ,„«« Mutual Lilc , ' ^°'°' °' h " THE ERA OF INDUSTRIAL EXPANSION 159 moters, then and afterward, was simply "water. " We have already seen, however, how seriously the investing public took even these common shares. They did, in fact, show particular favor to them, for the reason that the relatively lower price of common shares roused the bargain-counter instinct. Furthermore, in the immense industrial expan- sion of the period, these very common stocks, representing the inflated capitalization of concerns which in not a few cases had been bankrupt four or five years before, were very generally receiving dividends. For it was not only true that individuals, in the flush of material prosperity, were buying necessities and luxuries with increased freedom. Even in this direction there was a general tendency which approached extravagance. But a still more powerful demand came from the industries themselves. Iron, for instance, which had sold for #15.45 per ton in the autumn of 1894, brought $29.50 at the close of 1899; that is to say, its price had nearly doubled, and such a market necessarily brought about construction of new plants and enlargement of those already in the field. Iron for such construction was bought from existing mills. The same stimulus ran through every other trade. An extremely large demand for new material came from rail- ways, which had to carry the produce of the farmers to the coast. Naturally, after four years of rigid cutting of ex- penses under receivers in bankruptcy, the companies were in no condition to handle easily this enormous trade in 1897, and, as their profits and credit went on rising, after the readjustment of their financial status, their task was physi- cal reconstruction of the properties. What they spent on this, as compared with three or four years before, may be judged from the new railway securities which were sold in the investment markets to procure the money. In 1898 they put out $67,000,000 worth of stock and bonds, mostly for i6o PROGRESS OF THE EMPIRE STATE such purposes; in 1899, #107,000,000; in 1900, #199,000,000; in 1901, #434,000,000; and, in 1902, #527,000,000. That industry and finance halted in 1900, under the double influence of the collapse of the foreign market for our exports and the vicissitudes of the presidential campaign, was entirely natural. But the country's real prosperity, its accumulation of fresh capital, had not been arrested even momentarily. News of the final defeat of the free-silver coinage movement, in the November elections of 1900, found its immediate reflection on the Stock Exchange; it was the political side of things which served to fire the imagination, already brought to a pitch of no little excitement by the spec- tacle of the country's enormous economic power. From this mixture of causes followed very rapidly what may be de- scribed as the explosion of speculation at the beginning of 1901, — a period which will possibly have as conspicuous a place in the curious reminiscences of finance as the South Sea Bubble of 1720 and the railway craze of 1844. Its underly- ing causes were, indeed, identical with the causes of those older episodes ; the principal phenomena of each were the im- mense amount of new stock issued, the eagerness of the public to buy it, and the rapidity with which people who bought found the value of their holdings rising. The situation of 1901 was one which turned men's heads. The country seemed to have reached a pinnacle of prosperity from which nothing could dislodge it. The profits of our incorporated enterprises seemed to have no assignable limit. American capital pressed upon every avenue of investment. The most reckless and foolish speculation was apt to achieve success. Looking at the matter philosophically, there need be no wonder that the word went forth, in financial circles previ- ously noted for conservatism, that old precedents of finance were obsolete, that it was no longer necessary to judge the present and future by the past. THE ERA OF INDUSTRIAL EXPANSION 161 The climax of this great speculation came from a pecu- liar cause, which, I think, we shall understand in the light of what we have already considered, but which"the investing public of that day did not understand at all. It became evident, at the close of 1900, that something more than buy- ing by investors was at work in the Stock Exchanges. On one stock after another, a buying movement would converge which seemed to be utterly indifferent to prices, and which was accompanied by trading of quite unexampled volume. It was presently evident that what was going on was the purchase, at extravagant prices, of a controlling interest in the shares of railway and industrial companies. The public inferred, from what it saw, that these purchases were being made on their own account by men of boundless wealth, who were merely investing their private capital. Such a supposition naturally drew the investing public into the whirl of speculation : first, in order to make its own invest- ments before prices should go beyond its reach; second, in the hope of selling out at the much higher prices which the rich men's purchases were expected to bring about. But the public was mistaken as to the nature of the movement. What actually was happening was this. People connected with one corporation would borrow large sums of money, and use that money to buy up shares of another subsidiary or competing corporation. They were buying, however, not for themselves, but for the company with which they were identified; and their purpose was, as soon as the property had been obtained, to hand it over, issue new stock or bonds of their own corporation, sell such securi- ties to the public, and use the proceeds to reimburse them- selves, with a handsome bonus. There was the famous case, for instance, of the Chicago, Burlington & Quincy Railway. This company's stock, amounting to #110,000,000, sold at the end of 1900 for #144 per share, which was considered by 1 62 PROGRESS OF THE EMPIRE STATE most people rather high. People identified with the North- ern Pacific Railway bought up the stock at a seemingly reckless rate, pushed up its price above #180, and then announced that a bond would be issued by the Northern Pacific and Great Northern companies to pay #200 a share for the whole of the Burlington stock. These bonds were later sold on the open market, the result, of course, being that the supply of securities on the market was increased by some #50,000,000. The same process occurred in half a dozen other railways, the usual expedient being the issue of what was now called a "collateral trust bond." Stock of another company — sometimes all of it, sometimes a bare majority — was bought for a corporation. That corporation thereupon issued bonds for the cost of purchase; but those bonds, instead of being, like other mortgage issues, a lien on the franchise and road-bed of the issuing company, were merely secured by pledge of the stock which had been bought. When it was found that the public readily bought these bonds, the device was followed by another, not altogether new, but never before applied on such a scale. A company would be chartered for no definite purpose except to hold the shares of other companies. Having bought up these shares or acquired them through exchange, it issued its own stock to foot the bill. The public bought this stock, as it had bought the collateral trust bonds, and there seemed no limit to the scope of the operation. It was during this period that Mr. Morgan, in March, 1901, formed his "billion-dollar steel trust." The project met with remarkable success. Starting on the curb at a price of 38 for "Steel common," and 82^ for the 7 per cent. "Steel preferred," the Stock Exchange price advanced in a month to 55 and 101^ respectively. Half a million of the shares were dealt in during the first two days of their THE ERA OF INDUSTRIAL EXPANSION 163 appearance on the Stock Exchange; the next week's record was a million. The greater part of this was doubtless merely "matching of orders" through the medium of brokers, but the public did not know this. It caught the speculative fever; even in thrifty Western towns and New England country villages, the gossip of an evening was apt to concern itself with "Steel." So successful was the operation that a year or two later the #25,000,000 "under- writing syndicate " received back in cash its whole sub- scription, plus 200 per cent, in dividends. The outburst of speculation during April, 1901, was something rarely paralleled in the history of speculative manias. Not only did the younger men who had sold out to the Steel Corporation — now made into many times millionaires overnight and bewildered by their extraordinary fortune — toss into stock market ventures the money which they saw no other way of using, but old and experienced capitalists came near losing their heads, asserted publicly that the old traditions of finance no longer held and that a new order of things must now be reckoned with, and joined the dance. The "outside public," meantime, seemed to lose all restraint. A stream of excited customers, of every description, brought their money down to Wall Street, and spent their days in offices near the Stock Exchange. Two or three years before, it was called a good day's business when 400,000 shares of stock changed hands on the Exchange. In April, 1901, the daily record rose to a million shares, to two million, and finally, on April 30th, to three million and a quarter. Estimating the average price of stocks at that period at #60 per share — an inside figure — it will be seen that the 3,200,000 shares of April 30th meant that from some quarter #192,000,000 worth of stocks was bought. The mere posting of this enormous business compelled commission houses to keep their office forces working into 1 64 PROGRESS OF THE EMPIRE STATE the small hours of the night. Execution of the orders on the floor of the Stock Exchange, under the prevalent con- ditions of excitement, so manifestly threatened physical breakdown of the brokers that the governing committee took the quite unprecedented step of declaring an extra Stock Exchange holiday to give the membership a rest. The newspapers were full of stories of hotel waiters, clerks in business offices, even doorkeepers and dressmakers, who had won considerable fortunes in their speculations. The effect on the public mind may be imagined. While this was going on, promoters were busy with projects as daring, in their way, as the steel amalgamation. The phrase, "thinking in hundred millions," which had its origin in that period, fairly describes the state of things. Bankers in high standing asked and received commissions as high as five million dollars for managing some of these operations, and still the original proprietors who sold out to the combinations received prices of which they had never dreamed. The bankers who had successfully carried through the steel amalgamation entered new fields of experiment. Starting with two transatlantic steamship lines which were owned by American investors, they undertook to merge into one huge holding company all the competing foreign lines. The German companies, after some tentative negotiation, withdrew, and hasty counter-propositions by the British Government caused the Cunard Line to break off negotia- tions. When, however, control of such old English enter- prises as the White Star and Leyland lines was secured, partly for cash and partly through the #112,000,000 stock and #50,000,000 bonds of the International Mercantile Marine, an angry outcry arose in England. London itself shared in the notion, which the American press and public adopted on the spot, that we were using our boundless resources of capital to snatch away Great Britain's suprem- THEODORE PERRY SHONTS Railway and trad J; bom in Cra >unty, Pa., May 5, i; son Dr. Hen nd Margaret Nevin (Marshall) Shonts; ancestry, Dutch and Scotch-Irish; went with parents in boyhood, to Appanoose County, la.; educated in public schools of Centerville, la., and at Monmouth Co Monmouth, 111., from which he graduated in 1876; married in rville, la., 1882, Harriet Amelia, daughter General (after- ward Governor) Francis M. Drake; two daughters: Marguerite and Theodora (now Duchesse de Chaulnes). After graduation, D accountant, and was employed by national banks in Iowa to standardize and simplify methods of bookkeeping; studied, law and practiced a short time at Centerville, la.; became with General Drake, who had large financial and railroad interests, and who placed in his hands much of the work of management and construction. With associates, secured the control of the Toledo, St. Louis & Western Railroad (Clover Leaf Road), which he rehabilitated and made succt was selected in 1905 by President Roosevelt as chairman of Isthmian Canal Commission, continuing at its head until Feb- ruary, 1907, when he was elected president of the Interborough- Mctropolitan System of New York, entering upon his duties March 4, 1907. Also president Chicago and Alton, Toledo, St. Louis & Western, Minneapolis and St. Louis, and Iowa Central Railroads. THE ERA OF INDUSTRIAL EXPANSION 165 acy of the seas. Neither party could foresee the time, not very distant even then, when the English interests which had sold out for cash to the Wall Street promoters would buy back control of the whole unwieldy combination for one third or one fourth of the price paid originally by the Americans. Yet even in the face of the popular clamor in England during 1901, the chairman, at the ensuing annual meeting of the Leyland Company, flatly told the shareholders that the offer made was so extravagant that no manage- ment had a right to refuse it. :< The vendors, " wrote a high authority in the British shipping trade, "made an excep- tionally good bargain, which it is probable the purchasers will soon find out." Both at home and abroad, cool-headed criticism of this nature, on the American amalgamations, was occasionally heard; in fact, a process of this sort was merely riding for a fall — if for no other reason, than that, in the prodigious inflation of values which prevailed, the resources of capital and credit must eventually be exhausted. It usually happens, in such episodes, that the reckoning comes from an unexpected cause; also that it comes at the moment when the public and the speculators have reached the conclusion that it can never come. Both turned an absolutely deaf ear in 1901 to financial warnings, and to the aspirations of the financiers themselves there seemed to be no limit. It was the very next move of the Wall Street promoters, how- ever, which brought about the crash. The operation has been already noticed whereby the Chicago, Burlington & Quincy Railway was bought up by the Northern Pacific and the Great Northern. Now the Burlington was more useful as a feeder and more dangerous as a competitor to the Union Pacific Railway than to either of these two buyers. The Union Pacific asked to participate in the Burlington purchase, but the request was refused. 1 66 PROGRESS OF THE EMPIRE STATE What the Union Pacific management then did was to start in to buy control of the Northern Pacific itself on the open market. The Northern Pacific management discovered what was under way, and proceeded to strengthen its own holdings of the stock. In this fight for ownership of a #155,000,000 corporation, Mr. J. P. Morgan and Mr. E. H. Harriman were brought first into financial collision. Mr. Morgan, then at the pinnacle of his prestige, with the billion-dollar steel amalgamation just achieved, and wield- ing a personal authority and power which made his will the law with a good part of Wall Street's capitalists and institu- tions, represented the controlling interest in Northern Pacific. His adherents, among whom Mr. James J. Hill of the Great Northern was the most important, did not own a clear majority of the stock, but their financial resources, and the credit which they were able to command in this country and in Europe, were now utilized to make control secure. Mr. Harriman, a younger man, with a genius for both railway management and for stock speculation, was in full control of the Union Pacific Railway Company, and was affiliated with a body of immensely wealthy capitalists known as the "Standard Oil group." His task, in acquir- ing upwards of #77,000,000 Northern Pacific stock, was in fact considerably greater than Morgan's, because he had no such substantial holdings to start with as the Morgan inter- est held. He surmounted this handicap by daring use of the Union Pacific's credit. The shareholders had voted the Union Pacific management borrowing powers which amounted almost to carte blanche in the money market, and in those days of easy credit and accommodating bank- ing syndicates, the powers had been so used as to accumulate a great reserve of cash. A subsidiary company, the Oregon Short Line, was equipped by the Union Pacific, in return for certificates of indebtedness, with funds to buy up THE ERA OF INDUSTRIAL EXPANSION 167 #78,000,000 Northern Pacific stock, and with these resources its brokers entered the excited Wall Street market. The resultant situation was too much for Europe, whose banking houses had been lending freely to the great Ameri- can promoters, but which now began to take in sail. Paris bankers at once stopped further advances; the Bank of England called the London joint-stock banks together to warn them against New York. The contest for Northern Pacific, however, did not slacken. As the stock rose from 1 10 to more than 200, international bankers sold heavily — borrowing stock for delivery, to be replaced by the real foreign shares on the way from London — and speculators for the decline sold still more largely, in expectation of a break on which they could buy in at lower prices to close out their contracts. But they misunderstood the situation. The rival bidders, as it happened, were bent, not on taking profits in the rise, but on obtaining and locking up the actual shares. On the 9th of May, it was suddenly dis- covered that deliveries of more Northern Pacific stock had been thus contracted for than could be bought or borrowed. The #155,000,000 stock was cornered. Its price went up in an hour from 160 to 1000; for, naturally, enforcement of the contracts of sale meant ruin for the seller, and the scramble of cornered brokers to protect themselves was in- stantaneous. While this was happening to Northern Pacific stock, all other stocks broke violently, declines of 50 per cent, or more occurring in many of the soundest shares. It was admitted, afterward, that on the books of the lending banks, and on the basis of the day's low prices for collateral pledged against Stock Exchange loans, a good part of Wall Street was for a couple of hours technically insolvent. The crisis itself passed over when the two rival bidders, their hands forced by the disastrous results which their quarrel had invoked, came together and agreed on conditions 1 68 PROGRESS OF THE EMPIRE STATE which would relieve the victims of the corner; but the spell was broken. Much of the public's infatuation had been based on the enormous and accumulating "foreign credit balance" of the country which had been estimated, a year before, at not less than #200,000,000. By the middle of 1901 it was figured out by competent experts that not only had this great credit been entirely wiped out by the drafts of our banking houses, but that a floating debt to Europe, footing up nearly as much, had been created. Our bankers had, in fact, borrowed heavily in London, Paris, Berlin, Amsterdam, and even in the poorer European markets, like Vienna. These loans, as they matured, were called in by the lenders, and in the harvest months of 1901, when gold ought to have been flowing towards this country, the United States shipped #25,000,000 gold to Europe. One of the largest of the new trade combinations, the #155,000,000 Amalgamated Copper Company, had been holding the market for that metal at an artificial price; in the autumn of 1901, it lost its market, copper fell from 16 cents a pound to 11, and the "holding company" had to cut its annual dividend from 8 per cent, to 2. At the height of the April speculation, Wall Street had dismissed warnings of possible agricultural disaster with the reply that the country no longer depended on agriculture. Nature's response was a summer of scorching drought in the corn-belt, similar to that of 1894, as a result of which the corn crop of 1901 was cut down 28 per cent, from the year before, its yield being, except for 1894, very much the smallest in eleven years. Only the good fortune of a "bumper" wheat crop, in a year of partial European shortage, saved our export trade of 1901. The reaction from the excesses of 1901 continued during the two ensuing years; for although speculation again grew rampant in 1902, with resumption of promoters' activities and stock-jobbing exploits, the signs of public abstention THE ERA OF INDUSTRIAL EXPANSION 169 and over-strained credit were visible throughout the year. With the autumn, a severe money squeeze was the sequel to the activities of the speculators, and the year 1903 began with evidence that the "underwriting syndicates," which had guaranteed the numerous Wall Street promotions of the two preceding years, were caught in a trap. Banks which had loaned them money began to force a settlement. The stocks which they held had for some time been popularly known as "undigested securities," showing that the public understood the situation. A little later on it was James J. Hill, the author of the "Burlington deal," who suggested the term "indigestible securities." The syndicates began by selling their reserve investments of older high-grade stocks and bonds, and the market broke under their sales. Some of these syndicates, fairly forced to the wall, next threw on the market the underwritten securities, to get what they could for them. They got very little, for along with this heavy selling came news most disquieting to investors. The hastily capitalized industrial corporations themselves began to raise signals of distress. Some of them, like the New England Cotton Yarn, which had been paying 7 per cent, dividends, called a cash assessment from their shareholders. The great steel corporation stopped dividends on its common stock, which had been paid since the company was organized, and with the subsequent fall in prices of its shares, the market valuation of the stock, which had been #785,000,000 in 1901, fell in 1903 to #350,000,000. Other smaller combinations followed its example. The Consolidated Lake Superior, a #100,000,000 iron trade combination, which had paid 7 per cent, dividends on its stock, up to the preceding December, went suddenly into bankruptcy. The United States Shipbuilding Company, which sold its bonds on the assurance that foreign investors 170 PROGRESS OF THE EMPIRE STATE were buying both them and its #50,000,000 stock, was placed in the hands of receivers, with an exposure of humbug which was little less than farcical. Its promoters had never even approached great foreign bankers, but had been dealing with needy adventurers around the Bourse who had not the money to equip a mill. In the unsettlement of public confidence, there was even a run on financial institutions, and serious bank failures in two or three smaller cities. Yet, whatever may have been the really fundamental cause of the crash of 1903, the fact is that, as in the sequel of 1884, the doubts and misgivings of this minor crisis were dismissed within a year and a half. By 1905, not only the United States, but Europe also, had resumed the "industrial boom" on a scale of substantial magnitude. To at least some extent, it is reasonable to suppose that resumption of full gold production in South Africa had an influence. Other circumstances conspired to stimulate this movement of recovery. Two years of exceptional agricultural pros- perity occurred; of wheat in particular, the world produced in 1905 a crop larger by nearly 100,000,000 bushels than ever before harvested, and in 1906 the yield was 100,000,000 larger still. Prior to 1902, the world's largest wheat yield had been 2,900,000,000 bushels; the crop of 1906 was 3,400,000,000; yet such was the magnitude of consumption that English experts estimated the second of these figures to have been only 1,440,000 bushels beyond the world's actual requirements for the season. In the United States, despite the signs of diminishing productive capacity in 1904, the wheat crops of 1905 and 1906 surpassed all precedent except the great "wheat year" 1901 ; the corn crop estab- lished a new maximum yield in each of these two years; the cotton yield of 1905 was the third largest in our agri- cultural history and that of 1906 was only a trifle below the largest. JOHN STANTON Was conspicuous in copper industry; born in Bristol, England, February 25, 1830; mining engineer and expert. Developed mines in Virginia, Maryland, North Carolina, Tennessee, and irior region. Was president of the Wolverine, Mohawk, and Baltic, and treasurer of the Atlantic & Central Mining Co., and stockholder in practically all the Lake Superior mining and copper companies. Director in several coal companies, and one of the founders of the New York Metal Exchange in 1876, of which he was president two years. President of the Engineers' Club; member of the American Institute of Mining Engineers, the Lake Superior Mining Institute, and the North of England Institute of Mining & Mechanical Engineers. Died February 23, 1906. THE ERA OF INDUSTRIAL EXPANSION 171 Notwithstanding this bounty of nature, prices and cost of living rose with greater rapidity than at any time in a generation past. Taking the London Economist's "index number" as a measure, we shall find that between the middle of 1897, when the low level of the period was reached, and the end of 1904, the average of commodity prices had risen from 1885 to 2136. Between the middle of 1904 and the middle of 1907, it had advanced to 2601. Comparing the index number for the end of 1904 with that for the middle of 1897, we shall find an advance of 13! per cent. Compar- ing the number for the middle of 1907 with that for the end of 1904, we shall find the rise for that second period was no less than 2lf£ per cent. Putting the matter in another way, on the basis of units, the increase in the index number, from 1897 to 1904 inclusive, was 251 points; from 1904 to 1907 inclusive, it was 465 points. In 1901, cotton was considered dear at 10 cents a pound; a short crop and a New York corner raised the price in March, 1904, to i6f, from which, on the harvesting of a crop, the ensuing season, 20 per cent, larger than the pre- vious maximum yield, it fell to 8 cents or thereabouts. The cotton growers thereupon organized ; conventions were held, an association formed with branches throughout the cotton belt; resolutions were adopted fixing the minimum price at 15 cents a pound, and arrangements made for advancing money to the planter, whereby he might hold his cotton off the market until his price was reached. The "official price" was not achieved ; but a good part of the crop of 1906, which was only slightly smaller than the largest yield on re- cord, was sold at prices ranging from 12 to 13 cents. Mean- time, hand in hand with the rise in price of merchandise, land and rents advanced. The rise in land values, which began in earnest during 1904, reached the next year, in a good part of this country, the proportions of a mania.] Farm lands 172 PROGRESS OF THE EMPIRE STATE naturally led in the movement; with the great harvests and the high prices, their actual earning power was enormously enhanced; they doubled, trebled, and quadrupled in value. But town and city lots, throughout the country, followed suit. Speculation grew violent in a hundred widely separ- ated localities, and one would see, fifty or sixty miles away from populous cities, unimproved meadowland staked out with street signs of avenues and boulevards, and in some cases dealt in through paper "options," the speculators not taking the trouble even to pass title. Sums wholly with- out precedent were invested in the erection of town and city dwellings. In New York City, capital expended on con- struction of new buildings had never, even in the excited years of 1899 and 1901, exceeded $150,000,000; it was only $139,000,000 in 1904. But in 1905, it rose to the extraor- dinary figure of $230,000,000, and this was typical of dozens of cities throughout the United States. A quite inevitable outcome of this extraordinary rise in cost of materials and labor was the demand for increased amounts of capital for use in trade, and a rise in the price of money. Even among merchants, it was common com- plaint that nearly twice as much money had to be used to conduct the same volume of business as had been necessary two or three years before. Manufacturers had the higher cost of labor and materials to absorb increased capital on the same amount of output, and this happened at a time when the bank-deposit fund, the surplus capital of the community, was being narrowed by the increasing cost of living. That necessarily meant low bank reserves and dear money. Yet evidence of a growing strain on capital resources was no more conspicuous than evidence of the financial community's readiness to draw still more largely on the credit market. This readiness was tested in a very conclusive way. On the night of February 8, 1904, the Jap- THE ERA OF INDUSTRIAL EXPANSION 173 anese fleet attacked the Russian squadron at Port Arthur, and one of the three most costly wars since the Napoleonic era began. It continued, on sea and land, until August 29, 1905, and it involved an expenditure, by the two bellig- erents, of a sum not far below two thousand million dollars. Although 1904 had been the year of heavy Japanese loans in London, requisitions on that market's capital, through new security issues, ran in 1905 $220,000,000 above the preceding year, reaching a height never exceeded save in the twelvemonth before the "Baring panic year." Exchange of checks at the London Bankers' Clearing-house, in 1905, rose 16 per cent, above the highest previous yearly total, and 30 per cent, above so active a year as 1899. All this reflected immense activity at the central money market of the world. In the United States, bank clearings in 1905 rose 27 per cent, over 1904 and greatly exceeded all pre- vious records; yet those of 1906 were n per cent, larger still. On the European continent, Germany's issue of new securities in 1905 was 70 per cent, larger than in 1904; the estimated total, $770,000,000, comparing with $615,000,000 in 1898, itself the maximum of that decade's excited "boom" and the previous high record in the country's history. That it was not alone financial activity, moreover, which was pulling at the market's purse-strings, may be shown by the fact that iron production, a fair measure of industrial con- ditions, increased in England from 8,500,000 tons in 1904 to 9,500,000 in 1905 and 10,000,000 in 1906 — a 30 per cent, increase over 1901; in Germany from 10,000,000 tons in 1904 to 12,200,000 in 1906, and in the United States from 16,400,000 tons in 1904 to 25,300,000 in 1906, the figures of the last-named year being in all three instances unprece- dented. "Everything is in motion," wrote a trained observer regarding 1906; "railways, steamers, factories, harbors, docks; it is evident that so gigantic a development 174 PROGRESS OF THE EMPIRE STATE of trade and industry could not fail to have a marked influence upon the position of the international money- market." That influence would have been less formidable, even with the engulfing of capital in the Eastern war loans, had not speculation, with its enhancement of values and its peremptory demand on bank resources, thrown its weight into the scale. Let it again be observed that, unlike our "boom" of 1901, the industrial expansion of 1905 and 1906, and the speculation which accompanied it, were limited only by the bounds of the civilized world. In October, 1905, when the Imperial Bank of Germany put up its dis- count rate successively to 5, to 5^2, and to 6 per cent. — the last-named figure being the highest ever reached, except in time of actual financial panic — the authorities of the bank declared publicly that the volume of uncovered note cir- culation, a pure emergency device, was the largest in the history of the institution, and that the high discount rate was expressly designed to apply a curb to the German speculative mania. In Egypt, land and stock speculation reached, between 1905 and 1907, a pitch of excitement which, later on, a responsible financier described as meaning that the " people were apparently mad ; I do not know what other word to use; they seemed to think that every company that came out was worth double its value before it had even started business." In Japan, the declaration of peace in August, 1905, was followed by what was described in a subsequent government review as a "fever of enterprise," in which "prices of securities rose higher and higher," with "a similar rise of prices in general," and of which high banking authority remarked that, by 1906, "men of judg- ment had already begun to look askance at this state of affairs." Of the American speculation in commodities and land, THE ERA OF INDUSTRIAL EXPANSION 1 75 mention has already been made; but the spectacular interest of the period attached to the Stock Exchange. During the autumn of 1905 this speculation reached a singular position. It was not, like the American stock speculation of 1901, conducted on the basis of public partici- pation; the real outside investor now had employment for his own capital in the increasing demands of his private business. But to his absence the speculative leaders, who comprised large groups of immensely wealthy capitalists, bank officers, and railway directors, were seemingly indif- ferent. Their bank affiliations enabled them to pursue their course unchecked; their use of credit was practically unre- strained; there seemed no bounds to the audacity of their ventures. These exploits were carried out in the face of rapidly falling bank reserves and rapidly rising money rates. Even at the height of the speculative craze of 1901, mercantile discounts at New York had ranged around 5 per cent.; in the autumn of 1905, the full legal rate was charged, plus a "broker's commission," which brought the actual rate as high as 7 per cent. — a very abnormal figure, showing that general trade was feeling the strain. But Stock Exchange speculation did not halt; in various stocks controlled by powerful groups of capitalists, advances of 10 to 20 per cent, occurred, with enormous trading. When the New York banks reported a steadily weakening position, recourse was had to Europe. Money was raised in London on the collateral of these speculative holdings, and great blocks of American stock were shipped from New York to the English market. On November 11, 1905, and again on December 9th, reserves of the New York Associated Banks fell below the 25 per cent, ratio to deposits stipulated by the National Bank Act. Rates for demand loans on Wall Street went to 25 per cent, in November, and still the Stock Exchange 176 PROGRESS OF THE EMPIRE STATE speculation for the rise continued. On December 28th, the rate reached 125. Such events as have been narrated were of a character to influence profoundly social and political conditions, and no review of the period would be at all adequate which did not make careful account of developments in such directions. The advance in commodity prices; the growth of industrial combinations, on a scale of magnitude beyond the imagi- nation of the previous decade; the sensational speculation in securities and commodities; the overshadowing power acquired, through their bank and company affiliations, by groups of immensely wealthy capitalists — these were the typical phenomena of the day. They were dominant influences on financial markets; but they also touched closely the everyday life and habits of the ordinary citizen. Socially, they had two distinct and opposite effects. The first was extravagance of living — more spectacular in the case of men, like the independent steel-producers of 1901, whom the "deals" of the great trade combinations had suddenly made millionaires many times over — but noticeable also in the community at large. Belief in impregnable prosperity was general, and with that belief came not only lavish private expenditure, but appetite for speculation. One important question was no longer merely that of the size of combinations, but of the purposes of the controlling interests. Mr. Harriman, who had won repute not only as a skillful railway manager but as a daring speculator, was authorized by the Union Pacific board, of which he was chairman, to "borrow such sums of money as may be required for the uses of this company, and to execute in the name and on behalf of this company a note or notes for the amount so borrowed." Had Harriman achieved his purpose of capturing the Northern Pacific in 1901, his success, com- bined with his previous acquisitions, the Interstate Com- 1IMIIIIMIIII IIIIIIIICIIIIIII I HOME OF THOMAS F. RYAN This building, of white stone, on upper Fifth Avenue, was purchased by Mr. Ryan about 1910, and has been used since as his city residence. Mr. Ryan occupied for many years the substantial brick building at No. 60 Fifth Avenue. He also has a home on the site of his birthplace in Virginia, named Oak Ridge, where he maintains his legal residence, and a country house at Suffern, N. Y. > THE ERA OF INDUSTRIAL EXPANSION 177 merce Commission declared, "would have subjected to a common will and policy nearly one-half of the territory of the United States — a comparatively undeveloped, rapidly growing and extremely rich territory, into which must necessarily extend the population and business of the Eastern States." Even as regarded the rest of the United States, Harriman defiantly testified, in a public hearing, that if the law would let him alone, he would "spread not only over the Pacific coast, but spread over the Atlantic." "I would," he declared of his policy of buying up one group of railroads on the credit of another, "goon as long as I live." When the Northern Securities holding company, formed to own a majority interest in the Northern Pacific and Great Northern railways, came before the court, and its counsel was setting forth the good influence of the merger, he was asked from the United States Supreme Bench if the same machinery might not be employed to buy up all the railways of the United States, and place control of the whole of them in the hands of three or four individuals. He answered that such use of it would be highly improbable, but that it might be so employed. It was not alone, however, the possibilities arising from such power on which public interest was converged by the movement of events, but the manner of acquiring the power. On this question, what was deemed at the time an accident poured a sudden flood of light. In February, 1905, a quarrel broke out between the president and vice-president of the Equitable Life, a joint-stock institution with #413,- 000,000 total resources but a share capital of only #100,000, of which #5 1 ,000 was owned by one James H. Hyde, a young man of twenty-seven, son of the founder of the company. This stock carried only 7 per cent, dividends ; but the major- ity holding gave to its owner unusual power for overruling policies of the president and trustees. The president of the 178 PROGRESS OF THE EMPIRE STATE Equitable sent to his fellow-directors, over his signature and that of other active officers, a flat declaration that the reelection of Mr. Hyde as vice-president "would be most prejudicial to the welfare and progress of the society and the conservation of the trust funds." At the ensuing annual meeting of the Equitable trustees, this protest was again submitted, and a petition to turn the society from a joint- stock into a mutual company was added. The course of the personal dispute need not concern us further; in the event, Mr. Hyde and the President, Mr. Alexander, both retired from the company. The real significance of the episode was that it compelled investigation and publicity regard- ing the use of the Equitable's funds. First, the trustees appointed a committee of their own; this committee, three months later, submitted a report which threw the directors' meeting into disorder, and led to a searching inquiry by the New York Legislature. The Frick committee found that officers of the Equitable had used the company's funds as subscriptions to "under- writings" organized by themselves, thereby violating the insurance law; that one of them had without authority carried in his own name large blocks of securities owned by the company ; that the Equitable, which was debarred by law from speculative undertakings in Wall Street, had bought control of three trust companies with broader powers, and had kept on deposit with those companies the greater part of its own cash surplus; that in 1903, with #36,000,000 thus deposited, it had been unable to use for its own legitimate investments any part of the money thus deposited, undoubt- edly because the deposit had been tied up, through these other banking institutions, in illegitimate financial ventures; and that its president, with that huge sum in bank and with standard investment securities at a most inviting price, had written to a fellow-officer that "we would be buying a THE ERA OF INDUSTRIAL EXPANSION 179 good many of such things were it not that we are so strapped for money by engagements already made." When a committee of trustees had exposed such per- formances with the trust funds of the people, it was plain that the State would have to take a hand. The New York Legislature promptly named a committee of investigation. LInder the guidance of its counsel, Charles E. Hughes, it began, on September 6, 1905, a searching examination of all of the great companies. The committee found relatively little of the sale of securities to companies by their own trustees, as exposed by the Frick committee, but very much use of the companies' funds to participate in syndicates in which trustees were personally interested. Employment of life insurance funds, through subsidiary companies, for investment in undertakings forbidden to the life concerns themselves — including the United States Steel and "Ship- ping Trust" promotions — was found to have prevailed on an extensive scale, and occasionally with misleading entries on the books; legislators, political committees, and even newspapers had been subsidized in enormous sums. Along with this, exorbitant salaries and nepotism had prevailed, but dividends to policyholders had not only decreased actually, but had fallen far below official and published estimates. The climax of this extraordinary testimony was capped by the president of one of the largest companies, who, when confronted with the above conditions, declared on the stand that the promoters of his company had acted "from a pure spirit of philanthropy and benevolence," establishing "a missionary enterprise, so to speak"; but that it "was n't the object to declare a dividend to a man," in order that a policyholder, having paid his annual pre- mium, should "then at the end of the year get seven dollars and go home and spend it for cigars." This investigation, publicly conducted during four 180 PROGRESS OF THE EMPIRE STATE successive months, and reported in every newspaper, had an influence on public sentiment which was difficult to measure. In the insurance field itself a radical reform law was enacted, by which the life companies were prohibited from owning other institutions, and were required after an in- terval of years to get rid of their holdings of trust company, safe deposit, railway, and other stocks. At the height of the excitement, in 1905, Mr. Hyde's controlling interest of 51 percent, of the Equitable stock, with a par value of #100,000, was purchased by Mr. Thomas F. Ryan for #2,500,000. Although Mr. Ryan at once placed the stock in the hands of three voting trustees, — Grover Cleveland, ex-Judge Morgan J. O'Brien, and Lewis Cass Ledyard, — the effect of this purchase upon public opinion was not especially favorable, and the stock was ultimately taken over, several years later, by Mr. J. P. Morgan. Under the trusteeship, an effort was made to inject into the directorate a larger ele- ment of the business community outside of "Wall Street"; and Paul Morton, who had had a somewhat spectacular career as a pet of President Roosevelt and as his Secretary of the Navy, was made president. Morton had the shrewd- ness to engage as comptroller of the company and prac- tically as his confidential adviser Judge William A. Day, who had proved his industry and sobriety of judgment in Washington as a special attorney of the Department of Justice. Under the counsel of Judge Day, who succeeded to the presidency of the company on the death of Morton in January, 191 1, the Equitable was guided into more tranquil waters. What the outcome of these various episodes would have been upon our political history, had the conditions which people then described as "the existing order of things" continued to prevail at Washington, is a question full of interest. We possess no means of judging confidently how THE ERA OF INDUSTRIAL EXPANSION 181 far President McKinley's policies, after his second inaugu- ration in 1901, might have been shaped or altered by the new industrial problems which came suddenly into view that year. All we can say is, that his traditions and tem- perament were not such as to have invoked a collision be- tween the Executive and the corporations. The question was never tested; it was only five months after his second term began that he was shot by an anarchist at Buffalo, where he died on September 14, 1901. Mr. Roosevelt, who then succeeded him, had been nomi- nated for Vice-President against his own wish and there- fore without pledges or commitments. In his speech on taking the oath of office, however, Mr. Roosevelt declared his purpose "to continue absolutely unbroken the policy of President McKinley for the peace, prosperity, and honor of our beloved country," and he at once requested all of McKinley's cabinet ministers to retain office during the full term for which they had been selected. In his first message to Congress, two months later, he declared the "startling increase ... in the number of very large individual, and especially of very large corporate, fortunes" to be due "to natural causes in the business world" — a process which "has aroused much antagonism, a great part of which is wholly without warrant. " He advised "caution in dealing with corporations," because "to strike with ignorant violence at the interests of one set of men almost inevitably endangers the interests of all," and because "the mechanism of modern business is so delicate that extreme care must be taken not to interfere with it in a spirit of rashness or ignorance." All this was reassuring to those capitalists whose plans had apparently been disconcerted by McKinley's death. They paid less attention, therefore, to the new President's further declarations that "there are real and grave evils, one 182 PROGRESS OF THE EMPIRE STATE of the chief being overcapitalization"; that "combination and concentration should be, not prohibited, but supervised and within reasonable limits controlled," and that "cor- porations engaged in interstate commerce should be regu- lated if they are found to exercise a license working to the public injury." It was out of these three declarations, however, that what are now known as the policies of the Roosevelt Adminstration grew. These policies soon placed the Government in direct and formidable antagonism with the ambitious designs of capitalists which we have already had occasion to review. The case, in my opinion, was such that any and all available measures for protection of the public welfare would have been invoked by any government resolved on challenging the pretensions of the great promoters of the day. The instrument selected as the most serviceable on the statutes was the so-called "Sherman Anti-Trust Law" of 1890. In February, 1902, the Attorney-General, Mr. P. C. Knox, entered suit for the Government against the Northern Securities Company. This concern was an outgrowth of the famous "Northern Pacific corner" of May 9, 1901, when the disastrous contest between the Harriman and Morgan interests, for ownership of the Northern Pacific Railway, was compromised by deposit of their stock and that of the parallel Great Northern Railway Company in the hands of a holding corporation. The corporation had a stock of #400,000,000, which it exchanged for shares in the two railways; its directors were selected from the rival boards. Mr. Knox attacked the merger as "a virtual consoli- dation of two competing transcontinental lines," whereby not only would "monopoly of the interstate and foreign commerce, formerly carried on by them as competitors, be created," but whereby, through use of the same machinery, "the entire railway systems of the country may be absorbed, WILLIAM A. DAY President Equitable Life Assurance Society of the United States. Formerly engaged in practice as lawyer; was appointed auditor United States Treasury by President Cleveland, of whom 5 a cordial admirer; special assistant to Attorney-General of United States in cases under Interstate Commerce act and the Sherman anti-trust law; Assistant Attorney-General of United States in charge of prosecution of trust cases, 1903-1905. Was made Comptroller of Equitable Life Assurance Society at time of reorganization in 1905, vice-president in 1906, and president in 1911. THE ERA OF INDUSTRIAL EXPANSION 183 merged, and consolidated." A year after its introduction, on April 9, 1903, the Circuit Court before which the suit was brought decided for the Government, the essential part of its decision being the dictum that the merger "destroyed every motive for competition between the two roads engaged in interstate traffic, which were natural competitors for business. " Appealing thence to the Federal Supreme Court, the company's counsel fought on the theory that the merger was no restraint of trade because the North- ern Securities had committed no overt act in such direction, and because the combination had primarily been formed to protect and develop trade. The court, in its decision of March, 14, 1904, found that, "necessarily, the constituent companies ceased, under such a combination, to be in active competition for trade and commerce," and that, independ- ently of overt acts, "the mere existence of such a combina- tion, and the power acquired by the holding company, . . . constitute a menace to, and a restraint upon, that freedom of commerce which Congress intended to recognize and protect." In a bench of nine, four justices ruled on this ground against the appeal and four in favor of it. The ninth member, Justice Brewer, dissented from the larger applica- tion of the above-cited principles, on the ground that "the broad and sweeping language of the opinion of the court might tend to unsettle legitimate business enterprises, stifle or retard wholesome business activities, " and he rejected the application of the Anti-Trust Law to "minor contracts in partial restraint of trade," already recognized by common law. But he held the Northern Securities device to be one which "might be extended until a single corporation whose stock was owned by three or four parties would be in practical control ... of the whole transportation system of the country," and on that ground concurred in dismissing the 184 PROGRESS OF THE EMPIRE STATE appeal. The order of the lower court, that the Northern Securities Company be dissolved, was therefore reaffirmed. In due course, though not until after another legal fight over methods of redistributing its holdings to owners of Northern Securities shares, the company surrendered its Northern Pacific and Great Northern stock, and practically went out of existence. The Northern Securities victory by no means ended the activities of the government prosecutors against corpora- tions, though no subsequent achievement was of equal importance. To a large extent, the later moves of the Roosevelt Administration had to do with secret discrimina- tions in railway rates. In some of these suits the gravity of the abuse was not so clear, and in others the outcome much less gratifying, than in the Northern Securities case. The Standard Oil prosecution, announced by the President in a special message of May 4, 1906, ended in such a way as largely to defeat the Government's own purposes. The exploits of the Standard Oil Company, in the matter of secret concessions from the railways, had been exposed sensationally in the popular magazines, and the Govern- ment won a jury verdict, in August, 1907, wholly against the company. The Elkins Law, on which the suit was based, provided that "every person or corporation who shall offer, grant, give or solicit, accept or receive" from a rail- way any "rebates, concession, or discrimination," should on conviction be punished for each offense by a fine of not less than $1000 or more than #20,000. Judge Landis, sitting in the Federal District Court of Indiana, had to pass on the question how many separate offenses were to be subject to such fine. The railway rebates had been granted during the period from September, 1903, to March, 1905, inclusive; counsel for the company asked, first, that the whole series be adjudged one infraction THE ERA OF INDUSTRIAL EXPANSION 185 of the law, or, second, that the violations be fixed at three in number, because the rate was determined once a year, or, third, that the number be declared as thirty-six, because that number of bills were rendered. The court rejected all three suggestions; declared on August 3, 1907, that each of the 1462 loaded cars forwarded at the discriminating rate was a separate offense; imposed for each the maximum fine of $20,000, and thereby arrived at the somewhat extraor- dinary penalty of $29,240,000. This fine, imposed as it was, not on the $98,000,000 "Standard Oil Trust," but on the immediate offender, the $1,000,000 subsidiary Standard Oil Company of Indiana, went, even in the popular judg- ment of the day, beyond the bounds of reason; it was commonly expected that the higher courts would set it aside, and, as a matter of fact, the Illinois Circuit Court, in July, 1908, found that a fine thus computed "had no ba- sis in any intention or fixed rule discoverable in the statute" and was many times confiscatory. The court to whom the case was remanded for retrial directed, in March, 1909, a verdict of acquittal for lack of proper evidence. In this matter, despite an overwhelming and not un- founded dislike to the methods of the Standard Oil Com- pany, public sympathy was with the corporation. On the railway rate legislation, passed by Congress in response to the President's urgent messages, popular approval and disapproval were more evenly balanced than in the two great suits above referred to. There had been abundant provocation in the past relations of numerous important railways with favored communities and favored corpora- tions; the demand for regulation was urgent, in the West especially; and the Hepburn Act, passed by the House in February, 1906, by a vote of 346 to 7, and by the Senate in June, on a vote of 71 to 3, authorized the Interstate Com- merce Commission, on complaint, "to determine and pre- 1 86 PROGRESS OF THE EMPIRE STATE scribe what will bethe just and reasonable rate or rates . . . to be thereafter observed in such case as the maximum to be charged." It further declared that for each violation of the laws by a railway's officer or agent a fine of $5000 should be imposed, and that "every distinct violation shall be a separate offense, and in case of a continuing violation, each day shall be deemed a separate offense." This law is an important landmark, because the railway interests have ever since ascribed to it, and to the sweeping powers conferred on the interstate tribunal, the financial disorder of the ensuing year. It became, in 1908 and 1909, the commonplace of every annual railway report to ascribe the panic of 1907, and the reduced railway traffic which ensued, to the Hepburn Law of 1906. The law was undoubtedly regarded with much mis- giving by the railways; it was dissected and opposed, on grounds of constitutionality, of the rights of property, and of the dangerous public policy invoked through committing such powers to a board of commissioners, by some of the ablest Congressional lawyers. Yet it is not easy to doubt, conditions being what we have seen them to be in the great corporations of the country, that the good results of the Government's policy, taken as a whole, far outweighed the incidental evils. , ^-j^i/. ^Y-^^^ JEREMIAH WHIPPLE JENKS oi the University of Michigan, A.B., i ^ 7 .^ , A.M., LL.D., 1903, I'll. I)., University of Halle (Germany) [885; if Economics and Politics, Cornel] University 1891 iyu; Professor of Government and Director of the D Public Affairs, New York University, 1912. 1899-1901 Expert Agent of the United States Industrial Commission on Investi- gation of Trusts and Industrial Combinations in the United States and Europe, and Consulting Expert of the Department of Labor on the same subject. 1901-2 Special Commissioner of the War Department to investigate the questions of currency, labor, internal taxation, and police in the Orient; 1903 Special Expert on Currency Reform of the Government of Mexico; 1903-4 Member of the United States Commission on International Exchange, in special charge of reform of currency in China; 1907-11 Member of the United States Immigration Commission. Publications: The Trust Problem; The Immigration Problem; Principles of Poli- Citizenship and the Schools; Life Questions of School Boys; Making of a Nation; Great Fortunes, the Winning, the Using, 1 of reports on Trusts of the industrial Commission; reports of the Commission on International Exchange. Member of numerous economic and political scientific associations. CHAPTER VI THE DEVELOPMENT OF INDUSTRIAL COMBINATION BY JEREMIAH W. JENKS AND WILLIAM H. LOUGH IT is well known that a majority of the great combina- tions of the country have been planned, and in large part organized, in New York City. A distinction should be made, however, between the strictly industrial and the financial activities of combinations. Many con- cerns which were originally financed in New York City, and many even which are still directed from New York offices, really play no important part in the industrial and com- mercial life of the city or the State. Such concerns we eliminate from the present discussion. Even with this limitation the subject is by no means narrow. Few people realize the industrial greatness of New York State. Though it has less than one tenth of the population of the United States within its borders, it has nearly one sixth of the manufacturing interests. With the single exception of Pennsylvania, no other State even approaches New York in the value of its manufactured products. Moreover, the supremacy of New York arises, not from concentration of capital in a few industries, but from well distributed activity in a great variety of industries. In many of these the tendency toward combination has been strong, so that our subject, limit it as we may, covers a wide field. Until within the last few years, it has generally been 187 1 88 PROGRESS OF THE EMPIRE STATE assumed by economists that free competition is the normal condition of business. But, as a matter of fact, competition always has been and probably always will be restricted to a much greater extent than was formerly realized. In retail business, prices are generally fixed partially by personal relations between the buyer and the seller, and not wholly by strictly economic motives. In addition, there is an element of combination in most lines of business, as, for instance, the associations of druggists, of grocers, of butchers, and of other retail merchants which frequently exist in small communities and through which standard prices are tacitly agreed upon and made known. Likewise, nearly every line of manufacturing has its own national society or associa- tion. Such societies may exist primarily for the sake of promoting acquaintance and for interchange of ideas; yet the very fact that they bring competitors together in friendly intercourse fosters a half-unconscious tendency toward price agreement. Even in wholesale lines, where competition is more nearly unchecked, informal combina- tions and agreements among dealers nearly always play an important part. The formation of trade associations is the first stage in the universal movement for restriction of competition, although, of course, these associations in themselves exercise only an uncertain and intermittent influence. The effects of competition, where it does exist, are by no means always the same. Much depends upon whether the industry does or does not require the investment of a large amount of fixed capital. In those lines in which little capital is needed and in which, therefore, new firms are constantly rising and old firms disappearing, the result of competition is to eliminate those producers whose efficiency is not up to the standard of the industry and to maintain the price of the product at about the normal cost of produc- THE DEVELOPMENT OF INDUSTRIAL COMBINATION 189 tion plus a reasonable profit for most producers. Any efficient concern may be reasonably certain of holding its own. The kind of competition that we call "ruinous" cannot long exist, for the simple reason that the offending houses within a comparatively short time drive themselves into bankruptcy. The case is entirely different in those industries in which large amounts of fixed capital are required. This capital, once invested, cannot be withdrawn. If vigorous compe- tition is started, the price of the products may be forced down far below the level of the cost of production, and yet production will go on. With great funds of capital per- manently invested, it may be, and frequently is, the lesser evil to produce at a loss rather than to allow the invested capital to lie idle and gradually waste away. In industries of this kind, competition may easily become "ruinous" to every one concerned; and, as a natural consequence, an attempt to restrict competition through combinations is practically inevitable. Unrestricted competition in the large-capital indus- tries not only tends to drive prices so low that goods are produced at a loss, but also causes waste in methods of production and marketing. The most common forms of waste are: 1. The difficulty of making sales in a competitive market leads to excessive expenditures on advertising, on traveling salesmen, and on other schemes for securing business. 2. The pressure of competition leads to the extension of credits to doubtful firms. 3. Competing firms often ship large quantities of goods into each other's territories, thereby incurring heavy and unnecessary transportation charges. 4. Inferior plants frequently turn out large quantities 190 PROGRESS OF THE EMPIRE STATE of goods, owing to reckless and wasteful selling methods, while at the same time superior plants are not running to their full capacity. 5. A low grade of business ability retains control of some plants, while executive genius, on the other hand, does not obtain full scope for action. 6. By-products may be turned out by each plant in such small quantities as to be practically valueless, whereas, if combined, they could be made to yield a considerable income. For all these, and other less important reasons, industries in which large capital must be invested naturally tend toward combination. Here, then, are the two underlying factors which work most effectively toward combination: cut-throat price- making and the wastes of competitive producing and market- ing. As we have seen, these evils almost cure themselves — in industries in which fixed capital investments are not too large — by the rapid elimination of concerns which cannot make profits; but in those industries which require large capital investments, heavy losses may go on year after year without relieving the situation. Combination is the only cure. This is what George Stephenson, the great inventor, had in mind when he said of railroads (and, although a dis- tinction between natural and capitalistic monopolies may be made, the remark applies equally well to many other industries), "Where combination is possible, competition is impossible." It would seem at first glance that combination, which is designed to maintain fair prices and stop competitive waste, must necessarily be an association of rival companies. This is, in fact, the usual type of combination. Two or three or four or more concerns, which have been bitterly fighting, are brought together under a common management. There is, however, another type of combination, which in the last THE DEVELOPMENT OF INDUSTRIAL COMBINATION 191 ten years has become common — the combination, namely, of supplementary industries. This is an association of one or more companies which produce the raw material of the industry with other companies which manufacture semi- finished products, sometimes including also companies which turn out finished goods and even companies which sell those goods to the ultimate consumers. The American Tobacco Company, which carries its products through all stages of manufacture and sale from the warehouse to the smoker, is an excellent example. Such concerns are tech- nically called "integrated." They influence prices and stop competitive waste, not merely through direct combina- tion with rival companies (although this plan is at times also followed), but also through their control of raw and half- finished material. The distinction between combinations of rival industries and combinations of supplementary indus- tries — between lateral expansion and vertical extension — is vitally important. Combinations are not always formal; the essential elements of combination may be present in a simple, tacit understanding as to prices and methods of competition. It is generally found, however, that "gentlemen's agree- ments" are not effective. The temptation, ever-present to each member of the combination, to secure an advantage through some secret trick, is too strong. A more binding form of combination is called for. Among the forms that have been tried at various periods are: 1. Pools, either to divide territory or to restrict output. They have been successful in some European countries, but not in England or America. Our common law is distinctly hostile to such agreements, and consequently no legal penalties for failure to live up to pool agreements can be enforced. Indeed, those who enter into pool agreements are in danger of finding themselves entangled in the criminal 192 PROGRESS OF THE EMPIRE STATE law. At the present time, pools are practically non-existent in this country. 2. Selling bureaus, such as are common in Europe; the German Steel Kartell is the best-known example. This form was tried in this country several years ago by the Michigan Salt Association. It has proved repugnant to the common law, and for that reason is practically unworkable in this country. 3. "Trusts," in the original sense of that word; that is, agreements under which the controlling stock of each of several corporations is turned over to a group of trustees. These trustees, in exchange for the stock of the various member corporations, issue their own trust certificates. This must be clearly distinguished from a voting trust within a corporation. The Standard Oil Trust, the Ameri- can Sugar Trust, and other great combinations, were originally in this form; but after 1890, they were compelled to reorganize on account of decisions of the State courts, holding this form of combination illegal. 4. Holding corporations; that is, corporations which own the controlling stock of other corporations. This is the modern and, at present, almost the universal form of combination. In many respects, it is a somewhat clumsy method of maintaining control, for it involves a great deal of clerical and legal red-tape, and it often works injustice to minority stockholders. However, although in reality in its working it is substantially the same as the "trust," it seems as yet to be workable and legal in form and there is as yet no reason to think that this form of combination will not persist indefinitely. True, the United States Supreme Court has ordered the dissolution of the Standard Oil Company and of the American Tobacco Company; but both decisions were based upon specific acts which were found to be illegal, not on any inherent illegality in the I HENRY OSBORNE HAVEMEYER Sugar refiner; born in New York City, 1847; son of Frederick Christian Havemeyer; educated in public and private schools; married Louisine W. Elder. Com with Havemeyer & . sugar refiners, first as member of firm, then manager; after president American Sugar Refining ( nan Coffee Trustee of the Colonial Trust Co.; director Alliance Realty Co., Brooklyn Cooperage Co., Br<« Elevator* Milling Co., Colonial Safe Deposit Co., National City Bank of New York, New Jersey & New York Realty & Improve- ment Co., Palnur Waterfront Land & Improvement Co., Penn- sylvania Stave Co. Died, 1907. THE DEVEL0PMEN1 OF INDUSTRIAL COMBINATION 193 form of combination. The great majority of holding companies will probably escape legal interference. Inasmuch as the tendency toward combination is strongest in those industries which employ large amounts of fixed capital, it is evident that increased use of extensive plants and of long processes of manufacture encourages the formation of combinations. This is the reason why industrial combinations have become so numerous and powerful in the last twenty-five years. They are the by- products of improvements in the machinery of production and transportation. The salient dates in the history of the Standard Oil Combination — the greatest of all the "trusts" — indicate the progress of the movement, as it has led in practically all the movements that had an industrial, as contrasted with a speculative, foundation. As far back as 1867, Mr. John D. Rockefeller, then one of the rising young business men of Cleveland, Ohio, took the lead in organizing the firm of Rockefeller, Andrews & Flagler. Five previously independent, or practically independent, refineries were absorbed by the new firm. In two or three of the refineries, to be sure, Mr. Rockefeller had previously been the control- ling factor; yet the new partnership marked a step in advance of anything that had previously been accomplished toward introducing combination and stability into the oil business. In 1870, this firm was succeeded by the Standard Oil Company of Ohio, which had a capital stock of $1,000,000 and produced at the beginning about 4 per cent, of all the oil refined in this country. From this time on, the progress of the combination was steady and rapid. In 1872, this cor- poration, having first increased its capital stock to $2,500,000, formed an "alliance" with five competitors. This was an association, not of corporations, but of friendly stock- holders. It was officially known as the Central Association 194 PROGRESS OF THE EMPIRE STATE of Refiners. During the years following, this "alliance" accomplished a marvelous extension of its activities and of its control over the oil industry. Its proportion of the production of refined oil in the United States, it is claimed, grew from 4 per cent, in 1870 to 95 per cent, in 1877. No doubt much of this increase was due to the combination's enjoyment of advantageous freight rates. Much of the gain undoubtedly was due also to the su- perior business capacity, organizing genius and courage of Mr. Rockefeller, supplemented by those of Mr. Payne, Mr. Flagler, Mr. Harkness, Mr. Pratt, Mr. Archbold, Mr. Rogers, and other associates who were from time to time active in the management of the combination's affairs. In no other combination has the industrial side been so strongly emphasized. The Standard Oil stock has never been listed on the exchanges, and there has been little specu- lation in its shares. It seems to be a principle of its leading men not to accept directorships, unless they are able to give careful personal direction. Usually they control their companies and carry the responsibility. Mr. Rockefeller seems to have been preeminent in the qualities of saving, of judging men, of not permitting sentiment to interfere with business; and the same spirit has been infused into his associates. Many of his present associates were in earlier days his rivals. His chief counsel for many years was chosen after ability had been shown in fighting the Standard Oil Company. No feeling of personal hostility has hindered his recognition of ability. The Standard Oil Company from the early days has been noted for its savings in property and expenses and energy. It is its own manufacturer wherever that will pay. It owns its own fleet of ships, its own pipe-lines. Its plants are so located as best to save freights. Its supervision of details extends to the smallest matters; its organization is THE DEVELOPMENT OF INDUSTRIAL COMBINATION 195 a model. Its leading men have, many of them, been widely known for their broad-minded generosity. Even that has not been the result of an outburst of sentiment. It has been managed on a wisely thought-out plan. From the business viewpoint of getting the largest returns with the least expenditure of energy, and of doing business to make profits instead of speculating, its leaders have justly been considered preeminent. The great increase in its size made the loose form of com- bination inefficient. A remedy was found in the formation in 1882 of the Standard Oil [Trust, a form of organization which has already been briefly described. The stockholders of forty corporations turned in their stock to the nine trustees selected under the trust agreement, and; received in exchange the trustees' certificates. In addition, a large num- ber of concerns organized as partnerships and as individual proprietorships, turned in their property, and received trus- tees' certificates. From this time on, the combination, whatever its legal form, has always been a remarkably stable and efficient organization, and up to the present time has controlled a large percentage of the output of refined oil. About this time, the combination began its policy of developing the manufacture of by-products, a source from which it has since derived a large portion of its profits. It also started the export business, which has been so impor- tant a factor in its growth. At the present time, the Standard Oil Combination exports about 90 per cent, of the refined oil which goes out of the United States. By a decision of the Supreme Court of Ohio in 1892, the Standard Oil Trust was declared an illegal combination, and, in obedience to the decree of the court, was shortly afterward dissolved. The dissolution did not, of course, break up the actual combination of interests, for the same men who had been trustees remained, as individuals, the controlling stock- 196 PROGRESS OF THE EMPIRE STATE holders in the separate corporations. Once, again, how- ever, this loose form of combination became unsatisfactory. Finally, in 1899, the capital of the Standard Oil Company of Newjersey was increased from #10,000,000 to #100,000,000, and the greater portion of the stock of the New Jersey corporation was exchanged for the stock of the other affiliated companies. In other words, the Standard Oil Company of New Jersey became the holding company of the combination. The combination in this form was in turn decided to be "in restraint of trade" and an illegal monopoly, within the meaning of the Sherman Anti-Trust Law, by the United States Supreme Court in May, 191 1. The combination was given six months to dissolve, but was not excluded from interstate commerce pending the dissolution. The decision did not point out the way in which the company should dis- solve and reorganize. The exact method of dissolution was, however, agreed upon in consultation with the Government and with the Court and thus bore the stamp of official ap- proval. The principle followed in the dissolution was to give each stockholder of the Standard Oil Company of New Jersey his proportionate share of the stock of the thirty-three companies in the combination. These companies have since been operated as independent, and sometimes competing, units. These important dates in the history of the Standard Oil Combination roughly mark the stages in the progress of the general movement toward industrial combination. Up to the early eighties, there were only loose alliances. During the eighties, a few great "trusts," in the proper sense of that term, were organized. In the early nineties, these combinations were reorganized under the holding corporation form. Up to 1893 the movement was not widespread. In that year the securities of only twenty THE DEVELOPMENT OF INDUSTRIAL COMBINATION 197 industrials of any importance were listed on the New York Stock Exchange. From 1893 to 1897 the business depres- sion made the formation of great enterprises impossible. In 1898, however, the movement was resumed, and during the five years from 1898 to 1903 reached the culmination of its activity. In the three years 1898-1900, 149 large combinations, with a total capitalization of #3,578,650,000, were formed. The great majority of the large combina- tions now existent were formed in those five years. Since 1903 only a few combinations of any importance have been organized. The leading industries suitable for such organiza- tion were already so combined before 1903. The decisions of the United States Supreme Court in 191 1, requiring the dissolution of the Standard Oil Combination and of the American Tobacco Combination, have caused some uncer- tainty as to the stability of the other great combinations. This hasty review gives us the setting for a somewhat more detailed study of the industrial combinations of New York. New York City has been the headquarters of the whole movement. New York State, outside the city, has played a most important part in the underlying pro- gress which has favored the growth of combinations. We shall see, working here at their highest speed, the forces which have brought about the development of industrial combinations. It is helpful to classify industrial combinations, in a rough and ready fashion, into two groups — the big nation- wide trusts, which usually deal in the necessities of physical or industrial life, and the smaller combinations, which usually produce specialties rather than staples. Just as with many other useful classifications, it is impossible to draw a sharp line. The two groups, however, are plainly distinct in their methods of formation and operation. Without attempting to make an exhaustive list of all the 198 PROGRESS OF THE EMPIRE STATE industrial combinations that are important to New York State, it will be helpful to name some examples of each group. Combinations which belong to the first group are: Organized in: Title of Present Holding Corporation 1872 Standard Oil Company 1887 American Sugar & Refining Company 1 890 American Tobacco Company 1899 Amalgamated Copper Company American Smelting and Refining Company 1901 United States Steel Corporation These dates, as well as those in the following paragraph, are chosen, somewhat arbitrarily in a few cases, as marking the beginnings of the combinations. They are not neces- sarily the same as the dates of incorporation of the present holding companies. Among the combinations of the second group, which have interests in New York State, are: Organized in: Title of Present Holding Corporation 1890 National Casket Company National Saw Company 1 89 1 American Wringer Company 1892 General Electric Company United States Rubber Company 1893 Central Leather Company Union Typewriter Company United States Whip Company 1895 Mergenthaler Linotype Company 1896 Central Fireworks Company 1897 American Malt Corporation 1898 American Thread Company International Paper Company JAMES HOWELL POST ;ar refiner; born New 1 New York, October 13, in public schools. Began business as a clerk with B. H. Howell, Son & Company in 1874, and became a partner in the firm in 1889. President of National Sugar Refining Company of New Jersey; director National City Bank of New York; trustee Williamsburg Savings Bank, London Assurance Corpora- tion; director and treasurer Cuban-American Sugar Company and various other sugar companies; director United States Realty and Improvement Company, Nassau Trust Company, Franklin Trust Company, and various other companies. Trustee Industrial School Association of Brooklyn, Young Men's Chris- tian Association of Brooklyn, Bureau of Charities, Brooklyn Hospital and Dispensary, and South Third Street Presbyterian Church. THE DEVELOPMENT OF INDUSTRIAL COMBINATION 199 Organized in: Title of Present Holding Corporation 1898 Otis Elevator Company National Biscuit Company 1899 Electric Boat Company General Asphalt Company General Chemical Company International Steam Pump Company National Enameling and Stamping Company American Shipbuilding Company American Car and Foundry Company Niles-Bement-Pond Company American Ice Securities Company Royal Baking Powder Company Union Bag and Paper Company U. S. Cast Iron Pipe and Foundry Company American Chicle Company Standard Milling Company 1900 International Time Recording Company New York and Kentucky Company Casein Company of America 1901 Eastman Kodak Company H. W. Johns-Manville Company National Electric Lamp Company William A. Rogers, Ltd. American Can Company Union Mills United Drygoods Companies American Locomotive Company International Salt Company 1902 Butterick Company National Licorice Company Railway Steel Spring Company Corn Products Refining Company 1903 Standard Wall Paper Company 200 PROGRESS OF THE EMPIRE STATE Organized in: Title of Present Holding Corporation 1903 Aeolian-Weber Piano and Pianola Company 1904 American-La France Fire Engine Company 1905 Ingersoll-Rand Company 1909 Siegel Stores Corporation 191 1 American Bank-Note Company Even a casual glance at these two lists reveals certain striking facts. We see, for instance, how large a percentage of our trusts were formed in the five years, 1 898-1903, inclusive; and of these nearly half were organized in the one year, 1899. We note further that of the eight great combinations, five were in existence prior to 1893; and the chief exception is more apparent than real. The United States Steel Corporation, as is well known, is chiefly a combination of several preexisting combinations that had been organized some years before 1901. We may say in general — and this remark applies as well to combinations outside the scope of this article — that the great trusts were the ones first formed, and the lesser trusts were more or less conscious imitations. In some cases, they appear to have been organized more for the sake of putting profits into their promoters' pockets than because there was any urgent economic need for them. These generalities, however, must be applied with caution. Each combination has its own peculiarities and, if it is to be judged fairly, must be separately considered. Without attempting to discuss each combination in detail, a few typical cases will illustrate the process of development. The present American Sugar Refining Company was incorporated in New Jersey in 1891 to take over the entire assets and business of the Sugar Refineries Company, better known as the Sugar Trust. This latter company had been formed under the leadership of Mr. H. O. Havemeyer in THE DEVELOPMENT OF INDUSTRIAL COMBINATION 201 1887 to absorb the leading sugar refineries of the country then in operation; and during most of its history, Mr. Havemeyer's able, bold, dominating personality was the chief controlling factor in its development and policy. The United States Industrial Commission in 1900 brought to light the underlying reasons for the formation of the combina- tion. Before 1887 there were forty competitive plants. The sugar industry is one of the best examples of the type, referred to earlier in this article, of business which requires a heavy investment in plant, machinery, and other forms of fixed capital. Hence, the forty plants were all bent on extending their sales, even though prices were below the total cost of refining sugar. The inevitable result was bitter and ruinous warfare. Between 1884 and 1887 eighteen of the forty plants went into receivers' hands. The failed concerns, of course, went on competing even more recklessly than those which remained solvent. Into this chaos some order was introduced by the formation of the Sugar Refineries Company. This company was a "trust," in the legal sense. Each member entered into a contract to pool all properties, establishing a single and absolute ownership, and to receive in return trust certificates representing its proportion of the combined property and profits. By November, 1887, fifteen concerns had joined the combination. Five of the plants shortly after were closed and the efficiency of the other ten was developed to a high point. For two years the Sugar Refineries Company earned large profits. In 1889, however, these profits attracted three new and powerful competitors into the field — Claus Spreckels in Philadelphia, Arbuckle Brothers, and Claus Doscher in New York. Competition again became severe and, al- though the smaller number of competitors and better understanding of the situation prevented the recklessness 202 PROGRESS OF THE EMPIRE STATE which had marked the first era of competition, the profits of the Sugar Refineries Company were much decreased. At the same time the company was attacked in the New York State political campaign, and proceedings for its dissolution were threatened. Feeling itself legally insecure, after the decision of the Ohio Supreme Court dissolving the Standard Oil Trust, and being anxious to escape political attacks, the managers of the combination determined to reorganize. In 1891 the American Sugar Refining Company of New Jersey was incorporated. The entire capital stock of the new company, consisting of #25,000,000 preferred and #25,000,000 common stock, was issued in exchange for the assets of the Sugar Refineries Company plus #11,000 cash. The company's official circu- lar estimated the value of real estate and plants taken over at #41,250,000 and the cash assets and investments at #8,750,000. In 1892, the stock issue was increased to #75,000,000, in order to provide for the purchase of com- peting refineries, the most important of which were the Franklin Sugar Company and the Spreckels Sugar Refining Company. By these purchases and by better understanding with other concerns, the severity of competition after 1894 was much abated. The six years 1894 to 1900 were the most prosperous in the history of the Sugar Combination. In 1900, a new combination, the National Sugar Refining Company, appeared in the field. This was a consolidation of three formerly independent plants in the vicinity of New York. An able group of sugar men, including Mr. James H. Post and Mr. F. C. Mollenhauer, were active in its for- mation and have since administered the company's affairs. The exact relations between this company and the American Sugar Refining Company were for many years obscure. It has now developed, however, that the American Company was the owner, from the beginning, of something over one THE DEVELOPMENT OF INDUSTRIAL COMBINATION 203 half of the preferred stock and that the late H. O. Havemeyer, former president of the American Sugar Refining Company, received #9,300,000 of the common stock. This explains the harmony which has always been apparent between the two companies. The National Company, throughout its semi-independent existence, has been financially successful. Serious competition began to be felt in 1900 from the beet-sugar industry. The American Beet Sugar Company, a combination of some of the leading plants, was incorpo- rated in 1899. In the few years following, various smaller beet-sugar concerns grew into prominence. At present there are, it is said, more than sixty beet-sugar plants of some importance in the country. The relations between the American Sugar Refining Company and the beet-sugar interests are not definitely known, but it is generally believed that the American Company has a controlling influence in the beet-sugar industry. Nevertheless, it is certain that the profits of the Sugar Combination were much reduced after 1900. In 1891, 8 per cent, was paid; in 1892, 9 per cent. ; in 1893, 11 ]4 per cent. ; in 1894-1899, annually, 12 per cent.; in 1900, 7^ per cent.; and since 1900, 7 per cent, annually. The amount of common stock has been somewhat increased, but not enough to compensate for the diminution in dividends. Very few facts as to the extent of the Sugar Combina- tion's control over the industry are available. In a petition against the Company for alleged violation of the Sherman Anti-Trust Law, filed by the United States Government in November, 1910, it is claimed that the Company controls about 72 per cent, of the output of refined sugar in this country, excluding beet sugar, and about 70 per cent., including beet sugar. In reply, the Company claims that it is not a producer of raw sugar, does not and cannot control the price of raw sugar, is daily meeting intense competition 204 PROGRESS OF THE EMPIRE STATE in selling refined sugar, and controls not more than 51 per cent, of the national output of refined sugar. The Company further sets forth that the price of granulated sugar in New- York City has declined since 1870 from 13.5 cents per pound to 4.76 cents. Much of this decline would normally come with the progress of the industry. An investigation under- taken by the writer in 1900 for the Industrial Commission made it plain that the Sugar Combination up to that time had fixed prices at high figures whenever it could sup- press competition. As competition, however, had never been completely eliminated for any long period, it did not appear that prices, on the whole, had been raised permanently much above their normal level. The ten- dency was there, but was somewhat restricted in its working. The Sugar Combination, unlike some of the other combinations, has exercised little influence toward steadying prices. The Sugar Combination has never been free from a great deal of popular antagonism. It deals in one of the most common necessaries of life. There have been many com- plaints of the treatment of its workmen. There have been startling revelations from time to time as to the Company's methods of dealing with competitors, as in the well-known Pennsylvania Sugar Refining case, and, even more serious, as to the frauds practiced by certain of its employees in evading customs duties. The most potent factor, however, in promoting its unpopularity, has undoubtedly been the Company's former policy of secrecy as to all its operations. The violent fluctuations in the value of its stock have led many to believe that the directors were at times using their inside knowledge at the expense of other stockholders, though this belief could probably not be substantiated. President Havemeyer's defense of this policy of concealment at the annual meeting of the Company in 1894 is especially FREDERICK D. MOLLENHAUER Suga bom in New York City; son of John and Doris sihauer; married in Brooklyn, N. Y., 1890, May Craig. Secretary, treasurer, and director Mollenhauer Sugar Refining Co -: r, and director National Sugar Refining Co., of New Jersey; vice-president, treasurer, ling Co.; vice-president and lizens' Union Realty & Mortgage Co.; member ad, commission United States Lloyds; trustee Nassau Trust Co. director Central Aguirre Sugar Co., Cuban-American Sugar Co., Fajardo Sugar Co., Manufacturers' National Bank, St. Regis Paper Co. . I THE DEVELOPMENT OF INDUSTRIAL COMBINATION 205 interesting because it is typical of the attitude of many industrial executives. He said: "We have at present 13,000 stockholders. Any informa- tion which they, as a body, ask for, the directors will at all times be prepared to furnish. Up to the present time stockholders have determined that special information shall not be given to individual stockholders. ... A year ago, I made the point that a business corporation is an aggregation of individuals and that there were obvious objections to giving to competitors information about corporate affairs." From one point of view this opinion has justification, but it is a narrow point of view and one which has been dis- carded by the great majority of large corporations. The present management of the American Sugar Refining Company has abandoned the policy of extreme secrecy and in so doing has effected a praiseworthy reform. The Amalgamated Copper Company is the greatest combination in the mining field. It was incorporated under New Jersey laws in 1899, and at once acquired, in exchange for $154,000,000 of its own stock, the controlling interest in eight previously independent mining and smelting companies, and in the United Metals Selling Company, a marketing agency. The initial financing of the combination was remarkable for the public interest aroused, as well as for the conflicting accounts which have since been given as to the inner facts. It is not yet possible to disentangle the inaccuracies and exaggerations of these accounts and to set forth the exact truth. Its stock has been regarded from the beginning as a distinctly speculative security; and indeed this is inevitable, in view of the great fluctuations in the value of raw copper and the consequent fluctuations in the earnings of the Copper Combination. The parent company has reported surpluses for several years over its 206 PROGRESS OF THE EMPIRE STATE stock dividends, but this favorable showing is accompanied by a long series of deficits in the income account of its chief subsidiary, the Anaconda Copper Mining Company. The Amalgamated Copper Company is an instance of a combina- tion which does not control a sufficient proportion of the output to exercise a steadying influence on prices. Hence, it has been unable to achieve financial stability. It has been asserted that the original purpose of the organizers of the Amalgamated Copper Company was to make its formation simply the first step toward a much greater combination of all copper-producing interests. Negotiations looking toward further combination in this field were reported by the financial papers to have been under way in 1909 and 1910. They were apparently abandoned, however, for the time being. The first American Tobacco Company (not the present corporation) was chartered in New Jersey in 1890. At the time of its organization, it acquired all the property, in- cluding plant and good will, of five well-known concerns which were engaged chiefly in the manufacture of cigarettes. Mr. James B. Duke was the first president, and has ever since retained the leadership of the combination. In Mr. Duke again (as in Mr. Henry O. Havemeyer in sugar refining), the tobacco industry found a leader who knew the business from end to end and who had the ability, the courage, and the masterful personality to command his following. Practically every one of the great combinations has produced a leader of preeminent qualifications. The original capitalization was $25,000,000. The exhaustive report of the Commissioner of Corporations on the tobacco industry, from which the facts stated in this review are largely drawn, is authority for the statement that this company had control at the beginning of over 90 per cent, of the cigarette business of the country. It achieved THE DEVELOPMENT OF INDUSTRIAL COMBINATION 207 immediate prosperity, and during the period from 1890 to 1895 earned average profits of over #4,000,000 annually. The Company at once began to extend its activities. In 1 89 1, its authorized capital was increased to #35,000,000, and it bought the property of four important concerns which manufactured smoking tobacco, snuff, chewing tobacco, and cheroots. It developed the plug tobacco business with especial energy, and during the years from 1894 to 1897 entered into a bitter competitive warfare with the other plug manufacturers of the United States. The combina- tion's leading brand, "Battle-Ax," was sold at times below the cost of production. As a result, the Company's profits were temporarily cut, and in the last quarter of 1895 the usual dividend on the common stock was omitted. By 1898 some of the leading competitors of the Company in the plug tobacco business were ready to capitulate. In that year the Company bought outright two important plug manufacturing concerns. In December, 1898, a new combination of plug manufacturers, the Continental To- bacco Company, was formed. It took over all the plug business of the American Tobacco Company, and absorbed seven of the Company's leading competitors. The Conti- nental Tobacco Company issued approximately #100,000,000 of stock, half preferred and half common. A little over one third went directly into the treasury of the American Tobacco Company in payment for its plug manufacturing business. The individual stockholders of the American Tobacco Company had a large enough additional interest in the Continental Tobacco Company to insure harmonious relations between the two. During the same eventful year, 1898, a group of promi- nent financiers formed the Union Tobacco Company, a combination of some of the important concerns which were independent of American Tobacco. For a time a disastrous I 208 PROGRESS OF THE EMPIRE STATE war between the two combinations was threatened. Before long, however, peace was declared and a deal was made under which the stockholders of the Union Tobacco Com- pany exchanged their holdings for stock of the American Tobacco Company. In this way the Union Tobacco group, composed of Thomas F. Ryan, P. A. B. Widener, Anthony N. Brady, W. C. Whitney, and Thomas Dolan, became an important factor both in the American Tobacco Company and in the allied Continental Tobacco Company. At about the same time, several of the cigarette manufacturers who had joined the American Tobacco combination at the start became dissatisfied with the new policy of reaching into new fields of tobacco manufacture and sold their stock. Thus the financiers who had organized Union Tobacco came into practical control. In 1899 tne authorized common stock of the American Tobacco Company was increased from $2 1,000,000 to #56,000,000 and a 100 per cent, stock dividend was declared. The next step of the American Tobacco Combination was to start a vigorous campaign for control of the snuff trade. In 1899, three snuff concerns were purchased. Their output, added to that previously owned by the American and Continental companies, gave the combination about one third of the snuff trade of the country. An independent combination, however, the Atlantic Snuff Company, was still stronger in this branch of the tobacco business. After a brief struggle, the two parties, with one important estab- lishment outside either combination, cooperated in forming the American Snuff Company, which from the beginning controlled four fifths of the output of snuff. By 1900 the Tobacco Combination was the dominant factor in the cigarette, the plug, the smoking tobacco, and the snuff business of the United States. The cigar trade, however, had scarcely been touched. At first sight it would ANTHONY NICHOLAS BRADY litalist; born in Lil ugust 22, 1843; can parents in childhood; attended school until thirteen years old. I my, V V - ., in 1864; til he had practical control of ntrol of large granite quarrii te largely interested in gas and electric lighting icago, New York, and other , and in traction lines in New York City and elsewhere. His first public service enterprise was the starting of the Albany which he accomplished with the help of Roswell P. Flower and 1 diet. He first appeared in New York as one of the or the Metropolitan Traction Co., and in 1887 ; ganization of the Brooklyn Rapid Transit Co., in which he was chairman of the the time of his death. He was also very active in the New York Edison Co., in which he was succeeded by his son Nichol Brad; , ted president of the Company rn April, 1 9 1 3 . Anthony N. Brady was 1 tor Edison Electric Illuminating ( 1 i.lyn, Kings Co. Electric Light & P Co.; trustee Consolidated Ga ew York; director Ameri- can T I e Hudson Companies, National Surety Co., United States Rubber ( I inghouse Electric & Manu- facturing Co., and many other corporations. Died in London, England, July 22, 1913. THE DEVELOPMENT OF INDUSTRIAL COMBINATION 209 have seemed hopeless to try to form an important combina- tion of cigar manufacturers. Cigars are made in thousands of small shops, little expensive machinery is required, and skill in handling and rolling tobacco is not uncommon. These are precisely the conditions to favor a continuous competition. As a matter of fact, the American Tobacco people never have so far overcome all these handicaps as to establish control of the cigar business. But they have succeeded in becoming by far the largest single factor. The American Cigar Company, organized in 1901 with a capital stock of #10,000,000, took over most of the cheroot and small cigar business of the American and Continental companies and acquired the Havana-American and one or two other important outside concerns. By 1903 it turned out about one sixth of the output of the United States. As a method of raising additional cash and to bring about a closer union of the affiliated companies, the Con- solidated Tobacco Company was incorporated in 1901. The capital stock, #30,000,000, was paid for in cash by a group of the leaders in the Tobacco Combination. Consoli- dated four per cent, fifty-year collateral trust bonds were offered for exchange at the rate of #100 for each #100 par value of Continental stock and at the rate of #200 for each #100 of American stock, the bonds to be secured by deposit with a trustee of all the stock thus received. In view of the facts that Continental common had never obtained a divi- dend and American common was on only a 6 per cent, basis, the offer was remarkably attractive and was quickly ac- cepted by nearly all the stockholders of the two older companies. The organizers of the Consolidated, however, knew what they were about. They foresaw great profits, partly as a result of an approaching reduction in the internal revenue taxes, and to secure these profits were willing to advance a large sum of money and to guarantee to the other 14 210 PROGRESS OF THE EMPIRE STATE stockholders a greater income than they had previously received. Their optimism was justified. Within a little over three years following the formation of the Consolidated, profits were earned, over and above interest on the bonds, of approximately #30,000,000. Part of the #30,000,000 new cash brought into the com- bination by the sale of Consolidated stock was used to develop export trade. From the beginning in 1890, the American Tobacco Company had sought to extend its foreign sale of cigarettes, and had established several sub- sidiary companies abroad. In 1901, the combination deter- mined to make itself felt in Great Britain. Control of Ogden's Limited, a large English company, was purchased for something over #5,000,000, and a vigorous campaign was started. In self-defense, the British manufacturers formed their own combination, the Imperial Tobacco Company. After a year's hard fighting, one of the most remarkable and far-reaching industrial agreements yet established was effected through the skillful diplomacy of Mr. Thomas F. Ryan. Under this agreement, the American Tobacco Combination gave up its business in Great Britain and Ireland, and the Imperial Tobacco Company obligated itself not to sell in the United States, its dependencies, or Cuba. Both companies joined in the formation of a third combination, the British-American Tobacco Company, chartered under English laws, which operates throughout the rest of the world. In this company the American Tobacco Combination has about a two thirds and the Imperial Company a one third interest. The British- American Company took over all the export factories, offices, and good will of its two organizers. Since its formation, it has made great progress in extending its control. Another use for part of the cash capital of the Consoli- HIE DEVELOPMENT OF INDUSTRIAL COMBINATION 211 dated Company was found in the purchase of two large Cuban cigar manufacturing establishments, the stock of which went into the treasury of the American Cigar Com- pany. This company also took the controlling stock of a new subsidiary, the American Stogie Company. A change in the form of combination, which had pre- viously been considered, was put into effect shortly after the Northern Securities decision in 1904. The Consolidated Tobacco Company, a holding corporation, was succeeded by a new American Tobacco Company, which was an actual merger of the Consolidated, the Continental, and the first American Tobacco companies. Legally, a merger ends the corporate existence of each absorbed company. Its use is infrequent, partly on account of the usual difficulty of securing the assent of the required percentage of stockholders of the subsidiary companies. In this instance, however, the attractive offer by the Consolidated Company at the start had brought into its treasury almost all the outstanding stock of both the American and the Continental companies. The details of the merger were, therefore, easily settled. This change of form and name of the combination was simply a supposed protection against legal attack and was not of much practical importance. The report of the Commissioner of Corporations states that "the total number of formerly separate concerns and combinations which have passed under the control of the Tobacco Combination is in the neighborhood of 250." This includes, not only manufacturers of tobacco in its various forms, but also makers of contributory products, such as tin foil, cotton bags, wooden boxes, and cigar and cigarette machinery, as well as distributors, including the United Cigar Stores Company. The report estimates the combination's percentage of the national output in 1906 as follows: 212 PROGRESS OF THE EMPIRE STATE Cigarettes, 52.5 per cent.; little cigars, 81.3 per cent.; cigars, 14.7 per cent. ; plug and twist, 81.8 per cent. ; smoking, 70.6 per cent.; fine cut, 80.9 per cent.; snuff, 96 per cent. Apart from cigars and cigarettes, the combination's per- centage of the total output of manufactured tobacco in each of several years, according to the report, was: 1891, 7.1 per cent.; 1897, 20 per cent.; 1900, 60.6 per cent.; and 1906, 77.6 per cent. On May 29, 191 1, the United States Supreme Court affirmed with slight changes a decree of the United States Circuit Court dissolving the American Tobacco Company as an illegal combination under Sections I. and II. of the Sherman Anti-Trust Law. The plan of dissolution, as finally approved, provided that the combination should be resolved into its constituent elements, leaving separate companies in control of each of the several distinct tobacco trades — cigarette, smoking tobacco, plug, snuff, and cigars. The process of dissolution was made easier by reason of the orderly — we might almost say logical — growth of the combination. Far-sightedness, careful long-distance plan- ning, certainty of execution — these are striking features of the Tobacco Combination's history. Step by step the organizers proceeded, first to establish control of cigarette- making, then to make themselves dominant successively in,the plug, the smoking tobacco, the snuff, and the cigar trades in the United States, then to enter foreign markets. There have been no haphazard moves. Any fair-minded man, whatever judgment as to the good or evil results of the Tobacco Combination he may form, will be impressed, as he studies its history, with the ability of its management. At every stage its operations, though often daring, have been based on thorough knowledge and sound thinking. Time after time it has met and defeated strongly entrenched competitors. It is well known that, through an THE DEVELOPMENT OF INDUSTRIAL COMBINATION 213 efficient system of gathering information, its officers have gone far in reducing the uncertainties of the business. In the financial handling there is evidence of the same fore- thought and caution. At the beginning, the American Tobacco Company announced its "consistent policy of not borrowing money." Later, when its earnings became more stable, large issues of bonds were put out. But throughout its history it has steadily maintained an ample working capital and has never yielded to the temptation to develop its business without ample cash resources. Another noteworthy characteristic of the Tobacco Combination is the absence of one-man control. The report of the Commissioner of Corporations shows that ten of the largest stockholders in 1906 controlled 60 per cent, of the voting stock. These ten stockholders were J. B. Duke, A. N. Brady, O. H. Payne, P. A. B. Widener, Thomas F. Ryan, B. U. Duke, G. B. Schley, the firm of Moore & Schley (chiefly as agent for clients), and the estates of W. C. Whit- ney and W. L. Elkins. In the Tobacco Combination, one should not overlook the counsel, Mr. Fuller. He could not be spared any more than Mr. S. C. T. Dodd of the Standard Oil Company or Mr. Parsons of the Sugar Combination could be spared from the history of those concerns. The lawyers are not so prominent as the presidents. It has often been their skill that has opened the way to advance and that has warded off attacks — just and unjust. This group, the membership of which has varied somewhat from year to year, has from 1899 on worked almost as a unit. But no one or two or three members of the group have been strong enough to dominate their associates. The American Smelting & Refining Co. was founded under the laws of New Jersey, April 4, 1899. It started with a controlling interest in thirteen large concerns engaged in smelting and refining lead and silver ore, and was said to 214 PROGRESS OF THE EMPIRE STATE have sufficient capacity to handle all the smelting ore mined east of the Rocky Mountains. In 1901 a large in- terest in the enterprise was acquired by the house of M. Guggenheim's Sons. This remarkable family, of which Meyer Guggenheim was the head, has become the greatest mining and smelting family in the world. The family consisted originally of seven sons and three daughters, all of whom are living except Benjamin, who was lost on the Titanic, April 15, 191 2. Meyer Guggenheim enforced upon his seven sons the maxim that "in union is force." Following his advice, the action of the family councils is determined by the voice of a majority, and no important step is taken without the concurrence of all. It has also been a tradition that no outsider who has joined the family in a financial venture shall suffer loss. This was exemplified in a striking manner in 1906, when the firm paid up #1,500,- 000 losses which had been incurred by those who had joined in underwriting the Nipissing Cobalt Mines. After the Guggenheims acquired an interest in the American Smelting & Refining Co., Daniel Guggenheim became president and chairman of the board of directors. Three other members of the family — Solomon R., Isaac, and Murray Guggenheim — also serve on the board. Other members of the family conduct branches of the business in other parts of the country, Simon Guggenheim having lived for a time in Colorado and been United States Senator from that State for the term 1907 to 1913. Direct relations were established at an early date with the London silver market, and an effort was made by the Guggenheims to market the product of American mines on terms the most equitable and profitable to American miners. Among those who have contributed materially to the success of the company is Mr. Edward Brush of Greenwich, Conn., who rose from the position of secretary to that of one of a o^u^dt ■ff &^*^£x-£4~^+^_ DANIEL GUGGENHEIM Was born in Philadelphia, July 9, 1856. Entered the American Smelting & Refining Co. in 1901, and became president and chairman of the board of directors. He is president and director of the Guggenheim Exploration Co., American Smelters' Securi- ties Co., vice-president and director of the Yukon Gold Co., director of the National Bank of Commerce, Guaranty Trust Co., Utah Copper Co., Nevada Northern Railway Co., and other corporations. Mr. Guggenheim married on July 22, 1884, Miss Florence Shloss, and has two sons and one daughter. He is an active patron of art and some years ago presented Louis Loeb's painting, The Temple of the Winds, to the Metropolitan Museum of Art. THE DEVELOPMENT OF INDUSTRIAL COMBINATION 215 the vice-presidents, became one of the chief American experts on silver, and was consulted by the Government of Mexico in the plans for the monetary reform in that country. The capital stock of the American Smelting & Refining Co. stood for several years at #100,000,000, of which half was common and half preferred stock. The amount of common stock was increased by $15,000,000 in 191 1, the additional amount to be held solely for the conversion of the six per cent, convertible debentures of the American Smelters' Securities Co. The company has plants in Colorado, Montana, Nebraska, Illinois, Utah, and else- where in the United States, and also large establishments in Mexico. Certain other combinations work in such close harmony with the American Smelting and Refining Company that they may almost be considered part of the Smelting Com- bination. Especially is this true of the National Lead and United Lead companies. The former was organized in 1891 as successor to the National Lead Trust. It owns twenty- six plants for the manufacture of white lead, oxides, oils, and for the refining and smelting of lead. Its capital stock is $30,000,000, half preferred and half common. The United Lead Company, organized in 1903, includes most of the other lead plants of the country. Its capital stock is $25,000,000 and it has a bond issue of $10,000,000. The Steel, like the Oil, Combination is too well known to require a lengthy discussion. The United States Steel Corporation is a super-combination, a combination of combinations. The eight companies first included were: Carnegie Steel Company Federal Steel Company American Steel and Wire Company National Tube Company 216 PROGRESS OF THE EMPIRE STATE National Steel Company American Tin Plate Company American Steel Hoop Company American Sheet Steel Company. Shortly after organization, two other companies were taken in, namely: American Bridge Company Lake Superior Consolidated Iron Mines Company. Among the corporations which have since been acquired are: Shelby Tube Company Union Steel Company Tennessee Coal, Iron, and Railroad Company. The number of corporations directly subsidiary to the parent corporations has been reduced somewhat by con- solidating some of the subsidiary companies. The enter- prise is so vast that in the nature of things the officials of the holding company can maintain only a general oversight over the sub-companies. Each subsidiary company man- ages its own internal affairs, and buys and sells from and even competes with other sub-companies. Cross shipments, however, are avoided, and raw materials are furnished by common agencies. The idea is to stimulate each company, by internal competition and otherwise, to the highest pitch of efficiency. The formal organization of the company is less interest- ing, however, than a review of its industrial history and position. One striking fact is the falling off, during the last ten years, in its percentage of the total steel production of the United States. In 1901 this percentage was 66.2; in THE DEVELOPMENT OF INDUSTRIAL COMBINATION 217 191 1, 54.3. This decline may be due in part to the fact that in 191 1 the Steel Corporation was operating only about 72 per cent, of its maximum capacity, and the independent steel companies were operating over 80 per cent. Yet it cannot be doubted that the independent concerns have grown faster than the combination. This falling off does not have so important a bearing on the question as to whether the Steel Combination exercises control over prices or not as it is sometimes supposed to have. The influence of the Steel Corporation arises chiefly from the immensity of its ore supplies, and the economy with which they may be mined. It is estimated that it controls about two billion tons of possible iron ore underground. The Corporation now consumes at the rate of about twenty million tons a year and, of course, works those mines where the cost of extracting and transportation is lowest. This is an advantage over all present or future competitors which apparently places the Corporation, apart from possible legal interference, in an impregnable position. The chief event in the financial history of the Steel Corporation is its much discussed preferred stock conversion of 1902. In April of that year, the management issued a circular to stockholders proposing a plan for securing $50,000,000 new capital and at the same time effecting a reduction in the combined charges for interest and preferred dividends. The essential point of the plan was to exchange 7 per cent, preferred stock for 5 per cent, bonds on the following basis: Each preferred stockholder was to be permitted to subscribe, up to an amount equal to one half his preferred stock holdings, to a new issue of $250,000,000 5 per cent, sinking fund bonds, and to pay for his bonds either 80 per cent, in preferred stock and 20 per cent, in cash, or 100 per cent, in preferred stock at his option. It was expected in this way to retire $200,000,000 218 PROGRESS OF THE EMPIRE STATE preferred stock and substitute #250,000,000 in bonds. A feature of the plan to which considerable objection was raised was the underwriting of the new issue by a syndicate which included some of the corporation's directors. The syn- dicate obligated itself to insure a total sale of #100,000,000 of the bonds, in return for which it was to have the privilege of subscribing to any of the bonds not taken by stockholders and to receive a 4 per cent, commission on all the bonds disposed of. It was objected that the directors should not participate in such a syndicate and that the commission was excessive. To the first objection, a satisfactory answer was made by pointing out that most of the large financial houses, which would be capable of undertaking so large an underwriting, were more or less directly represented in the directorate of the United States Steel Corporation. Opinions as to the propriety of the commission charge differ. It is undeniable that the operation was risky and called for special skill and capital. The percentage agreed upon is not unusual for similar transactions. On the whole, there seems to be no adequate reason for casting doubt on the good faith of the Corporation's directors. The whole transaction, though much criticized at the time, may fairly be said to have been justified by the subsequent financial record of the Steel Corporation. The earnings have been amply sufficient to take care both of the increased interest charges and of the preferred dividend. The enormous capitalization of the United States Steel Corporation is made up approximately as follows: Bonded debt #600,000,000 Preferred stock 360,000,000 Common stock 508,000,000 Total #1,468,000,000 THE DEVELOPMENT OF INDUSTRIAL COMBINATION 219 The common question as to how much of this capitaliza- tion is "water" may be variously answered, depending on the test of over-capitalization which is applied. There can be no doubt that the subsidiary combinations, which were taken into the United States Steel Corporation, were capitalized to a nominal value far in excess of the cost of their tangible assets. The United States Steel Corpora- tion, in turn, issued approximately #540,000,000 of stock at its formation over and above the par value of the stock of subsidiary companies which it received in exchange. In applying the test of money value invested, therefore, there can be no question but that the United States Steel Corpora- tion was over-capitalized. It is possible, however, that the value of the Corporation's assets may have increased since they were first acquired by the subsidiary companies to such an extent as to create a firm foundation for the combina- tion's capitalization. That they have increased greatly is certain. Charles M. Schwab, the first president, is authority for the valuation of the unmined iron ore of the Steel Cor- poration at #700,000,000. If this valuation is correct, the present money value of the corporation's assets is not far removed from its nominal capitalization. The third test is the earning power of the corporation. Approximate net earnings since incorporation have been: Net Earnings 1902 $133,000,000 1903 109,000,000 1904 73,000,000 1905 120,000,000 1906 157,000,000 1907 161,000,000 220 PROGRESS OF THE EMPIRE STATE 1908 $ 91,000,000 1909 13 1,000,000 1910 141,000,000 191 1 104,000,000 These financial results have been even more favorable than was anticipated by independent judges at the start. Assuming that it would be fair to capitalize these earnings on a 10 per cent, basis, we get a result approximately equal to the total nominal capitalization. There has been general recognition of the far-sightedness, energy, and wisdom of the corporation's management. The directorate includes some of the ablest financial and industrial leaders of the country. The successive presidents of the corporation — Mr. Charles M. Schwab, Mr. William E. Corey, and Mr. James A. Farrell — have shown marked ability. The active head of the Steel Company, Judge Elbert H. Gary, holds a commanding position among the steel men of the world; he is conspicuous among industrial leaders for his moderation and breadth of view. When formerly president of the Federal Steel Company, he had shown marked ability and judgment in directing the affairs of one of the great "integrating" combinations. Moreover, even then, before the organization of the Steel Corporation, he had outlined in his testimony before the United States Industrial Com- mission the wise policies of publicity, responsibility to government and law, moderate, steady prices, considera- tion for public opinion that he has since exemplified in the direction of the affairs of the Steel Corporation. Although in speaking of the Steel Corporation to-day the names of Andrew Carnegie and J. Pierpont Morgan are often not mentioned, it is not too much to say that they were — one indirectly, the other directly— its creators, and that its present success is largely due to them. Carnegie had stsC^G SOLOMON R. GUGGENHEIM Was horn in Philadelphia, February 2, 1861, fourth of the seven sons of Meyer Guggenheim. First studied mining and smelting in Colorado. He afterwards went to Mexico, where he superintended the building of the first smelter in that country at Monterey; visited Alaska, and assisted in forming the Guggen- heim Exploration Co. Mr. Guggenheim is chairman of the executive committee of the American Smelting & Refining Co., president of the Yukon Gold Co., director of the American Smelt- ers' Securities Co., the Guggenheim Exploration Co., the Utah Copper Co., the Interborough-Metropolitan Co., and other corporations. THE DEVELOPMENT OF INDUSTRIAL COMBINATION 221 long been known as America's greatest ironmaster. The Carnegie Company was the largest of the companies that helped form the Steel Corporation. Though Carnegie himself decided to sell his interests — at a very good price, naturally — and retire from active business, it is after all largely his principles and methods that have been followed in the conduct of the plants. The three presidents are all his "boys," whose ability he discovered and whom he trained. His system of bounties to managing heads had produced enormous salaries — over a million dollars a year in one case at least — but it had produced also unrivaled masters for profit-making. And the Steel Corporation has had the benefit. It must be said, on the other hand, that the same system is likely to prove hard on the lower grade laborers, and it is a matter of question how far the condition of long hours and seven-day weeks found a year ago at Bethlehem and elsewhere in the steel industry — now gen- erally remedied on the initiative of the Steel Corporation — is due to that system and to the other factors accompany- ing it. However that may be, Mr. Carnegie's influence is still felt, though indirectly, in the steel industry, and will long remain. Again, no other banker than Mr. Morgan had the skill and the power and prestige necessary to finance so huge a combination as to give to it and to maintain for it the public confidence needed to insure success. Mr. Morgan was always a constructive financier — not a wrecker. When he under- took an organization, the people expected — and he had given them reason to expect — fair treatment and success, and es- pecially this is what counts in the market. This confidence was needed in the Steel Corporation. The event has proved that it was justified. As examples of the Corpora- tion's policy, we may cite especially the profit-sharing plan, for which Mr. George W. Perkins is largely responsible, 222 PROGRESS OF THE EMPIRE STATE under which twenty-five thousand employees have become stockholders; the practice of giving ready publicity to all important developments and to financial statements; and the willingness of the directorate to recognize and defer to the force of public opinion. The United States Steel Cor- poration through this policy has gradually overcome much of the suspicion and active hostility which its very magnitude at first aroused. It is impossible here to do more than touch on the striking characteristics of a few of the corporations listed among the lesser combinations. The Union Typewriter, which controls five companies manufacturing standard machines, has important interests in New York State. This is a typical specialty combination, organized as a result of severe competition. The combination is estimated by Mr. John Moody to control about 75 per cent, of the American output of typewriting machines, but is by no means free from vigorous competition. It is understood to act more or less in harmony with its leading competitors, at any rate in maintaining prices. The corporation has not yet achieved financial stability, for its earnings fluctuate violently, but it is said to be progressive and well-managed. The Malting Combination has had a checkered financial history. The American Malting Company was incorporated in New Jersey in 1897 and issued $12,500,000 preferred stock and $13,747,000 common stock in exchange for twenty- two malting plants, several located in New York State, and cash working capital of $2,080,000. In the two years following, several additional plants were purchased. The prospectus of the company was so drawn as to lead investors to expect that earnings would easily take care of the 7 per cent, divi- dend on preferred stock, and of an equal dividend on common stock. The full dividend on the preferred was paid for two years. THE DEVELOPMENT OF INDUSTRIAL COMBINATION 223 Toward the end of 1899, however, it was discovered that the company was short of cash, and the directors proposed that a bond issue be put out. As the result of protest from the stockholders, a special committee was appointed to examine the company's affairs. The committee reported, among other things, that within two years after its organiza- tion the company had accumulated a floating debt of nearly three million dollars; that dividends paid had not been earned ; and that the company in general was badly managed. The result of this investigation was a partial change in management and the sale of four million dollars of fifteen- year bonds to provide additional cash. A movement for reorganization, designed to reduce the capitalization and to take care of the accumulated unpaid dividends of the pre- ferred stock, was inaugurated. Not until 1906, however, was an acceptable plan of reorganization adopted and put into effect. Under this plan the American Malt Corpora- tion was organized with a capital stock of $6,000,000 common and $9,000,000 cumulative preferred. The pre- ferred stock of the American Malting Company was ex- changed for the preferred stock of the American Malt Corporation at the rate of $62 of new stock for each one hundred dollars of old stock, and the old common was exchanged for new common at the rate of #44 of new stock for $100 of old stock. This plan was accepted by practically all of the old stockholders. Combinations among trading enterprises are much less frequent than among manufacturing companies. An in- teresting example of mercantile combination is the United Drygoods Companies. This corporation was formed in 1909, but the combination really dates from 1901, when the Associated Merchants Company acquired a controlling interest in several large department stores. This company in turn was successor to a still earlier alliance of wholesale 224 PROGRESS OF THE EMPIRE STATE and retail drygoods interests under the lead of the H. B. Claflin Company. The combination is another expression of a general tendency on the part of wholesale houses to enter the retail field. By so doing, they entrench themselves against competition and establish their own outlets for the goods which they handle. From the other side appears a similar tendency; that is, the great retail stores which buy in large quantities often find it profitable to enter the wholesale field, thus coming into direct competition with the wholesale houses and shutting off some of their chief markets. Since 1901, Mr. John Claflin, through the companies which he controls, has purchased and developed retail stores. Under his guidance this policy has proved profitable. The United Drygoods Companies has more than fulfilled the predictions of its organizers. The experience with industrial combinations in New York State has not been essentially different from the experi- ence of other States and of foreign countries. Here, as elsewhere, two extreme parties have been conspicuous — one advocating the destruction, or at least the severest regulation, of trusts, the other demanding further protection for trust property and privileges. Both these parties, fortunately, are losing their holds on public attention. The moderates, believers in business progress and development and in combination under sane governmental supervision and in the light of full publicity, are making themselves felt. The difficult problem is that of keeping industrial combinations within the bounds of honesty and of respect for other people's rights, without at the same time inter- fering with industrial efficiency. In the world-wide strug- gle for markets, the American manufacturer and trader, our people recognize, must not be seriously handicapped. On the other hand, he must not be left entirely free to oppress or attack his neighbors as he sees fit. There THE DEVELOPMENT OF INDUSTRIAL COMBINATION 225 seems to be no good reason why the ideal of intelligent regulation without unnecessary interference should not be reached. The effects of industrial combinations on prices and wages have not proved so harmful as was generally antici- pated ten or fifteen years ago. In a few instances new- formed combinations have attempted to justify their existence by arbitrary increases of prices. This policy, notably in the case of the Whiskey Trust, awakened so much hostility and so obviously invited fresh competi- tion that its unwisdom is now apparent to every one. Most of the combinations have contented themselves with en- deavoring to effect economies in production and, at the same time, maintain good prices. When this policy is combined with fearless publicity, the normal result is to disarm hostile criticism. The record of the American combinations, on the whole, in spite of special exceptions, in avoiding and settling disputes with labor organizations is remarkable. Nor has industrial peace been secured at the laborer's expense. On the contrary, wages have been adjusted from time to time by voluntary agreement between the two parties. It has been often shown that organized labor, on the one side, and organized capital, on the other side, when both are headed by reasonable and far-sighted men, can agree. Industrial combinations are not entitled, by any means, to unstinted praise. Many of them have been selfishly and foolishly conceived and managed. There have been many instances of oppression and unfair measures in com- petition, though no more than among smaller rivals. The tendency is for the survival and growth only of those com- binations which possess "a decent regard for the opinions of mankind," and a sense of moderation which governs their dealings with their business associates, their employees, 15 226 PROGRESS OF THE EMPIRE STATE and the public. On the credit side of our account with almost all industrial combinations must be placed their influence in raising the standards of industrial and commer- cial efficiency. The natural tendency has been to bring to the leadership of the combinations the best equipped and most progressive men. These men have taken the lead in the movement toward better organization of business and better training for executive positions. Perhaps the best thing that can be said of industrial combinations, both in New York State and elsewhere, is that though they make it hard for the small man to succeed independently, they offer a great opportunity to men of first-rate ability and training. GEORGE BRUCE CORTELYOU Ex-Secretary of the Treasury; born New York City, July 26, 1862; son Peter C, Jr., and Rose (Scary) Cortelyou; graduated Hempstead (L. I.), Institute, 1879; State Normal School, West- field, Mass., 1882; LL.B., Georgetown University, 1895; LL.M., Columbian (now George Washington) University, 1890; LL.D., Georgetown, 1903; Ky. Wesleyan, 1905; University of Illinois, 1905. Married Lily Morris, daughter Dr. Hinds, president Hempstead (N. Y.) Institute, September 15, 1888. General law and verbatim reporter, New York, 1883-85; principal of preparatory schools, New York, 1885-89. Entered public service, 1889, and was private secretary to various officials, including post-office inspector at New York, Surveyor of the Port of New York, and fourth assistant postmaster-general. Was made stenographer to the President, November, 1895; executive clerk, February, 1896; assistant secretary to President McKinley, July 1, 1898; private secretary, April 13, 1900; reappointed by President Roosevelt, September 16, 1901. Was Secretary of Commerce and Labor, February 16, 1903, to June 22, 1904; Postmaster-General, March 7, 1905, to March 4, 1907; and Secretary of the Treasury, March 4, 1907, to March 8, 1909, in cabinets of President Roosevelt; was chairman Republican National Committee, 1904-07; president Consolidated Gas Co. of New York, since March 9, 1909, and director of leading corpora- tions. CHAPTER VII THE CRISIS OF 1907 BY GEORGE B. CORTELYOU. THE better perspective afforded by the lapse of several years has resulted in the causes of the panic of 1907 being very generally understood. Economists differ to a certain extent on the relative importance to be attributed to the four great underlying influences which combined to bring on the trouble; but on the question of what these influences were, there is pretty general agreement. In the first place, there was the conversion of capital into fixed forms which took place on a tremendous scale in the period between the closing of the last century and the crisis of 1907. In the second place, there was the speculation which naturally attended the immense capital creations of that time — a speculation which was not confined to the United States but spread over the entire world. In the third place, there was the great expansion of bank credit by which this speculative movement was naturally attended, and which, by the beginning of 1907, had gone beyond all reason. The fourth, and last, of all the causes was the absorption of something like three billion dollars of capital as a result of three costly wars. "In preparing this chapter, I have availed myself freely, with the consent of the publishers, of the chapter on the same subject in Mr. Charles A. Conant's History of Modem Banks of Issue, fourth edition, G. P. Putnam's Sons, 1909; and of my own official reply to Senate Resolutions of December 12, 1907, Senate Document 208, Sixtieth Congress, 1st Session. — The Author. 227 228 PROGRESS OF THE EMPIRE STATE How great was the conversion of capital from floating into fixed forms is well remembered by those who went through the period. At the end of the nineteenth century, it will be recalled, the United States was emerging from a period of business depression. Its closing years saw the trust-movement well under way, but it was only at the very end of the century that the really big movement toward issuing new securities got fairly started. From 1898 on, the formation of one big company after another took place, many of them having a capitalization unheard of only a few years before. In rapid succession, one industry after another went through the process of combination, a great volume of bonds and preferred shares representing actual value being supplemented by a volume of common stock representing little more than anticipated earning power and good will. By no means was this movement toward the corporate form of doing business, and the combination of enterprises already conducted in that form, confined to the United States. In England, Germany, and France, the same tendency was strongly marked and while, perhaps, there is no parallel anywhere for our own record of a billion dollars' worth of new securities created yearly for several years in succession, the aggregate of the new bonds and stocks put out was extremely large. How large can be seen from the following table, based upon figures taken from the Moniteur des Interets Materiels, showing total issues of all classes of securities: Issues of New Securities, 1896-1906 Net new demands Year Total i Conversions for capital I896 $3,227,359,071 $1,465,451,600 $1,761,907,451 1897 1,852,173,846 132,182,873 1,719,991,013 I898 2,034,766,348 316,530,453 1,718,235,895 THE CRISIS OF 1907 229 Net new demands Total issues Conversions for capital I899 #2,175,823,434 #120,873,970 #2,054,949,464 I900 2,289,642,963 2,289,642,953 I90I 1,917,916,282 1,917,916,282 I902 3*597,489,052 1,639,921,000 I,957,5 6 8,052 I903 3,534,248,906 1,687,729,387 1,846,519,519 1904 2,785,138,525 353,445,223 2,431,693,302 I905 3,688,124,622 323,487,879 3,364,636,743 I906 5,126,000,000 2,001,000,000 3,125,000,000 These figures show that, while new demands for capital were comparatively uniform from 1896 down to 1903, they increased greatly during the next three years. Hence came the strain which was felt in the market for capital in Great Britain and Germany as well as in America. In the United States, issues of the negotiable securities of corporations — stocks and bonds — multiplied much more rapidly than the total mass of tangible physical property, whose value was computed in 1904 at #107,104,211,917. This increase in security issues gave an appearance of fluidity to the capital of the country, which was in some respects deceptive. While securities are themselves readily negotiable under normal conditions, they represent fixed capital and not circulating capital. Stocks constitute the titles to shares in permanent investments, like railways, factories, and buildings. Bonds usually represent the obligations which have been issued to acquire fixed capital and are secured by mortgages upon railway mileage, fac- tories, and buildings. The conversion of circulating capital into these fixed forms proceeded at a remarkable rate after the recovery from industrial depression about the year 1900. Careful calculations show the principal securities outstanding in the United States even in 1905 to have 230 PROGRESS OF THE EMPIRE STATE been about #35,000,000,000 par value. Among the chief items were the following: Par Value of Outstanding Securities in the United States, 1905 Class of Securities Par Value Government debt $ 3,265,000,000 Steam railways 12,600,000,000 Street railways 3,200,000,000 National banks 800,000,000 Other banks 650,000,000 Manufactures 6,800,000,000 Mining, oil, etc 3,300,000,000 Other classes 4,385,000,000 Total $35,000,000,000 Theamount of securitiesoutstandingthroughout theworld as early as 1900 was estimated at about $110,000,000,000, or more than the entire wealth of the United States. Great Britain was credited with $26,400,000,000, or $616.97 per capita; France with $19,500,000,000, or $500.95 per capita; and Germany with $10,000,000,000, or $177.41 per capita. To these amounts important additions were made during the following seven years. In Great Britain alone, issues of new capital were estimated for the five years ending with 1904 at $3,454,978,975, but this included a considerable amount in foreign securities offered on the London market. In the United States, calls for new com- pany capital were computed for 1904 at $1,003,542,200; for 1905, $1,694,187,211; for 1906, $2,307,970,000; and for 1907, $1,459,325,000. Into Russia was poured in a few years French capital to the amount of at least $200,000,000. Coincident with these issues of new securities occurred THE CRISIS OF 1907 231 a speculative movement of great breadth and magnitude. Naturally, during the flotation of the securities of the new combinations, earning prospects were fully exploited and the public was imbued to the greatest extent possible with the idea that large profits were to be realized as a result of more concentrated and economical management. Launched one after another, these combinations added fuel to the speculative flame, so that before the movement had been in progress for more than two or three years the speculative tendencies of the public were thoroughly aroused and people who never before had had the slightest interest in securities were freely buying these new shares and bonds. A glance at the record of transactions on the New York Stock Exchange during the opening years of the present century in comparison with transactions just before the panic shows clearly to what extent general public interest in the market had increased. The speculative field was widened in the United States by the conversion of private manufacturing enterprises into stock-companies and the grouping of these companies by consolidation into dominating factors in their special industries. Large issues of securities for "good will" became necessary in order to acquire properties which might otherwise prove dangerous competitors, and the securities thus issued became the subject of active specula- tion on the ^stock exchanges. Already as early as 1900, the number of industrial companies classified by the Census as "combinations" was 183, with capital actually issued to the amount of #3,085,200,868. By the year 1904, the amount of capital, including bonds, of 305 "industrial trusts," was estimated at #6,717,791,533. It was inevitable that the conspicuous creation of such a mass of new securities should draw into the maelstrom of speculation a new public which had not been there before, 232 PROGRESS OF THE EMPIRE STATE that prices of securities should be forced by extravagant expectations to heights not warranted by real value, and that the market should react violently under every sudden gust of adverse influence. Such a reaction, of extreme violence, took place on the 9th of May, 1901, due to a struggle for control of the Northern Pacific Railway between rival interests, which led to a rapid advance in the stock and large "short" sales. But it was a storm which soon passed. The buyers of the cornered stock accepted a moderate settlement by the "shorts," prices of securities promptly recovered, and the day after the panic money was loaned as low as three per cent. Speculation raged vigorously through the year 1902 but received a serious check in 1903. Prices of securities, both railway and industrial, had reached a height which repelled the public and imposed caution upon the banks. In February, 1903, began the decline in the price of pig iron, which was not checked until from $24.25 per ton, it had fallen by successive stages to $15.50 in November. Inevitably, the profits of the Steel Corporation declined, the price of its common stock fell from 39 7 / 8 to 10, and that of the preferred shares from 89^4 to 49^, and in the autumn it became necessary to suspend the dividend on the common stock. Other industrial shares suffered in like proportion, and at times during the summer of 1903 grave results were feared for the entire market. The fall in quotations for iron was due in large measure to the restriction of orders by the railways, which were influenced primarily not by the decline of business, but by the scarcity of capital. When it was found that bonds issued at low rates for long terms of years could not be sold to advantage, recourse was had in many cases to notes, running for only two or three years, and paying, over these short periods, a much higher rate of interest than bonds. A large volume AUGUSTUS D. JUILLIARD Merchant and capitalist; senior member of A. D. Juilliard & Co. Director Chemical National Bank, National Bank of Commerce, The Bank of America; trustee Mutual Life Insurance Co., New York Life Insurance & Trust Co., Title Guarantee & Trust Co., Central Trust Co., Guaranty Trust Co. of New York; director Atchison, Topeka & Sante F6 Railroad, North British & Mercantile Insurance Co. of New York, and Realty Associates. President of the Metropolitan Opera & Real Estate Co.; governor New York Hospital; trustee American Museum of Natural History; member Chamber of Commerce since 1875; member of leading clubs and prominent in charitable and civic work. THE CRISIS OF 1907 233 of new securities, however, was still undistributed in the hands of rich men and powerful syndicates, and their heavy losses led to the designation of the long period of liquidation as "the rich man's panic." By skillful support of the market, so that the decline in prices was spread over several months, the worst consequences of the crisis were averted. The industrial depression proved only temporary, and by the summer of 1904 speculation for the rise was resumed, and continued, with varying fortunes, until the latter part of 1905. The year 1906 saw the culmination of this great specula- tive movement. It was the time when most unexpectedly the dividend on Union Pacific was raised from six to ten per cent, and an initial dividend of five per cent, was de- clared on Southern Pacific. These circumstances were taken full advantage of, and the speculative fever was fanned into as hot a flame as possible. Rumors of coming deals and of the cutting of all sorts of "melons" were freely circulated, and everything was done to induce the public to go into the market and take part of the load from the shoulders of those who were carrying stocks at the then exceedingly high prices. In the midst of the campaign for the rise the supply of funds ran low and recourse was had to borrowing in the foreign market. There is a great deal of exaggeration, without doubt, as to the extent to which the market was financed with foreign money, but there is no doubt that the accommodation secured in London and Paris ran into hundreds of millions. Even with the accession of this fresh supply of ammunition, however, those in control found themselves face to face with a constantly rising rate for money. In the fall, European bank-rates were all advanced to record figures, and on this side call-money reached 125 per cent. 234 PROGRESS OF THE EMPIRE STATE The years of active speculation preceding the panic naturally saw an enormous expansion of bank-credit. The flotation of all these new securities and the speculation by which the process was accompanied were a heavy strain upon the credit resources of the country. As each new issue of stocks and of bonds was made, it was necessary for the underwriting syndicates to borrow millions of dollars in order to carry the load, and in many cases, where the marketing of the securities was not readily effected, it was necessary to continue these borrowings for a very consider- able time. The speculative activity by which these years were marked also imposed a heavy strain upon the banks. In spite of the large participation of the public in the stock- market from 1900 to 1907, the bulk of the operations carried on was conducted by strong interests relying absolutely upon supplies of money borrowed from the banks. Time after time, during these . years, the available supply was used up and it was necessary to go into the foreign markets for accommodation. That happened at the end of 1902 and, as we have seen, it happened in an even greater degree in the summer of 1906. The period was one of almost continuous expansion, and, finally, of inflation. Writing of these conditions, Joseph French Johnson, in his able treatise entitled The Crisis and Panic of 1907, says: "In 1897 the cash reserves of commercial banks and trust companies in the United States amounted to about eighteen per cent, of the net liabilities. Thereafter there was a steady decline until 1907, when the cash reserve had dwindled to ten per cent. Mr. Miihleman in a new edition of his Monetary and Banking Systems — a most intelligent and satisfactory manual of financial statistics — gives on page 107 a table showing a decline in total bank reserves from 17.9 per cent, in 1897 to 11.3 in 1907. In the same table he shows that the amount of money and bank deposits THE CRISIS OF 1907 235 'in the hands' of the people increased during this period from #4,000,000,000 to over $11,000,000,000. The decline in the ratio of banking reserve was due principally to two circumstances: (1) the growth of trust-company deposits, supporting which there was a reserve of barely five per cent. ; (2) the relatively smaller cash reserves kept in the country banks, many of these institutions having been tempted by high rates of interest to invest heavily in call loans and time-paper in New York City. It is true that the amount of cash in the vaults of country banks increased after 1897, yet their liabilities grew in greater proportion. This decline of the country's banking reserve is regarded by some as a sufficient explanation of the crisis. In my opinion, however, it can be regarded merely as evidence that the lending power of the banks was severely strained, and that any further great extensions of credit were there- fore impossible. The country's low bank reserve in 1906 certainly meant that the country's business could not go on booming and expanding as it had done in the preceding years, but it did not necessarily presage disaster. The situation, however, was bad enough to make every conser- vative man careful as to his ventures. If in 1906 the banks of the country could have had competent leadership and could have been made to see the necessity for the careful husbanding of their resources and for the restriction of their advances upon high-priced collateral, the year 1907 would probably have passed without any great financial shock or serious loss to business interests. Unfortunately, however, there was no leader. "Another weakness in the banking situation lay in the relative decline of the ratio of capital and surplus to liabili- ties. The banking laws in this country do not require that a bank's capital shall bear any definite relation to the amount of its liabilities, yet from some points of view such 236 PROGRESS OF THE EMPIRE STATE a requirement would be more reasonable and more useful than the well-known reserve requirements. As a result, our banks are in the habit of expanding their business without regard to the amount of their capital investment, the latter seldom being increased except when the directors believe that in this way the institution can win greater favor with the public. After 1897 there was considerable increase in the total of banking capital and surplus in the United States, but it was not proportionate to the immense expansion of banking liabilities." From 1897 to 1907, a new element of weakness was injected into the situation by the great development of trust companies and State banks, without any proper correlation to the national banking system. These State institutions were not only not required to keep adequate reserves, but even the reserves required were permitted to be kept in bank notes. Thus their deposit and credit operations were capable of expanding to enormous propor- tions without any definite relation to gold. And such an expansion actually occurred. Within seven years, from 1900 to 1907, total liabilities of State banking institutions and trust companies expanded by more than five thousand millions of dollars, while cash reserves expanded by only about #171,000,000, and national bank-note issues expanded by about $440,000,000. As these bank notes are secured by evidences of the public debt and not to any appreciable extent by gold reserves, it becomes apparent how one form of credit was built upon another, until the whole fabric became a house of cards which a zephyr might topple in ruins. And to this fragile nature of the structure was added the fact that there was no refuge to which to look in time of storm, like the central banks of Europe, nor even a system of cooperation for guarding against a common THE CRISIS OF 1907 237 danger. For the national banks, and a few of the State banks of New York City, there did indeed exist the Clearing- House Committee, and through its existence it became possible to take certain steps to avert shipwreck after the storm had reached its worst; but among the trust companies there was not even this slender bond of union. When the Clearing House required of New York City trust companies, early in 1903, that they should gradually accumulate ten per cent, in cash reserves against their demand deposits, they withdrew from the Clearing House rather than comply with the requirement; and they made no move to secure reinstatement after the State Legislature in 1906 required of all such companies a reserve of fifteen per cent., of which only one third, however, need be in cash, and the other two-thirds might be respectively on deposit in other banking institutions or invested in pre- scribed securities. In this position of expansion and of isolation, therefore, the trust companies stood when the storm of 1907 broke, adding a portentous burden to the structure of credit sustained by the reserves of the national banks, upon which the entire structure thus ultimately rested. However much economists may disagree concerning the influence upon prices of the production of gold, there is no doubt that the way in which such production increased during the ten years ending with 1907 had much to do with the expansion in bank credit which preceded the crisis. The average annual production of gold for the twenty years ending with 1890 was #110,544,000. Then for the twelve years ending with 1902 came an annual average production of #221,635,000. The total production during these twelve years was #2,659,624,000, which was nearly 30 per cent, of the total production for the long span of four centuries ending with 1890. The production of the next five years , 238 PROGRESS OF THE EMPIRE STATE exceeded #1,850,000,000. Official estimates for these five years are as follows: Gold Production of the World, 1903-1907 Year Value I9°3 $327,702,700 IQ °4 347,087,300 1905 380,288,700 1906 402,503,000 1907 412,966,600 Total $1,870,548,300 When this prodigious total for five years is added to the production of the previous twelve years, a total is obtained for seventeen years of $4,530,172,300. Thus, within less than twenty years, production reached an amount equiva- lent to more than half of the entire production of the preced- ing four centuries. Even these figures do not reveal the increase in the proportion available for money, which bore a much greater ratio to the preexisting stock. The amount required for the arts increased from year to year, but did not keep pace with the ratio of production. If in 1890 about $60,000,000 was absorbed throughout the world for industrial purposes and the arts, only about $50,000,000 of the annual product was left available for additions to the monetary stock; while in 1906, even with a consumption in the arts estimated at $121,601,200, the amount left available as money was about $280,000,000, or more than five times the average of the years ending with 1890. It would be natural, under any theory of money, that this great addition to the monetary stock should have an influence upon prices and the condition of credit. Funda- mentally, it is the supply of other things than gold which determines the ability of a community to build railways, THE OLD MORGAN OFFICE BUILDING The Drexel Building, better known, perhaps, as the Morgan Office Building, at 23 Wall Street, was closed soon after the death of Mr. Morgan on March 31, [913, and has since been pulled down. Arrangements had already been made before Mr. 11 to take offices temporarily in Trust ing, at 14 Wall ending the erection of a new build- ing 01 ate. The old building was a seven-story marble or mansard roof, completed in 1873. Mr. ' andon the old strut whicl 1 to belong to the Drexel estate until purchased by □ the spring of [912. A and Broad Si 3 purchased by Mr. quare foot, — a price which in Wall Street at the time. Additional land has been acquired for the new structure, which will be seven or eight stories in height, but with foundations sufficiently strong for the erection of additional stories if required. The cost of the building will be from $1,500,000 to $2,000,000. THE CRISIS OF 1907 239 houses, and factories. It requires rails and steel beams, machinery and labor. But the fact that these can, under normal conditions, be obtained for gold obscures the import- ance of the part they play, until the community is brought face to face with scarcity of supply in relation to demand or with scarcity of consumable goods necessary to the ordinary processes of life. The influx of new gold into bank reserves tends, other things being equal, to stimulate speculation in both securities and goods, whence may occur a rise in prices. The fact that the problem remains essen- tially one of capital and credit rather than of the stock of gold was demonstrated, however, by the conditions of the crisis of 1907. In spite of the outpour of gold from the mines at a rate never equalled or approached in the history of the race, demand outran supply, the new gold did not offset the maladjustments of capital, and the money markets found gold an unsatisfying aliment when what was required was more capital in forms adapted to the continuance of production. The effect of this great expansion of loans made itself felt in every part of the world. Long before the final crash there were many signs of weakness. To enumerate them all is unnecessary — some of the striking cases are sufficient to illustrate. In Russia, newly dowered with the gold standard by the skill of Count Witte and encouraged by the consequent influx of foreign capital, prices rose rapidly in 1898 and 1899. The far-sighted Minister of Finance gave a warning in vain, early in the latter year, to the bankers of St. Petersburg of the danger of locking up their resources in speculation. The Bank of Russia was compelled to come to the rescue of the market, and on September 23, 1899, there was a crash in bank shares and industrial securities which carried them down by from 20 to 50 per cent. 240 PROGRESS OF THE EMPIRE STATE The loss of capital in Russian enterprises had its reaction in Germany and Belgium, whence much of the money for these enterprises had come. In Germany, efforts to main- tain high prices for iron and coal were made by the large syndicates by curtailing production, but they were only partially effective. Banks which had tied up their capital in new industrial projects found themselves unable to fulfill their obligations. Two mortgage banks failed in the autumn of 1900, because they had been speculating in real estate through subsidiary companies. The failures caused a panic in mortgage bonds, which was most acute in the case of two companies — the Bank of Pomerania and the Mortgage Bank of Mecklenburg-Strelitz. Bonds of the former fell from 98^ to 77, and of the latter from 100 to 49; but the discount banks came to their aid and they were saved from failure. On the heels of the mortgage bank failures came diffi- culties in two large institutions of a different character. One of these, the Dresdner Creditanstalt, was aided tem- porarily by other institutions, but was eventually compelled to liquidate. The other, the Bank of Leipzig, with a capital of #12,000,000 and 12,000 depositors, went down at once. To a single industrial syndicate, the Trebertrock- nung Gesellschaft, advances had been made under various accounts to the amount of #21,000,000. The head of the Leipziger Bank was refused aid when he sought it at Berlin, in spite of the fact that its failure was sure to cause pressure upon other institutions. A serious run fol- lowed upon the banks of Saxony, and some small institu- tions and many industrial companies went into liquidation. Much money was lost in tramways and other electrical enterprises. Of 443,550,000 marks (#106,000,000) in nominal capital for twenty-one companies, most of the shares being quoted far above par, there were losses in THE CRISIS OF 1907 241 market quotations between January 1, 1899, and October 15, 1901, which amounted to 270,810,000 marks (#64,500,000), or 61 per cent, of the earlier quotations. The fourth important influence which operated to bring on the panic was the dissipation of capital as a result of the three wars which took place during the ten years preceding the panic period — the Spanish-American War, the Boer War, and the Russo-Japanese War. That the great expenditures attending a war create activity in certain industrial lines is, of course, true, but students of economic conditions are all agreed that the wasting of capital in an unproductive manner has a strong tendency toward raising the rate of interest. If the thousand dollars which the small man has in his bank, available for the uses of commerce and industry, is invested in a government bond issued for the purpose of helping to carry on a war, the money is consumed in an unproductive use. And this happened on a tremendous scale during the progress of the three wars which occurred between 1898 and 1907. The war in South Africa cost the British Government nearly #800,000,000 and resulted in loans to the amount of nearly #600,000,000. The effect was severely felt in the money market in restricting the supply of capital for other classes of investments. Especially was the issue of large quantities of new securities felt upon the price of British consols. Quotations had been as high in 1896 as 114^. The reduction of the interest rate from 2^ to 2^ per cent, took effect in 1903 and had some influence in depressing prices, but the influences which were most potent in carrying down consols to a minimum price of 91 in 1901, and 80^ in the autumn of 1907, were the great demands for capital and the increase in the amount of consols on the market. The war between Russia and Japan began in February, 16 242 PROGRESS OF THE EMPIRE STATE 1904, and hostilities practically ceased in June, 1905. The attack of the Japanese upon the Russians was followed by a serious break in the markets of Paris and Berlin, but partial recovery soon took place. The estimated cost of the war to Russia was about #840,000,000, but this did not represent the disbursements after the peace. The cost to Japan, up to the close of 1906, was officially calculated at about #1,000,000,000. The war between Spain and the United States in 1898, though of minor importance, cost the United States about #165,000,000, and for a time seriously impaired Spanish credit. Thus, in these several conflicts in arms were expended not less than #2,800,000,000, making demands upon the savings of the world equal to more than the usual output of all classes of securities for an entire year. The outward signs of these causes which operated finally to bring about the crisis of 1907 were visible at least a full year before, but the warning was not generally heeded. Proof of this is afforded by what happened in the stock market during the first quarter of the year. The specula- tion at the end of 1906 had gone over into the beginning of 1907, which found the floating supply of stocks concentrated in the hands of the strongest interests in the country. There is no longer much mystery about the " silent " panic of the middle of March. It is generally realized now and admitted that the complete drying up of the springs of capital took those who were carrying the bulk of stocks entirely unawares, and forced upon them a liquidating movement almost without parallel in stock market history. The ordinary investor remembers "1907" by the smash in the stock market which took place in October and the sus- pension of banking facilities by which it was followed. Many of the strongest and richest men in the country remember 1907 rather by the cruel losses which were THE CRISIS OF 1907 243 inflicted upon them in the March smash, six months before the real panic occurred. Caught unawares, they were compelled to jettison great masses of stocks at prices which, in the case of many prominent issues, were almost as low as those reached when the main crisis later on in the year was at its height. Events during the early summer were not encouraging to the market. The government prosecutions of corpora- tions culminated in the fine of #29,240,000 imposed upon the Standard Oil Company of Indiana, upon 1462 counts, for rebating. The scarcity of capital was indicated by the failure of bond offerings by leading cities whose credit was above reproach. On August 9th, an offer by the city of Boston of #4,000,000 in 4 per cent, bonds brought bids for only $200,000. Three days later an offer by the city of New York of #15,000,000 4 per cents brought bids of only #2,713,815, at par. The market recovered slowly and fitfully for a time, but suffered another downward movement in July and August, which carried prices in some cases below the level of March. Even after these events, however, although it was known that many indi- viduals had suffered seriously and that loans had been called in large amounts by the banks, there was no important bank failure and no indication of serious disaster until the middle of October. As in most panics, the crash came suddenly and at an unexpected moment. It began through the inability of certain persons who were speculating in copper stocks to continue the operations which they had been carrying for a rise. A fall in the price of copper metal affected adversely most of the copper securities. Under the misapprehension that a corner had been created in United Copper, quotations were run up in a few days from 37 to 60. All the stock bought by the bull pool, with a view of squeezing the 244 PROGRESS OF THE EMPIRE STATE bears, was delivered to them. The brokers found themselves unable to pay for it, the stock dropped on October 16th to 10, and it soon developed that a chain of banking institu- tions had become deeply involved in their operations. The result was that several banks — the Mercantile National, the National Bank of North America, the New Amsterdam National Bank, and a few smaller ones — appealed to the Clearing House Committee for aid in meeting the adverse balances which confronted them at the Clearing House. These conditions afforded an opportunity for the more conservative bankers on the committee to accomplish what they had long desired — the elimination of a certain group of speculators from American banking. The latter were notified that the resignations of officers and directors must be placed in the hands of the Clearing House Com- mittee, and new officers appointed, if aid was to be extended. There was nothing to do but to comply with this demand. New officers were appointed, and the institutions endeavored to continue doing business. On Monday night, October 2 1 st, however, application for aid was made to the Clearing House Committee by the Knickerbocker Trust Company, the third largest trust company in New York, having deposits of nearly $60,000,000. It developed that its assets were to a considerable extent locked up in enterprises which could not be immediately liquidated, and that the president had been in close business relations with the controlling spirits in the National Bank of North America. The National Bank of Commerce, which attended to the clearings of the Knickerbocker Trust Company, finding a heavy unsettled balance against the company, refused to clear for it, and, after a run in which about $8,000,000 were paid out, the company, on October 22d, closed its doors. The next morning began a run upon the Trust Company of America, also having deposits of nearly $60,000,000, / / Ul. MM^^- SETH MELLEN MILLIKEN Capitalist; born in Poland, Maine, January 7, 1836; son Josiah and Elizabeth (Freeman) Milliken; educated in public schools, Hebron Academy, and Yarmouth Academy; married in 1874, Margaret L. Hill. Began business life at Minot, Maine, in 1856; 16 founded, with William 1 )eering, and is now senior member, the firm of Deering, Milliken & Co.; president .and director Cowan I. aine), Dallas Mfg. Co. (Ala.), Farnswortl (Maine), Gainesville Cotton Mills (Ga.), Great Falls Woolen Co. iN. II.), Malison Woolen Co. (Maine), Pondichcrry Co. (Maine); trustee Bowery Savings Bank, Colonial Trust Co.; director Albeville Cotton Mills (S. C), Cascade Woolen Co. (Maine), Darlington Mfg. Co. (S. C), Drayton Mills (S. C), Fidelity Bank, Forest Mills Co. (Maine), Hartsville Cotton Mill (S. C), Laurens Cotton Mills (S. C), Lockhart Mills (S. C), Lockwood Co. (Maine), Mills Mfg. Co. (S. C), Monarch Cotton Mills (S. C), Pacolet Mfg. Co. (S. C), Poland Paper Co. (Maine), and other corporations. Was Republican Presidential elector, 1892. THE CRISIS OF 1907 245 which proved to be the most serious run ever made upon a banking institution without destroying it. Within about two weeks the sum of #34,000,000 was paid in cash to depositors and in settlement of checks presented by other banking institutions. A run also began upon the Lincoln Trust Company, which reduced its deposits within a short time from about #20,000,000 to about #6,000,000. Under the strain of panic and the rigidity of the currency system, American banking broke down as it had done in 1857 and 1893. On Saturday, October 26th, the New York Clearing House Committee decided upon the issue of Clearing House certificates on the following Monday, and on the same day payment of checks in currency was generally suspended at the New York banks, and the same policy was adopted by banks throughout the country. Clearing House certificates were issued directly by Clearing House committees in leading cities. The amounts issued at the principal cities were: New York, #100,000,000; Chicago, #37,505,000; Philadelphia, #13,295,000; Boston, #11,995,000; St. Louis, #12,965,000; Pittsburg, #5,855,000; Baltimore, #2,520,000; Milwaukee, #3,260,000. In Pitts- burg and many other cities, certificates or checks of small denominations were issued for general circulation. In Pittsburg the Stock Exchange was closed, and in several Western States bank holidays were declared by the governors. These measures did not entirely allay alarm, and deposits in many banks and trust companies in New York continued to be withdrawn and hoarded in currency. The refusal of the banks to pay currency for checks caused a so-called "premium on currency," which rose as high as 4^ per cent., and was for a considerable time at 3 per cent. It was estimated that during October and November not much less than #25,000,000 in currency was sold by brokers in 246 PROGRESS OF THE EMPIRE STATE the financial district for checks. Almost immediately, also, the New York banks began to feel the strain of the demand from their correspondents in the interior for the return of their reserve deposits. It was calculated that from the beginning of the panic to the close of December about #296,000,000 in currency was absorbed throughout the country, and that of this sum #218,000,000 passed through the banks of New York. The actual breaking of the storm found the officials of the Treasury Department very much alive to the situation and ready to afford whatever relief was possible. As early as August, the Secretary of the Treasury, realizing that the monetary situation was gradually becoming more threaten- ing, took the unusual step of making weekly deposits in banks in all sections of the country with a view to facilitat- ing the fall movement of the crops, by anticipating the demand for currency that accompanies such movement. Beginning on August 28th, and continuing each week until October 14th, deposits were allotted to various banks to a total amount of #28,000,000, covering forty-six States and Territories. Every effort was made so to distribute this fund that it would meet actual needs in sections where business activity was at the maximum and currency was most urgently needed. To the extent that it was possible to apply it, this relief saved the New York banks the additional burden always thrown upon them at the crop- moving period. In order to meet the demand for currency by the institu- tions which were subjected to pressure, the Treasury Department forwarded to New York within three days about #36,000,000 in small bills. While these were not in all cases used in making direct deposits of public moneys in the banks, they were available at the Subtreasury for any banking institution which desired to obtain them in exchange THE CRISIS OF 1907 247 for hills of larger denomination or for coin. At a later date, gold coin was paid in many cases, at the request of certain institutions, hecause they found that payment of coin to depositors tended in a measure to discourage runs. It was not because the coin was preferred to notes; on the contrary, it was because depositors did not desire to be burdened with taking away the coin, and would have pre- ferred notes of large denomination. It is, indeed, a source of gratification that at no period of the crisis was there the slightest suspicion of the integrity of the currency issued either by the Government or by national banks. The effect of the law of March 14, 1900, in creating an adequate gold reserve and providing necessary measures to replenish the reserve in case of need, so completely set at rest any distrust of the exchangeability of all forms of paper for gold that the subject was hardly mentioned anywhere, except as a cause of congratulation upon the effects of the Gold Standard Act. The transfer of large amounts of gold from the Treasury to the banks made it necessary to run the mints at high pressure in order to comply with the requirements of the act of March 14, 1900, that not more than #50,000,000 of the legal gold reserve of #150,000,000 should be kept in bullion. There was at no time any disposition to convert any form of govern- ment paper into gold because of any question as to safety of the paper, nor was there any disposition to present gold certificates for redemption in gold coin. While the action of the Treasury Department in placing large sums in the national banks in New York was sub- jected to some criticism, it was amply justified by the con- ditions as they then existed and as they have been disclosed in the light of subsequent events. Figures show that the national banks in New York did not retain in their own keeping the public moneys received, but were enabled 248 PROGRESS OF THE EMPIRE STATE through their extended relations as reserve depositories with banks of all classes throughout the country to employ these moneys to meet a large proportion of the calls made upon them. An examination of the deposits made by the Treasury in the banks, from time to time, commencing in the middle of October, will show that as the stringency progressed the Treasury gave relief in every important locality where assistance seemed to be required. Some of the more important deposits were as follows: New York, $35,000,000; Chicago, $3,000,000; Pittsburg, $1,500,000; Cincinnati, $1,500,000; Minneapolis and St. Paul, $500,000; and in many places in the South and West, the public revenues, which ordinarily would be remitted to the various sub- treasuries, and thus taken out of circulation, were allowed to accumulate in national bank depositories. Obviously, when the pressure was focused to the extent which has been set forth on the financial center of the country, it seemed advisable to focus relief there also. The national banks of New York City held on August 22d only $28,253,386 in deposits of public money, aside from certain balances of disbursing officers, or considerably less than 3 per cent, of the national banking capital of the city. The United States deposits in national banks in all other places were about $115,000,000, or more than 12 per cent, of the national banking capital of the remainder of the country. It is plain, therefore, under the policy of recall- ing the public funds which was inaugurated in the spring, that the national banks of New York were not favored with any large proportion of public moneys, but, if any uninten- tional discrimination was shown, were treated less favorably than the banks of other sections of the country. While the Secretary of the Treasury felt compelled, in order to meet the exigencies of the situation, largely to THE CRISIS OF 1907 249 increase deposits in the banks of New York City, even the proportion left in their custody after the panic had subsided was smaller than the proportion in certain other cities and States. A table of the distribution of government deposits on December 7, 1907, by States and by sections of the Union, shows that the amount of public deposits on that date in the entire country was #222,352,252, which was 15.3 per cent, of national banking capital and surplus, amounting to #1,451,296,366. While the banks of the State of New York appear as holders of public moneys to the amount of 26.8 per cent, of their capital and surplus, the banks of the New England, Eastern, and Middle Western States, taken as a whole and including New York, show a propor- tion of deposits to capital and surplus of only a little more than 15 per cent. The banks of the Southern, Western, and Pacific States, on the other hand, show a proportion of nearly 18 per cent. With the elimination of New York from the Eastern group, the percentage of the remaining Eastern and Middle Western States is only about 11.2. These public funds were distributed among 1421 national banks. The object, of course, in distributing public money is not to afford profit to banks as such, but to afford to the business community means for carrying on its transactions upon a normal basis of money supply and interest charges. It was not thought necessary by the Department to extend the distribution of public funds to all small banks, but the aim was to distribute them so widely in every part of the country that the benefit of the funds thus distributed would reach even the most remote quarters through the increased power of making loans and rediscounts given thereby to the stronger banks of the locality. An effort was made also to broaden the basis upon which public deposits might be made by extending the list of bonds acceptable to the Treasury Department. Up to 250 PROGRESS OF THE EMPIRE STATE about the ist of October, State, railway, and municipal bonds were accepted at 90 per cent, of their market value, when not above par, when such bonds came within the provisions of the laws of the States of New York and Mas- sachusetts governing investments by savings banks. At about this time bonds coming within the provisions of these laws became very scarce. Banks were then informed that bonds would be acceptable which came within the laws of Connecticut and New Jersey, thus making available many millions of bonds which were considered as good security. After the offer of the Secretary of the Treasury to receive State, railway, and municipal bonds, in substitution for government bonds to be transferred to circulation account, as above referred to, a few bonds not strictly in conformity with the provisions of the laws of any of these States, but yet of good market value, were accepted at the rate of 75 per cent, of their market value. Under a strict construc- tion of the laws of these States, the bonds of several of the largest municipalities are not available as investments for savings banks, owing to the fact that their percentage of debt, as compared to assessed valuation, is slightly in excess of the amount stipulated in these laws. The same state- ment applies in a measure to railroads. There are several issues of second-mortgage bonds, which in point of security might properly be classed as first-mortgage bonds, inasmuch as the first-mortgage bonds have been largely paid, or a fund established to pay them as fast as presented. In some other cases also the mileage of the railroad is not quite sufficient to bring its bonds within the class of investments legally prescribed for savings banks. The Department exercised great caution in the accept- ance of bonds as security for deposits, and in nearly all cases where bonds were accepted which were not legal savings bank bonds they were marketable at a price equal -7T |7~ OHHDI. HERBERT HAROLD VREELAND Born in Glen, New York, October 28, 1856. In 1874 entered the service of the Long Island Railroad Company and p through each grade of the transportation department to freight and passenger conductor. In 1881 he was with the New and Northern Railroad Company as conductor, and later train . superintendent, general superintendent, and general man- ager. He remained with this company until 1893, when he ted the presidency of what was then known as the Houston, Street and Pavonia Ferry Railroad Company, its successors being the Metropolitan Street Railway Company, the Interurban Street Railway Company, — now the New York City Railroad Company, — and the Metropolitan Securities Company. He was afterwards chief executive officer of the corporation. Under his presidency nearly thirty independent and competing com- panies owning franchises were united in one system, comprising every surface line in the boroughs of Manhattan and the Bronx. THE CRISIS OF 1907 251 to, and in some cases in excess of, that of savings bank bonds. It was deemed wise, however, as they were not classed as savings bank bonds, to accept them at a lower rate, namely, 75 per cent, of their market value. It is gratifying to be able to state, as evidence of the care with which the entire situation was handled, that not a dollar of the Government's money was lost through the acceptance of inadequate security or through the failure of any bank to return its deposits when called upon to do so. All possible relief in the way of increased deposits in the national banks having been extended, the Treasury Depart- ment turned toward bringing about an increase in the supply of currency. Here the great trouble was in the shortage of bonds available to secure additional bank notes. The Department, therefore, notified national banks that they would be permitted to substitute bonds suitable for savings bank investments for government bonds which were held as security against public deposits. The purpose of this measure was to enable the banks to employ the government bonds, which were thus released, as security for additional bank-note circulation, in conformity with the law. To this offer the banks responded promptly, and as a result many millions of additional bank notes were taken out and were employed in meeting the currency famine. As usual in emergencies, the difficulty of obtaining bonds, and other obstructions of detail, prevented the increase in circulation becoming effective to the full amount until some time after the need for it had passed. Just before the acute stage of the crisis, the national bank-note cir- culation stood (on October 15th) at #607,118,742. While strenuous efforts were made, especially by some of the large banks in New York and Chicago, to comply with the ex- pressed wishes of the Department and of the Comptroller of the Currency to increase circulation, the amount out- 252 PROGRESS OF THE EMPIRE STATE standing had risen on November ist only to $611,822,676, and on November 15th to $631,344,943. The most important increase in the circulation took place after the announcement, about to be referred to, of the government issues of Panama bonds and one-year Treasury certificates, so that the circulation attained, on December ist, the amount of $656,218,196; on December 15th, $676,914,235; and finally, on December 31st, $690,130,895. By the latter date the urgent pressure for currency had practically ceased and yet notes continued to be issued in compliance with orders previously received, until the outstanding circulation on Saturday, January 18, 1908, was $695,927,806. The fact that the national banks were exerting them- selves to increase circulation, and that the Treasury by these new issues placed at their command means of doing so, undoubtedly had a moral effect which tended still further to check the panic and reduce the premium on currency. The banks were hampered, however, before the announcement of the new government issues, by the rapid advance in the price of 2 per cent, bonds. These bonds sold as high as no, and even at this price the supply in the market obtainable by national banks was extremely limited. It was with a view to relieving this situation, and counteracting the premium on currency — which was itself a stimulus to hoarding and which practically interrupted exchanges between different cities — that it was decided on November 17th to receive at the Treasury applications for subscriptions for $50,000,000 in Panama Canal bonds, under the act of June 28, 1902, and $100,000,000 in 3 per cent, certificates of indebtedness, under the act of June 13, 1898. One of the direct effects of these issues was to afford to the banks the means of increasing their circulation. If the proceeds of these issues had been retained in entirety in THE CRISIS OF 1907 253 the Treasury, the increase in bank circulation would have been offset by the amount paid by the banks for the bonds. By providing, however, for the transfer to the banks of a part of the purchase money as an addition to their holdings of public deposits at the time, a very considerable net increase in circulation became possible. In order to afford this relief, the banks to which awards were made of Panama bonds were allowed to retain 90 per cent, of the purchase price as a deposit, and those to which allotments were made of the one-year certificates were allowed to retain 75 per cent, of the purchase price. Thus an inducement was offered for subscriptions to the new issues, as well as a means of increasing bank-note circula- tion. It was with deliberate intent also that the offer was made more attractive in the case of the bonds than in the case of the certificates, after it became evident that the issue of the entire amount of the latter first proposed would not be required to restore confidence. Ultimately the results of these offers on the part of the Treasury were such that it was found necessary to issue only $24,631,980 in the Panama bonds and $15,436,500 in the certificates of indebtedness. Practically all of both classes of obliga- tions, excepting $91,820 in bonds, were used as the basis for increasing the bank-note circulation or securing public deposits. The issue of new securities by the Treasury Depart- ment was influenced by the conclusion that it was advisable to take some strong and resolute step which would convince the public, both at home and abroad, that the Government was thoroughly alive to the situation and determined to give its aid in every possible legal and proper form. The most potent weapon at such times in bringing a crisis to an end is often as much one of moral effect as of the definite action taken. It has been the history of many great crises 254 PROGRESS OF THE EMPIRE STATE in Europe as well as in this country that the knowledge that adequate resources existed to avert disaster was sufficient to obviate the necessity for employing such resources to their utmost limit. An illustration in point is the action of the Chancellor of the Exchequer in Great Britain in the panic of 1866, when the announcement that he had authorized the Bank of England to disregard the Bank Act and to issue its notes to any necessary limit promptly arrested pressure upon the banks. So prompt was the response of public feeling to this action in suspend- ing the demand for discounts and the withdrawal of deposits that the bank did not find it necessary to avail itself of the authority to issue additional notes. The fear that accom- modation could not be obtained by solvent business men was completely allayed and the panic almost immediately subsided. The fact that the Treasury was in a strong position in respect to its normal cash balance made the situation much more easy of control in some respects than after the panic of 1893, when the cash balance was almost completely exhausted and the reaction of this influence was felt in depleting the gold reserve. At that time the first issue of $50,000,000 in 5 per cent, bonds was not announced until the cash reserve had been depleted below $50,000,000. And the same depletion took place before the second issue of bonds in the autumn of 1894. While the pressure upon the banks was not allayed at once by this measure, confidence was so far restored that the premium on currency fell immediately, and bids were received in such volume for both classes of issues that it was not considered necessary to allot even half of the total amount of the two issues. The Panama Canal bonds were issued under authority of the act of June 28, 1902, as amended by the act of De- THE CRISIS OF 1907 255 cember 21, 1905, authorizing the Secretary of the Treasury, "To borrow on the credit of the United States from time to time as the proceeds may be required to defray expendi- tures authorized by this act (such proceeds when received to be used only for the purpose of meeting such expendi- tures), the sum of $130,000,000, or so much thereof as may be necessary." It would seem to be obvious from this language that it was intended to construct the canal entirely from the pro- ceeds of loans issued for the purpose and not to charge any part of the cost of construction upon the current ordinary receipts of the Government. As the entire proceeds of the bonds which were actually issued under this offer, amounting to $24,631,980, were expended on the canal work, it would seem that no question of the legality or propriety of such an issue of bonds could be raised. The one-year certificates were issued under authority of the act of June 13, 1898, authorizing such issues when necessary to meet the expenses of the Treasury. The criticism has been made that with a nominal cash balance of some $200,000,000 in the Treasury the occasion contem- plated by the act did not arise and the power therefore did not inhere in the Secretary to make an issue of such securities to meet current expenses. From a strictly legal point of view, there is probably no question that the deter- mination of the occasion for making such an issue is within the discretion of the Secretary of the Treasury. Indeed, it is expressly made so by the statute. From a financial point of view the Secretary felt justified in exercising this discretion with due regard to the amount of cash actually in the Treasury as well as to the amount shown upon the balance sheet, including deposits in national banks. It seemed to him that it would be a strained construction of the act of 1898, and of his official responsibility, to hold 256 PROGRESS OF THE EMPIRE STATE that it was his duty, in order to meet the current needs of the Treasury, to invoke a financial disaster by attempting to withdraw funds on deposit with national banks at a time when they were subject to severe strain in meeting the business requirements of the country, and when any additional act or policy tending to subject them to further pressure might make absolutely impossible, if it were not already so, the return to the Treasury of the funds required for meeting its obligations. The character of the new issues of securities offered for subscription was such that it was anticipated that most of the subscriptions would come from national banks. The 2 per cent, bonds afford such privileges to national banks as a basis of note circulation that there are strong inducements to the banks to outbid private investors, who would find in the bonds nothing more than the best form of security paying only 2 per cent per annum. It was expected — and this expectation was fulfilled — that the bonds would be used largely as a basis for additional bank-note circulation and that such circulation would contribute its share to relieving the acute pressure for currency which existed throughout the country. Even if there had been no other justification for limiting subscriptions to national banks, this consideration — that the bonds would be used to meet the pressure for currency — would, in the opinion of the Department, have justified an absolute restriction of the awards to national banks. The legal right of the Department to make allotments of the bonds and securities to such persons and banks and in such amounts as it might see fit can hardly be called in question, in view of the fact that reservations on these points were made when subscriptions were invited. Thus the circular offering the Panama bonds contained this distinct provision: " The Department also reserves the CHARLES COURTER DICKINSON R " '.skill, N. V.; graduated CobleskUl Acad ', bar, May i". [894, al Alban or oi Dickinson on Eminent Domain, Groesbeck and Dickinson's Banking York. Dickinson ami Cummings' General Municipal Lines of New York. Was president Delta Tan Delta I- chairman of 1; [of Direi I ' w v '"' k: esident and dii :;l1 Trus< ' acting ie Trust Co., for which Leslie M. Shaw, ex-Secretary of it. Made tour around the world, 1 Mayflower ,] of Huguenot. Socie United States, Sons of the Revolution, Cornell Alumni Metropolitan Museum of M" st ' : the Municipal An | M e w ., New York Botanical Gar 1 (910. TIIF. CRISIS OF 1907 257 right to reject any or all bids, if deemed to be to the interests of the United States so to do." Obviously, so far as the offer of securities was influenced by the desire to prevent distress in the money market, it would have failed of this purpose if awards had been made, even to bona fide bidders, which would have resulted in large drafts upon the reserve money of the banks and would not have aided in drawing money from private hoards. After careful analysis of the bids received, the conclusion was reached by the Department that if bids were awarded to individuals in large sums, it would have the tendency to cause still further withdrawals of money from the savings banks, which usually carry relatively small reserves in currency and in case of heavy demands would have been compelled to draw upon the national banks and trust companies. It was, therefore, decided in the case of the Panama bonds to make no awards to individuals in excess of #10,000. It was also decided to accept the highest bids of national banks for the remainder of the issue, after these minimum allotments to individuals. At no stage of the crisis did the Government feel called upon to interfere directly with the normal movement of gold between international markets. The movement of foreign exchange was very irregular in the early stages of the crisis, because of some demand for remittances to London in settlement for maturing finance bills and in payment for American securities which were being remitted by disturbed foreign holders to the United States. The sum of #1,500,000 in gold was actually engaged for export to Germany on Octo- ber 19th, but was explained as being a special transaction. After a short period of uncertainty, however, exchange turned strongly in favor of imports of gold into the United States, and by the end of October engagements of over #24,000,000 were announced, which were eventually swelled 17 258 PROGRESS OF THE EMPIRE STATE during the next two months to more than #100,000,000. None of this gold arrived until November, but the moral effect of the engagements was felt as soon as they were announced. The metal was distributed, chiefly through the channel of the New York clearing-house banks, to threatened points throughout the country. It is a striking proof of the energy with which the banks of New York extended aid to those of other parts of the country that the national bank returns show a reduction in specie in the national banks of New York from #173,221,007 on August 22, 1907, to #147,974,918 on December 3, 1907. Thus, not only did the entire volume of gold imported between these two dates pass through New York to other places, except so far as a part was hoarded by individuals, but the New York banks gave up #25,000,000 of their usual and normal reserves. These various relief measures marked the turning-point of the panic. The deficit in the reserves of the New York clearing-house banks w hich on November 16th was #53,666,- 950, increased in the next week less than #500,000, and in the following weeks turned rapidly downward, until the amount on December 28, 1907, was only #20,170,350, and by January 18, 1908, had been converted into a surplus of #22,635,475. The cash holdings of these banks, which had touched a minimum on November 23, 1907, of #215,851,100 rose on January 18, 1908, to #295,182,600. No further steps were considered necessary by the Treasury except to continue deposits in the banks of public moneys where they were available, and early in December it became possible to replenish the cash in the Treasury by the with- drawal of about #6,000,000 from national banks in New York City. The premium on currency did not wholly disappear until about the beginning of the new year, but remained only nominal during the latter part of December I I Hi CRISIS OF 1907 259 as the panic subsided and as the funds withdrawn from banks for hoarding were gradually restored. In Europe, also, conditions began to improve rapidly with the passing of the crisis in America. The percentage of the reserve at the Bank of England rose from 35.62 per cent, on January 2, 1908, 1052.69 percent, on January 16th, and the directors felt justified in reducing the official discount rate from 7 per cent, to 6 per cent, on January 2nd, and two weeks later (on January 16th) to 5 per cent. The gold stock of the bank, which had been reduced on November 7th to £27,725,225, rose on January 2, 1908, to £32,543,666, and on January 16th, to £35,791,425. The Imperial Bank ot ( Jermany, which had been under severe pressure, benefited by an increase in its cash by #20,000,000 in the single week of January 17th, and a decrease in its note issue by #43,875,- 000, and under these conditions felt justified in reducing its discount rate from 7^ to 6 l /> per cent., and later (on January 25th) to 6 per cent. The Bank of France also greatly increased its cash resources and reduced its discount rate early in the year. THE NEW YORK STOCK EXCHANGE present New York Stock Exchange building, which in architectural beauty is the foremost bourse in the world, was completed in April, 1903. It is an eight-story, steel-cage,' fire- proof structure of the Roman Renaissance type. The main structure is approximately rectangular, about 150 feet deep, with fronts on Broad and New Streets, respi wide. An irregular extension about 84 feet long, with a 15-foot front, affords an entrance on Wall Street. The materials 1 construction are wholly American, tl n g of Georgia marble aad the interior of marble from South Dover, N. Y. Within the Board Room proper there are neither columns nor supports; the effect is that of a majestic hall with noble surfaces of marble walls, crowned by an ornate ceiling. George P. Post was the architect, and Charles T. Wills the builder. CHAPTER VIII HISTORY OF THE NEW YORK STOCK EXCHANGE BY SERENO S. PRATT MUCH might be written concerning the close re- lation between war and the origin of stock markets. War is not merely a question of men and guns. It is likewise a question of finance. While destructive of wealth it calls for extraordinary government expenditures which impart a temporary activity to many industries. It results in an extension of government credit. These things lead to inflation and speculation. War creates national debts. National debts make necessary certificates representing this indebtedness. These certificates pass into the hands of investors through stock markets and stock exchanges. Thus the history of stock markets is closely interwoven with the history of govern- ments. The national indebtedness created by Louis XIV. gave rise to John Law's bank, the Mississippi Bubble, and the beginnings of the Paris stock market. The national indebtedness created by the wars of the seventeenth century gave rise to the Bank of England and the beginnings of the London stock market. ' It was war likewise that gave birth to the New York stock market, the history of which starts directly and in the same place from the organization of independent 261 262 PROGRESS OF THE EMPIRE STATE constitutional government in the United States. In New York and in Wall Street, where Washington was inaugurated in 1789 and where the First Congress assembled, started the stock market which sprang as did the stock markets of Paris and London, out of the debt burdens of war. William M. Gouge, writing in 1837, said: "The period immediately succeeding the Revolutionary War was in a peculiar sense an age of speculation. " The contest of the colonies for independence created a mass of indebtedness, continental and colonial, aggregating about #80,000,000. The First Congress established a treas- ury department. Washington appointed Hamilton as Secretary of the Treasury and Hamilton's first great act as Secretary was to report to Congress in favor of the assumption by the new government of the debts incurred in the conduct of the War of the Revolution. This report, presented in January, 1790, started the first stock speculation on this continent. "Eager speculators," says Lodge in his Alexander Hamilton, "hurried over the country to buy up the debts, and the Secretary of the Treasury already began to be regarded as one who could make the fortune, not only of the government, but of individuals." The certificates of indebtedness bought from the original holders at low prices advanced rapidly to high figures. The plan of refunding the debt was bitterly opposed by Hamilton's enemies on the ground that greedy and successful speculators were to profit at the expense of the original holders, the men who had in the perils of war actually loaned their money to the struggling colonies. Even Hamilton was not spared from personal abuse, but was charged with having aided in and profited by this speculation. In a subsequent Congressional inquiry he was completely vindicated. It was Hamilton also who planned the first United States Bank, the organization of which in 1791 produced another HISTORY 01 INI NEW YORK STOCK EXCHANGE 263 medium of speculation. This, we are told, "expanded into a wild mania and consequent panic and disaster." Hamil- ton had already some years before assisted in the establish- ment of the Bank of New York, the first institution of the kind in New York City. In 1 791, "hearing with infinite pain of the circumstance of a new hank" (in opposition to the United States Bank and the Bank of New York), Secretary Hamilton wrote: 'These extravagant sellers of stocks do injury to the government and to the whole system of public credit by dis- gusting all sober citizens and giving a wild air to every thing." The speculative mania, as speculative manias usually do, resulted in collapse and loss. In 1791 United States Bank stock declined from 195 to no, rallying later to 145. This caused a number of failures and the distress was so great that Hamilton resorted to the expedient of buying government bonds so as to get out more money in the market, a device which he had to repeat in the following year. The cashier of the Bank of New York, in a report to Secretary Hamilton, March 25, 1792, said: "We have no public sales of stocks now in the evenings. Therefore I cannot go into the market until to-morrow. . . . The large dealers in stocks are to have a meeting this evening and it is reported will enter into an absolute agree- ment not to draw any specie from the banks for three months to come." All this is of interest as it is a contemporary reference to the infant stock market and also to a measure of relief for an overburdened credit situation by the first Secretary of the Treasury which his successors have more than once been obliged to repeat. In the very month that the cashier of the Bank of New York wrote this letter to Hamilton, it was recorded in the public press that "the stock exchange office is open at 22 264 PROGRESS OF THE EMPIRE STATE Wall Street for the accommodation of the dealers in stocks and in which public sales will be held daily at noon." This would appear to have been an auctioneer's organization. But there were even then brokers in stocks independent of the auctioneers and these on March 21st held a meet- ing at Corre's Hotel at which they agreed not to attend the auction sales and appointed a committee to make suitable arrangements and regulations for the transaction of their business. This meeting was the beginning of a regulated stock market in New York. On May 17, 1792, the brokers, seventeen in number, three of whom had offices in Wall Street, four in Broad Street, and the rest in adjacent streets, signed the following agreement: "We, the subscribers, brokers for the purchase and sale of public stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day, for any person whatsoever, any kind of public stock at a less rate than one quarter per cent, commission on the specie value, and that we will give a preference to each other in our negotiations. In testimony whereof we have set our hands this 17th day of May, at New York, 1792." It may have been accident or destiny that willed that the stock market should have been located in Wall Street, but there is nothing accidental in its evolution. I have connected its origin with the War of the Revolution because that war resulted in the creation of securities to be bought and sold. While war creates a supply of marketable securi- ties and stimulates speculation, it is no explanation of the mystery of the development of a demand for securities whether these securities be the outcome of destructive wars or of the constructive enterprises of peace. We must go back farther than the American Revolution or even the wars of the seventeenth century to account HISTORY OF THE NEW YORK STOCK EXCHANGE 265 for the evolution of stocks, of stock markets, and of stock exchanges. This evolution has developed naturally out of economic laws. The stock market has grown out of human needs as legitimately as the establishment of representative govern- ment itself. The modern financial system is indeed syn- chronous with modern liberty. Both are closely allied in spirit, in origin, and in evolution. The expansion of indi- vidual liberty has carried with it the expansion of commercial enterprise. Commercial enterprise required new tools with which to explore and develop the wealth of the earth. Science rushed to its aid with wonderful inventions which have revolutionized the conditions of human life, but even as much as steam and electricity have modern credit and the modern corporation proved the most powerful instru- ments of commercial enterprise. No one studying closely the history of the development of this continent can fail to appreciate, in part at least, the fact that without the stimu- lating influence and dynamic power of banking credit, corporate capital, and the stock market, it would have been impossible to have brought this country to its present state of wealth and power. Credit and the stock market have accomplished in one hundred years what it would otherwise have taken perhaps five hundred years to accomplish. The steps in the development of the stock market are easy to trace. It was found that individual resources were insufficient to supply the capital required to carry on the large enterprises which the new needs of the world required, especially after the discovery of America. The modern corporation sprang out of this necessity. It was found that by aggregating the means of many small capitalists the money could be secured to carry on the large enterprises. Just as in the domain of politics it was found that by unit- ing the many under a form of government which joined the 266 PROGRESS OF THE EMPIRE STATE principles of union and liberty, with a strong central execu- tive and a representative assembly, so in the domain of business it was found that by means of the corporation it was possible to secure the power of united capital and at the same time retain the advantages of individual liberty. This was not indeed all thought out in the beginning. It simply grew, as all mighty movements do, out of the operation of the law of supply and demand. The capital of many invested in the corporation was represented by shares, and it was soon found convenient that these shares should be equal in value but that each investor or partner in the enterprise might own as many of these equal shares as he had the means to buy. From this developed the transferable certificate of shares of stock so that partnership interest in the corporations could be more easily bought or sold and transferred from one owner to another. Out of this has developed the modern stock company, which facilitates the gathering, out of the small means of many, the capital adequate for undertakings too large for any one individual; which permits of limited liability, so that a maximum of power is joined to a minimum of individual risk; and which secures continuity to a corporation not depending upon the life of any one stockholder, but existing like a self-perpetuating body. Out of the stock company has, by an inevitable evolu- tion, sprung the stock market. With many people owning shares in stock companies, it was of course inevitable that some would want to sell their interest while others would want to buy. Just as inevitably there developed a class of middlemen or brokers between these sellers and buyers. The brokers had to have a common meeting-place where they exchanged their wares. Such a meeting-place became a stock market. As this stock market developed it was /?, r~ *- RUSSELL SAGE rona,N.Y. f August 4,1816. Began his '■ as an errand boy in his brother's grocery store at Troy- rapidly advanced until ie a wholesale grocer in ,n t8 37- *man of Troy ix 47: member of Congress , S"!,H 7 ' active m A all Street. Was director in a large nun ^orations mdudmg the Manhattan Raih h aue Bank, ConsoUd entra] ;r ,Wa >'. < liri P; "'^' Railwa 1 Pacific Mail I DHvia Slocum, of Syracuse , * - who survives bin,, an m his largo fortune was bequeathed. Since the death of her husband Mrs. Sag many other public benefactions, has es [ m ' his . >ry, with an endowment of $10,000,000, the "Russell Sage Foundation," for the Improvement of Social and Living Condi- tions in the United States. Mr. Sage died at Lawrence, Long Island, July 22, 1906. HISTORY OF THE NEW YORK STOCK EXCHANGE 267 found necessary to organize it with rules and regulations, and thus the stock exchange came into existence. Macau- l.i\. in a celebrated passage, has described the origin of the English stock market. The surplus income of the people, he explained, demanded some new opportunity for invest- ment other than in land, for the supply of capital seeking investment was greater than the demand for it in agricul- ture. Hence set in an eager buying of stocks in commercial corporations. All this was absolutely legitimate, but out of this demand for stock investments developed some gross abuses, such as fraudulent promotion and dangerous over- trading, leading to panic and loss. This has not, however, in the least impaired the legitimate foundation of the stock exchange, which rests upon the sound basis of human need. It exists because it is necessary for the world's progress in civilization. It is difficult in this day to conceive what the world would be without the corporation and the stock market. It is certain that without them the United States of America would not now be one of the three or four great powers of the earth. Stock markets are products of civilization, and are to be found in their most highly developed state in those countries which are richest in liquid capital seeking permanent investment. The early growth of the New York stock market was slow, as was to be expected in a new country with limited capital, immense as were its undeveloped resources. For twenty-five years the New York stock market was conducted substantially under the agreement of May 17, 1792, for it was not until 1817 that the New York Stock Exchange was founded. Although there were seventeen brokers in this agreement of 1792, there were only seven stocks to deal in, as is shown by the following price-list of May 26, 1792: 268 PROGRESS OF THE EMPIRE STATE Six per cents 22s od Three per cents 12s 8d Deferred 13s 2d Indents 12s 3d Final settlements 18s 6d Half shares Bank U. S 50 per cent, premium Shares Bank of N. A. (Phila.) ... 15 per cent, premium Mr. Francis L. Eames, 1 to whom the Stock Exchange is much indebted for most of the few records of its early history, gives copies of curious entries in the books of one of the brokers of 1792 in which accounts are made not only of transactions in stocks but also of election bets. It is a remarkable fact that stock markets are waifs of the street. What is known as the Mississippi Bubble was a speculation in shares of the so-called Mississippi Company which was carried on in the Rue Quincampoix. For a century the stock market of London was located on the curbs and in the coffee houses of Change Alley. Likewise the earliest New York market was conducted under a buttonwood tree in front of 68 and 70 Wall Street. There has scarcely been a time since then when part of the stock market was not located in the street. In 1792 accommoda- tions were obtained by the brokers in the Tontine Coffee House, for many years the center of the commercial activi- ties of New York. The merchants, rather than the bankers or brokers, were the business leaders of that time. Nearly half a century before, the merchants had established a place of meeting in Broad Street, and in 1768, in the long room of the Fraunces' Tavern, they organized the Chamber of Com- merce. But from 1793 to 1827, when the Merchants' Ex- change was completed on the site of the old Custom House Building, they centered in the Tontine Coffee House. 1 The New York Stock Exchange, by Francis L. Eames, 1894. HISTORY OF THE NEW YORK STOCK EXCHANGE 269 Very little is known concerning the New York stock market during the first twenty-five years of its development. There was a remarkable growth of the country during those years and investment and speculation in stocks slowly but surely grew with it. At first, as has been related, the trad- ing was in government securities. Then, and for a long time, bank shares were the leading object of investment interests. The first banks proved profitable enterprises and capital was rapidly drawn into that field. In nine years the number of banks increased from three to twenty- three, the latter having a capital of #33,000,000. Insur- ance companies were also started and the shares of these came into the market. After this, canal stocks and the shares of development and industrial companies began to be traded in. It was not until the nineteenth century was thirty years old that railroad stocks, which have ever since been the leaders in the market, first appeared. In 1801 a stock list advertised by a broker whose offices were at 50 Wall Street contained the names of five government stocks, three bank stocks, and three insurance stocks. It is noteworthy that every one of the bank and insurance stocks sold at par or more. It must be remembered that at this time the country was still in a primitive state, and so limited were the facilities of transportation that prayers were offered in the churches for those about to make the journey between New York and Boston. Wall Street, as its name indicates, was the outer stockade or wall of the original settlement of Man- hattan Island. In the latter half of the eighteenth century trade had already invaded the lower half of the street, but the church then, as now, held sway at its Broadway entrance, while some of the best society in the city resided between Broadway and William Street. Almost from the very start the banks and corporations and the brokers began to 270 PROGRESS OF THE EMPIRE STATE claim the street as their own, and at the beginning of the nineteenth century it was as truly the financial center of the city as it is now, although it was not until a generation later that, New York forging ahead of Philadelphia, it became the financial leader of America. To-day if the question were asked, what is the most famous thoroughfare in America, the answer would have to be, not Broadway or Pennsylvania Avenue, but Wall Street. Certainly no other street contributes so much to the glory, the wealth, and the power of the Empire State. The State derived a revenue in 1906 of #6,800,000 by its taxes on the stock transfers of the street, but it might well pay even a larger sum than that to prevent the business of the street from diversion to another State. Without Wall Street, New York would still, no doubt, be an important State, but she would not possess that which now most distinguishes her from all other political divisions of the Federal Union, namely, financial power. The stock market continued without a name or formal organization until 181 7, when it was finally transformed into a stock exchange. Philadelphia, and not New York, has the distinction of having founded the first bank and the first stock exchange in America, and it was from Phila- delphia that the New York brokers obtained ideas for their own constitution and by-laws. There seems to have been not a little business in stocks between the two cities in these early years, and it would appear that wide-awake brokers were able to pick up arbitrage profits. I find in an old publication a statement that " about 1818 the Southern mail was detained at Powles Hook nearly two hours to enable certain speculators to reach Philadelphia and make their purchases before the arrival of the news contained in the mail." Medbury, 1 in a book on Wall Street in 1870, gives 1 Men and Mysteries of Wall Street, by James K. Medbury, 1870. HISTORY OF THE NEW YORK STOCK EXCHANGE 271 what is evidently another version of the same incident, al- though he places it sometime prior to the organization of the exchange. He relates that important news having arrived from London, causing a rise in stocks, three smart New York brokers took the coach for Philadelphia. By connivance with the driver the coach broke down at Powles Hook and the three brokers hired a post chaise and drove full speed to Philadelphia where, in advance of the mail containing the news, they were able to buy the stocks at lower prices than those prevailing in New York. The same "enterprise" was displayed by Rothschild who, witnessing the Battle of Waterloo, managed to get to London ahead of the news and reaped a fortune out of his exclusive information. Prob- ably these New York brokers got the inspiration for their Philadelphia coup from Rothschild's Waterloo "scoop." No copy of the constitution of 18 17 exists, although there are some records of the transactions of the first exchange, and it is recorded that, for a brief session during the preva- lence of yellow fever, it was compelled to hold its sessions at Washington Hall on the corner of Reade Street. In November, 1819, a committee composed of W. H. Robinson, F. A. Tracy, R. H. Nevins, L. Loomis, and Nathaniel Prime was appointed to revise the constitution. On February 21, 1820, this new constitution went into operation. Under it the title given to the association was the New York Stock and Exchange Board. It was provided that no one could be eligible for membership who had not been a broker one year or an apprentice or clerk to a broker for two years. The entrance fee was $25. The president presided and called the roll of stocks, the secretary recording the transac- tions. The rates of commission as fixed by the constitution were one quarter per cent, on funded debt, insurance, bank and other stocks, bills of exchange and specie; one half per cent, for cashing promissory notes and acceptances, and one 2*]2 PROGRESS OF THE EMPIRE STATE per cent, for obtaining money on mortgages. Brokers were held liable unless they could surrender principals who would be considered responsible. In time bargains, principals had to be surrendered before I p.m. of day of contract and the other party had until 5 p.m. for consideration. If the prin- cipal was not acceptable the bargain was held to be void. No fictitious sale was permitted under penalty of expulsion. A member failing in his contracts was suspended. A vote of two thirds of his fellow-members could reinstate him except in case his failure was caused by his own speculation, when he could not be reinstated until all his engagements were settled. In time bargains, interest was fixed at 7 per cent. Leaving the board room during the calling of stocks, indecorous language and conduct, were punished by fines or suspension. In some of these provisions are to be found the germs of the system prevailing to-day on the Stock Exchange. The membership of the board at the time this constitution was adopted was thirty-nine. The president was G. S. Mumford and among the members were Nathaniel Prime and John Ward, who appeared from all accounts to be the leaders in the street. As the War of the Revolution led to the starting of the stock market, so the War of 1812 may be said to have led to the organization of the stock market into the stock exchange, for this second war with England resulted in a new output of securities, new inflation, new starting of enterprises. From 1812 to 1816 the government issued over $80,000,000 of new loans, although the Treasury received only $34,000,000 from them as measured in specie. During the same time the number of banks increased from 88 to 246 and the note circulation from $45,000,000 to $100,000,000. The new loans and the stock of the new banks added to the material out of which investment and speculation were made, and it is not surprising therefore that action had to be taken ■ f A/yy^c^- HENRY CLAY PIERCE Financier; born at St. Lawrence, Jefferson County, X. Y.; son Dr. Dyer Ensworth and Mary Jane (Ackcrt lucated in Jefferson County High School. Chairman New York Board National Railways of Mexico; chairman and director Waters- Pierce Oil Co. (St. Louis), Pierce Fordyce Oil Assoc. (Texas), e Oil Corj' lexican Central Railway Co., Tennessee Central Railroad Co. (Nashville); president and director Pierce Investment Trust Co. (St. Louis); director B. & O. Southwestern Railroad Co., Seaboard Air Line Railway, Mexican Pacific Railway Co., Central Mexico Railroad Co., Tennessee Construc- tion Co. (St. Louis), Mexican-American Steamship Co., Mexican National Construction Co., Tampico Harbor Co., Brier Hill ishville), International Banking Corporation (New York), National Bank of Commerce, Mississippi Valley Trust Co., American Central Insurance Co. (St. Louis), Bank of Commerce and Industry (City of Mexico), Mercantile Fire & Marine Insurance Co. (Boston), and Mexican Fuel Co. (City of Mexico). I lis loin <>!• Mil NKW YORK STOCK EXCHANGE 273 to give regular organization to the stock market. The records of the Stock Exchange show that in November, 1818, there were quotations of seven government stocks, ten bank stocks, and thirteen insurance stocks. In 1820, the very year of the amended constitution already outlined, Wall Street began to figure a little in the press, and one of the newspapers, with much of the same editorial virtue displayed to-day in treating of the stock market, commented upon "the progress of stock gambling." It appears that there was talk of a corner in United States Bank stock and the shorts were frightened into covering. This early trading, it should be remembered, was without the facilities which now bind the world together. There was no telegraph, no cable, no railroad, and it took weeks for the news of Europe to reach New York. The hazards of speculative stock operations were very great indeed. Nevertheless the stock market steadily expanded with the rapid growth of the country and independently of the mightier markets on the other side of the Atlantic. An era of promotion set in about 1824 which added to the number of securities in the market. In that year companies having a capital of #52,000,000 were organized in New York alone, and there was speculation not only in stocks but in mines, cotton, and real estate. It was in 1822 that the oldest mining company in the country, the Lehigh Coal and Navigation Company, was organized. The appetite of the public at this time for stock invest- ments was amazing considering the small supply of liquid capital. On April 22d, the public were offered #500,000 worth of stock of the Blackstone Canal and the subscriptions aggre- gated #1,127,900 in one day. Even greater were the results in the case of the stock of the Morris Canal Company, which was subscribed for twenty times over. In 1826, which was a year of bursting of many bubbles, a large number of these 18 274 PROGRESS OF THE EMPIRE STATE new companies went into bankruptcy and out of existence. It was in this year that Jacob Barker, who had been largely instrumental in raising loans for the government in the War of i8i2,was arrested for an alleged challenge of David Arthur to fight a duel on account of words spoken in the Merchants' Exchange — a case which created a great sensation in the city, for Barker was at this time and for a number of years thereafter one of the leading financiers of the country. At this time an event of far-reaching importance took place. It is not too much to say that the State of New York owes its prominence in the country, its long-continued power in commerce and finance, to two developments: first, the organization of the Stock Exchange in 1817 and, second, the completion of the Erie Canal in 1825. The latter established on a firm footing the commercial suprem- acy of New York City. From that time it began to take first place among American cities, soon supplanting Phila- delphia in population, commerce, and wealth, although Philadelphia for a number of years thereafter continued to be the headquarters of the United States Bank, which under the presidency of Nicholas Biddle largely controlled the money market. The United States Bank had its New York branch in the building on Wall Street long occupied by the United States Assay Office. In 1825, the very year of the completion of the Erie Canal, the great London banking house of Alexander Brown & Sons established a branch in New York and the city began to take a recognized place in the markets of the world. In 1827, when the city had a population of over 175,000, with sixteen banks, including the branch of the United States Bank, the merchants erected an exchange in Wall Street on the site of what was for a long time the Cus- tom House but which has now become the home of the National City Bank. In this exchange the stock board HISTORY OF THE NEW YORK STOCK EXCHANGE 275 rented for #500 a year a room for its trading, and here it remained until the great fire destroyed the building in [835. The initiation fee was raised to $100. The board met in secret, and transactions were not made public. The value of continuous and public quotations was not then recognized. The quotations of September 29th, of this year included eight government securities (National and State), twelve banks, five marine and fourteen fire insurance com- panies, and the stocks of the Delaware and Hudson Canal, the New York Gas Light Company, and the Merchants' Exchange. The Delaware and Hudson became an active stock and has remained ever since, a period of eighty years, one of the best-known securities in the investment arena. The fire insurance stocks were then eagerly sought after on account of their high earning power. In 1829 the first railroad train moved by steam power was operated, and in the year following, the list of the stock board for the first time contained the name of a railroad stock. It was that of the Mohawk & Hudson, now a part of the New York Central system. American stocks had even then been long traded in in London, but it was not until 1838 that the first railroad security was introduced there. We have now reached a time when it is possible to give some account, fragmentary though it be, of the stock market as it appeared to those living three quarters of a century ago. Ex-Mayor Philip Hone, then a leading citizen of New York, kept a diary in which he recorded a number of references to the stock market and Wall Street. On July 23, 1832, he says that notwithstanding the cholera then prevailing he went to Wall Street and did considerable business. A year before, he had recorded the extraordinary prosperity and business activity that existed all over the country and espe- cially in New York, but in November, 1833, he comments with much severity upon what he called "the ill advised 276 PROGRESS OF THE EMPIRE STATE action " of President Jackson in removing deposits from the United States Bank. This, he said, produced an awful scarcity of money and a sharp fall in prices, Delaware & Hudson declining from 125 to 114. This refers of course to the war which Jackson carried on against the United States Bank that led to its overthrow and finally culminated in the panic of 1836. It was in 1833 that Jacob Little appeared prominently upon the scene of action as a leader in the stock market. He had been a clerk of Jacob Barker and was for many years a noted bear operator. He is generally credited with having introduced short selling in the New York market. This is not strictly accurate. He undoubtedly made short selling prominent, but bear trad- ing had been imported from London long before, and in 181 2 the New York Legislature passed a bill prohibiting sales of stocks not actually in possession of the seller. The law was a dead letter and was repealed in 1858. Little made a fortune in the panic of 1836 but in the next decade lost a large portion of it in the first extensive operation that he entered into upon the bull side. To return to Mr. Hone's diary. On December 27, 1833, he records that panic prevails and that stocks are falling. On December 30th he said that the times were "dreadfully hard." He records the failure of Shipman & Corning as brokers who had been "gambling in Delaware & Hudson." Hone himself lost #20,000 in sixty days. No wonder that he felt aggrieved with the action of Jackson in attacking the United States Bank, which he attributes to "the sin of Nicholas Biddle in opposing Jackson's election." Hone writes that "the gambling in stocks has been carried on by brokers to an extent disgraceful to the character of the city." This is alleged to be one cause of the distress. Then he goes on to describe the process of selling stocks short as practiced by Jacob Little, although he does not HIS loin OF INI NEW YORK STOCK EXCHANGE 277 mention his name. "It consists," he said, "in selling stocks ahead, where a man sells to the amount of millions without owning a dollar of the stock — betting it will fall and then taking pains by every kind of lying and chicanery to injure the reputation of the stock so that he may win." On February 11, 1834, Hone attended a big mass-meeting in the Merchants' Exchange in Wall Street to protest against the removal of the government deposits. The country, how- ever, recovered from the blow of the removal of these depos- its, and in January, 1835, Hone commented upon the rage for speculation in lands as being one of the bubbles of the day. On October 14, 1835, he wrote that "gambling in stocks in Wall Street has arrived at such a pitch and the sudden reverses of fortune are so frequent that it is a matter of every day intelligence that some unlucky rascal has lost other people's money and run away." The newspapers had already begun to report regularly the course of the stock market, and on May 13, 1835, the Herald, itself then published in Wall Street, said: "Yesterday the fancy stocks took a tumble of from two to four per cent, on some descriptions, the railroads espe- cially. Money is beginning to get scarce and there is a fear that the banks mean to curtail. This impression does not prevail generally." The sales of the Stock Exchange that day amounted to 3671 shares and included the stocks of three banks, four railroads, one canal company, one gas company, and one insurance company. Of course the number of stocks of which quotations were given was much larger. Some idea of the market fluctuations at this interesting period of the stock market is afforded by the fact that from August to December 30th Delaware & Hudson fell from 125 to 99, Harlem from 95 to 70, and New York Life and Trust from 160 to I39>2- In 1834, from January 3d to January 278 PROGRESS OF THE EMPIRE STATE 17th, there was a decline from 91 to 73 in Delaware & Hud- son while Mohawk & Hudson advanced from 80 to 94. In 1835 there was a big speculation in stocks as in lands. Higher prices prevailed in commodities as in securities. In 1836, however, the great movement of inflation which had been going on for a number of years collapsed, and in October, 1836, nearly a dozen failures were announced in the Street. The panic swept over the entire country and in fact was felt throughout the world, and on May 9, 1837, the New York banks were obliged to suspend payments. Philip Hone speaks of that event in these words: "The volcano bursts and overwhelms New York. The banks suspend payments. Wall Street was greatly crowded but there was no riot or tumult." From 1837 to 1839 there were 33,000 failures in the United States, involving a loss of #440,000,000. The United States Bank, deprived of its federal charter, con- tinued in business for a few years under a Pennsylvania charter and finally went out of business entirely in 1841, and Hone declared that the losses caused by this failure equaled even those of the great fire which destroyed New York on December 16, 1835. He was very pessimistic in his views and asserted that the failure has caused "an utter destruction of American credit abroad." The year 1835 had been notable for its corners and so wild became the speculation that the Stock Exchange had to close its doors twice. In fact, the history of the stock market contains nothing that equals for audacity the corners in Morris Canal and in Harlem if that year, although there have been a multitude of transactions of greater magnitude. The shorts in Morris Canal were compelled to settle at 150 by a clique which had bought the stock at much below par. Another combination in Harlem compelled the shorts, who had sold in two months 60,000 shares of a stock of which GEORGE WALBRIDGE PERKINS Fin ,n in Chicago, III., January 31, 1862; educated in public schools of Chicago; began business life in Chicago office of Insurance Co., 1877, as an office boy, later becom- ing successively bookkeeper, cashier, and inspector of agencies. Mr. Perkins was made superintendent of the western department of the company in 1889, and in 1892 third vice-president in charge of the agency force, with headquarters at the home office in Xew City; promoted to second vice-president, 1898; to vice- president, 1903; and elected chairman of the Finance Committee of the company in 1900. Partner in the banking firm of J. P. Morgan & Co., 1901 to 1911. At various times chairman ex- ecutive committee and director Chicago, Burlington & Quincy Radroad; chairman board of directors Cincinnati, Hamilton & Dayton Railroad, and Pere Marquette- Railroad Co.; president and director Toledo Railway & Terminal Co.; chairman finance committee and director International Harvester Co.; vice- president and director Great Central Dock Co.; trustee New York Trust Co.; director United States Steel Corporation Northern Pacific Railway Co., National City Bank, International Mercantile Marine Co., Bankers' Trust Co., German-American Insurance Co., etc. Trustee of Vassar College, and active worker for social reforms. HISTORY OF HIE NEW YORK STOCK EXCHANGE 279 only 7000 shares had been issued, to settle at high figures for their folly. From November 25, 1834, to November 25, 1835, the Morris Railroad advanced from 70 to 120, Harlem from 64 to 105, and Delaware & Hudson from 72 to 1 13. In 1836 the Exchange appointed a committee to investigate corners with a view to preventing some of their gross abuses. The great fire of December, 1835, destroyed the Mer- chants' Exchange, and the stock board was obliged to sus- pend operations temporarily, but in two days engaged a room in Howard's Hotel in Broad Street, the site of which is now covered by the present Stock Exchange building. During the succeeding six years the board occupied rooms at 43 Wall Street in a building which at the beginning of the century had been the stable of an English gentleman then residing in New York. In the panic of 1837 one Stock Exchange house was large enough to fail for liabilities of #5,000,000. So great was the subsequent depression that the board, having a surplus of #20,000, instead of buying a site for a building, divided the sum among its eighty-eight members. In January, 1837, the list of stock quotations included ten banks, two trust companies, eight railroads, and three other companies. A new Merchants' Exchange was erected and in this the Stock Exchange long held its sessions. I have discovered some description of the stock market at this time in a little book entitled A Week in Wall Street, published anonymously in 1841. The writer was clearly prejudiced against Wall Street but nevertheless some instructive information may be obtained from its pages. In his preface he declared that there was existing at that time "a demoralized condition of principle in regard to pecuniary transactions." He admits that he had himself been "flunked" in Wall Street. He describes joint stock companies as "an ingenious device wherein an imaginary body is made accountable for the acts of its members, while 280 PROGRESS OF THE EMPIRE STATE real actors may hide behind it as long as it has power to protect them and scamper off without warning when it has not." He defines a broker as "a negotiator between two parties who contrives to cheat both." He said that while credit well sustained gave success to enterprise, by its misapplication and abuse it had come to have a different significance, namely, that "the more one owes the more he has to sport with." In describing the board of brokers the writer declared that when a broker is employed by another person to buy or sell on time he has the right to give the name of his principal within twenty-four hours, and then if the other party is not satisfied he is required to deposit ten per cent. Stocks sold on time were seldom delivered, but when the contract matured the difference between the sale and the average market price was paid over by the loser. He said that there was a large class, sometimes controlling a good deal of money, who made speculation their business and often united in squads for the purpose of cornering. These professionals were called "bull backers" or "bear traps," according to the nature of their operations. The former bought stocks for a rise and the second sold stocks for a decline. Bull backers and bear traps are terms which have disappeared from Wall Street. There was another class described by the writer as called "flunkies." This is another term lost to Wall Street which now uses the word "lambs" to describe the same class of persons, namely, those who enter into speculation without any knowledge or intelligence and generally leave their money behind. Stock gamblers, he said, of very small capital often have contracts pending of many hundreds of thousands of dollars. When a broker operates for others he usually requires a deposit of ten per cent, as security against loss. This deposit is now called "a margin." The pessimism of this view of Wall Street was a reflec- HISTORY OF THE NEW YORK STOCK EXCHANGE 281 tion of the great losses entailed by the panic of 1837 and the depression which followed. This depression was so great that Philip Hone, describing the new Custom House, now the Sub-Treasury in Wall Street, then just completed, in 1842, said it was "a magnificent winding-sheet of de- parted commerce." But even as he wrote the process of recovery had started, and for fifteen years there was steadily advancing activity and prosperity in this country interrupted only by a temporary setback in 1848. It was in this very year of 1848, when gold was discovered in California, that another description of Wall Street and the stock market was published in a magazine of that day from which we are able to obtain a somewhat lifelike picture of conditions as they existed sixty years ago. "The American stock market," said the writer, "when compared with the markets of other nations is peculiarly sensitive, and this was never more fully illustrated than during the period which has elapsed since the commencing of the present war with Mexico." It should be remembered that this was written in 1848. "Insiders," he said, "speculate both on their own ac- count and act as commission brokers for others." Out- siders he described as being those people who dabble in stock to a greater or less extent through brokers. There were two stock exchanges at that time. The old Board, the regular successor of that organized in 1817, is described as being very exclusive in character and as sitting with closed doors. The qualification for membership was one year in business, the settlement of all debts, and the payment of an admission fee of #400. Three blackballs excluded an applicant and there was much blackballing, so that it was difficult to get into the Board. This exclusiveness caused the organization of the new board but it did not prove suc- cessful, and in 1848 it had only twenty members and at the 282 PROGRESS OF THE EMPIRE STATE close of that year was consolidated with the old board. Business in the old board was carried on from 10.30 to 12 and then from 2.45 to 3 p.m. When not in session members, and all others who wished to, assembled in the street at the corner of Wall and Hanover, where an open business was conducted in a volume that even exceeded the total tran- sactions of both boards. Securities could in 1848 be hypothecated for loans for five and ten per cent, less than the market value. The bank margin at this time (1912) is rarely less than twenty per cent. Loans could be ob- tained from the banks at the regular market interest and from other lenders at interest and a bonus of one eighth per cent. The fluctuations in fancy stocks were often from one to ten per cent, upward in a day and as much as forty per cent, in decline. The writer gives an interesting account of a transaction in which he had been concerned. He owned stock in the Norwich and Worcester Railroad but it had declined to 55. He was then informed ("tipped") that Cornelius Vanderbilt had a large holding of the stock; so he held on until it had advanced to 63^, when he sold. The stock however continued to advance, and so he was induced to buy 200 shares at 66>4 when it immediately fell ten per cent, and at length sold at less than 40. Cornering he described as consisting in "creat- ing at the same time both demand and scarcity," a most felicitous definition. The writer also tells of a transaction in which Jacob Little was interested. The bulls, he said, bought five thousand shares of stock and borrowed #100,000 from Little and #100,000 more from Prime, Ward & Co. The day for payment arrived when Ward failed. Little, who was himself a bull, got early intelligence of this and fainted away, but in an hour's time had fully recovered and quickly raised the money. The fact then leaked out and caused a break of ten points and the shattering of the pool. HISTORY OF THE NEW YORK STOCK EXCHANGE 283 He said that outsiders were largely influenced at that time by the money articles in the newspapers in most cases written by interested persons or by individuals bribed with stocks. In this respect, as in many others, the morality of Wall Street has now greatly advanced. The facility with which fortunes were made in Wall Street at that time he illustrates by the history of two brothers named Josephs who came from Richmond with about $20,000. Later they formed a partnership with M. Henriques and finally had a capital of $490,000 and made several millions of dollars. This is the firm that in 1837 is mentioned as having failed for $5,000,000. The writer gives a list of bubble stocks among which he names the North American Trust and Banking Company, the stock of which sold at $20 even after going into receiver's hands. Others were the Commercial Railroad of Vicksburg, the Morris Canal, the Canton Company, the Mohawk & Hudson, the Harlem, the Stonington, and the Norwich & Worcester. He describes the Reading stock as a "worth- less trap" and as being one of the mammoth operations of Nicholas Biddle. The Reading has continued ever since to be one of the most active stocks in the market list and it, Erie, and Northern Pacific have been identified with more "great days" in Wall Street than any other three securities. He mentions a corner in Norwich & Worcester conducted by Jacob Little. Little carried the price to 95, when there was a break to 60. Certain parties who had sold 3000 shares for delivery in twelve months offered to sell at $30,000. Little refused, and they held on so that in the subsequent decline they bought in at prices which netted them a profit of $60,000. It is of interest to note that the writer men- tions the Farmers Loan and Trust Company as one of the "bubble" stocks of that period, although now this company is one of the largest, most substantial and conservative 284 PROGRESS OF THE EMPIRE STATE institutions in the city. He gives also a description of many of the leading brokerage houses. Drew, Robinson & Co., he said, were worth over $1,000,000. Another firm was that of Clark, Dodge & Company which he described as standing high and having branch offices at Boston, Providence, Philadelphia, and Baltimore. This is a firm name that still commands high respect in Wall Street. David Clarkson was then president of the Exchange and described as "respectable and possessing great nerve." He had once been worth $300,000. In 1845 it was estimated that Little was worth $500,000 and Daniel Drew $300,000. The discovery of gold in 1848 started the magnificent boom period that lasted until 1857. The enormous produc- tion of gold caused an uplift of prices, an impetus to enter- prise, the building of railroads, the multiplication of banks, and a widespread speculation in stocks, lands, and commodi- ties. Several other things had happened beside the dis- covery of gold which contributed to make this a memorable financial period. Morse had invented the telegraph, and in 1844 the first telegraph line was constructed. In 1846 the independent treasury system was established as it exists substantially to-day. A greater stability had been imparted to banking in the State of New York by the abolition of special charters to banks and the enactment in 1838 of an admirable free banking law, which later became the model on which the national banking act was drafted. During the boom period a further notable improvement in New York banking was brought about by the organization in 1853 of the Bank Clearing House. In the same year the United States established an assay office in Wall Street, and the Corn Exchange was organized. During this period not only Jacob Little but George Law, Dean Richmond, Nelson Robinson, and other capitalists were conspicuous in financial operations, while Commodore Van- -f JULES S. BACHE Banker; born in New York City, November 9, 1861; son Semon and Elizabeth (Van Praag) Baehe; educated Charlier Institute, N. Y.; married in New York City, March 23, 1891, Florence R. Scheftel. Now senior partner J. S. Bache & bankers; chairman executive committee Now .Amsterdam Casu- alty Co.; director International Banking Corporation, National Bank of Cuba, Empire Trust Co., Anniston City Land Co., New River Collieries Co., Oakland & Bayside Realty Co. Member New York, Lambs, Lawyers, and Automobile Clubs. HISTORY OF THE NEW YORK STOCK EXCHANGE 285 derbilt, Daniel Drew, and Jay Gould began their mammoth operations. The panic of 1857 came with startling suddenness and devastating severity on August 24, 1857, when the Ohio Life and Trust Company, having a branch office in Wall Street, failed. Two months later all the banks in the city, except the Chemical, suspended specie payments. An old cut gives a picture of Wall Street on the day of the suspen- sion of the banks. The street was crowded with excited people in front of what is now the National City Bank. The president of the American Exchange Bank addressed the excited crowd in front of his bank in hopes of allaying the excitement. The Stock Exchange is described as having looked like a "gathering of demons." Bull and bear came into personal contact and fierce blows mingled with the ceaseless rapping of the president's hammer and the terrible slaughtering of every description of security. The decline in the prices of the leading stocks was sharp and extreme. For instance, Reading Railroad stock fell 36^ points from August to October, Michigan Central 37 in the same time, Illinois Central 323^, Rock Island 31^2, Panama 20, American Exchange Bank 40J/4, New York Central iojkf, and Virginia State 6's 13^. Sudden as was the blow and severe as was its effect, the stock market depression did not last long. The fol- lowing year prices recovered and the Exchange was so prosperous that the initiation fee was raised to #1000 except for clerks who had served three years. The banks had resumed specie payments the preceding 12th of December. The country, with remarkable vitality, quickly recovered from the effects of the panic. It needed, indeed, all its strength, for another crisis greater than that of financial panic was soon to confront it — the crisis of the Civil War. We now enter upon the period of modern speculation. 286 PROGRESS OF THE EMPIRE STATE This is a theme much too vast for the limits of a single chapter. Nowhere else has the stock market developed on so enormous a scale and with such dynamic power as in Wall Street from 1861 to the present day. Here upon the arena of the Stock Exchange the great operations have been carried on out of which, in spite of many colossal wrongs, the criminal conspiracies of manipulative pools, and the madness of a generation intoxicated by the possession of fabulous wealth, the capital has been mobilized for the development of the splendid resources of our nation. The stock market during the Civil War was neither loyal nor disloyal. Markets as a rule seek to ascertain values in a cold-blooded way without much regard to patriotic considerations. It does not follow, however, that the stock market does not perform at times a patriotic service. M. About, writing of the French stock market, said that it is speculations that "make the prosperity, the strength, and the greatness of France." He added that they give vigor to the most timid capitalists. They furnish millions for the operations of peace and war. "If we ever revenge ourselves for the misfortunes of Napoleon," he said, "it will be less on the battle field than on the green baize of speculation." While this may be too sweeping a claim, yet as regards Wall Street it is true that its transactions during the Civil War did, in the main, contribute to the preservation of the nation. Certainly Wall Street deserves a large share of the credit for the floating of the #2,700,000,000 national debt created between i860 and 1866. It was well paid for its services, but the risks were enormous. The passage of the law creating the national banking system and providing for a note circulation secured by government bonds greatly aided the government in marketing its war bonds. The bankers, besides aiding the government, came to the rescue of the commercial credits of the country at HISTORY OF THE NEW YORK STOCK EXCHANGE 287 this time when the necessities of the nation were so great. The recently organized Bank Clearing House for the first time issued loan certificates and from i860 to 1864 put out $59< 159,000 of these certificates, the largest amount out- standing at one time being $21,960,000 in 1862. In five other financial crises: namely, 1873,1884,1890, 1893, and 1907, the Clearing House repeated this service. Its total issue of loan certificates in the various panics since i860 has amounted to $269,834,000. These have been the chief bulwarks of the credits of the country in the periodic financial crises, preventing the spread of disaster. Even the speculation in gold, bad as it was in many respects, and which the government by various acts sought to prevent, actually served a useful purpose inasmuch as it "tended to keep gold in the country by giving its holders the continued prospect of an advance in prices." 1 The Stock Exchange, whatever may be said of the stock market, gave practical proof of its patriotism during the Civil War. Early in 1861 it passed resolutions pledging its fidelity to the union and appropriating all the money in its treasury to sustain the government. It prohibited dealings in the bonds of any of the seceding States, and when gold went to a premium and became a speculative com- modity, while it placed it on its list, it did not encourage dealings in it, and as a matter of fact the great gold specu- lation during the war, which continued for a number of years thereafter, was carried on outside of the Stock Exchange. At the opening of the war the Exchange was almost a secret organization with admission made exceedingly difficult by reason of the blackballing of applicants. It furnished facilities which at this day would be considered absurdly meager. The quotations were not distributed as now by tickers, but carried by brokers from office to office. 1 The Nation in 1866. 286 PROGRESS OF THE EMPIRE STATE This is a theme much too vast for the limits of a single chapter. Nowhere else has the stock market developed on so enormous a scale and with such dynamic power as in Wall Street from 1861 to the present day. Here upon the arena of the Stock Exchange the great operations have been carried on out of which, in spite of many colossal wrongs, the criminal conspiracies of manipulative pools, and the madness of a generation intoxicated by the possession of fabulous wealth, the capital has been mobilized for the development of the splendid resources of our nation. The stock market during the Civil War was neither loyal nor disloyal. Markets as a rule seek to ascertain values in a cold-blooded way without much regard to patriotic considerations. It does not follow, however, that the stock market does not perform at times a patriotic service. M. About, writing of the French stock market, said that it is speculations that "make the prosperity, the strength, and the greatness of France." He added that they give vigor to the most timid capitalists. They furnish millions for the operations of peace and war. "If we ever revenge ourselves for the misfortunes of Napoleon," he said, "it will be less on the battle field than on the green baize of speculation." While this may be too sweeping a claim, yet as regards Wall Street it is true that its transactions during the Civil War did, in the main, contribute to the preservation of the nation. Certainly Wall Street deserves a large share of the credit for the floating of the $2,700,000,000 national debt created between i860 and 1866. It was well paid for its services, but the risks were enormous. The passage of the law creating the national banking system and providing for a note circulation secured by government bonds greatly aided the government in marketing its war bonds. The bankers, besides aiding the government, came to the rescue of the commercial credits of the country at HISTORY OF THE NEW YORK STOCK EXCHANGE 287 this time when the necessities of the nation were so great. The recently organized Bank Clearing House for the first time issued loan certificates and from i860 to 1864 put out #$9,159,000 of these certificates, the largest amount out- standing at one time being #21,960,000 in 1862. In five other financial crises: namely, 1873,1884,1890, 1893, and 1907, the Clearing House repeated this service. Its total issue of loan certificates in the various panics since i860 has amounted to #269,834,000. These have been the chief bulwarks of the credits of the country in the periodic financial crises, preventing the spread of disaster. Even the speculation in gold, bad as it was in many respects, and which the government by various acts sought to prevent, actually served a useful purpose inasmuch as it "tended to keep gold in the country by giving its holders the continued prospect of an advance in prices." 1 The Stock Exchange, whatever may be said of the stock market, gave practical proof of its patriotism during the Civil War. Early in 1861 it passed resolutions pledging its fidelity to the union and appropriating all the money in its treasury to sustain the government. It prohibited dealings in the bonds of any of the seceding States, and when gold went to a premium and became a speculative com- modity, while it placed it on its list, it did not encourage dealings in it, and as a matter of fact the great gold specu- lation during the war, which continued for a number of years thereafter, was carried on outside of the Stock Exchange. At the opening of the war the Exchange was almost a secret organization with admission made exceedingly difficult by reason of the blackballing of applicants. It furnished facilities which at this day would be considered absurdly meager. The quotations were not distributed as now by tickers, but carried by brokers from office to office. 1 The Nation in 1866. 288 PROGRESS OF THE EMPIRE STATE The telegraph was in operation but there were no news agencies serving the brokers with continuous information of what was going on in the world, and it is a remarkable fact that the stock market advanced the very day Fort Sumter was fired upon, and the significance of the event was not realized until the next day. The news from Europe was always weeks old before it reached the Street, and it was not until 1866, when Cyrus W. Field had completed his Atlantic cable, that regular daily quotations were received from London and arbitrage dealings between the two markets were started. In 1867 the stock ticker was intro- duced, but it was not until 1878 that telephones, by which the great bulk of orders are now transmitted to the Exchange, were put in use. Nevertheless without these facilities a stupendous specu- lation was developed, and it is believed that the transac- tions in the several board rooms and on the curb, carried on by night as well as by day, nearly equaled the sales of the Stock Exchange during its recent best year. It has already been seen how war stimulates stock mar- kets, and the War of the Rebellion with its fearful hazards, its enormous output of fiat money and new securities created a speculation which, for excitement, has not been exceeded since. Besides the regular stock board, which in 1863 changed its name to its present title, The New York Stock Exchange, there was organized in 1864 the open board of stock brokers, and also the New York Gold Ex- change, while, as has been said, there were immense dealings on the curb and at night in the corridors of the Fifth Avenue Hotel. Night exchanges were started up- town. Gallagher's Stock Exchange opened in West 24th Street on April 15, 1865, and had accommodations for 1200 persons. Among these "accommodations" were a bar and a billiard room. It was during this period that the Harlem, HISTORY OF THE NEW YORK STOCK EXCHANGE 289 the Prairie du Chien, and the Fort Wayne corners occurred. The collapse of the Fort Wayne deal in 1864 caused a stock panic of no small dimension. In 1865 the Exchange had, in the name of a building company, a new #450,000 home erected for itself in Broad Street, covering a part of the site of the present Exchange. The board room was on the second floor, while the ground floor was leased to a number of brokers who used it for conducting business between calls. Members and non-members were admitted in this room on payment of an annual fee. In 1869 an event occurred of large importance. The Stock Exchange and the open board of brokers were con- solidated and a radical change in government took place. Already, in the year previous, memberships had been made transferable by sale, and new members instead of being elected by ballot were chosen by a committee on admission. In 1869 the government of the Exchange, instead of being carried on directly by the members, was vested in a Govern- ing Committee elected by the members, with powers corre- sponding to those of a board of directors of a corporation. In the Exchange thus consolidated, dealings instead of being limited to call were made continuously during the Exchange hours and were prohibited thereafter. At last, after many years, Wall Street had an exchange representative of its whole body of brokers and adequate for the transaction of an immense business. The consolidated membership was 1060 which was afterward increased to 1 100, its present limit. In 1 871 the Exchange remodeled its building and became a thor- oughly modern institution, in a true sense "a public mirror of values." 1 An important reform of 1869 had been the establishment of an exchange law requiring shares of active stocks to be registered with some satisfactory agency, thus doing away with the fraud and abuse of secret issues of ■ Conant, Wall Street and the Country, p. 68. 290 PROGRESS OF THE EMPIRE STATE stock and their sale before the fact of issue had been made public. In 1868, before the consolidation of the two boards, it was estimated that the official sales at the two boards aggregated 19,713,402 shares of stock and #245,245,240 par value of bonds, but this was only a small part of the actual business of the street. "To-day," wrote Medbery in 1870, "the New York Stock Exchange eclipses all other organizations in the world for wealth. The daily credits and deposits of brokers in city banks and trust companies are estimated in hundreds of millions, and the par value of annual sales made at the boards and over the country are computed as considerably exceeding #22,000,000,000. This notable increase in financial importance has been attended by corresponding results. Speculations which in former times swept over the Street like a monsoon now produce mere ripples. A healthy conservatism and a profound sense of responsibility lay at the base of the vast proportion of operations." He called attention to the important results of the consolidation and said that the Governing Committee had three vital objects to serve; first, a rigid scrutiny of all securities dealt in: second, a surveillance over members in respect to their fidelity to contracts, and, third, a systema- tization of the whole business of brokers so far as it relates to the intercourse of members. The Stock Exchange, on the whole, has in the past thirty-seven years provided a wise regulation of the stock market, giving increased safeguards for investments and constantly extending the area of that publicity by which alone the dangers incident to transactions in stocks may be diminished and the benefits correspondingly magnified. While it was true, as Medbery boasted, that a healthy conservatism and a profound sense of responsibility lay at the base of the vast proportion of operations, yet even as he SAMUEL SPENCER R.I: and ; i n i a j„ ,*, , n t in upon the cinnal ic Railway Compan Rail- ;land; Centr; . Milwaul •il Railwa ion S< Richmon urg & Po1 Railr York; Hanover National Bank < i ompany of Ann New ': i ompany. He member of the New York Chamber of Commerce. Died nber 29, 1906. HISTORY OF I Hl ; . NEW YORK STOCK EXCHANGE 291 wrote the Erie wars were in progress, and in the year preced- ing, on September 24th, occurred the famous Black Friday panic which was the culmination of the gold conspiracy engineered by Jay Gould and James Fisk. It should be said that the gold speculation was not carried on in the Stock Exchange, hut in the Gold Exchange organized espe- cially for that purpose and which for several years was the center of an excited speculation. The premium on gold finally disappeared, and in 1879 specie payments were definitely resumed. The gold conspiracy and the Erie wars make dramatic chapters in the history of speculation. They were the subject of government investigation and have been the theme of many books. They must, however, be dismissed with the merest reference in this review. Both illustrate all that is most wicked and demoralizing in corporation management, stock market manipulation, and criminal speculation. The Congressional report on the gold corner compared the power of Fisk in Wall Street with the malign influence which Cataline exercised in Rome. Adams, in his brilliant account of the Erie wars, described the trans- actions as the acts of "freebooters." The Black Friday panic, although brought about by the speculation in gold, communicated itself to the stock market, and there were fourteen failures on the Stock Exchange. The Erie wars lasted for twenty years, from 1852 to 1872, when Gould, who had succeeded in getting control of the road after a long contest between Commodore Vanderbilt and Daniel Drew, was himself driven from power. The Drew device of issuing new stock and flooding the market with it and then preventing its transfer on the books was copied by Gould. Adams declared that it was the most extraordinary feat of financial legerdemain ever recorded. There have been several expert exhibitions of financial legerdemain in our 292 PROGRESS OF THE EMPIRE STATE own days, but this particular device is now impossible under the rules of the Exchange, and it may be said that every year makes it more and more difficult to play the game of business with marked cards. The Chicago fire on October 8, 1871, and the Boston fire on November 9, 1872, caused several failures in the Stock Exchange, and in 1873 tne l° n g period of war inflation, during which time there were vast railroad constructions, notably that of the first transcontinental line, came to an end in one of the widespread and devastating panics which occur about once in every twenty years, with a minor convul- sion midway between. The panic started with the failure on September 18, 1873, °f tne fi rm OI " J a Y Cooke & Co., promoters of the Northern Pacific Railroad, and so severe was the collapse in prices that it was almost impossible to market securities, and "in the vicinity of the Exchange, people seemed to have taken leave of their senses." Two days later, September 20th, the Exchange closed its doors and its business was suspended for ten days. Never since has the Exchange been obliged to resort to such a measure of protection as that. There were fifty-seven Stock Exchange failures, besides a multitude of insolvencies throughout the country in every branch of trade. The period of depression following the panic lasted until 1879 when, with the resumption of specie payments and a restoration of confidence, another business boom set in, which though checked by the assassination of Garfield in 1881, did not end until the minor panic of 1884, in which occurred the failures of Grant & Ward and the Marine Bank. A stock market incident of this panic was the failure of A. S. Hatch, president of the Exchange, who had just been reelected. He had to resign and at a special election J. Edward Simmons was chosen as his successor. There were, all told, fifteen Stock Exchange failures in this HISTORY OF THE NEW YORK STOCK EXCHANGE 293 panic. It was during this period that S. V. White conducted his celebrated corner in Lackawanna, and the great bear operations of C. F. WoerishofTer and Addison Cammack were carried on. In 1 S S 5 the Exchange established a department of unlisted securities so as to permit dealings in the stocks of industrial companies which could not or would not furnish the information of financial conditions required of railroad companies. This step was practically forced upon the Exchange by the demoralization in railroad stocks resulting from the extreme and wasteful competition in rates. Only a very small proportion of the securities dealt in were in the unlisted class, and in April, 1910, the "unlisted department" was abolished. In 1892 the Exchange added immensely to the capacity and stability of the stock market by establishing a system of stock clearings. This applied the principle of clearing checks, established with such advantage between the banks, to the operations of the stock market. A limit had been reached to the ability of the banks in the certification of brokers' checks. Over-certification was not only illegal but had been carried on to an extent that became dangerous. The stock clearing house by eliminating over 60 per cent, of the certification otherwise required removed this danger and at the same time extended almost indefinitely the capacity of the stock market. It is conceded that but for this system the panic of 1893, which occurred one year after the organi- zation of the Clearing House, would have been even more disastrous to Wall Street than that of 1873. But while the total value of the stocks cleared in 1893 amounted to $16,169,800,000, the amount of check certification required was only $1,470,700,000, and the burden upon the banks was immensely lightened. In 1901, the year of memorable specu- lation, the value of the stocks cleared was $77,853,500,000 while the certification required was only $10,930,850,600. 294 PROGRESS OF THE EMPIRE STATE But for the clearing system the certification required would have been #27,995,896,400. It is safe to say that the stock market would have broken down under such a load. In 1906 when the volume of speculation was even greater, the money market, even with the aid of the clearing system? had difficulty in meeting the needs of the stock market and those of the expanding trade of the country at the same time, and the suggestion was made, though not yet adopted, that the clearing system could be still further expanded by an amendment providing for semi-monthly settlements of stock balances while retaining the rule of daily settlements of cash balances. To Francis L. Eames the Exchange is largely indebted for the establishment of its clearing house. The year 1893 was one of great excitement in Wall Street. Its first notable event was the collapse of the McLeod combination in Reading on February 20th. On May 4th the Cordage Trust broke with several failures and then followed a long series of disasters. The panic was precipitated by the free silver agitation and the fear of tariff revision. The nation saved itself from suspension of gold payments only by buying gold through the issue of bonds, and the merchants were protected from general insolvency only by the action of the Bank Clearing House in issuing loan certificates. In 1895 there was another stock market eruption caused by President Cleveland's Venezuelan message, which threatened war with England. The depression lasted until 1896, when the election of McKinley on a gold standard pledge started the country on the most remarkable period of expansion it has ever known and which lasted until 1907, with only moderate recessions in 1900 and 1903. The victorious war with Spain, increasing the international prestige of the United States, helped rather than retarded the boom. The stupendous production of gold, interrupted only HISTORY 01 HIE NEW YORK STOCK EXCHANGE 295 by the Boer War and facilitated by the cheaper processes of mining, expanded the world's money circulation. A succession of splendid crops rescued our great West from debt and gave it a surplus of wealth. During this period measures of enormous economic significance were taken to give order to competitive business. Vast combinations of capital in railroad and industrial enterprises were entered into, and such power given to American commerce and finance that two Secretaries of State, Hay and Root, publicly announced that the United States from being a debtor nation had become a creditor nation and that the financial center had passed from the Thames to the Hudson. This was a period of financial concentration. Mr. Morgan organized the billion-dollar Steel Corporation which has given stability to the steel trade and at the same time furnished the country with its most notable illustration of the value of corporation publicity. Other industrial com- panies of immense size, banks with #25,000,000 capital, railroad systems that divided the country into seven or eight groups were formed, and industrial order took the place of commercial anarchy which had so long prevailed to the injury of both producer and consumer, and capital and labor. In this notable work such names as J. Fierpont Morgan, John D. Rockefeller, James J. Hill, E. H. Harriman, Thomas F. Ryan, James Stillman, Jacob H. Schiff, August Belmont, and George Westinghouse became eminent. "Captains of industry" was the term appropriately applied to these leaders and others who, like them, engineered the industrial uplift. But they could not have accomplished their work without the facilities of the Stock Exchange and its regulated, open, stock market. Andrew Carnegie, the great organizer of the steel trade, not long ago gave utter- ance to a scathing criticism of Wall Street and said that he w ished he could invent a system whereby both parties to 296 PROGRESS OF THE EMPIRE STATE stock gambling would suffer. Mr. Carnegie, however, failed to make a proper distinction between speculation and gambling; and if it had not been for the machinery of the stock market with its facilities for speculation, he could never have capitalized his great fortune by converting it into the bonds of the United States Steel Corporation. Moreover that corporation could not have been brought into being without the assistance of the Stock Exchange. If it is fair to attribute to the stock market the evils of over- capitalization, criminal promotion, crooked manipulation, and dangerous overtrading, then in all justice the credit should be accorded it for acting as the world's agent in supplying the capital required for the development of the stupendous enterprises which have in the last fifteen years made this the richest country on the globe. The most sensational Wall Street incident of this period occurred in May, 1901, when there was an extraordinary stock panic caused by the contest for the control of the Northern Pacific between the two most powerful financial interests in the country. The sales of stock on May 9, 1901, were the largest on record, — 3,336,695 shares. In 1903 there was a rich man's panic, otherwise called "the panic of undigested securities," from a phrase invented by J. Pierpont Morgan. There was a severe decline in stock prices, but this was followed by another upward movement and in 1906 every high record of trade and speculation, transportation and banking, was broken and another "high water mark" of American prosperity was touched. The history of this period may be traced in the average price of twenty railway stocks as compiled by The Wall Street Journal. In the free silver campaign of 1896 the average price wa-s $41.82. After numerous fluctuations, it advanced to $12930 in September, 1902. In the reaction of 1903 it dropped to $88.80, but in 1906 it established a new high Ms. ^ WILLIAM ALMY WHEELOCK Banker; born in Providence, R. I., March 23, 1825; son Joseph and Amelia (Ames) Wheelock; educated at New York University; married in Buffalo to Harriet Efner. Has been director of the il Xational Bank, the American Surety Co., the Equitable Life Assurance Society, the Gold & Stock Telegraph Co., and prominently connected with other financial institutions. Retired from active service in 1864. Member American Fine Arts Society, the New England Society, Metropolitan Museum of Art, and of American Museum of Natural History, and president of Council of New York University. Was president of Central National Bank for fifteen years, resigning in 1887. Died July 6, 1905. HISTORY OF THE NEW YORK STOCK EXCHANGE 297 record at $138.36 with a subsequent sharp decline in the panic year 1907. The history of the period may also be traced in the price of Stock Exchange memberships, or "seats" as they are called. In 1896 the price was as low as $13,000. From this there was an advance to $80,000 in I90i,with a decline to $60,000 in 1903, and a subsequent rise to $95,000 in 1906. At the latter price the 1100 Stock Exchange memberships had an aggregate market value of $104,500,000. In 1909 "seats" sold even higher, at $96,000, but in 191 1 they declined to $65,000 and in 191 3 to $45,000. Likewise the record of the total sales of the Exchange revealed in large measure the history of this period. In 1896 the total sales of stocks amounted to 54,654,096 shares or 18,000,000 shares less than in 1879 and 63,000,000 shares less than in the boom year of 1881. But in 1901 when prosperity again prevailed, a total of 265,944,650 shares was recorded and the money value of the stocks and bonds traded in was over $26,000,000,000. During the next four years this total was not reached, but in 1906 the total shares dealt in was 286,006,051 and the bond transactions were $675,377,050, making a total par value of sales of $29,275,000,000. When on February 11, 1892, the day's trading aggregated 1,446,915 shares, which for seven years remained the high record of activity for one day, the country was amazed. But in 1906 there were 125 days in which the sales exceeded 1,000,000 shares and there were three days in which the total exceeded 2,000,000 shares. This activity was in spite of the disaster of the San Francisco earthquake and fire and the world-wide stringency in the money market, the rate of interest, moving with the higher cost of living, having gone on a higher level. Indeed at the very time of the enormous speculation of 1906, business and political conditions at home and abroad 298 PROGRESS OF THE EMPIRE STATE were rapidly developing into one of those great economic crises which periodically arrest the industries of the world. Early in 1907 keen observers had begun to see the signs of approaching disaster, and in October the panic of 1907 culminated. This was so acute that the clearing houses of the country issued an aggregate of $248,279,000 of loan certi- ficates, the issue in New York alone being $101,060,000. The panic was attended with the usual accompaniment of financial and commercial failures and was followed by a long period of varying inactivity in industry and trade, lasting until 1912. The volume of Stock Exchange sales of stocks declined to 196,438,824 shares in 1907 and to 127,208,258 shares in 1911. It should be remembered in reviewing the record of the Stock Exchange that it is its sensational side that chiefly passes into history while its great constructive work is done in comparative obscurity. One hears of the panics, but the operations by which investment and enterprise are brought together often go unnoticed. It is a common say- ing in Wall Street that only bear markets make news. Bull markets, on the other side, make wealth. As an institution the Stock Exchange was not concerned in the movement for corporation reform which has been the commanding feature of governmental policy since 1901. The stock market was at times severely strained by the various investigations and court proceedings, the enforce- ment of the Sherman Anti-Trust Law, the enactment of a railroad rate law, and the measures taken for the establish- ment of fairer methods of competition. The collapse in 1907, while due chiefly to international money conditions, and to the clashing of powerful financial interests, may be attributed in part to this contest between the Federal Government and the financial powers represented in some of the interstate corporations. The concentration of capital HISTORY OF THE NEW YORK STOCK EXCHANGE 299 had become so immense during this period that it seemed necessary to invoke the Federal power to subject it to reasonable regulation. During this memorable period when, as never before, except in Jackson's administration, the political power and the financial power clashed, the sentiment of Wall Street was divided. Many condemned what they termed the governmental interference with business, while others sup- ported the popular demand for publicity and regulation. Without going into the merits of this controversy, the point should be made in behalf of the stock market that while it is frequently used by unscrupulous persons, yet as a market it is the freest in the world, being open to all on equal terms. Nowhere else is competition better established than in the Stock Exchange, while the Exchange by its rules and regu- lations tries to protect the freedom of this competition. Since the panic of 1907, moreover, important changes have been effected in the machinery of Wall Street, changes which have strengthened the financial system and removed many causes of popular criticism and discontent. These changes include an increase in the requirements of publicity, a notable expansion of the membership of the Bank Clearing House, the issuance of a more comprehensive bank statement, and, lastly, a number of amendments of the rules and regulations of the Stock Exchange by which new safeguards are provided both for investors and speculators. Next to the admission of the leading trust companies into the Clearing House, the most notable advance which has been made in the financial center of this country in recent years has been the improvement of the Stock Exchange system. This improvement was in large part the outcome of the investigation of the speculative exchanges made in 1909 by a commission appointed by Governor Hughes, of which commission Mr. Horace White, the well known 300 PROGRESS OF THE EMPIRE STATE economist, was chairman. This commission, while up- holding the essential soundness of the Stock Exchange system, made a number of criticisms and recommendations. It is to the credit of the Stock Exchange authorities that they quickly carried out most of the recommendations, this requiring many amendments to the by-laws. The most important recommendation was that the Unlisted Depart- ment should be abolished, and this, as already stated, was carried into effect early in 1910. On April 22, 1903, the Stock Exchange opened its present building, which is undoubtedly the best appointed bourse in the world. During its construction the Board held its sessions in the Produce Exchange on Beaver Street. The new building has a frontage of 137 feet 8>£ inches on Broad Street, 152 feet 10 inches on New Street, and a narrow opening of 14 feet 2 inches on Wall Street. It is constructed of white Georgia marble, the style of the architecture being Roman Renaissance. The most conspicuous features of the Broad and New Street fronts are the high Corinthian columns and several groups of statuary by John Quincy Adams Ward. The board room is a magnificent expanse of I > 1 69,352 cubic feet. The annunciator boards, operated by electricity, which serve to summon brokers when non-mem- bers wish to speak to them, cover 800 square feet and require 8000 separate electric wires to operate. The cost of the building was in the neighborhood of #4,000,000, and it is one of the architectural features of the city. There is nothing mysterious or complicated in the Stock Exchange system. It is easy to understand, although it requires a peculiar order of talent to operate skillfully. The Stock Exchange is an unincorporated body of 1100 members engaged in the business of buying and selling secu- rities either for themselves or on specified commissions for outsiders. The objects of the Exchange, as explained in its WILLIAM ELLIS COREY i; born in it the mrgh, larles M. S> id in [903 it and din Is din m Railwa i member Ann ites of Mining Engineei ng clubs. HISTORY OF THE NEW YORK STOCK EXCHANGE 301 new constitution adopted in March, 1902, are "to furnish exchange rooms and other facilities for the convenient transaction of their business by its members as brokers; to maintain high standards of commercial honor and in- tegrity among its members; and to promote and inculcate just and equitable principles of trade and business." From 10 a.m. to 3 p.m. dealings are permitted on the floor of the Exchange in such securities as the governing committee has, after strict examination, admitted. The members are prohibited from trading after hours or outside of the board room. There are no calls of securities as in former days. The more active stocks are assigned to different designated positions or posts in the board room, and a member wishing to buy or sell a certain stock goes to the position assigned to it and announces his bid or offer. Nothing could be more simple. All business is done by word of mouth, and the oral contract is as binding as a written contract would be outside. A broker, let us say, offers to sell 500 shares of Union Pacific at 140. If no buyer appears at that figure he is forced, if he must sell, to offer it at ^ of 1 per cent, or 139^ and so on by ^ recessions until a bidder appears. The sale made, both brokers record the transaction on pads which they carry, and report it to their offices. No exchange of securities takes place on the board. What occurs there is a verbal promise to sell and to buy. It is, however, a real transaction and involves an actual exchange of property later. All offers made and accepted are binding, and nowhere else in the world are such enormous obligations entered into by word of mouth. The transactions may be for "cash," that is to say, delivery on the day of sale, or " regular," which involves delivery in the business day following the sale or at three days: that is, delivery in three days, or at buyer's and seller's options for not less than four or more than sixty days. 302 PROGRESS OF THE EMPIRE STATE The bulk of the transactions are "regular." No fictitious or, to use the Street term, "wash" sales are permitted, nor are dealings in puts and calls allowed, these being con- sidered as mere bets on prices. All deliveries of securities must be made before 2.15 p.m., in lots of 100 shares or multiples thereof in the case of stocks, or of #10,000 or multi- ples thereof in the case of bonds. Transactions in odd lots, however, take place in considerable quantities. After the sale is made in the board room the transaction is completed outside, either through the Stock Clearing House or ex-Clearing House. Comparison or Clearing House slips are exchanged, and on or before the time fixed for delivery the seller delivers the securities sold to the buyer or, if the transaction goes through the Clearing House, to a party designated by the Clearing House. The securities bought are paid for in full, on delivery, by certified check. Between the brokers, therefore, the transactions are essentially cash transactions. It is in the relations of the brokers to their customers that the principle of credit enters in. Any reputable person who can give a satisfactory reference can go to a Stock Exchange broker and, by making a deposit equal usually to 10 per cent, of the value of the securities to be dealt in, can give an order to buy or sell such stocks or bonds as he may designate. The broker, therefore, provides 90 per cent, of the capital required to carry on the transaction. This he is able to do by the use of his own capital and also by obtaining loans from banks or trust companies, using the stocks or bonds purchased for his customers as collateral for these loans. The banks usually require from the brokers a margin of 20 per cent, on the value of the securities thus hypothecated. The broker charges his customer a commission of ^ of 1 per cent, both for buying and for selling, and also interest upon the amount of the credit which he gives him. HISTORY OF THE NEW YORK STOCK EXCHANGE 303 Although there are fourteen stock exchanges in the principal cities of the United States, the New York Stock Exchange is the only one which is truly national in its membership and in the scope of its transactions. Every section and almost every industry of the country is repre- sented on the list of its admitted securities, while of the 590 firms identified with it, 83 are in other cities. Of the 1100 members, 104 have their offices in Chicago, St. Louis, Phila- delphia, Boston, Pittsburg, Buffalo, Minneapolis, Rochester, Richmond, Hartford, Baltimore, Washington, Cleveland, Kansas City, Cincinnati, Erie, Detroit, Newark, New Or- leans, and Los Angeles. Over three hundred of the firms rep- resented in the Exchange maintain 505 branch offices located in every part of Greater New York, and also in Berlin, Germany; London, England; Paris, France; and in Montreal Toronto, Ottawa, and Hamilton, Canada; as well as in up- wards of one hundred different cities and towns of the United States. The business of the Exchange, therefore, comes from all parts of the country, as well as from the principal markets of Europe. It has been roughly estimated that there are on an average of 60,000 persons trading in the stock market all the time, and as the personnel of the dealers is constantly changing, this means that millions of people are interested in the stock market during the course of a year. Not all of the 1100 members of the Exchange act as brokers. There is a large body of room traders, that is to say, members who trade for their own account only. Then there are a number of members who rarely, if ever, enter the Exchange, but who, as important principals, buy and sell through other members. By virtue of their own member- ship they gain the reduced commissions charged to members. There are also many members who do business almost exclusively as brokers for other brokers. These are com- monly called $2 brokers because their commission in serv- 304 PROGRESS OF THE EMPIRE STATE ing other members whose names they "give up" amounts to $2 per ioo shares. The commission which the laws of the Exchange establish for members doing business for non-members amounts to $12.50 per 100 shares. Every important banking house is represented by at least one of its partners in the Exchange, but it is a mistake to suppose that every great name in the financial world is on the membership roll. For instance, J. Pierpont Morgan, Jacob H. Schiff, andjames Speyer are not members, although their banking houses are represented and the sons of Mr. Morgan and Mr. SchifF are members. James R. Keene, for many years considered one of the most expert organizers of stock market movements, is not a member. On the other hand, John D. Rockefeller and William Rockefeller, who have not in years entered the Exchange, are members. The same is true of George Gould, Edwin Gould, and Frank J. Gould, sons of Jay Gould. One of the most noted members of the Exchange was E. H. Harriman, admitted in 1870, once active as a broker and trader, later one of the seven controlling personalities in the railroad world until his death. It may be said that it was by his genius not only in railroad organization but also in the knowledge of the stock market and its movements that he was able to achieve the wonders he wrought. Another well-known member of the Exchange is August Belmont whose house has for two or three generations represented the Rothschilds in America. Edwin Hawley was also a member until his death in 191 1. Although in active board business the Stock Exchange is essentially a young men's institution, there are still names on its rolls which have been there since 1869 or before. Among these are J. H. Whitehouse admitted in 1857, Henry Clews, admitted in 1864, who has been prominent in the Street for over forty years and who has published HISTORY OF Mil NIW YORK STOCK EXCHANGE 305 a hook of Wall Street reminiscences;' Francis L. Eames, Janus Seligman of the well-known banking house of J. W. Seligman & Co.; E. C. Benedict, known as one of the closest friends of ex-President Cleveland; and also L. D. Alexander, J. M. Amory, W. F. Bishop, E. H. Bonner, S. W. Boocock, A. M. Cahoone, H. G. Campbell, W. T. Colbron, A. H. Combs, E. S. Connor, G. F. Cummings, Charles S. Day, E. A. De Mauriac, W. B. Dickerman, L. G. Fisher, H. S. Germond, R. Suydam Grant, Charles Gregory, W. S. Gurnee, Albert J. Hatch, Louis P. Henop, John H. Jacque- lin, A. Josephson, A. M. Judson, W. B. Lawrence, C. H. Leland, G. J. Losea, R. P. Lownsbery, J. Edward Mastin, J. R. Maxwell, P. H. Minis, Donald Mackay, H. J. Morse, F. Nathan, E. L. Oppenheim, A. I. Ormsbee, S. M. Schafer, F. K. Sturgis, T. W. Thome, D. B. Van Emburgh, A. H. Ver- nan, W. B. Wadsworth, Joseph Walker, and W. G. Wiley. That in an institution limited to 1100 members, in a business involving such nervous strain and pecuniary risks as that of the Stock Exchange, there should be found forty- nine men who were admitted forty-three or more years ago, one having been admitted fifty-five years ago, is certainly remarkable. After all, the physical strain, the pecuniary risks of legitimate stock brokerage are not so great as is generally supposed. The number of insolvencies, especially in recent years, has been extraordinarily few. Among other members of the Exchange known for their activities in various directions may be mentioned: A. S. Heidelbach, of Heidelbach, Ickelheimer & Co. ; H. L. Higgin- son, of the well-known Boston house of Lee & Higginson; Rudolph Keppler, for several years president of the Ex- change; R. P. Doremus, long chairman of the Clearing House Committee; Bernard M. Baruch, William Baylis, C. Ledyard Blair, Walton H. Brown, Daniel Chauncey, A. M. Cahoone, ' Twenty-eight Years in Wall Street. 20 306 PROGRESS OF THE EMPIRE STATE Harry Content, John H. Davis, W. M. Donald, Jacob Field, F. S. Flower, Ernest Groesbeck, A. E. Goodhart, R. Suydam Grant, C. I. Hudson, Howard H. Henry, Colgate Hoyt, C. W. Maury, T. L. Manson, Eugene Meyer, Jr., H. K. Pom- roy, George B. Post, Jr., E. C. Potter, J. D. Probst, F. L. Rodewald, F. W. Savin, W. M. Scheftel, G. B. Schley, Leo Speyer, Henry C. Swords, James B. Tailer, H. C. Taylor, Edward Wasserman, Louis Wolf, Thomas F. Woodlock, Isidor Wormser, Jr., L. Zimmermann, James B. Mabon and R. H. Thomas, formerly president of the Exchange, and who holds the record for length of service in that office. Few realize the value of the services performed by the New York Stock Exchange in protecting the stock and bond securities of the country. Every stock and bond listed on the Exchange is required to be engraved in a certain speci- fied manner so as to prevent forgery, and to be properly registered so as to prevent fraud. The rules of the Exchange governing admission to the list specify a number of im- portant requirements, all intended to protect investors. This service alone entitles the Stock Exchange to the grati- tude of the investors of the country. When it is said that from 1888 to 1906 there were listed by the Stock Exchange #10,915,000,000, par value of bonds and #9,402,000,000 par value of stock, a total of $20,317,000,000 or an average of #1,128,000,000 a year, some conception is obtained of the magnitude of this service. In 191 1, the total of stocks and bonds then admitted to the privileges of the Exchange was #24,374,081,323. This was an increase in nine years in the total of securities admitted to the Exchange of over #9,000,000,000. The securities represented in the Stock Exchange amount to four fifths of the total securities in the country, and to nearly one fifth of the total estimated wealth of the United States. The evils incident to a stock market have led some to SMELTING PLANT AT GARFIELD, UTAH This typical plant of tl can Smelting & Refining Co., situafc Lake City, was under constru during thi 905-1906, and was in actual operation in Augu The principal product is copper bullion, of which the output is about 170,000,000 pounds per year. The number of men employed is about 1200. This is only one of several plants operated by the American Smelting & Refining Co. in different parts of the West, in Mexico, and elsewhere. HISTORY OF Illi: NEW YORK STOCK EXCHANGE 307 propose the abolition by law of the Stock Exchange. Such a proposition is inspired by ignorance and prejudice. Just as civilization has its dark slums and nameless crimes from which barbarism is exempt, so the modern financial system has its abuses and dangers from which the older and simpler system of trading was exempt, but as we would not exchange civilization with all its evils for barbarism, so it would be equally absurd to abolish the credit and stock markets because of their abuses. The panic which comes with periodic and devastating power is a product of the modern financial system. It is a direct result of over-extension of credit and over-speculation, but we might with just as much sense abolish the railroad because of the certainty of accident at frequent intervals, or stop building cities because of the ever-present peril of great conflagrations, as to abolish the modern financial system of credit and stocks because it results about once in every twenty years in a world-wide financial crisis called "panic." All the transactions of trade involve the taking of risks. Speculation, a term common both to philosophy and busi- ness, means the making of an investment involving large risk with the chance of large profit, this investment being entered into, however, after intelligent consideration of the risks. From the very beginnings of the English and French stock markets, speculation has been the object of attack. Odium attached to it not unlike that which at- tended in the earliest days the lending of money, which was then called "usury." Governments attempted to regulate and even to prevent it; and for more than two centuries the functions of the stock market have not been properly understood and appreciated. The Stock Exchange has been for years denounced as a gambling house and repre- sented as a den of thieves. Even as recently as 1906 one of the highest officials in the American government declared 308 PROGRESS OF THE EMPIRE STATE that speculation in neither stocks nor lands contributes in any degree to the development of the resources of our country, to the expansion of our trade, or to the continua- tion of our industrial activity. This statement is a most extraordinary misconception and misstatement. Never- theless it does reflect in some degree the public idea of the place of the Stock Exchange. This idea is that it performs no great national function, that it contributes in no way to the common wealth, and that it is a source of evil and wrong by giving opportunity for gambling. It is no part of my task to enter into an elaborate defense of speculation or even give a detailed description of the functions of the stock market, but it is necessary that this subject should be touched upon in order to comprehend the history of the Stock Exchange in its relation to the development of the nation. President Hadley of Yale University in a recent address said: " The objections urged against modern trade ethics are two: First, that modern trade in its larger forms is not an attempt to meet public needs. It is mere speculation — gambling or something worse. Second, that fair competition does not exist except when buyer and seller are on equal terms. Much of the present-day specu- lation is bad. But side by side with the bad there is much that is good and indeed necessary. The first essential in right speculation is that a man must be really able to make good his guarantees as to the future." President Hadley approaches pretty closely to the actual truth and yet he does not develop the truth in its fullness. It is not speculation, but the abuse of speculation which is bad. The abuse of speculation is the result, first, of entering into large risks with inadequate capital and without intelli- gent observation of conditions, and this is not speculation at all but mere gambling. The result, second, of unfair me- thods of competition. The development of the organized HISTORY OF THE NEW YORK STOCK EXCHANGE 309 stock market has constantly tended to enlarge the area of that publicity which is essential to fair competition, and also to the extension of safeguards against illegitimate overtrading. The Stock Exchange provides a regulated market by which investments in corporation securities may be ex- changed. It is like the bank and the railroad, really a part of the mighty system of transportation which contributes to the wealth of the world by affording the facilities by which production and consumption may be brought together. The stock market promotes that mobility of capital by which continental enterprises are promoted and human wants are filled. Its operations tend to regulate supply and demand so that the one shall not be in excess of the other. It affords a conclusive test of values, and its wide publicity of quotations safeguards investments and guaran- tees values in all parts of the country. The legitimate specu- lation which takes place in it has its economic value in that it makes a continuous market in which investors can instantly put their surplus earnings into securities and as quickly con- vert their securities into money. Thus it promotes thrift and enterprise, and gives to the commerce of the country a national leadership and community of purpose by which national life is expanded and the national power spread over the globe. ^^^e^t^^^r^ LOUIS WINDMULLER Merchant; horn in Westphalia, 1835; educated at gymnasium at Munster; emigrated to United States in 1853; since then Ql of New York City, where he became a successful mer- chant. Has been associated with, and took part in founding the Title Guarantee & Trust Co., the German- American Insurance the German Alliance Insurance Co., Maiden Lane .Safe Deposit Co., Bond & Mortgage. Guarantee Co.; is director of most of these; is president Maiden Lane Savings Bank. One of the founders and since 1889 treasurer of the Reform Club; one of the founders and vice-president Queensboro Chamber of Commerce; managing director Board of Trade and Transportation; agitated successfully for improvement of our state canals; member Chamber of Commerce; and member of number of charitable institutions, including Legal Aid Society, of which he is treasurer; vice-president of Heine Monument Society; treasurer Tree Planting Association; life member New York Historical Society; indefatigable pedestrian. CHAPTER IX THE COMMERCIAL PROGRESS OF GOTHAM BY LOUIS WINDMULLER WITHIN sixty years the population of the city of New York has increased from five hundred thousand to five million people. The foreign trade in 1850 amounted to: Exports $ 52,712,789 Imports 111,123,524 Total £163,836,313 The foreign trade of New York in 1910 amounted to: Exports $651,986,356 Imports 93S>990.958 Total £1,587,977,314 exports being twelvefold, and imports ninefold, what they were sixty years ago. The foreign trade of the whole coun- try in 1910 amounted to three thousand and five million dollars, so that nearly one half of the foreign commerce of the United States passed through the port of New York. The tonnage of American and foreign vessels engaged in our foreign trade was for the port of New York: 3" 312 PROGRESS OF THE EMPIRE STATE Cleared Year ending June 30, 1850 983,478 tons Year ending June 30, 1910 12,541,903 tons Entered Year ending June 30, 1850 1,145,331 tons Year ending June 30, 1910 13,042,818 tons The testimony of an eye-witness to these changes, and his reminiscences of men who assisted in the development, should be interesting. The Croton Reservoir, which supplied the city, was on the site of the Public Library, and had the appearance of a fortress. Small as the basin was, covering half a block, it furnished water for the whole city. Complaints of insuf- ficient supply came only from owners who had erected their houses above the street level. Around the ramparts of that "fortress" a comfortable walk was available for pedestrians who did not mind the ascent of an easy flight of stairs. On many Sunday afternoons we went to view from these breastworks the ground upon which a greater city was to rise. A few structures only were in sight to the north. The most conspicuous, Rutgers academy for the education of women, with its serpentine fronts and "swell " windows, occupied the block on the east of the Avenue from Forty-first to Forty-Second Street. St. Patrick's Gothic Cathedral, destined to become the finest church on the continent, was not planned — but Catholics owned the site; the flower of their flock continued to worship in Mott Street. A vast asylum absorbed the block on the east side of Fifth Avenue between Fifty-first and Fifty-second Streets; the Union Club has since erected a home on the corner, and the Vanderbilt mansions are opposite. Squatters, with THE COMMERCIAL PROGRESS OF GOTHAM 313 grunting pigs and chattering geese, controlled the territory between the Arsenal and McGowan's Pass; Vaux and Olmsted have made it the finest park of which any city can boast. Fifth Avenue had been lined with sombrous dwellings which reflected the brown study of their occupants. Many continue to offend the eyes; others have been changed into shops of a brighter hue and more attractive styles. As their business increases, the thrifty tenants will probably transform this avenue, from Madison Square to the Park, into an American "Rue de Rivoli " if avaricious owners can be prevented from building too high in the air. Of the boroughs which were annexed in 1898, Brooklyn was and remains the most important. It is, as it always has been, a city of homes. Devoid of palaces, it is free of slums. The "Heights" offered eligible sites for the dwellings of merchants whose business was in lower Manhattan. To the benefit of good air and the attraction of fine views, the eloquence of Henry Ward Beecher was added when he was minister of Plymouth Church; other preachers, like Dr. Storrs, contributed fame to the city of churches. No wonder that the families of Judge Pierrepont, Edward M. Shepard, Alfred T. White, George Foster Peabody, the "Schroeders," and their friends, filled every available block as far as Clinton and Court Streets. No indication of de- velopment beyond was evident. Here and there Dutch farmhouses, surrounded by hotbeds, remained the only familiar signs of civilization until Prospect Park was laid out. South Brooklyn, where Henry C. Murphy and J. S. T. Stranahan lived, was in bad repute on account of malaria. Many localities, including the separate community of Williamsburg, suffered temporarily from a collapse of specu- lation in building lots which culminated during the panic of 1857. A friend of the writer had agreed with the tenant of 3H PROGRESS OF THE EMPIRE STATE one of his houses on Bedford Avenue to let him remain rent free until prosperity should enable him to resume pay- ments, but he was surprised to see him remove his furniture a few days later. The tenant explained his behavior by showing the exasperated landlord an offer of the use of a better home for taking care of it; but the houses did not go begging long. Ex-Mayor Kalbfleisch made chemicals in the Eastern District. Staten Island, now the Borough of Richmond, has changed in character less than other annexed districts. It is covered with unostentatious, comfortable homes surrounded by shrubbery, and looks what it is — the ideal spot, chosen for the dwellings of refined and happy families. When we gaze at those hills, as we glide through the narrow channel which separates it from Long Island, we appreciate why this emerald spot, the gem of our port, was long a bone of contention between the English and the Dutch. The banks of the romantic Bronx River, named after Jonas Bronck, a patroon from Germany, did not be- come generally known until the city acquired for parks, botanical and zoological gardens, the most attractive sites. Pierre Lorillard continued to grind, on the shores of the babbling brook, the pungent snuff by the sale of which, at 16 Chambers Street, he made a fortune; and "Papa" Bodouin had already acquired a reputation for that Bur- gundy wine which has made his "Hermitage" the popular resort of Williamsbridge. Queens was chiefly visited by people who wanted to attend the races. A turnpike led from Paynter's, whose house was once the scene of an engagement between Wash- ington's army and the British, near Hunter's, the sponsor of Hunter's Point, to the race course at the second tollgate. The turnpike was named after John C. Jackson, who sold job lots of crockery in Water Street. A jovial Englishman THE COMMERCIAL PROGRESS OF GOTHAM 315 with florid complexion, he married Captain Riker's daughter, the wealthiest heiress on the island. After her husband's death, she moved to New Jersey, and took the colonial homestead she was born and bred in on "Oakhill," piece- meal with her. Her daughter married J. L. Riker, the Cedar Street merchant. From the race course the turn- pike led to St. Ronan's well near Flushing Creek. The waters of this spring, celebrated for their healing properties, had already been used by Indians. A popular resort was established on the brow of the hill, where guests continued to enjoy the water with other refreshments, until specu- lators filled the spa and leveled the hillsite. John Aspinwall resided in Flushing, and Senator Rufus King settled in Jamaica. Among the fashionable quarters of New York families in Manhattan was the Bowling Green. In 181 5 the ground which faced it was sold for dwellings by the government. A restriction that the houses should be of uniform size with gardens fronting the street induced wealthy merchants to build there. Robert Fulton lived and died in "Marketfield," in that neighborhood. The light red brick and white marble trimmings, with flowers and shrubbery in the front yards, long remained an orna- ment of lower Broadway. John Hone lived at the corner of Whitehall Street; Stephen Whitney, the last one to leave, was at the other end, on the corner of State Street. After the families vacated, these brick dwellings were occupied by the Oelrichs for offices of their Bremen steamers, by agents of the Cunard and French lines, and by foreign consuls. This entire square has been absorbed by an impos- ing Custom House. Where our Knickerbocker families entertained their guests, Mr. Loeb scares their descendants blue when he suspects them of smuggling. Plebeian indi- viduals who import goods to sell are suspected by the nature of their calling. 3l6 PROGRESS OF THE EMPIRE STATE The neighborhood of St. John's Park was a center of good society. Here were the homes of Alexander Hamilton, General Schuyler, and John Ericson; the families of the Aymars, and the Lydigs lived here. No vestige of the past remains but the old church, which rang the curfew bell at nine o'clock when other belfries had closed, and that seems to be doomed. Gramercy Park, founded by Samuel B. Ruggles, con- tinues as it was when chosen by Samuel J. Tilden, John Bigelow, and Peter Cooper for their respective residences. In Bond Street, Washington Irving, Dr. Francis Fenimore Cooper, and Julia Ward Howe lived. On Washington Square were the homes of Samuel F. B. Morse, the Rhine- landers, and William E. Curtis, who lived in summer on Staten Island. The gray stone building of the New York University embellished the east side for thirty-five years, until the college moved to Fordham. Dr. Mott and John Austin Stevens lived on Bleecker Street; Thomas Paine died there in 1809. Jacob A. West- ervelt, the shipwright, resided on East Broadway when he was Mayor in 1853. The families and friends of Preserved Fish were grouped around Stuyvesant Square; Senator Evarts's home was on Second Avenue near Fourteenth Street where Joseph H. Choate, his partner, became his genial neighbor. Evarts would never walk where he could ride; he died at 83, having been bedridden the last two years of his life. Choate who never rides where he can walk, is hale and hearty at eighty-one. Many good people owned charming brick cottages in Greenwich Village and Chelsea, which included London Terrace. Among them were George Bancroft, Horace Greeley, General Winfield Scott, and Edwin Forrest, who lived at 436 West Twenty- second Street. We can best appreciate the character and location of the HORACE BRIGHAM CLAFLIN Merchant; born in Milfi , December 18, 181 1 ; received his education in the common schools and Milford Academy. Began business as a clerk in his father's store, and in 1831, with his brother and brother-in-law, succeeded to his father's business. In 1832, opened drygoods store in Worcester. In 1843, Horace removed to New York and organized the house of Bulkley & Claflin, wholesale drygoods, at 46 Cedar Street. After a changes, due to the rapid expansion of the business, Mr. Claflin in 1 85 1 erected the Trinity Building, at 1 1 1 Broadway. The present location of the house on Worth Street, extending from Church Street to West Broadway, was secured in 1861. The Civil War and the panic of 1873 compelled the house to ask their creditors for an extension of time, but no paper with their name went to protest and in 1873 their notes were all paid in three months, sixty days before the end of the extension. At the death of Mr! Claflin, the business of the house, which had sometimes reached $72,000,000 in a single year, exceeded that of any other such house in the world. Mr. Claflin was a strong opponent of slavery, and practised many unostentatious charities. THE COMMERCIAL PROGRESS OF GOTHAM 317 old shopping centers by following thrifty housekeepers as they came from their rural retreats for an expedition to lower Manhattan. Usually the first stop was made in Canal Street. That wide thoroughfare, once considered our northern boundary, had not been opened farther east than Broadway. It was expected that the city would turn this street into a boulevard, shaded by elms, and stretching from river to river — a dream which will never be realized. The northern boundary of the city has not yet been fixed; it may be Yonkers — named after young Dutch bloods, "Yonge Heerens," who went there to frolic — or it may be farther north, alongside the Hudson. Already Broadway extends as a city street to Yonkers. For ladies the chief attraction of Canal Street was the dry-goods store of Arnold, Constable & Co., on the northwest corner of Mercer Street, now occupied by Adams Express. The firm had been Arnold & Hearn. James A. Hearn left to establish himself at 425 Broadway, when Mr. Arnold took his daughter's fiance, Mr. Constable, into partnership. George, the son of James Hearn, has become a benefactor of American artists, and a patron of art museums. James M. Constable agitated for tariff revision, and was often chosen "merchant appraiser" to arbitrate disputes between collectors and importers of dry-goods, while friendly ad- justments of differences were feasible. From Arnold's ladies wended their way to Taylor's saloon on the northwest corner of Broadway and Franklin Street, the Ritz-Carlton of yore. Gaudily decorated, re- splendent with mirrors, this hall presented a gay spectacle at noon. Every plush-covered "settee" around every table was adorned by young ladies, who had come to meet their friends and to gossip while sipping ices. The saloon and charming guests have disappeared; the building is a toy emporium. 318 PROGRESS OF THE EMPIRE STATE Those who had not finished shopping on Canal Street were wont to continue their promenade on the "dollar" side, as the west of Broadway was called, until they came to Reade Street. Here they crossed to invade the marble palace of A. T. Stewart. This remarkable man had been a teacher in Bragg's private school at Roosevelt and Pearl Streets. When his mother died in Belfast, he recrossed the ocean to claim £500, his share in her estate. As he had learned, during the intercourse with his female pupils, what styles of Irish lace were popular, and what prices New York ladies had to pay, he made a judicious selec- tion of the best and brought them here in place of sovereigns. He sold them to good advantage; by strict economy, abstinence from debt, and close attention, he became successful. He never gave notes, but was always ready to pay creditors who were willing to allow the rebate Stewart claimed. In 1848, a few years after he had estab- lished himself, he was able to build his large store. Careful in the engagement of help, he understood how to secure the most faithful. When examining applicants, he selected once an artless lad because he had observed that, on enter- ing, the youth had picked a pin from the floor. No em- ployee was allowed to carry matches, and he discharged one who gave reluctantly a box to Stewart himself when he asked for it. Stewart's counters had to be cleared after the visit of every shopper; no piece of goods, no shawl was allowed to remain; it had to be put into the creases, dusted, and returned to the shelf from which the salesman had taken it. No store in the city was more spick-and-span. Some fifty-three Novembers ago, the writer had occasion to buy a trousseau for his bride-elect; he went to Charles C. Merchant, 287 Broadway, whose assortment of silks was the best. During a subsequent depression Stewart managed to buy of Merchant's notes an amount sufficiently large THE COMMERCIAL PROGRESS OF GOTHAM 319 to force him into bankruptcy, and then engaged him to buy his silks. Stewart was not equally successful when he tried by similar practices to ruin more formidable rivals. Yet his business increased; he became a lavish contributor to charities, especially where his munificence was likely to command attention. The gifts which have served his purposes best, Wv He sent a cai c ,o ... food to his starving countrymen in Ireland. He contributed to the Union cause in 1861. After the German occupation of 1870, he assisted the needy artisans of Paris. He helped sufferers by the Chicago fire in 1871. When he died he left an estate estimated at fifty millions, which became a bone of contention between clamorous heirs. Indefatigable shoppers, who were not quite satisfied with Stewart's, turned east and trotted up Chatham Square. At that time the finest bonnets were displayed in the windows of lower Division Street, — they had to be inspected and criticized before the ladies proceeded to Lord & Taylor's celebrated store on Catharine Street. Samuel Lord, an Englishman, established this firm early in the nineteenth century. He lived in Newtown village on a handsome estate which he purchased from Theodore Vietor, the genial Pearl Street merchant. This old shopping center has lost its attractions. Intercommunication within the city was long restricted to stages, which went, some from the Battery, some from Fulton ferry uptown over the slippery "Russ" pavement for which Jean Deghuee and Charles Guidet, his son-in-law, substituted "Belgian" granite blocks. One of the most popular lines, the "Knickerbocker," turned into Bleecker Street, going as far as Greenwich village. The " Bullshead " line rode up the Bowery to Twenty-third Street. The 320 PROGRESS OF THE EMPIRE STATE customary fare, sixpence (6j^c.) was handed to the driver on entering, through his observation Jiole, whom passengers notified by a pull of his strap when they wanted to leave. Horse-car lines were opened as follows: 1 85 1, from Vesey Street up Sixth Avenue; 1853, from Ann Street up Third Av aSt > •; 1855, from Vesey up Hudson Stre^ r £ st l Eighth Avenue. Stages being more popular, it took time before cars became crowded and straps were needed. Uptown branches were of the "bobtail" variety. The first elevated road began to run in 1871 from the Battery up Greenwich Street. Its shaky appearance inspired no confidence; few people realized that this sys- tem of transportation would annihilate distances and practically create New York." The present means of New York's intercommunication includes: 101 miles Subway tracks, 213 " Elevated tracks, 1288 " Surface trolley tracks. These are almost exclusively moved by electric power. They carry over one billion passengers a year. Some #250,000,000 has recently been appropriated to extend these lines and build new ones, in full expectation that by in- creasing population and taxable values they will prove profitable. When passengers wanted to go to Philadelphia by rail sixty years ago, they left the Battery by the steamer John Potter which carried them to Amboy. The road took them on rails across the State of New Jersey to Camden, and hence ferried them over the Delaware River to the foot of Market CLARENCE WHITMAN Manufacture! talist; born in Annapolis, No ! John and Rebecca (Cutler) Whitman. The Whi family is of English origin, d n John Whitman ol lOUth, Mass., who came from England about 1625. Clai Whitman was . in Cambridge. d has d< his entire busin 1 drygoods interests, first in Boston and afterwards in New York City. He began as an employee of J. C. Howe & Co. of Boston, and was later with the firm of James M. Beebe & Co. He came to New York in 1866 and was for nine years with J. S. & E. Wright & Co., which was later suc- i by the firm of Wright, Bliss & Fabyan. He established the firm of E. C. & C. Whitman in the drygoods comm business, and obtained the selling agency of the Ponemah Mills, which became the pioneer manufacturer of white goods in the United States. The same energy and perseverance which ltd to success in this line led him to engage in the lace curtain industry. He established the Wilkes-Barre Lace Manufacturing Co., which entered extensively on the manufacture of Nottingham lac tains. Mr. Whitman was five years president of the Merchants' Association of New York, is director of the Pantasote Leather Co. and Credit Clearing House; and member of the New York Chamber of Commerce. THE COMMERCIAL PROGRESS OF GOTHAM 321 Street, Philadelphia. It took six hours to complete this journey. The passage over the New Jersey Railroad was shorter, but once, in 1861, it took us longer. Near Rahway we drove into a snow hank and had to get some army sutlers to shovel so as to release the wheels of the locomotive. We arrived at daybreak in Germantown. Compare the ferry- house of the John Potter, with the Pennsylvania Depot on Seventh Avenue and the Congressional Express with the Camden and Amboy train! The Hudson River Railroad Depot was covered sixty years ago by a wooden shed in Hudson Street, opposite the grocery of Thomas Hope. Hence the train was drawn by teams to Thirtieth Street, where it was made up and hitched to a locomotive. It took longer to reach Albany than it takes the Empire State Express train to get to Buffalo. The new terminal of the New York Central speaks for itself. Railroads have done wonders for the development of our city. When the neighborhood of the Pennsylvania Depot was monopolized by colored people a brick house and lot sold for #30,000; this property has since been leased for a long term at #30,000 a year. The writer attended forty years ago the golden wedding of his friend, William Bragaw, who related how he negotiated, when married, for a farm. He had the choice of about a hun- dred acres each, one in the heart of Williamsburg; the second around the Arsenal (now the menagerie in Man- hattan) ; the third in Newtown. He chose the last because his relatives lived there. Their original name, "Broucard," was changed when they came from France. The value of our real estate depends on the convenience of the location and on the caprices of trade and fashion. The old shopping center at Chatham Square ceased to be 322 PROGRESS OF THE EMPIRE STATE reputable when it was darkened by the structure of the ele- vated road. The neighborhood became infested with " Peter Funk" auctioneers, bed-house keepers, and other sharp- ers. They knew how to rope in the passing stranger, and they did not allow one they caught to leave until they had stripped him of his valuables. The good-natured sailors, who had come from their ships through Catharine from South Street, considered this treatment a tribute which every visitor had to pay, and proceeded without murmur to less expensive quarters. Passengers from New England by the Sound boats were more inquisitive. They returned with a policeman to the spot where they had been despoiled, generally to find the place closed. Interested neighbors assured the guardian of peace that the shop had not been open for months, and that the stranger must be mistaken. But when the robberies were repeated, the police closed the fences. The glory of South Street vanished with the decadence of American shipping. While A. A. Low and Brothers im- ported tea from China, and exported American products in their fast clippers, more tonnage was covered on the oceans by our Stars and Stripes than by any other flag. Seth Low, the son of A. A. Low, became president of Columbia College and Mayor of the city. He endowed the college with a li- brary. Amongst other China traders were William H. Fogg, Fletcher Westray, and Talbot & Olyphant. Large steam- ers which dock along the North River from Christopher Street north, and German lines landing in Hoboken, carry now the goods we send across the oceans. East Fulton Street, Manhattan, and lower Fulton Street, Brooklyn, were the most crowded thoroughfares of the boroughs until Roebling's bridge supplanted the ferries which connected them. Both ferry and bridge are superseded by tunnels; which may yet be replaced by airships. THE COMMERCIAL PROGRESS OF GOTHAM 323 The largest dry-goods merchants were clustered around Hanover Square, near the financial center, until they moved west of Broadway, between Chambers and Broome Streets. A movement has been started by these firms to go uptown to the east of Union and Madison Squares. Already we find old familiar signs, which we have long seen down town, on Fourth and Madison Avenues. Real estate formerly used by the dry-goods trade has declined. Tefft, Weller & Co.'s old store, on the east side of Broadway, between Pearl and Worth Streets, on the site of the old Broadway Theater, sold for half a million when they recently failed; it had been appraised at a million. As a tenant, the writer had some experience with fluctua- tions and elasticity of realty values. When we moved, forty-five years ago, from Maiden Lane to Reade Street, we were induced to pay for lofts we continue to occupy, more than they were worth. As we found that our landlord was not as poor as he looked, we were heartless enough to force reductions of the rent every year, until we arrived at a third of the original price. Now the rent has advanced again. R. A. & G. Witthaus, importers and makers of small wares, came from Osnabriick, Germany, and had their princi- pal office at 57 Exchange Place. Although their legitimate business was lucrative, they abandoned it to speculate, for some time successfully, in real estate. The elder brother was wont to express his opinion that property in Manhattan was safe enough to buy on the smallest possible margins. When the panic of 1873 made the best mortgages unavail- able Witthaus could not raise funds to pay interest and taxes. In despair he laid down to die in his home near Judge Hilton's. The same real estate has risen since far beyond his sanguine expectations. Some ten years later a strong company, in the organiza- 324 PROGRESS OF THE EMPIRE STATE tion of which the writer took part, began to search and to guarantee titles to real estate. This new departure, coupled with the facility of obtaining loans for customers of the company, has made property, which had been slow of sale, a liquid asset. The example was followed by other com- panies in other cities. The system would have saved Witthaus and others, if it had been in vogue in their time. The character of settlers influenced the character of the neighborhood. The Irish once predominated at the "Five Points"; of the rowdy element among them, a gang known as "Dead Rabbits" made the Bowery unsafe whenever they invaded it. Germans congregated on the East Side as far north as Second Street, which was known as " Klein Deutschland." The writer has watched long processions of them go down through the Bowery, Chatham Square, and Nassau Street to their respective workshops, and has seen them return home evenings by the same route. Automo- biles were unknown, but pedestrians encountered reckless butcher boys who delivered, in two-wheel gigs, breakfast in the early morning, and at all hours firemen who raced down Chatham Hill; as they preferred sidewalks to the prevailing cobblestones. Educated Germans comprised the best ele- ment of our population. Conscientious in the performance of their duties during the day, they knew how to enjoy their nights. They sang in the "Liederkranz," danced in assembly rooms, and drank in "gemiithliche Kneipen," where good beer was available. Besides teaching us harm- less pleasures, they spread their taste for art and literature. Amongst their foremost citizens were Carl Schurz, Oswald Ottendorfer, and Charles Hauselt. Since Germans assimilated, they have ceased to live apart. Since the Irish abandoned manual labor they have become jurists and statesmen. Prominent amongst them were James T. Brady, Chester A. Arthur, Samuel J. tou, 2, £>336,34 8 -93 or forty-four millions assets now against six and a quarter millions sixty years ago. To these sixteen have been added nineteen other com- panies, with an aggregate Capital of # 9,650,000.00 and a surplus of 24,280,627.62 the most important additions being the German-American, Germania Fire, the Queens Insurance Company of America, and the Fidelity-Phoenix Fire, making a total for the entire thirty-five companies of: Capital, #20,250,004.00 Surplus, 58,616,976.55 The following three became the most successful Ameri- can companies: The "Home" under the able management of Messrs. D. A. Heald, John H. Washburn, and Ellridge Gerry Snow. The "Continental" under Messrs. George T. Hope, Francis C. Moore, and Henry Evans; Mr. Hope was pro- minent amongst exempt firemen. The "German-Ameri- can," under the careful supervision of Messrs. J. W. ELBRIDGE GERRY SNOW President Home Insurance Co.; born in Barkhamsted, Coryi., January 22, 1K41 ; educated district and high schools, and gradu- ated Fort Edward Institute; married in Waterbury, Conn., September 5, 1S65, Frances J. Thompson. After leaving school, studied law and later entered insurance agency in Connecticut; in 1862, became clerk in the main office of the Home Insurance ( '<)., where he remained nine years, then became state agent of the company for Massachusetts, and also with J. Edward Hollis, in insurance firm of Hollis & Snow; represented several other companies as local agent in Boston, until 1885, when he came again to New York City as secretary of the Home Insurance Co., and subsequently became vice-president and president of the company. Director of North River Savings Bank; trustee New York Life Insurance Co. and other New York corporations. Member American Museum of Natural History, New England Society, Independent Order of Odd Fellows, Municipal Art Society, Mayflower Society. THE COMMERCIAL PROGRESS OF GOTHAM 363 Murray, Ernest L. Allen, and William N. Kremer. All three companies have been punctual in the payment in full of all their losses, those of San Francisco included. It was customary for a merchant personally to visit the companies he believed in and place his insurance where he could get the best policy at the lowest price. The writer kept his own expiration book, and was received with wel- come smiles when he paid an annual visit to the officers to renew his policies. Brokers were then considered the parasites of insurance. Since the business has assumed large proportions so that merchants can no longer attend to it personally, brokers have made themselves more than useful by their knowledge, which they employ for the benefit of their clients. Up to 1865 we relied on volunteers, exempt from the payment of taxes and from civic duties, to extinguish fires. Bells gave the alarms, and members responded at all times of the day and night. Every company was eager to get ahead of every other company, so as to reach and extinguish the fire first. This rivalry resulted occasionally in disorder. While members quarreled over precedence, they some- times allowed the flames free play. But when a fire was peaceably extinguished, the brave fighters were invited by neighbors to partake of refreshments. The volunteers were actuated by benevolence and impelled by emulation; to extinguish a fire had for them a strange fascination. The social intercourse between members was pleasant. Some of our best citizens took a pride in belonging to favorite companies. Amongst them were two bank presidents, Wil- liam L. Jenkins of the Bank of America, and William H. Macy of the Seamen's Bank for Savings; Jordan L. Mott, the iron master; of ship builders, William H. Webb who launched more tonnage than any other American; and erected for aged ship carpenters, at Fordham, the home 364 PROGRESS OF THE EMPIRE STATE which bears his name; George and James R. Steers, who built famous yachts and steamers of the Collins Line. Other volunteer firemen were: Solomon Kip and Albert Brown, who owned the Broadway stages; Albert J. Delatour, who cooled off the heads of speculators with soda-water at 25 Wall Street; James Y. Watkins, the house furnisher of Catherine St.; ex-Mayor Daniel F. Tieman; the brothers Harper, born in Newtown, the Second Ward of Queens, who became famous publishers; Thurlow Weed, the jour- nalist and politician; William H. Wickham, Dr. Hosack, Cornelius W. Lawrence, W. H. Appleton, the publisher, A. W. Spies, gun importer; Lorenzo Delmonico, Police Inspector Byrnes, were all connected with our Exempt Fire Department. Firemen's balls were of social im- portance, and attended by our best families. On one of these occasions, Cyrus W. Field appeared in the full uniform of a policeman. He wanted to demonstrate that he was not too proud to wear the city's livery, and by this act he overcame the repugnance of guardians of the peace who refused to don it. On the outbreak of our Civil War a regiment of firemen Zouaves was formed and sent to the front under command of Colonel Elmer W. Ellsworth. When called upon to save life or property our firemen never shirked danger. Young volunteers who were ambitious to be enrolled slept on the bare floors of the engine houses, and were broken to endure smoke; after filling their boots with brandy they some- times helped to extinguish eight fires within twenty-four hours. When it was found that volunteers could not always be relied upon, and when the accumulation of valu- able goods in congested districts made prompt action imperative, the present system of a paid department was inaugurated. The men combine with bravery a thorough knowledge of modern appliances, including the high pres- THE COMMERCIAL PROCRESS OF GOTHAM 365 sure, which in most cases they have been able to use effectively. Few of our marine underwriters have prospered. Most of them have taken greater risks than circumstances justi- fied, and they lost instead of making money. Horace J. Moody of the "Pacific" was of the most venturesome. B. C. Morris, president of the "Columbia," paid five per- cent, only of adjusted claims for losses. All of the following companies were obliged to liquidate: The "Mutual" Insurance Co., incorporated in 1832, managed by Mr. John Delafield, who brought the first copy of our treaty of peace with England when he landed. He lived in Ravenswood, and was a director of the New York branch of the " Bank of the United States. " Colonel Richard Lathers from Charleston, S. C, was long president of the "Great Western. " He made strenuous efforts to reconcile the South when Lincoln became Presi- dent; for this patriotism he was greatly esteemed in the North. Owning a fine estate in New Rochelle, he lived and died at 248 Central Park West, after having entertained there some of the best people of the reunited country. Over the door of his downtown office hung this quaint sign: Richard Lathers Smith Shaves Smith, a relative of Commodore Vanderbilt, discounted notes at stiff rates in the same building. The "Orient Mutual" was managed by Eugene Dutilh. When he himself was obliged to fail, he paid American creditors in full. The "National Lloyds," managed by Arthur Leary, who was a devoted friend of Mrs. Paran Stevens, the gay and festive widow of the Boston "Revere" house. 366 PROGRESS OF THE EMPIRE STATE The "New York Mutual," which was presided over by T. B. Bleecker of the old New York family. Even the "Sun Mutual" was compelled to quit in spite of the long and careful management of John P. Paulison. That the "Atlantic Mutual," established in 1842, sur- vives other American marine insurance companies is chiefly due to A. A. Raven, its president, and to his prede- cessors. At the Warehouse fire in 1845 a number of under- writers, who had insured against both fire and marine losses, had to fail, and the "Atlantic" acquired the best portion of the latter business. This company also had the foresight to purchase government bonds at the low prices which prevailed at the beginning of our Civil War. Following the action of the London Lloyd's, American companies have begun to insure against almost everything — against losses caused by depression of trade; against all accidents to automobiles and to their owners; against every loss on merchandise during transportation, such as leakage, theft, and depreciation of the value of fashionable dry goods ; against loss sustained by caterers and other purveyors in consequence of bad weather, and against tornadoes. Before 1863, when the national banking system was invented, our medium of exchange consisted of coin, and State bank notes, the value of which fluctuated. John Thompson, 2 Wall Street, predecessor of the First National Bank, was the best judge of their value. He published the Bank Note Detector, a weekly newspaper, which was more indispensable to receivers of money than Bible and prayer book. It contained the rates of discount at which issues of banks in different parts of the country were accept- able, which varied from one half per cent, for Eastern bills to 5 per cent, for " wildcat " notes. Values of notes of suspended banks and descriptions of the last discovered counterfeit notes were published and hawked in extra editions along our THE COMMERCIAL PROGRESS OF GOTHAM 367 streets. Experts were employed besides to scrutinize the notes. When the cashier was in doubt, he required the written endorsement of a responsible party. Receipts of the day were taken to the nearest broker, — like Joe Hough, succeeded by Benjamin F. Maniere, under Barnum's Museum, to obtain checks for what he approved. Maniere became Police Commissioner. Locations of "wildcat" banks were generally mysterious, and always distant. A large amount of the issues of one of those banks had been accumulated by a shrewd broker, who decided to present them personally at the bank. After a careful search, he discovered finally a log cabin at a railroad station in southern Indiana, over the door of which the sign of the bank was displayed. A polite cashier excused his inability to pay at once, — "the president had gone to Chicago, and carried the cash with him." It took the broker some days to find him, and to get his money, but not before he was nearly lynched by the indignant Hoosier community. Because twenty millions — some thirty-five tons of bullion — were required by?the banks to adjust daily balances, fifty-two of them established, October 11, 1853, a Clearing House at 14 Wall Street. Here they met and adjusted their mutual obligations in an hour, avoiding the risk of transport- ing the money they owed each other through the public streets. When the South threatened to secede, and failures were a daily occurrence, these banks agreed to help each other by an issue of Clearing House certificates. All members who needed assistance, and who could demonstrate their solvency to the others, could get certificates for 75 per cent, of their good assets. For these issues all members of their Clearing House became jointly responsible, and the certificates passed between them in settlement of their mutual obligations. 368 PROGRESS OF THE EMPIRE STATE This remedy, adopted by advice of Mr. George S. Coe, President of the American Exchange Bank, alleviated the money stringency. It has since been resorted to at the recurrence of every panic, and proved effective. Mr. Coe had been the New York agent of the Ohio Life Insurance & Trust Co., the failure of which precipitated the panic of 1857, when 4000 failures occurred, involving three hundred millions. This panic was caused by loans to rail- roads in course of construction, and before the bonds issued for construction could be sold. The panic pre- cipitated the suspension of every bank but the "Chemical." The writer then learned his first financial lessons. He had recently established himself; his capital was small, he had no liabilities. He drew a hundred dollars in gold from the Bank of New York, and a larger amount in notes from' a Brooklyn bank. While his competitors chased impecu- nious creditors, he drank with a friend, who had been equally fortunate, to failures which could no longer disturb us. To while away time, he played chess with his book- keeper. The panic was severe, but of short duration; bankers more than merchants were affected, and the writer began to extend credit again to solvent customers the following spring. When Fort Sumter was bombarded in 1861 and the Civil War began, almost every Northern merchant who traded with the South was ruined. The banks realized that the Government could not borrow sufficient money to bring the war to a successful end, and suspended in December, 1861, except the Chemical, where the writer kept his account. His business had grown and included foreign accounts. Being anxious to protect his European creditors, he called on the bank to inquire about a balance of some $5000 he had on deposit. His mind was relieved when he was promptly assured that this balance had been placed to his credit in ANTON ADOLPH RAVEN iident and bank official; horn Curasao, Dutch ptember 30, 1833; son of John R. and Petronella (Hutchings) Raven; paternal ancestry English; maternal i tors emigrated from Holland to New York and afterwards settled in the Dutch West Indies; boyhood spent on Island of St. Thomas until seventeen years old, when he came to New York City; married in New York City, i860, Gertrude Oatman; has four chil- dren, of whom one, thc'Rcv. John Howard Raven, is professor of Old Testament languages and exegesis in the Theological Semi- nary of the Reformed Church in America, at New Brunswick, .\. J. Became clerk in office of Atlantic Mutual Insurance Co., January 4, 1852; advanced successively to underwriter, fourth vice-president, thirl president, vice- president (1895-1897), since then president. 1 lonorary vice-presi- dent and trustee of Home Life Insurance Co.; director Bank of New York (N. B. A.), Fidelity & Casualty Co.; trustee Seamen's Bank for Savings in the City of New York; vice-president American Geographical ! lember American Museum of Natural History and of Metropolitan Museum of Art. THE COMMERCIAL PROGRESS OF GOTHAM 369 gold — "because it had been as good as gold when deposited." No other hank was equally considerate. The action encouraged the writer to keep his books on a gold basis, and taught him to abstain from risky ventures. The difference between speculators on margin on the Stock Exchange and ordinary gamblers is trifling. The former's transaction is sanctioned by law, and may occasion- ally have been useful by upholding worthy enterprises, such as the extension of railroads. On the strength of this argu- ment speculators on the bull side have claimed that their efforts to sustain the market were patriotic and deserved encouragement. The facts are, one class of speculators only can gain what the other loses, while buyers and sellers of merchandise may both benefit by their transactions. When Daniel Drew, a cattle drover, became a successful stock manipulator, he was consulted by a pretended friend about the stock market. This "friend" did the opposite of what Drew advised, and made money, until one day "Dan" told him the truth, and ruined the fellow, who had continued the same policy. George G. Williams, President of the Chemical Bank, was the son of a physician in Haddam, Conn. The remarkable success of the bank was largely due to his faithful services. He lived and died at 24 West 58th Street; his charming daughter Clara married Mr. F. B. Keech. Amongst the re- miniscences of Mr. Williams, one is worth recounting. While still cashier, a customer came to Mr. Williams and inquired anxiously for Director Goelet. Williams pointed to the door of the directors' room, but saw the customer quickly withdraw, — he "could see only a man seated in shirt sleeves, who mended his coat." But, "That's him," Mr. Williams retorted, and pushed the customer in again. When he took courage to say why he came and who sent him, he received the money he wanted. 24 370 PROGRESS OF THE EMPIRE STATE Money was hard to get, but sometimes it was harder to get change. The writer remembers a twenty dollar bill of a Rochester bank he could not get changed for several days. In every coach or restaurant where he offered it, he was obligingly requested to pay another time. Tokens from a penny up were issued by tradesmen, cities, and railroads. Handsomely engraved, they served at the same time as advertisements. The situation was relieved when the Government issued postal currency in denominations vary- ing from five to fifty cents, ostensibly to purchase postage stamps — in reality to provide change. A large amount, some ten millions of this " money, " has never been redeemed. When gold rose to a premium, it was sold by brokers, first at their exchange in a dingy room called the "Coal Hole," on the southeast corner of William Street and Exchange Place, under the Lackawanna office, and when the business grew, in larger quarters. The premium fluctuated with the fortunes of war, but rose to^no alarming figures, until patriotic members of Congress prohibited the sale in 1863. The gold room was closed, but the premium rose until it touched 250. The writer paid to Trevor & Colgate 260 for a small amount needed for duties. The country became alarmed, and Congress repealed the law quicker than it passed it. The speculation in gold, after this abortive attempt to suppress it, became more active, and was continued in evening sessions at the Fifth Avenue Hotel. When news of Sherman's successful march through Georgia came, some "copperheads," continued to doubt. Mr. Tobin offered to take at 200 all the gold available in the room. When it was tendered to him on the following morning, he suspended. After the war gold declined to a reasonable premium, and rose only once to over 150, on September 24, 1869, the memorable "black Friday," when daring gamblers manipulated it to depress the stocks. THE COMMERCIAL PROGRESS OF GOTHAM 371 Jay Cooke & Co. failed September 18, 1873, because they could not realize on their bonds of the Northern Pacific Railroad. Their suspension made a deep impression, because they had long been the financial agents of the Government. When the Union Trust Co. could not borrow on the credit of the Michigan Southern Road, they sus- pended September 20th. Edward King of Prime, Ward & King became president; he succeeded in rehabilitating the company, making it one of our strongest institutions. Prices of securities fell, so that the Stock Exchange closed its doors for ten days, and the banks composing the Clear- ing House again pooled their assets. Some five thou- sand failures with #230,000,000 of liabilities occurred in 1873. The number of failures increased to six thousand in 1874, but the liabilities diminished to $150,000,000. More mer- chants and fewer bankers were involved. The failure of Hoyt, Sprague & Co., with debts of #10,000,000, took place in 1874. They made print cloths in Providence, and sold them in Franklin Street. William Sprague, Senator for Rhode Island, had married the accomplished daughter of Salmon P. Chase. A. D. Juilliard, a patron of art, became receiver. Mrs. Juilliard is known as a contributor to charities. Fred Gebhard came from Germany in the early years of last century. Established in lower Greenwich Street with Fred. Schuchardt, his kinsman, under the name of Gebhard & Schuchardt, he sold swan gin, hardware and furs. When they became bankers, and moved to 21 Nassau Street, they continued to sell merchandise on commission. The Geb- hards left, and Schuchardt took a son-in-law as partner. Imprudent loans to railroads compelled the firm to fail in Exchange Place in 1875. Fred Gebhard, grandson of the founder, became infatuated with Mrs. Langtry, the hand- 372 PROGRESS OF THE EMPIRE STATE some actress, called the " Jersey Lily" when she visited this country. During the following years, as commodities and securities continued to decline, some of our best houses failed. In 1875 Duncan, Sherman & Co. became involved by the decline of cotton. When the combination of anthracite coal miners collapsed, their accumulated stocks were sold at auction by J. H., son of Simeon Draper. There were ten thousand failures in 1878 with liabilities of #234,000,000, and the depression continued. The noon- day meetings in our downtown churches were crowded — but prayers could not restore confidence; the resumption of specie payment did, when in January, 1879, it became a fait accompli. When we found how readily we could turn our bills receivable into cash, we took since 1873 advantage of the low rates which prevailed these lean years for exchange, and recouped many of our losses through rebates on sterling drafts. Our prominent foreign bankers then were: August Belmont, who came as agent of the Rothschilds from Frankfort, married Commodore Perry's daughter, and was sent as minister to The Hague by Franklin Pierce. He was irritable, but a strong man of good judgment. His son, bearing the same name, who continues the business, has inherited his father's sterling qualities. L. von Hoffmann & Co. were distinguished by extreme caution. In 1857 they withdrew from the banks what balances they had, and locked the money in their office safes in the Post Building. One of the two brothers slept alternately with the other, with loaded pistols in the rooms, and so continued until the banks resumed. Marquis de Mores, the French nobleman, who married von Hoffmann's daughter, became a rancher, and astonished the Western cowboys by his eccentricities. THE COMMERCIAL PROGRESS OF GOTHAM 373 When Franz Martin Drechsler Americanized his German name, and opened in Philadelphia as F. M. Drexel in 1837 a JVechsclstubc, he did not dream of the power his successors would exercise. Besides the old Philadelphia firm, there is John Pierpont Morgan, the " Jupiter Tonans" of Wall Street, as Mathew Marshall called him; Drexel, Harjes & Co. in Paris, and Morgan, Grenfell & Co. in London. Eugene Kelly & Co. laid the foundation to their fortune in California under the firm name of Donohoe, Kelly & Co. Punctilious in business, Mr. Kelly had the most kindly disposition toward worthy sufferers, the Catholics especially. J. & W. Seligman, also California merchants, dealt in notions in Vesey Street, under the name of Seligman & Stettheimer. They weathered the financial storm of 1857, became bankers and fiscal agents of the Government. Brown Bros. & Co. began business as linen importers under the name of Alexander Brown & Sons. Heidelbach, Gans & Co., predecessors of Heidelbach, Ickelheimer & Co., origin- ally were merchants; so were the following firms: Knauth, Nachod & Kuhne. Philipp Speyer & Co., predecessors of Speyer & Co. Schulz & Bleidorn, predecessors of Schulz & Ruckgaber, agents for John Berenberg, Gossler & Co., in Hamburg. Ballin & Sander relinquished their import business in 1852 to become bankers. Eugene Ballin assisted Philipy Bissinger in founding the German Savings Bank. He was proud of his artistic mustache, his Henri quatre, and of his membership in the Old Guard. No picture of Mr. Ballin, except in uniform, has ever been taken. Wm. Schall, besides being a good banker, was a genial companion. His son continues the firm under the name of Muller, Schall & Co. The Hallgarten firm was founded by Hallgarten & Herzfeld in the basement of 4 Hanover Street, where they 374 PROGRESS OF THE EMPIRE STATE "shaved" notes, — the old gentleman received customers in his shirt sleeves. His son Adolf was partner of Lanman & Kemp. M. Putzel, who also bought notes, took Goldman for his partner. Their successors, Goldman, Sachs & Co. have become large international bankers, like Lazard Freres. Of the older generation, Wm. & John O'Brien and E. Pavenstedt & Schumacher discontinued; Meyer & Stucken are succeeded by H. Amy & Co. The serial successors of G. vom Bauer were: — Marcuse & Baltzer, Baltzer & Taaks, and Taaks & Lichtenstein. Paul Lichtenstein in the firm of Ladenburg, Thalmann & Co. is the only survivor. Of merchants who could sell their "clean" bills of exchange, (without documents), the following deserve mention: Christian Boers, agent for Nottebohm Freres, Antwerp, and also the chief exporters of petroleum before the Standard Oil Company drove them out of business. Meissner & Ackermann, who became export agents for John D. Rockefeller, and who were large exporters of cotton. Knoop, Hanemann & Co., agents for Gebriider Knoop, cotton spinners in Moscow, Russia. Hanemann drew on De Jersey in Manchester. De Rham & Co. Alfred Merian. Hennings, Miiller & Gosling. Ehrich Meyer, successor to F. W. Kriege & Meyer, who shipped naval stores. Chief exporters of tobacco were: Hermann Koop & Co., William Street. Simes & Hiiffer, Stone Street, and their serial successors: Leopold Hiiffer; Hiiffer, Toel & Co.; Toel, Rose & Co. They all were agents of Wm. Hiiffer from Miinster, who ^jQSfc&tA^ ELLIS GRAY RICHARDS Fire insurance specialist; born in Worcester, Mass., December 1 6, 1848, and educated in that city. Has been in the business of fire insurance for nearly forty years, being manager of the United States branch of the North British & Mercantile Insurance Co of London and Edinburgh. His earlier years in his business were spent in Worcester and Boston. Removed to Hartford, Conn., in May, 1887, and until the close of 1899 was vice-president and secretary of the National Fire Insurance Co. of Hartford. Mr. Richards is president of the North British & Mercantile Insurance Co. of New York and also of the Commonwealth Insurance Co. of New York, as well as a director in both companies. His present busmess relations were commenced in January 1, 1900. He is also vice-president of the National Board of Fire Underwriters THE COMMERCIAL PROGRESS OF GOTHAM 375 became purchaser of tobacco for the French Government, which has the monopoly of the weed in all French possessions. Recknagel & Co., successors to Recknagel & Schwab, and Fischer & Keller exported drugs. Carl L. Recknagel considered merchandise safe to speculate in, because it was difficult to sell! Ralli Bros. ; Barnsdorf & Co. P. C. Rodochanachi, succeeded by Munzinger & Co. Stursberg & Ruperti, successors to Janssen, Schmidt & Ruperti. This firm originally was established early in the nineteenth century by J. W. Schmidt, the Prussian Consul- General. Bunge, Burlage & Co. were agents for Burlage & Co. in Antwerp. Edward Bech & Kunhardt, 69 West Street, were suc- ceeded by Kunhardt & Co., who have been agents until 1888 for the Hamburg Line of steamers. They did, and continue to do, a large West India business. The charming manners of Mr. George E. Kunhardt brought hosts of friends to his firm. Shippers sold their bills to bankers for cash, payable against delivery of documents, on the sailing day of mail steamers. Brokers who negotiated these sales received commissions of one eighth per cent, for the sale of English, and one quarter per cent, for continental bills, — rates which seem exorbitant now. Bankers, merchants, and brokers who dealt with foreign countries were, with few exceptions, Germans. In their anxiety for business, brokers bought what bills the respective firm had to draw during the week. This was legitimate for brokers who had funds to carry what bills they did not sell. They included fifty years ago: Brockelmann, Unger & Co., succeeded by Charles Unger, now F. S. Smithers & Co. 376 PROGRESS OF THE EMPIRE STATE George Wortherspoon ; Kamlah, Sauer & Co. Mr. Sauer became president of the German-American Bank. Daniel H. Greffe; Rodewald & Winterhoff; Henry Verhuven, who are dead. Greffe lost his fortune by the failure of Schepeler, the Russian merchant, who negotiated for W. H. Seward our purchase of Alaska. Many smaller brokers, who had been unfortunate in other callings, resorted to the sale of bills. One portly gentleman, who had to visit Carlsbad while he was a banker, became slender after he failed. When he was compelled to go from house to house, to sell bills to his former competitors, he needed no other cure. Some impecunious brokers, who had the temerity to buy bills before they sold them, got into trouble when Friday came and they had no means to pay. The writer, known as a buyer, evaded the Broad Street block, where brokers congregated, so as not to be importuned. One of them, who had a violent temper, and who exerted a magnetic influence, could not pronounce the letter " 1. " He spoke of Hagen & Billings as "bunion" dealers when we declined once to buy his drafts on Hamburg; we appeased his anger by the purchase of his dog. He ended by com- mitting suicide. When the indefatigable Gumpellino lost his place as secretary of a banker, and became broker, he profited by the friendship of his customers. He sold drafts, which his former principal no longer would take. Many of these were returned under protest, and he acquired the reputation of dealing in bills on which his clients could collect, besides principal and interest, the customary penalty of 10 per cent. When his clients found their credit to suffer in consequence, Gumpellino had to relinquish his specialty. On another Friday we encountered Fritz Teaserman on Broad Street. He had sacrificed the bills he could not pay for, but needed cash to resume business on Monday. We bought a fine THE COMMERCIAL PROGRESS OF GOTHAM 377 portrait of Goethe, an heirloom, which he had received from Europe, and which continues to adorn our library. The proceeds did not help long, — he died in misery soon after. In time of depression many bankers accepted notes instead of cash for their bills; they charged naturally high rates, and terms were confidential. Business has now grown to large proportions, and is done for small commissions, almost exclusively for cash. Most of it has fallen into the hands of a few large banks, who sell their sight bills to merchants direct, and who have dispensed with the services of brokers. These banks generally employ expert German clerks to manage this business. The largest banks dealing in foreign exchange are: The National City Bank, formerly ruled by James A. Stillman. The Hanover National Bank, formerly by James T. Woodward. The National Park Bank, by Richard Delafield. The Bank of Commerce and the Bank of New York are also dealers in foreign bills. The Guaranty Trust Co. has the reputation of doing more foreign business than all others, while The American Express Co. has absorbed the lion's share of traveler's credits. Since European travel has begun to grow, the amount needed for such credits has become enormous. Speculation in mining stocks, which was initiated in 1861, included many worthlessclaims,such as the "Mariposa Co.," which had been boosted by borrowing the name of General John C. Fremont. Edward Mott Robinson, father of Hetty Green, sold California mining stocks at 23 Wall Street. When petroleum wells were discovered along the Allegheny River and West Virginia, a number of speculators rushed to take advantage. Many oil fields put on the market were sold by misrepresentation. As Western gold mines 378 PROGRESS OF THE EMPIRE STATE had been salted, oil wells were greased by pouring barrels of crude oil into the crevices of the rocks, which diggers were invited to smell. A petroleum and mining stock exchange was opened 1866, and did for some years a large business, most of which proved disastrous. A persistent stock broker, who dealt in these claims, was John Pondir. He learned to lie while he was salesman for the Christian importing firm of Messrs. Christ & Jay. "Honest John" he was called by his competitors, because ultimately he believed the lies he told; — "handsome John" because his son was uglier than he was. His nose was so long that he could not see the point without spectacles. This man allowed no acquaintance to pass without selling him a few hundred sharesof "Germania "or other "chromos." The writer became one of his victims, and has kept shy of promoters ever since. When they importune him, he dam- pens their ardor with the quiet remark that "he is satisfied with the means he has." The crisis of 1884 came with the failure of the Metro- politan Bank on May 14th the day when a robbery of #3,000,000 from the Second National Bank by its speculat- ing president was discovered. The deficiency was made good by the president's father, and the Clearing House came to the assistance of the bank and of George I. Seney, President of the Metropolitan. He had attempted to con- trol certain railroads of doubtful value by watering their stocks. The Clearing House nursed the assets of the bank and of Mr. Seney, until the debts were all paid. Seney left when he died a collection of excellent paintings. On May 18th, Grant & Ward, together with the Marine Bank, failed. The financial reputation of Ulysses Grant was never great; — this failure ruined it. Fish, President of the Marine Bank, was hypnotized by Ward, the "Napoleon of Finance, " who paid unheard-of interest to secure deposits, THE COMMERCIAL PROGRESS OF GOTHAM 379 and finally went to prison. A number of large failures followed; amongst them were: Orlando M. Bogart, Fisk & Hatch, Donnell & Lawson. The rate of interest on call loans, which recently had been 4 per cent, per annum rose to 4 per cent, a day, caused by the return from Europe of American securities, and the consequent rise of foreign exchange. Baring Bros., a firm of London bankers, failed in 1890, when securities of the Argentine Republic became unsalable; they were the oldest and best known firm in the world, but alone they could not sustain the credit of this now flourishing South American commonwealth. The passage of the Sher- man Act, compelling, as it did, our Government to pay for silver more than its value, impaired the confidence in our securities. These two incidents were sufficient to create a panic, which would have been more disastrous if our Clearing House had not stepped in to help. No better remedy has been devised forthe faults of ourfinancial system. Runs on banks are indicated by long lines of anxious depositors, some of whom remain all night to be on the spot when the bank opens. The string of depositors extends often from the doors into the street, and around the adjoin- ing squares. Policemen watch so that no depositor gets an unfair advantage over another depositor. These scenes continue until the bank fails, or until the depositors are satisfied that it is safe to leave their money where it is. This transition of extreme diffidence to perfect confidence is remarkable. The collapse of the Cordage Swindle led to the crisis of 1893. Securities of industrial enterprises were discredited, and money was hoarded. In Western communities amateur burglar clubs were formed, the members of which agreed to scare with dark lanterns and burglar tools all neighbors who had hidden money, and induce them to return it to 380 PROGRESS OF THE EMPIRE STATE banks from which they had withdrawn it. Most of them were glad to be relieved of the anxiety. The events of 1907, the suspension of the Knickerbocker Trust Co., the embarrassment of other banks, are fresh in our memories. Histories of panics repeat themselves; the circumstances alone differ. During 1907, we drew on Europe for more gold than we did during any previous crisis, but we have since exported large sums to relieve a money pressure in Berlin. We have also begun to negotiate foreign loans on a large scale. Deposits in our Clearing House banks were sixty-five millions in 1855; they approx- imate two billions now. The accumulation of money in financial centers enables New York to lend, where formerly she only borrowed. &s£t^ L^>c ELIZABETH JORDAN Editor, author, and playwright; literary advi born Milwaukee, \\ laughter William Fi and Margarita (Garver) Jordan; graduated Convent of Notre , Milwaukee. Member editorial staff New York World, ng assistant editor Sunday World three years. Harper's Bazar January i, 1900, to March, 1913. Author, Tales of the City Room (Scribners); Tales 0} the Cloister (Harpers); Tales of Destiny (Harpers); May Iverson — Her Book Many Kingdo rs); May Iverson Tackles Life (Harpers); joint author of The Whole Family (Harpers), in oration with William Dean Henry James, and others; author of numerous essays and short stories in English m\ magazines. Author of three-act comedy, The Lady from Oklahoma, produced in New York, 1 9 1 3 ; and one-act play, The Beauty Parlor, \ [913. Vice-president Notre Dame Alumni Association; member Big Sisters Organization, Com- mittee of One Hundred, New York Equal Franchise Society, New York Education Committee, Immigrants Civic League of North America. CHAPTER X DEVELOPMENT OF THE PERIODICAL PRESS BY ELIZABETH JORDAN THE history of modern civilization, with all its short- comings, — with all its crimes, if one takes so dark a view of the world, — is the history of the printing press; and certainly the history of American newspaper and magazine literature is, in a very intimate and real sense, the story of the invention which Gutenberg made in Mainz more than five hundred years ago. There is a great deal to be said for the school which educates a race of readers. There is a great deal to be said for the library which develops a taste for reading. Those who found the one and the other are, undeniably, apostles of learning and of literature. The lecturer, the man who works the stereopticon slide, the men who have opened up the means of transportation across continents and across oceans — all these have stimulated that curiosity in regard to life which is the reader's appetite and thus one of the primary causes of the amazing development of the press in the last fifty years. To all of these belongs in some degree the credit, if credit it be, of arousing that which only the frequent, vitally alive periodical can satisfy; but it is the men who have perfected the printing press who have made it possible that this craving could be satisfied and who, paradoxically, have thus created a greater passion. In nothing is it more true 381 382 PROGRESS OF THE EMPIRE STATE than in reading that the appetite "doth grow by that it feeds upon." The names of these mechanicians are not upon the familiar roll of fame along with our Hawthornes, our Lowells, our Poes, our Emersons, and the intellectual descendants of these mighty men. But it is they who have established the fame of these, our great, in all parts of the world. The Clymers, the Stanhopes, the Smiths, the Treadwells, the Nicholsons, the Napiers, the Koenigs, the Dutartres, the Hoes, the Cottrells — there is a long line of them. One by one, here, in Germany, in France, and in England, they have all — probably quite careless of the cause of letters, probably quite indifferent to the hunger of the human heart for poetry or the thirst of the human mind for information concerning its neighbors — perfected the wonderful thing which now deluges us with information and with misinformation. As long as printing and all the following processes up to distribution were expensive, slow processes, so long was knowledge bound to be the possession of the few, and so long were magazines and even newspapers limited both in their actual or physical reach, and in their appeal, to the intellectual or the pseudo-intellectual classes. But with the marvelous mechanical developments of the last fifty years, and particularly of the last fifteen or twenty of these years, the labor of production and of distribution has been enormously reduced and cheapened. The machinery for turning out newspapers at a rapid rate was improved, one may almost say perfected, long before it was considered desirable to combine a great rate of speed with the fine quality of craftsmanship demanded by maga- zine work. As early as the forties, American press manu- facturers were experimenting with the possibilities of the single small cylinder and the double small cylinder machines which one Napier, in England, had patented. The single DEVELOPMENT OF THE PERIODICAL PRESS 383 cylinder produced 2000 impressions an hour, the double 4000, and the world held its breath at the thought of such an output. By 1871 a rotary press to print from a continu- ous roll or "web" of paper was under consideration. When this was perfected 18,000 perfect papers an hour were pos- sible of delivery and the great dailies, as we know them, were practically established. Now 150,000 twelve-page papers an hour are turned off the giant machines! Another factor contributing to the enormous increase of periodical output during the last half century has been the discovery of a process for producing paper from wood pulp. Up to 1850 rags were used for the manufacture of paper. About that time the supply of rags began to fall far short of the demand for them. A period of experimenting in the pos- sibilities of straw followed, but this had no very satisfactory results. Then came the discovery of the wood pulp pro- cess and forthwith paper was a cheap product and the for- ests of the country promised to supply it indefinitely. It can be produced at a rate of about three cents a pound — something amazingly below the old price of the rag product. After the newspapers were, so to speak, on their feet, the mechanical processes which have resulted in the enormous output of magazines in the past twenty or twenty-five years began to be perfected. Some idea of what this output is may be gained from the statement that an ordinary library bulletin contains over three hundred magazines of the lit- erary sort listed, besides page after page of special periodi- cals. All this has been made possible by the perfection of machinery. Consider what it means — a machine which every hour will turn out 4000 magazines of thirty-two pages each, with a cover in two colors, delivering them folded, fastened together with two wire staples, and counted ! It is only about twenty-one years ago that machinery was adapted to do not only swift but fine work, such as is demanded by all 384 PROGRESS OF THE EMPIRE STATE the modern magazines. Theodore De Vinne describes this magazine press thus: "At the end of a long row of machin- ery stands the web press — a massive and complicated con- struction, especially built by Hoe & Company, for printing, cutting, and folding the plain and advertising pages of the Century. Web presses for newspapers are common enough, but this press has the distinction of being the first, and for three years the only, web press used in this country for good book work. At one end of the machine is a great roll of paper, more than two miles long when unwound and weigh- ing about 750 pounds. As the paper unwinds, it passes first over a jet of steam which slightly dampens and softens its hard surface and fits it for receiving impressions without leaving it wet or sodden. It passes under a plate cylinder on which are 32 curved plates, inked by seven large rollers, which print 32 pages on one side. Then it passes around a reversing cylinder which presents the other side of the paper to another plate cylinder on which are 32 plates which print exactly on the back the proper pages for the 32 previously printed. This is done quickly — in less than two seconds — but with exactness. But the web of paper is still uncut. To do this, it is drawn upward under a small cylinder contain- ing a concealed knife, which cuts the printed web in strips, two leaves wide and four leaves long. As soon as cut, the sheets are thrown forward on endless belts of tape. An in- genious but undetectable mechanism gives to every alter- nate sheet a quicker movement, so that it falls exactly over its predecessor, making two lapped strips of paper. Busy little adjusters now come into play, placing these lapped sheets of paper up to a head and a side guide. Without an instant of delay, down comes the strong piecing blade over the center of the sheet and pushes it out of sight; pulleys at once seize the creased sheet and press it flat, in which shape it is hurried forward to meet three circular knives on DEVELOPMENT OF THE PERIODICAL PRESS 385 one shaft which cut it across in four equal pieces. Disap- pearing for an instant from view, it comes out on the other side of the upper end of the tail of the press in the form of four folded sections of eight pages each. Immediately after, at the lower end of the tail of the press, out come four en- tirely different sections of eight pages each. This dupli- cate delivery shows the product of the press to be at every revolution of the cylinder 64 pages, neatly printed, truly cut, and accurately registered and folded, ready for the binder. Two boys are kept fully employed in seizing the folded sec- tions and putting them in box trucks by which they are rolled out to the elevator and on these sent to the bindery. This web press is not so fast as the web press of daily newspapers but it performs more operations and does more accurate work. It is not a large machine nor is it noisy, nor does it seem to be moving fast; but the paper goes through the cyl- inders at the rate of nearly 200 feet a minute; it does ten times as much work as the noisier and more bustling presses by its side." As if this miracle were not enough, the manufacturers of the press proceeded to busy themselves with the invention of a machine on the rotary principle adapted for the finest kind of illustrations— indeed to make a press which should do as fine work as it was possible to do on the hand press or the stop cylinder. The result was that the next year after the web press just described was set up in the De Vinne printing house, a machine known as the "rotary art" press was introduced there. This is described in the Century Magazine, which first used it, as follows: "Sixty-four plates of the Century, truly bent to the proper curv«, are firmly fastened on one cylinder 60 inches long, and about 30 inches in diameter; 16 inking rollers, supplied with ink from two fountains, successfully ink these 64 plates with a delicacy and yet with a fullness of color never before attained. The 386 PROGRESS OF THE EMPIRE STATE shafts of the impression cylinder and the plate cylinders, \]/2 inches in diameter, do not give or spring under the strongest impression. Although rigid in every part, in the hands of an expert pressman it can be made responsive to the slighest overlay. This machine is fed by four feeders from single sheets in the usual manner, and does the work of four stop cylinders in superior style. The gain in per- formance is not so great as the gain in quality and press- work, but quality was considered more than speed. The performance of the machine could have been more than doubled by adding to it other cylinders which would print on both sides of the paper; but careful experiment has proved that the finest woodcuts cannot be properly printed with this rapidity. To get the best results the ink on one side of the paper must be dry before it is printed on the other side. " Here then we have, if not the primary cause of the enor- mous increase of magazine and newspaper literature in New York State and throughout the country, at least an inter- acting cause. At the great Source of Things it seems to be arranged that the intellectual and spiritual needs of the human race shall dumbly make their appeal to the race's mechanical genius and then that the mechanical genius shall in turn stimulate that which has, with mute insistence, brought it into being. Without Gutenberg, the Renaissance might have been a vague dream. But who shall deny that the great subterranean human forces which were to produce a revival of learning — the wholes modern world — did not labor to produce Gutenberg ? And so it has with the great modern manifestation and weapon of democracy, the force which more than any other has made all men free and equal, giving information alike to all — the material on which to build judg- ments. The modern newspaper and magazine press is, in a very real sense, the child of modern mechanical genius; but modern mechanical genius exists in response to the r 'tZ6<^ EDWARD PAYSON BRYAN Railway official; bom Ashtabula County, Ohio, July 2 1847- son John Love and Calista (Griswold) Bryan; educated in public schools and preparatory department of Denison Univer- sity, Granville Ohio. Began as telegraph operator on Louis- ville & Nashville Railroad, at Lebanon, Kentucky, ,865- held various positions on same road and appointed superintendent at Louisville, 1890, and later transferred to St. Louis; vice-president and general manager Terminal Railroa lt ion, St. Louis 1900; vice-president and general manager, 1900-07, of the York subway, then under construction; president, 1907- 09, of the Interborough Rapid Transit Co. (resigned June ,0 1909); v,ce-president Great Western Power Co., San Francisco' since January 1, i 9 o 9; director Metropolitan Securities Co.' (New York), New York City Interborough Railway Co.; trustee New York & Long Island Railway. Died January 23 i 9IO DEVELOPMENT OF THE PERIODICAL PRESS 3*7 untranslated, dimly understood needs of the race — is itself the child of insistent spiritual longings. And what has the progress been of the printed word in this century? The records show us that in 1800 there were, to a population of something over five million, two hundred periodicals, such as they were. As far as the magazine part of them was concerned, they were mainly reprints from the English reviews. By 1873 we learn that there were eight thousand periodical publications of all sorts in this country. That record is the result of the work of a New York booksel- ler, Ernest Steiger, who, with great diligence and a patriotic interest in the country of his adoption, labored to collect for the Vienna Exposition of that year an American periodi- cal exhibit. He had great difficulties in his undertaking, and complained rather bitterly of the indifference of publishers to his requests for samples of their periodical wares. But in spite of their apathy and his own forebodings concern- ing the success of his undertaking, the exhibition must have been rather an imposing one, for we find in a copy of Ueber Land und Meer of that year this exclamation of wonder and admiration: "Eight thousand periodicals are issued between the Gulf of Mexico and the great Canadian Lakes! One periodical to every five thousand persons, published in nearly all the languages of the civilized world!" To-day to our population of something over ninety-five million souls, there are more than twenty thousand news- papers and periodicals. In other words our population is seventeen times as large as it was a century ago and our journalistic provision for that population is a hundred times greater. Almost all of this increase has been since 1850. Probably no cause contributed so largely to the growth of the newspaper — no cause, that is, outside the mechanical developments in printing — as the Civil War. The Ameri- 388 PROGRESS OF THE EMPIRE STATE can people had to have newspapers then 'and, as always happens when a real need arises, they did have them. Of course there were periodical publications before 1850. The North American Review, now in New York, and sole survivor of the very early period, was started in Boston in 1815; and it is worthy of note in these days when authors of all sorts — poets, story-tellers, essayists, war correspond- ents, social philosophers, and even "common scolds" — fall over one another, figuratively if not literally, in the waiting rooms of all the magazines, that the whole of the first number of the North American was, except for one long poem, the work of one man, William Tudor. This magazine was, however, the only one of lusty enough life to survive the chances and changes of the early period; and to-day, in New York, under the brilliant editorship of Colonel George Harvey, it is steadily growing in power and greatness. Until 1833, when the Knickerbocker Magazine made a serious and noteworthy attempt in the direction of a modern literary magazine, the chief periodical food of the country was the Annual and abortive little reprints out of English magazines. Between 1815 and 1833, 137 of these "literary" periodicals came into being and passed out almost unnoticed. About fifty of them were religious, six were organs of reform, and six were devoted to science and art, as these terms were understood in that period. The rest were full of clippings from the English reviews and of miscellaneous literary and family journalism. The Annuals were wonderful things. They contained engravings of the widow-and-the-weeping-willow school of sentiment, poems to match, highly moral stories, many of them by the indefatigable Mrs. Sigourney, fashion notes and domestic advice, mostly in very fine print, excessively trying to the eyes and perhaps accountable for the great prevalence of the horn-bowed spectacle. DEVELOPMENT OF THE PERIODICAL PRESS 3^9 Among the monthlies preceding Putnam's Magazine, which was established in 1853, was the American Monthly Magazine, whose leading spirit was Henry William Herbert, better known as Frank Forester. He was an Englishman educated at Cambridge, and an authority on all sorts of sports. He also later played an important part in the early life of Putnam's Magazine. In that early period — the "false dawn" of magazine literature — it almost seemed as if no periodical was well started to which Poe did not contribute either literarily or editorially. We read of him on the Southern Literary Mes- senger, published in Richmond in 1830 by E. A. White. Mr. White invited Poe to help in the editing of the maga- zine, and Poe soon had entire charge of it. However, his course here, as in all other places, was meteoric. He resigned and became merely a contributor. In 1837 the Gentlemen s Magazine was founded in Philadelphia by the actor comedian, William E. Burton. Again Poe was its leading contributor, and by the end of the second year its editor. And again the inevitable happened. Mr. Burton resumed control after the customary harrowing experience with the most stormy, electric genius that has ever flashed across our literary firmament. Again in 1841 we find Poe editor of and contributor to Graham's Magazine. In this we find much of his very best work. Here he was succeeded as editor by the gentleman who was responsible for the most vindictive biography of him, Dr. Rufus W. Griswold. But it was not till 1853, when Putnam's Monthly was established in New York by George Palmer Putnam, that the American monthly magazine can be said really to have found itself. It must be admitted, when one looks over the file of the magazine during the first year or two of its life, that it entered the arena very fully equipped — a full-grown Min- erva of magazines. Some one, reminiscing concerning those 392 PROGRESS OF THE EMPIRE STATE enterprise. Longfellow, Lowell, Thoreau, and Melville were almost the only contributors to the new enterprise who could be called authors in contradistinction to newspaper men, and the newspaper men were preponderantly, almost exclusively, recruited from the staff of the Tribune. Quite rightly and inevitably so, since the Tribune, then in its twelfth year, had established itself as the organ of the humanities, the center of all the virtuosity and nearly all the intellect of the place. . . . Mr. Godwin indeed came from the Evening Post. Mr. Maverick, the compiler of the scientific notes, was already, I think, a useful journeyman on the Times. But 'G. W. C and 'C. A. Dana' were of the Tribune. In subsequent numbers appear the names of Clarence Cook, then the art critic of the Tribune, of George Ripley, its literary critic, of W. H. Fry, its musical critic, of Bayard Taylor, its very special correspondent. . . . Fitz-James O'Brien appears in the first number as the critic of 'Our Young Authors,' the first of the youngsters treated being Donald G. Mitchell, and the second Herman Melville. This brilliant Irish Bohemian, who, ten years later, was to give his life for his adopted country, might more fairly than any other contributor be called a magazinist in contradis- tinction to a journalist." In 1857 this magazine of such brilliant promise, the fore- runner of the literary magazines which have followed since in such numbers, failed, probably as a result of the panicky conditions preceding the Civil War. In 1867 its publication was renewed by Mr. Putnam, but in 1870 it was sold to the Charles Scribner Publishing Company and became part of Scribners Magazine, of which Dr. J. G. Holland was editor. It was almost sixty years ago, in 1857, that the Atlantic Monthly made its first appearance. Like Putnam's and all the early magazines, its contributions were anonymous, and only by their later reprinting in book form is their author- MARSHALL SYLVANUS DRIGGS Fire insurance underwriter; born in New York City, January i), 1834; son Edmund and Delia A. (Marshall) Driggs; educated ge Payn Quackenbos' High School and Reading (Conn.) Institute; married in Reading Ridge, Conn., December 2, 1857, Man.- Elizabeth Sanford; Became a policy clerk of the Williams- burgh City Fire Insurance Co. of Brooklyn, March 22, 1853; later assistant secretary; director, 1868; chairman of the finance ittee, 1883; president, 1892; Director First National Bank of Brooklyn; trustee Williamsburgh Trust Co., Broadway Trust Co.; director Casualty Co. of America, National Foundry Co. DEVELOPMENT OF THE PERIODICAL PRESS 393 ship traceable. That most delightful of all its contributors the writer with whom its fame is indissolubly linked, Oliver Wendell Holmes, writing at a much later period about the early days of the Atlantic, said: "In the meantime the nebula of the first quarter of the century had condensed in- to the constellation of the middle of the same period. When, a little while after the establishment of this magazine, the 1 Saturday Club ' gathered about the long table at ' Parker's, ' such a representation of all that was best in American litera- ture had never been collected within so small a compass. Most of the Americans whom foreigners cared to see — leav- ing out of consideration official dignitaries — were seated at the board. But the club did not yet exist, and the magazine was an experiment. There had already been several monthly periodicals, more or less successful and permanent, among which Putnam's Monthly was conspicuous, owing its suc- cess very largely to the contributions of that very accom- plished and delightful writer, Mr. George William Curtis. That magazine, after a somewhat prolonged and very honor- able existence, had gone where all periodicals go when they die — into the archives of the deaf, dumb, and blind recording angel whose name is Oblivion. It had so well deserved to live that its death was a surprise and a source of regret. Could another monthly take its place and keep it when that, with all its attractions and excellencies, had died out and left a blank in our periodical list?" — How this question has been answered by the intervening years! In these same reminiscences of Dr. Holmes is a sketch of one of the figures most prominent in the magazinedom of that early time — as frequent and beloved a contributor as — shall one say it? — the Henry van Dykes and Margaret Delands and others of our own day, without whom no maga- zine is quite complete. This was Nathaniel Parker Willis. Holmes, recalling him, mentions the house "from which 394 PROGRESS OF THE EMPIRE STATE emerged one of the liveliest of literary butterflies. The father was editor of the Boston Recorder, a very respectable but very far from amusing paper, most largely patronized by that class of the community which spoke habitually of the first day of the week as 'the Sahbuth.'" To his con- temporary young Willis appeared "something between a remembrance of Count d'Orsay and an anticipation of Oscar Wilde. There used to be in the gallery of the Luxembourg a picture of Hippolytus and Phaedra, in which the beauti- ful young man always reminded me of Willis, in spite of the shortcomings of the living face as compared with the ideal. The painted youth is still blooming on the canvas, but the fresh-cheeked, jaunty young author has long faded out of human sight. I took the flower which lies before me at this moment as I write, from his coffin as it lay just outside St. Paul's Church on a sad, overclouded winter's day in the year 1867. At that earlier time Willis was by far the most prominent young American author. Cooper, Irving, Bryant, Halleck, Drake, had all done their best work. Longfellow was not yet conspicuous, Lowell was a schoolboy. Emerson was unheard of. Whittier was beginning to make his way against the writers with better educational advantages whom he was destined to outdo and to outlive. . . . That was the day of souvenirs, tokens, forget-me-nots, bijous, and all that class of showy annuals. Short stories, slender poems, steel engravings on a level with the common fashion plates of advertising establishments, gilt edges, resplendent bind- ing — to manifestations of this sort our lighter literature had very largely run for some years." From this tinselly beginning, which the most charming of essayists thus preserves in crystal for us, to Putnam's, to Harper's Magazine, which, established in 1850, soon led its associates in the production of a serious literary magazine, to the Century which sprang in 1881 from the Scribner's DEVELOPMENT OF THE PERIODICAL PRESS 395 Magazine which Dr. Holland had conducted from 1870 until 1 88 1, to the new Scribners Monthly begun five years after the merging of the old in the Century; and from these to that great influx of popular periodical literature of the last decade of the nineteenth century, — here is wonderful progress indeed. In literature itself — that art held by some to be so widely divergent from "writing for the magazines" or "writing for the papers" — New York was early distinguished. Out of the "annuals," the "souvenirs," the "lady's treasure boxes," or out of contemplation of life or browsings in libra- ries upon the products of the English writers — somewhere — was born among the men of those remote days the desire for a real expression in letters of our early national life. And it happened, then as now, that when New York did not herself bear writers, the cities and towns of their nativity did contribute them later in life to the metropolitan city. In almost all the histories of American letters, the father of American letters, certainly of American fiction, is held to be Charles Brockden Brown, who, chronologically, at least, seems to deserve his title. He was a Philadelphia Quaker by birth, and he antedated the Revolution by five years. Bred to the law, he decided early in life that his heart was in literature, and he undertook to support himself by its practice. As has befallen so often since, the result of this decision was to send him to New York where practically all of his writing days were passed, and where he died of con- sumption in 1 810. In spite of the fact that his maturity coincided with a period of intense national feeling — between the Revolution and the War of 1812 — his novels struck no national note, unless, indeed, one dignifies by this descrip- tion the tendency to speak in superlative praise of all things American and to decry all things foreign. This he had to an extent seldom surpassed. As for his novels, they are of 396 PROGRESS OF THE EMPIRE STATE the school popular in England at the time, the school of the mysterious, the dreadful. Later, in Poe, this class of fiction touched, with us, the heights of genius. There is some gen- tle, sublimated suggestion of it in much of Hawthorne's work. But as Brockden Brown developed it, it was a fair- ly frank imitation of Mrs. Radcliffe with The Mysteries of Udolpho and similar tales. Wieland, Brown's best remembered novel, is distinctly of this class. At about the period when Brown's career was closing, another luminary, to whom, in a much more real sense, the title of the father of American letters belongs, was rising. In 1806, Washington Irving, the son of a prosperous New York tradesman, began publishing a series of essays called the Salmagundi Papers. In 1809 he published his Knicker- bocker History of New York in which the learned profess to find the same sort of playfulness which appears to-day in Mark Twain, in Dooley — in all distinctively American humor — that almost imperceptible gliding from sense to nonsense and back again which has become one of our characteristics. This history, like several other permanent pieces of literature, was lightly undertaken, Irving and his brother beginning it as a parody upon Dr. Samuel Latham Mitchill's bombastic History of New York published in 1807. Irving's was a distinguished career. He was the first American writer to be seriously considered in England. He was employed in both England and Spain on diplomatic mis- sions — being Secretary of the American Legation in London from 1829 until 1832 and Minister to Spain from 1842 until 1846. The other great name in American letters of this period belongs to New York, although it was in New Jersey that James Fenimore Cooper was born. His father moved in 1789, however, when he was about a year old to that part DEVELOPMENT OF THE PERIODICAL PRESS 397 of New York known now as Cooperstown. Here the elder Cooper maintained a sort of savage feudal estate upon a vast property. Until he was fourteen the boy lived there, storing up the impressions which made him the first of the American "nature" writers. For it is in his feeling for nature and in his fidelity in its portrayal that his permanent greatness, perhaps, lies. Nowadays we do not believe in the verisimilitude of Cooper's Indians, but we cannot doubt the lifelikeness of his backgrounds. He was partly educated at Yale, then under the great Timothy Dwight, and leaving that institution of learning at something like the urgency of the faculty, he went to sea, eventually becoming a mid- shipman. In 181 1 he married, and resigning his commission settled in Westchester. He began his literary work by an anonymous novel Precaution, a tale of fashionable Eng- lish life written chiefly because Cooper thought that he could write a better story than a certain now-forgotten English novel of the day. The next year, in 1821, he came into his own with The Spy, a tale of the Revolution. Then came The Pioneers, The Pilot, The Last of the Mohicans, and the rest of the long list of his works. Those early days were not without their New York poets. Of these, before William Cullen Bryant appeared to domi- nate the horizon with his great, impressive figure, the chief were James K. Paulding, whose name might have gone into complete oblivion had he not collaborated with Irving in the production of the Salmagundi Papers; Joseph Rodman Drake, who wrote "The Culprit Fay," and Fitz-Greene Halleck. The two latter were intimate friends during Drake's brief life — he died in 1820, only twenty-five years old — and the only poetical work of Halleck except "Marco Bozzaris" which has survived neglect is a poem on the death of his friend, the first stanza of which is the really touching, simple, and beautiful one: 398 PROGRESS OF THE EMPIRE STATE Green be the turf above thee, Friend of my better days ! None knew thee but to love thee, Nor named thee but to praise. The two young men had collaborated in the production of the "Croaker Papers," the appearance of which in the Evening Post of that period used to be awaited breathlessly and apprehensively, like the celebrated Junius papers in England. These poetical, satirical criticisms of events and people, locally important, created a stir in the dignified New York of the time which the most voluble of modern scolds and reformers might rejoice to arouse. It was to this New York that Bryant came — a country lawyer from Massachusetts, son of a country doctor. He was, perhaps, the first of the long line of the distinguished men from that commonwealth which has added fame to the history of New York letters. Certainly he was far the great- est of the early period. He was, indubitably, the first great American poet. Great he was from the beginning of his career. "Thanatopsis, " written when he was seventeen, is as noble, as finished, structurally and spiritually, as anything he published during his long life. But Bryant was not only a poet. He was a journalist as well, and perhaps to a greater — certainly to a more admitted — extent than any American editor who has succeeded him, he dignified his calling. He edited the Evening Post for half a century, and in all his editorship there was nothing of which the high, luminous poet in him could have been ashamed; and, more remarkable still, nothing which needed the leniency of the counting-house department of manage- ment. His was, in every sense, a great and vigorous per- sonality. That he should have died in 1878, at the age of eighty-six, from a sunstroke received while he was deliv- ering a speech at the unveiling of a Central Park monument, HENRY EVANS President of the Continental Insurance Co. and thi Phenix Insurance Co. of New York; was horn in Houston, Texas, \pril 14, i860. Some time after 1 of the war, went to New York, where he was educated, leaving Columbia < School of Mines to enter the service of the Continental in March, 1878 as a junior clerk. Becaj . t ry of the agency depart- ment May 10, 1888; was econd vice-president, retaining the agency department secretaryship in 1889; vice-president January 14, 189-', and president January 15, i9<>3- In March, 1904 assumed the chairmanship of the Committee of Twenty on congested districts of cities of the National Board of Fire Under- writers In June, 1906, formed the Fidelity Fire Insurance Company, of which he is president and a director. In Decei 1909 he was requested by the directors to take control of the Phenix Insurance Company of Brooklyn, which company v trouble because of irregularities in its administration, and he suc- ceeded in saving the Phenix's agency plant. On March i, 1910, the company was merged with the Fidelity Fire Insurance Co., under the title of the Fidelity-Phenix Fire Insurance Co., and Mr. Evans was elected president of the merged company. DEVELOPMENT OF THE PERIODICAL PRESS 399 speaks volumes for the mental and physical quality of the man who lived and wrought so long and so splendidly in New York. Truly in those days there were giants in the land. Until about 1890, the well-established magazines contin- ued in kind very much what the old Harper s and Putnam's had promised. Names which will be preserved in the his- tory of letters are found on their pages of contents. Bril- liant, scholarly, oftentimes timely, the fine print of their yellowed pages holds much that is choicest in our literature. But they were magazines more or less for the elect, the lite- rati, the illuminati; they did not deal largely in that form of timeliness which is so familiar to us to-day. Exposure, warning, that had been rather the province of the daily newspaper and of the weekly. It was Harper s Weekly and not the Monthly which, through Nast's cartoons, destroyed the power of the Tweed Ring, and sent the chieftain into exile. It was Harper s Weekly and those same cartoons, by the way, which discovered him in his retreat, and haled him home to his punishment. It was Harper s Weekly and not the Monthly which played an important part in the events preceding the Civil War. Harper s Weekly was a brilliant and a stirring force. The monthlies dwelt in a higher, rarer, more tranquil air — or so it was supposed. But the nineties saw a wonderful change in the magazine world. Periodicals were issued to please the eye — not pri- marily because the publishers had discovered a fondness for pretty pictures among a large rural constituency, but primarily because some one had invented a cheap process for reproducing pictures which took the place of the expen- sive and laborious wood and steel cuts used up to that time. Munsey's Magazine led the army of the popular pictorial periodicals. Its followers, its improvers, have been legion. There can be no doubt that, as in the ancient brotherhood of dignity and worth, Harper's, the Century, and the rest, 400 PROGRESS OF THE EMPIRE STATE the claims of the intellectual man were considered, so the new magazines gave careful and highly profitable attention to the needs and the desires of the man who made no pretense of unusual intellect. Pictures, light literature, amusing verse, articles of the most ephemeral value, gossip — these were the mental food products at first offered by the newer magazines. The literary limitations as well as the financial limitations of the great "common" people were very well understood or very sympathetically divined by the publishers of these peri- odicals. And what has the result been? It has been twofold. Those trifling, half-picture magazines, have been, as it were, the primer on which a non-reading public learned to read; having learned to read, that public demands a somewhat more solid volume for its delectation. Those magazines have had to improve their own quality and tone to meet the demands which they themselves have created. And mean- time the older brethren of the magazine world have had to come down somewhat from the mountain heights on which they dwelt, and have been obliged to consider the needs of that ubiquitous person, the man in the street. Gradually the older magazines have been popularized, without, it may be confidently asserted, injury to their standards or their style, while the popular magazines have been strengthened, solidified, dignified, to meet the demands of the public that they themselves have created. Charles Dana, who knew a great deal about it, once said that there were two kinds of newspapers, "those made for sensible persons and those made for fools. " " It is perfectly right," he declared, "to provide for the fools in special news- papers; and that duty is extensively and conscientiously performed by gifted and conspicuous individuals, and I have heard that some of them make money by it." The caustic saying is no less true of magazines than of newspapers. One of the most interesting literary results of the enor- DEVELOPMENT OF THE PERIODICAL PRESS 401 mous growth of the popular magazine, with its immediate response to the need of the moment and its entire indifference to the longer need, has been the development of the Ameri- can short story. We are still the leaders in this form of literature among English-speaking people. The perfect style and grace attained by those masters of the short story art, the French, is certainly not yet ours, but we have outdis- tanced our English brethren to a marked degree. Though they still seem to be the masters of the essay form — that form which demands the atmosphere of leisure, the back- ground of long scholarship — yet to us the short story palm must be awarded. There seems to be something peculiarly congenial to the American temperament, with its nervous- ness, its sense of dramatic values, its humor, its restlessness, in the short story. The honor roll of our short story writers is a long and resplendent one. Not even to the French can Mary Wilkins yield the palm for fine, delicate, marvel- ously terse delineation of character and of situation. Alice Brown is another of the most charming of the short story tellers. Mrs. Wharton's genius still seems to many of us to have found its happiest expression in her briefer studies of character in a single episode or a single setting. Next to its influence upon the development of the art of short story writing, the New York magazine of these later days has had an important effect upon art in the pictorial sense. The cynics may sneer and declare that but for the new monthlies, with their insistence upon catching the eye of the thoughtless with a picture, many excellent and worthy young men and women, who should be following the plow or hemming muslins, would be pursuing their proper call- ing; and it is true that much that passes as illustration is not even second cousin to art. Nevertheless, the field of illus- tration has offered a development to a school of real artists which would otherwise almost inevitably have failed of the 26 402 PROGRESS OF THE EMPIRE STATE true means of expression. At the present time particular interest attaches to this view of the case. The American academicians are accused of all sorts of sins, of stiffness, un- originality, " prettiness, " and hide-bound tradition. Critics — the genuine critics of art, not the mere carpers at exist- ing situations — find the promise of the future — where? Almost without exception among the men who had their training and made their early reputations as illustrators in the newspapers and the magazines. These are the men who in one way and another have seen life raw, and have striven to reproduce it as they have seen it. Their genius, their talent, is their individual gift from heaven; their technique, their sense of values of light and shade may be partly the gift of their schools and their masters; but their ability to paint life, to get away from some time-honored convention of beauty, has been the gift of the periodicals on which they have worked — the "timely" writings which they have had to illustrate, the journeys they have had to take, not whither their artistic impulses led them but whither dramatic hap- penings summoned. The militant "eight" of whom we of New York hear much — George Luks, Robert Henri, and the rest — the latest rebels against the dictates of the Academy and, according to not negligible authority, the latest hopes for the future of art in America — are almost without exception men who have done much illustrating. The newer school of magazine literature has developed something besides the short story. It has developed what may be called the campaign literature of civic decency. To do this it has, of course, encroached more or less upon the field of the daily newspaper, but it has accomplished its results in a way which the newspaper failed in doing. Exactly why it should be true that the scream which passes unnoticed in the morning paper becomes a loud, insistent, thought-compelling cry in the monthly magazine, it is diffi- GUSTAV LINDENTHAL 1 engineer; born Brunn, Austria, May 21, [850. Pursued scientific studies at colleges in Brunn and Vienna, [864 employed on surveys and construction of railroads and bridges in Austria and Switzerland till 1874, when he came to United States; engineer Center.- I national Exhibition, Philadel- phia, 1S74 reafter consulting engineer in construction of rn railroads, with main offio gh; removed to New York City, 1892; Bridges, City of New "»"- 03; con imsburg bridge, and made plans for the Bl | and Manhattan bridges; was memb which planned the tunnel ania Railroad under the and East Rivers and in New York City; engineer and architect Hell Gate bridj st River for New York Con- necting Railroad, which, when completed, will be the longest arch bridge in the world; president North River Bridge Co.; mem- ber British Institute of Civil Engineers, American Society Civil Engineers, Canadian Society Civil Engineers, Verein Deutseher Maschinen Ingenieure in Berlin, and other similar organizations. 01 \ I I ol'. MI NT OF THE PERIODICAL PRESS 403 cult to determine. Perhaps, in spite of ourselves, we cannot fail to attend more to that for which we have paid ten, fifteen, twenty-five or thirty-five cents than to that for which we have paid but a penny or two. Or perhaps it is that the magazines have so far been kept freer from the suspicion of political bias than the newspapers. Most of us know, or believe that we know, that the newspapers are the organs of a rich man's ambitions, a corporation's desires, a political party's needs. With one or two signal exceptions we do not believe this in regard to the monthly magazines. Conse- quently we attend to their warnings with a soberer interest. That this literature of outcry, of denunciation, this uni- versal muck-raking, has been tiresomely overdone, there is no possibility of denying. But that in its saner forms it has been productive of immense good is equally impossible of controversion. We have been stirred out of our sluggish self-content. Willy-nilly, we have been obliged to recog- nize that our political system is susceptible of grave abuses, that our social system is not impregnable to corruption, and that only by the active interest and labor of ourselves — ourselves, "the better element" — can all manner of hideous civic disease be cured and prevented. If it had done no other thing than this, the popular magazine would deserve a place in the literary hall of fame. How our magazines strike a foreign contemporary is of interest and even of importance to us. "There can be little doubt, we think, that American illustrated magazines are decidedly better, and, having regard to the quality of their engravings and the quantity of their letter press, much cheaper than their English competitors. Which of our maga- zines, for example, can compare with Harper s? The cause of this superiority is an interesting question. " "Praise from Sir Hubert is commendation indeed." When an English literary and critical review, not famous for 404 PROGRESS OF THE EMPIRE STATE too urbane a spirit, goes out of its way to pay compliments like this to our periodical press, we can indeed plume our- selves on having accomplished something remarkable. The Spectator, in which this appreciation appears, is somewhat overcritical in its outlook upon all the world, and perhaps particularly so in its attitude toward things American. Yet see how long a way we have come since the days when Sydney Smith stabbed our national vanity with a sneer, demanding to know "who ever read an American book." The Spectator attributes part of this superiority which it so gracefully concedes to the American magazine to our postal regulations, which, it seems, are more favorable to publishers than those in England. But even having done this, it goes on handsomely: "It would, however, be equally wrong to assume that the postal advantages enjoyed by the American magazines are the sole, or indeed the main, cause of their superiority to our own. It lies in the fact that magazine readers, and readers generally, are not only absolutely but relatively far more numerous in the States than they are here, and that the average American reader both buys more books and pays a higher price for them than the average English reader. . . . Among other reasons for the prosperity of American magazines and periodicals generally are the marvelous enterprise and energy of their conductors. A New York weekly paper has been known to spend £5000 in advertising a short romance of small merit by an author of no great repute. The larger maga- zines, besides paying liberally for ordinary contributions and spending largely on their illustrations, never consider expense when it is a question of obtaining something strik- ing or new. ... If it were physically possible, they would be quite capable of sending expeditions to survey Saturn and illustrate the mountains of the moon." The city which has benefited most — if benefit it shall DEVELOPMENT OF THE PERIODICAL PRESS 405 be called — by this amazing and prodigious increase in the output of the presses, is New York. One of the most inter- esting features of the great public library lists of periodicals is the place of their publication. Looking over page after page of them one is struck by the continual recurrence of the word "New York. " London, Paris, and this city are the great periodical publishing centers of the world. In the United States the magazine activity is confined so closely to the East that the Western publications are almost a negli- gible quantity. One finds, of course, the Overland or the New Californian of the Pacific Coast. Not long ago one found the Lakeside Monthly of Chicago. And there are, to be sure, scattering periodicals bringing up the tail of the great lists like the scattering votes for practically un- known candidates in the great elections. There is an occa- sional Des Moines, an occasional Minneapolis, an occasional Denver imprint, but for the most part the production of periodical literature is confined to the section east of the Alleghenies, and particularly to New York City. Of course this was not always so. Boston's early supremacy in the magazine field is something which Boston does not allow the rest of the country to forget, even if it were inclined to do so. But the last twenty-five years have seen a great change in the respective positions of Boston and New York in this regard. The Atlantic Monthly still remains to the city of the gilded dome a reminder of past glories, and a monument of present importance. But except for the Atlantic, the periodicals published in Boston are practically negligible. In this city it is a dull week, one may almost say, which does not see a periodical begun or a periodical ended. But during the past ten or fifteen years, in spite of the death of many abortive publications, there has been a steady increase in the list of New York magazines. Of the so-called "lit- 406 PROGRESS OF THE EMPIRE STATE erary" sort alone — the kind dealing with life, art, and letters in general, not the organs of a specific profession or trade — there are about 180 published in New York. The circulation of these magazines is no less remarkable than their number. For a "popular" periodical to claim a circulation of a million copies is not unknown. The five hun- dred thousand circulation list is a mere commonplace of magazinedom. Everybody s, at the time when Lawson's "Frenzied Finance" articles were appearing, is said to have reached the million point in circulation. Munsey claims to have touched the 750,000 limit. McClure's is another of the great popular successes. These claims of an immense circulation are even com- moner in the New York dailies and the Sunday newspapers than in the weeklies and monthlies. A circulation of a mil- lion is something which almost any of the metropolitan news- papers will claim without a quiver. The figures quoted on the Sunday papers are simply staggering in their immensity. Rival publishers prepare statements showing how the deal- ers who advertise in their respective journals will have an audience of anywhere from a million to twice that number, as against half as many allowed to the combination of all their competitors. That these claims are often absurdly extravagant there is no possible denying. But, on the other hand, that the circulation is something which would have been unbelievable thirty years ago, and which is almost unimaginable to the human mind now, is also certain. The Sunday newspapers travel to every remote hamlet. The evening newspapers appear in successive editions from nine o'clock in the morn- ing until the same hour or later at night. So addicted to the newspaper habit is the average American that he buys half a dozen of these editions in a day, especially when any event of national importance is enacting. During the Span- DEVELOPMENT OF THE PERIODICAL PRESS 407 ish War those evening "extras" were bought literally by the score by almost every individual in New York; and although matters of such universal interest as war are rare, nevertheless the publishers of the daily newspapers are masters of the art of stimulating public curiosity in regard to whatever is going on in the world, and of the allied art of deluding newspaper buyers into the belief that something vitally important is happening every hour. Of course these claims to enormous circulation, on the part of both newspapers and magazines are bait for the advertisers. It is in the advertising that the prosperity of the publications lies. From this fact springs the charge that it is the countinghouse which rules the policy of both the great dailies and the great monthlies. The truth of this charge, as far as the dailies are concerned, there may be no refuting, but the history of the metropolitan newspapers does not show that the days when the editorial and not the business office dictated a journal's policy were so much wiser than our own. Greeley, Godkin, Dana — great men and great editors though they were — were also violently preju- diced human beings in many regards. Greeley utterly failed to interpret the sentiment of the country, in the days pre- ceding the Civil War, in regard to the John Brown affair. All of them made many mistakes in policy, perhaps not such sordid ones as those of the countinghouse, but no less wrong-headed. The result, on the whole, of the new place of dictating policies has not been detrimental to the public interests; newspapers have tended to become rather more the mediums for communicating actual news, and less the teachers of the public. Consequently every man is more his own editor than in the old days. That the enormous circulation claimed by the great New York popular magazines has been in no degree detri- mental to the older established ones is one of the evidences 408 PROGRESS OF THE EMPJRE STATE that in this country there is room for all sorts and conditions of literature. The more expensive periodicals have been enabled to maintain their advertising by a claim which appeals as strongly to the intelligence of the advertisers as does the claim of enormous circulation, — namely, that of an exclusive and highly cultivated circulation. To appeal to a vast mob is, of course, gratifying to any merchant with products to sell; to appeal to a thoughtful and pre- sumably a prosperous clientele, is equally to be desired. It is this fact which has enabled the expensive magazines to maintain their own in competition with the cheaper ones. In a sense, the history of New York newspaper develop- mentduring the past half century has paralleled that of maga- zine development. Here again the wonderful inventions and improvements in machinery, the discovery of the method of transmuting a forest tree into a Sunday supplement or an evening extra, have played an incalculable part in increas- ing the newspaper output. An observer who had a unique life in which to mark the changes in our current litera- ture and whose interests led him to study them, the late Richard Watson Gilder, once had some pregnant and valuable things to say on this subject in an interview. "I suppose," he is quoted as saying, "in no country are newspapers so much an integral part of the people's life and thought as here in America. We are, as Mr. Bryce says, the great reading people of the world. You see the contrast if you go to Southern Europe, for instance. There illiteracy is common and the people depend to a great extent on talk and local gossip for their daily enlightenment. I think that we have a greater eagerness than they to know what is going on in the world. . . . The enormous appetite the public has for periodical literature seems astonishing, but it is perfectly natural. One of the strongest traits in the GEORGE PRESTON SHELDON Insurance officer; born in New York City, January 17, 1847; graduated from Yale in 1867, with degree of A.B. Became president Phenix Insurance Co., 1888. Member Chamber of Commerce, Metropolitan Museum of Art, Yale Alumni, Athletic, University, and New York Clubs. Died December 25, 1909. DEVELOPMENT OF THE PERIODICAL PRESS 409 human mind is curiosity. The newspaper habit is the re- sult of our attitude of inquiry toward all mankind. Curi- osity accounts in a great measure for our love of literature, for our love of news, for our love of life. . . . The aspect in which the daily press has changed most within my recol- lection is in its development of sensationalism. This sen- sational wave which started in the West has now swept across the country from ocean to ocean. But the new journalism is not without its good points. Along with all the sensationalism, the lack of responsibility, the getting together of 'fake' news, and the contriving of evi- dent pictorial falsehoods, a great deal of talent goes into the make-up of the papers. The editorial pages, espe- cially, contain a remarkable amount of expert and expres- sive writing." Colonel George Harvey, president of Harper & Brothers and one of the most honored figures in the American world of journalism and literature, is equally generous in his judgment of the latter-day newspaper press and equally hopeful in his outlook. Many critics, lacking the fine lit- erary sensibility of these men, have deemed it incumbent upon them to be pessimistic. They have professed to see nothing but unmitigated harm in the wave of sensational- ism which has, truly, swept over the country within the last twenty-five or thirty years, and from the influence of which not even the staidest of the old guards of daily journalism has entirely escaped. Yet to the writer of this resume, too, the situation seems not so unmitigatedly gloomy as the pes- simists would have us believe. That the school of humor which the quick-printing color press has foisted upon us is a horror is not to be denied. That the effect upon young minds and upon uneducated minds of all ages of the con- stant preaching of class antagonism, the constant exploit- ing of crime and sordid tragedy, is deplorable is also not to 410 PROGRESS OF THE EMPIRE STATE be controverted. But just as the cheap magazines — cheap being used here in relation to the sort of intellectual pabulum they offer their readers and not to their price — effected their own cure by the very harm which they wrought, so with the sensational daily newspapers. They attract a class of read- ers who might never read a printed line if our estimable Tribune, our worthy Times, and even our brilliant Sun, were the only daily journals on the market. To those who buy the others, the sensational newspapers, these productions are, as it were, a primer; from them the habit of reading grows. It is doubtful if the readers of the more objec- tionable of the "screamers" are the same from year to year. The class to which their appeal is particularly addressed may rapidly outgrow the appeal, and seek a more worthy source of information. Meantime these dailies, with their prodigious ability, their unequaled generosity in many causes which the old- time newspaper regarded as not at all its province, have not only been a primer in which the ignorant have learned to read the news, but they have also been the means of infus- ing a new life and vigor into the more conservative journals. The frequent complaint against modern journalism — that it is offensively personal — cannot be altogether ignored. It is offensively personal; it is often gratuitously insulting, outrageously meddlesome. Undoubtedly when the British press was feebly struggling toward that "freedom" which the nation now regards as the bulwark of its liberties, kings and ministers, nobles and parliaments, felt the same thing to be true of it. With a change of sovereigns, the situation is not so very different. The regnant American citizen finds himself in much the same position in which George IV., for example, found himself when young Mr. Leigh Hunt was sent to prison for writing about his liege. That some restraint should be put upon the publishers of newspapers DEVELOPMENT OF THE PERIODICAL PRESS 411 can scarcely be denied; but that the idea of private rights, based upon a purely individualistic conception of society should give way to another conception is far from being an absolute evil. INDEX TO THIS VOLUME Achelis, Thomas, career of, 335. Albany, meeting of Colonial Congress at, 13. Aldrich, Nelson W., aids in framing currency law, 146. Alexander, James W., retires from Equit- able Life Assurance Society, 178. Alexander VI., Pope, makes grant to Spain, 1. Alsop, Richard, business career of, 345. Amalgamated Copper Co., flotation of, 86; loses control of copper market, 168; incorporation of, 205. American Bankers' Association, creates committee to cooperate with New York Chamber of Commerce, 145. American Beet Sugar Co., incorporation of, 203. American Cigar Co., organization of, 209. American Institute, aids American in- dustry, 346. American Malting Co., organization of, 222. American Opera Co., establishment of, 344- American Smelting & Refining Co., origin of, 213; relation to other corporations, 215. American Sugar Refining Co., origin of 192; incorporation of, 200; relations with Beet Sugar Co., 203; criticism of methods of, 204. American Tobacco Co., incorporation of, 206; extends its hoi lings, 207; number of concerns in, 21 1 ; dissolved by Supreme Court, 212; distribution of ownership, 213. American Trading Co., development of, 103. Amsinck, L. E., business career of, 342. Anaconda Copper Mining Co., income account of, 206. Andros, Edmund, takes possession for England, 7; returns as Captain- General, 9. Arbuckle Bros., enter field of sugar refining, 201. Archbold, John D., interest in Standard Oil Co., 194. Architecture, samples of different periods, 356. Arnold, Constable & Co., origin of, 317. Arthur, Chester A., becomes President, 38; appoints Charles J. Folger Sec- retary of the Treasury, 132; attains prominence, 324. Aspinwall, John, residence in Flushing, 315- Aspinwall, William H., takes interest in Panama railroad, 341. Astor, John Jacob, fortune of, 65; ar- rives from Heidelberg, 349. Astor, William B., estimated fortune of, 65- Astor Hotel, opening of, 356. Atlantic Monthly, literary character of, 393- Atlantic Mutual Marine Insurance Co., 366. Auburn, meeting at, to organize Republi- can party, 32. Auctioneering, early development of, 338. 15 Bancroft, George, residence of, 316. Bankers of New York, assume most of the financial burden of the Civil War, 116; unite with those of other cities to take war loan, 117;, object to methods of Secretary Chase, 118; take the lead in urging specie resump- tion, 129; oppose Mr. Bryan in 1896, 139- Banking houses, list of early firms, 374. Bank Note Detector, issued in New York, 366. Bank of England, changes in discount rate, 155. Bank of Germany, raises discount rate in 1905, 174. Bank of New York, The, origin of, 263. Bank reserves, decline of, in 1905, 175. Banks, suspend specie payments, 66; resources of in 191 1, 79; country re- 413 414 INDEX Banks — Continued serves of, in New York, 88; statistics of, 90. Barclay & Livingston, business of, 329. Baring Bros., connection with crisis of x 893, 77; failure in 1890 causes alarm, 135; failure of, 379. Barker, Jacob, arrested for alleged challenge, 274. Beecher, Henry Ward, comes to Brook- lyn. 3I3- Belgian granite blocks, adopted for paving, 319. Bell, Alexander Graham, perfects tele- phone, 347. Belmont, August, Sr., death of, 80; civic activity of, 95. Belmont, August, Jr., services in con- structing first subway, 95; character of, 372. Belmont, August, & Co., subscribed for government bonds, 127. Berkeley, Lord, receives grant of New Jersey, 7. Biddle, Nicholas, attempt to corner cotton, 64; share in panic of 1833, 276. Bierwirth, Leopold, business career of, 35i- Bigelow, John, residence of, 316. Black, Frank S., elected governor, 41. "Black Friday," gold speculation on, 290. Blackstone Canal, stock of, 273. Blaine, James G., assails Secretary Fairchild, 137. Bland silver act, passage by Congress, 132. Bliss, Cornelius N., career of, 332. Bloch, Adriaen, reaches New York, 4. Bogart, Orlando M., buys auctioneers' notes, 339. Booth, Edwin, appearance at Winter Garden, 358. Borgfcldt, George, business career of, 346. Boston, effect of fire in 1872, 75; diffi- culty of journey from, to New York, 269; effect of fire on speculation, 292 ; early literary supremacy of, 405. Bowen & McNamee, suspension of, 331. Bowery, frequented by Germans, 324. Bowery Theatre, character of, 326. Bowling Green, fashionable quarters in, 315- „ Bowne, Robert, gives employment to John Jacob Astor, 349. Braddock, General, effect of defeat in New York, 14. Bradford, William, first printer in the colony, 12. Brady, Anthony N., becomes factor in tobacco business, 208. Bragaw, William, career of, 321. British- American Tobacco Co., organiza- tion of, 210. Bronx River, origin of name, 314. Brooklyn, character of, 313. B rower, John H., brings cotton from Texas, 352. Brown, Alexander, & Sons, establish branch in New York, 274. Brown Bros. & Co., origins of, 95. Brown, Charles Brockden, literary career of, 395- Brush, Edward, vice-president American Smelting Co., 214. Bryant, William Cullen, literary career of, 398. Buchanan, James, sells Treasury notes, 115- Buildings, expenditure on, in New York City, 172. Bull's Head stage line, route of, 319. Burlingame, Anson, kept waiting at Grace Church, 357. Burr, Aaron, candidate for Vice-Presi- dent, 20; duel with Hamilton, 113. Bush, Irving T., inaugurates freight terminal in Brooklyn, 104. Bush Terminal Co., development of, 105. Cable Building, associations of, 358. California, effect of gold output of, 65. Cammack, Addison, bear operations of, 293- Canada, movement against, 13; up- rising of 1837-38, 28. Canal ring, attacked by Governor Til- den, 36. Canals, corruption in management checked, 36; improvement of, 48. Canal Street, early history of, 317. Cannon, Henry W., Comptroller of the Currency, 141. Capital, conversion into fixed forms, 228 ; absorption of, in recent wars, 241. Capon, Arthur, early career of, 331. Carnegie, Andrew, share in organizing United States Steel Corporation, 221; criticism of speculation, 295. Carnegie Trust Co., suspends payment, 99- Caroline, burning of, 28. Central bank, recommended by Chamber of Commerce committee, 144. Chamber of Commerce of New York, recommends increased taxation to carry on Civil War, 119; adopts plan INDEX 415 Chamber of Commerce — Continued for currency reform, 144; organized in Fraunce's Tavern, 268. Champlain, Samuel de, first governor, 3. Chase, Salmon P., negotiates with New York bankers, no; demands ment of bank loans in coin, 118; fails to recommend adequate taxation, 1 [9. Chatham Square, millinery shops in, 319; decline of, 322. Chemical National Bank, weathers panic of 1857, 368. Chesterman & Hoguet, business 1 of, 338- Chicago Board of Trade, price of wheat on, 150. Chicago, Burlington & Quincy Railway, purchased by Northern Pacific, 161. Chicago fire of 1871, 75; effect on speculation, 292. China & Japan Trading Co., develop- ment of, 102. Choate, Joseph H., career of, 40; resi- dence of, 316. Civil War, enlistments for, 34; influence of on Stock Exchange, 286. Claflin, H. B. & Co., development of, 331. Claflin, John, member of Committee on Currency Reform, 144; influence in United Drygoods Companies, 224. Clark, Dodge & Co., early standing of, 284. Clark, Dumont, member of Committee on Currency Reform, 144. Clark, Myron H., elected Governor, 32. Clearing House, certificates first resorted to in i860, 68; origins of, 93; varia- tions in volume of transactions, 94; withdrawal of trust companies from, 99; joined by Assistant United States Treasurer, 131; certificates of , issued in 1907, 245; organization of, 284; certificates of, issue of 1860-64, 287; established in 1853, 367. Clearings, decrease of, in 1897, 149; growth of, at London in 1905, 173. Cleveland, Grover, elected Governor, 38; elected President, 39; election due to vote of New York, 53; stands firmly for gold standard, 134; calls extra session of Congress, 135; becomes trustee of Equitable Life Assurance Society, 180; effect of Venezuelan message, 294. Clews, Henry, book on Wall Street, 305. Clinton, De Witt, candidate for Presi- dent, 2 1 ; plans for extending water- ways, 23. Clinton, George, British Governor of New York, 13; chosen governor, 18. Coe, George S., opposes legal tender issues, 123, advi ■! clearing house certificates, 368. Coffe . attempts to corner, 343. Colden, Cadwallader, Lieutenant Gover- nor, conflict with the colonics, 15. niations, industrial, planned in New York City, 187; types of, 190. Commission merchant , bu iness meth- of, 328. ( Competition, in relation to business, 188. Conant, Charles A., member Committee on Currency Reform, 141. Concrete, use in construction, 355. Conkling, Roscoe, candidate for Presi- nl, 36; resigns from Senate, 38. Consolidated Lake Superior, goes into bankruptcy, 169. Consolidated Tobacco Co., organization of, 209; merged with other companies, 211. Constitutions, dates of revision, 25. Construction, modern methods of, 354. Continental Congress, chooses New York as national capital, 19. Continental Tobacco Co., allied with American Co., 208. Cooke, Jay, aids in the distribution of government bonds, 72; becomes in- volved in Northern Pacific Syndii 73; failure of, 75; later years, 76. Cooke, Jay, & Co., aid in distributing public debt, 128; failure of, 292; effect of failure of, 371. Cooper, James Fcnimore, literary career of, 396. Cooper, Peter, residence of, 316; busi- ness career of, 346. Cordage trust, failure of, 294 ; effects of failure, 379. Corey, William E., president United States Steel Corporation, 220. Corn Exchange, organization of, 284. Cornell, Alonzo B., career of, 37. Coming, Erastus, member of sub- committee on war finance, 120; ques- tions legal tender measure, 121. Corre's Hotel, meeting place of stock brokers, 264. Correspondence, committees of, 15. Cortelyou, George B., Secretary of the Treasury, 140; on the crisis of 1907, 227. Cosby, William, administration as gover- nor, 12. Cotton, fluctuations in price of, 171. Country banks, keep reserve funds in New "York, 88. Credit, expansion of, prior to 1907, 234. Croswell, Edwin, political power at Albany, 26. Croton Reservoir, beginnings of, 312. 416 INDEX Cunard line, refuses to join steamship combination, 164. Currency, premium on, in 1907, 245. Curtis, George William, early literary work of, 391. D Dana, Charles, opinion on newspapers, 400. Dash, Bowie, attempts corner in coffee, 343- Davis, Jefferson, stops at New York Hotel, 359. Day, William A., becomes president of Equitable Life Assurance Society, 180. Debtors' jail, functions of, 339. Decatur, Stephen, protects New York, 22. Declaration of Independence, support pledged by state convention, 18. Degener, John F., career of, 336. De Lancey, James, lieutenant-governor, 13- Delaware & Raritan Canal Co., stock subscriptions to, 61. Department stores, origin of, 327. Dcpew, Chauncey M., career as senator, 46. Dewey, Admiral George, destroys Span- ish fleet at Manila, 154. Dickinson, Charles C, career of, 100. Direct nominations, 45. Dix, John A., elected governor, 35. Dix, John A., Secretary of the Treasury, 116. Dodge, William E., career of, 350. Dommerich, Louis F., business career of, 334- Draft riots, 33. Draper, Simeon, sells captured Confeder- ate vessels, 340. Drcier, Theodore, engaged in iron busi- ness, 351. Drew, Daniel, early wealth of, 284; methods of speculation, 291, 369. Drew, Robinson & Co., early wealth of, 284. Drexel, origin of the family, 373. Duke, James B., president American Tobacco Co., 206. Duke's laws, promulgated by Duke of York, 7. Duncan, Sherman & Co., involved in decline of cotton, 372. Dutch, enter unoccupied lands, 1 ; regain New York, 6. Eames, Francis L., history of the Stock Exchange, 268; promotes establish- ment of stock exchange Clearing House, 294. Education, development of, 47. Egypt, speculation in, 174. Elevated railways, beginnings of, 320. Ellsworth, Elmer W., forms regiment of Zouaves, 364. Embargo Act of 1807, 21. English, grasp Atlantic coast, 1 ; capture New York, 6; issues of securities for Boer war, 155 Eno, Amos R., career of, 330. Equitable Life Assurance Society, quar- rel over management of, 177; placed in charge of trustees, 180. Erie Canal, plans for construction of, 23 ; opening of, 61 ; completion of, 274. Erie Railroad, comes under control of Fisk and Gould, 70; over-issue of stock, 71; wars over securities, 291. Evans, Henry, connected with Continen- tal Insurance Co., 362. Evarts, William M., career of, 37; resi- dence of, 316. Everybody's Magazine, circulation of, 406. Fairchild, Charles S., Secretary of the Treasury, 137. Farmers Loan & Trust Co., mentioned by Philip Hone, 283. Farrell, James A., president United States Steel Corporation, 220. Faulkner, Page & Co., business of, 332. Federalists, secure majority in Legis- lature, 1789, 20. Fenton, Reuben E., career of, 34. Feudal tenure, causes Rebellion of 1836, 30. Field, Cyrus W., business career of, 341 ; appears at firemen's ball, 364. Fillmore, Millard, elected Vice-President, 31. Fire Department, early history of, 363. Fire insurance, early development of, 361 . Fire of December, 1835, 279. Fire-proof buildings, list of, 353. Fish, Hamilton, elected governor, 31 ; becomes Secretary of State, 35. Fish, Preserved, residence of, 316. Fish & Grinnell, business career of, 34i- Fisk, James, control of Erie Railroad, 70; associations with Grand Opera House , 359. Fisk & Hatch, connection with refund- ing, 128. Five Nations, denounced by French king, 4. INDEX 417 Flower, Roswcll P., elected governor, 40; supports sound money in Congress, 138. Fogg, William H., engages in China trade, 322. Folger, Charles J., defeated for governor, 38; Secretary of the Treasury, 132. Foreign affairs, influence of New York upon, 55. Foreign exchange, value of, 95; turns in favor of United States in 1907, 259; early vicissitudes of, 376. Foreign trade of New York, 311. Forrest, Edwin, residence of, 316. Fort Orange, built by Walloons, 4. Fort Wayne corner, 289. France, security issues in, 230. Fraunce's Tavern, used by Chamber of Commerce, 268. Free banking law, enactment of, 284. French, discover St. Lawrence, 1. Frontenac, burns Schenectady, 4. Fuller, William W., 'counsel for American Tobacco Co., 213. Fulton, Robert, residence of, 315. Gage, Lyman J., Secretary of the Treas- ury, 139. Gallagher's Stock Exchange, opened 1865, 288. Gallatin, James, opposes legal tender issues, 123. Gallatin National Bank, absorbed by Hanover National, 101. Gary, Elbert H., acting head United States Steel Corporation, 220. Gebhard, Fred, business career of, 371. German-American Fire Insurance Co. 362. Germans, character of northern immi- grants, 340. Germany, issues of new securities in, 173, 230; efforts to maintain high prices, 240. Gilder, Richard Watson, opinion on newspapers, 408. Gold certificates, provided for in 1882, 133- Gold exchange, operations of, during Civil War, 288; location of, 370. Gold, increase of imports in 1897, 150; production of, checked by war in South Africa, 155; resumed after close of war, 170; influence of California discoveries on stock market, 284; speculation in, 287. Gold payments, resumed at New York Clearing House, 132; threatened by silver legislation, 134. Gold Standard act, approved by Presi- dent McKinley, 140; supported by A. Barton Hepburn, 141; supported in Congress by J. Murray Mitchell, 142; prepared by caucus committee, 143; beneficial effects of, 247. 1 ri idea Hill, conflict with soldiers at, 17. Goldman, Sachs & Co., origins of, 374. Goluchowski, Count, fear of American competition, 151. Gouge, William M., discusses early speculation, 262. Gould, Edwin, member of Stock Ex- change, 304. Gould, George J., member of Stock Exchange, 304. Gould, Jay, control of Erie Railroad, 70; operations of, in gold pool, 75; death of, 80; share in Erie specula- tion, 291. Gorman, Arthur P., willing to compro- mise with silver, 136. Governors, in colonial times, 8. Grace Church, architecture of, 357. Grace, W. R., career of, 345. Gramercy Park, foundation of, 316. Grand Opera House, associations of, 359. Grant, Ulysses S., loses vote of New York in 1868, 35; supported for third term, 37; conference with New York bankers in panic of 1873, 130; New York bankers aid in protecting government gold fund, 131. Grant & Ward, failure of, in 1884, 76, 292, 378. Great Britain, security issues in, 230. Greeley, Horace, enters politics, 29; candidate for President, 35; residence of, 316; newspaper career of, 407. Greenbacks, recommended by Elbridge G. Spaulding, 120. Greenwich Village, brick cottages in, 316; old buildings in, 353. Grocery business, early development of, 340; development of wholesale trade, 343- Guggenheim, Daniel, president American Smelting & Refining Co., 214. Guggenheim, Meyer, founder of remark- able family, 214. Guggenheim, Simon, United States senator from Colorado, 214. Guggenheim, Solomon R., director American Smelting & Refining Co., 214. Gunther, Charles G., establishes fur business, 345. H Hackctt, Frank W., describes panic of 1873- 130. 4i8 INDEX Hadley, William T., definition of specu- lation, 308. Haggerty, John, business career of, 338. Half Moon, enters Hudson, 3. Halleck, Fitz-Greene, literary work of, 397- Hallgarten & Herzfeld, early history of, 373- Hamilton, Alexander, aids in framing Constitution, 18; influence upon American finance, 56; large share in finances of New York, 109; Secretary of the Treasury, 110; reorganizes the national debt, in ; return to New York, 112; reports in favor of assum- ing state debts, 262; buys govern- ment bonds to steady market, 263; home of, 316. Hanna, Hugh H., promotes gold standard legislation, 142. Hanover Square, drygoods center, 323. Harper's Magazine, origins of, 394; English opinion of, 403. Harriman, Edward H., career of, 87; share in Northern Pacific corner, 166; speculative railway ambitions of, 177; shares in industrial organization, 295; admitted to Stock Exchange, 304. Harrison, William Henry, defeats Van Buren for President, 114. Harvey, Col. George, opinion on news- papers, 409. Hatch, A. S., compelled to resign as president of Stock Exchange, 292. Haussmann, Baron, rules regarding high buildings, 356. Havemeyer, H. O., forms American Sugar Refining Co., 200; explains attitude of Sugar Refining Co., 205; relation to sugar trust, 342. Hayes, Rutherford B., vetoes silver bill, 132. Hedges, Job E., candidate for governor, 45- Hepburn, A. Barton, Comptroller of the Currency, 141 ; chairman of Commit- tee on Currency Reform, 145. Hepburn act, passes Congress, 185. Herbert, Henry William, literary career of, 391. " Hermitage," origin of, 314. Hessenberg, Gustavus, career of, 336. Hewitt, Abram S., career of, 346 Higgins, Frank W., elected governor, 42. Hill, David B., career of, 39. Hill, James J., ownership of Great North- ern stock, 166; discusses undigested securities, 169. Hiscock, Frank, career of, 46. Hoffman, John T., chosen governor, 35- Holding companies, development of, after 1900, 161; origin of, 192. Holland dwellings, existing in Green- wich Village, 353. Holland Land Co., acquires large estates, 19- Holmes, Dr. Oliver Wendell, literary work of, 393 Home Fire Insurance Co., 362. Hone, John, residence of, on Whitehall Street, 315. Hone, Philip, diary of, 275; describes prostration of 1837, 281. Hooper, Samuel, cooperates with Mr. Spaulding in war legislation, 120. Horse car lines, early history of, 320. Hoyt, Sprague & Co., failure of, 371. Hudson, Henry, enters North River, 3. Hudson River railroad stage, early his- tory of, 32 1 . Hughes, Charles E., career of, 43; conducts insurance investigation, 179; appoints commission on Stock Ex- change, 299. Hunt, Wilson G., career of, 329. Hunter's Point, origin of name, 314. Hyde, James H., resignation from Equit- able Life Assurance Society, 178; sells control of society, 180. I Indianapolis Monetary Commission, pro- motes gold standard law, 143. Industrial combinations, growth of, after 1890, 157 ; planned in New York City, 187; classification of, 198; regulation of, in New York, 224; influence on prices, 225 Ingersoll, Robert G., financial methods of, 348. Insurance investigation of 1905, con- ducted by Charles E. Hughes, 179. International Mercantile Marine, for- mation of, 164. Irish, predominate at "Five Points," 3 2 4- Iron, increased demand for, in 1899, 159; increased production of , in 1906, 173; importers of, 335. Iroquois, resist French invasion, 4. Irving House, historical associations of, 358. Irving Theatre, devoted to German plays, 359- ., . Irving, Washington, residence of, 316; inspires foundation of Astor Library, 350; early career of, 396. Iselin, Adrian, business career of, 337. Italians, immigration of, 325. INDEX 419 Jackson, Andrew, receives vote of New York in 1832,27; checks inflation, 64. James, Thomas L., resigns as Post- master-General, 38. Japan, makes war on Russia, 172; rise of prices in, 174; cost of war with Russia, 242. Jay, John, placed on committee of col- onies, 17; appointed Chief Justice, 18. Jefferson, Joe, plays at Winter Garden, 359- Jews, character of, 325. Jobbers, business methods of, 328. Johnson, Reverdy, attends conference in New York, 130. Johnson, Sir William, begins career, 13; confers with Six Nations, 16. Johnston, John Taylor, sells art treasures, 350. Jordan, Conrad N., United States Treasurer, 137. Judicial tenure, conflict over, 14. juilliard, A. D., becomes receiver for Hoyt, Sprague & Co., 371. K Kartells, character of, 192. Keene, James R., relation to Stock Exchange, 304. Kelly, Eugene, & Co., business methods of, 373- King, Edward, rehabilitates Union Trust Co., 371. King, Rufus, receives Federalist vote for President, 23; settles in Jamaica, 315- Knickerbocker Magazine, origins of, 388. Knickerbocker stage line, route of, 319. Knickerbocker Trust Co., closes its doors, 244. Knox, John J., Comptroller of the Currency, 140. Knox, Philander C, enters suit against Northern Securities Co., 182. Kohlsaat Bros., established in New York, 333. Kreft, William, defeated by Indians, 5. Kremer, William N., connected with German-American Fire Insurance Co., 363- Kuhn, Loeb & Co., career of, 96. Lakes, an asset of the State, 2. " Lambs," early synonym for, 280. Land values, speculation in, 172. Landis, Kenesaw C, fines Standard Oil Co., 184. Lapham, Elbridge G., elected senator, 38. Lathers, Col. Richard, career of , 365. Law, John, originates Mississippi Bubble, 261. Ledyard, Lewis Cass, becomes trustee of Equitable Life Assurance Society, 180. Lefferts, Marshall, constructs early tele- phone lines, 349. Legal lender notes, reluctantly approved by Secretary Chase, 124. Lehigh Coal & Navigation Co., organi- zation of, 273. Leipziger Bank, failure of, 240. Leister, Jacob, assumes governorship, 10; hanged for treason, 1 1 . Lincoln, Abraham, receives vote of New York, 32. "Little Italy," established in Harlem, 325- Little, Jacob, becomes prominent in stock market, 276; engaged in bull pool, 282. Livingston, Robert, R., appointed chan- cellor, 18. Lord & Taylor, business of, 319. Lorillard, Jacob, estimated fortune of, 65- Lorillard, Pierre, business beginnings of, 3 J 4- Loudon, Earl of, Commander-in-Chief of British forces, 14. Lovelace, Francis, second Governor of New York, 7. Low, A. A., & Bros., career of, 322. M McClure's Magazine, success of, 406. McCulloch, Hugh, becomes head of London branch of Jay Cooke & Co., 74; encourages refunding of debt, 129. McGowan's Pass, early history of, 313. McKinley, William, approves gold stand- ard act, 140. McLeod combination, collapse of, 294. Mabon, James B., member of Stock Ex- change, 306. Macy, R. H., career of, 326. Mali, Pierre, becomes Belgian consul, 35o. Manhattan, early boundary of, 317. Manning, Daniel, Secretary of the Treasury, 137. Manufactures, growth of, 49; condition of, in 1899, 152. Marcy, William L., career of, 27. Marine Bank, failure of, 292. Marine insurance, 365. 420 INDEX Marvel, Ik, writes Reveries of a Bachelor, 390. Medbury , James K. , book on Wall Street, 270; discusses Stock Exchange, 290. Mercantile National Bank, appeals to Clearing House for aid, 244. Merchant, Charles C, career of, 318. Merriam, Benjamin W., relations with Roosevelt family, 349. Metropolitan Hotel, associations of, 358. Metropolitan Life Building, architecture of, 357- Meyer, Eugene, Jr., member of Stock Exchange, 306. Miller, Warner, elected senator, 38. Milliken, Seth M., career of, 332. Mining stocks, speculation in, 377. Mississippi Bubble, origins of, 261. Mitchell, John Murray, supports gold standard law, 142. Mohawk & Hudson River Railroad, completion of, 63. Mohawk River, relation to the Hudson, 2. Mollenhauer, F. C, enters sugar refining industry, 202. Money, high rates for, in 1905, 176. Montcalm, ravages Lake George and the Mohonk, 14. Moody, John, estimate of typewriter output, 222. Moore, Sir Henry, governor, 16. Morgan, E. D., career of, 344. Morgan, J. Pierpont, beginning of career, 81; forms United States Steel Corporation, 82; checks panic of 1907, 83 ; stays panic after Carnegie Trust failure, 100; relieves effects of Northern Pacific corner, 168; takes over control of Equitable Life Assur- ance Society, 180; share in organizing United States Steel Corporation, 221; shares in industrial organization, 295; invents term "undigested securities," 296. Morris Canal Co., subscriptions for stock, 273 ; corner in, 278. Morris, Gouverneur, estimated fortune of, 65. Morris, Robert, head of Continental Treasury, 109. Morse, James R., becomes president American Trading Co., 103. Morse, Samuel F. B., residence of, 316. Morton, Bliss & Co., subscribe for government bonds, 127. Morton, Levi P., elected Vice-President, 40; early career of, 329. Munsey's Magazine, origins of, 399. Murray, Lawrence O., Comptroller of the Currency, 141. N Nast, Thomas, cartoons of, 399. National banking act, influence of, on New York, 68. National Bank of Commerce, expansion of, 85. National banks, increase circulation in I 9°7. 2 5 2 : chief subscribers for bonds in 1907, 256. National City Bank, development of, 85. National debt, made payable in coin, 125; increase through rise in prices, 126. National Lead Co., relations with American Smelting Co., 215. National Lloyd's, development of, 365. National Monetary Commission, author- ized by Congress, 146. National Sugar Refining Co., formation of, 202. National Theatre, on Chatham Square, 359- Negroes, alleged plot to bum New York City, 12. New Amsterdam, convention of, in 1653, 5- New Jersey, granted to Lord Berkeley, 7. New Jersey Railroad, early history of, 321. New York bankers, form combination to advance gold to Treasury in 1893, 134; take part of British loan, 156. New York City, draft riots in, 33; scope of financial development, 62; attains financial supremacy before 1857, 65; becomes sub-Treasury city, 115; finds difficulty in selling bonds, 243 ; banks of, receive public money, 248; deficit in reserves of, in 1907, 258. New York Clearing House, discriminates against silver, 133. New York Gazelle, started in 1725, 12. New York Hotel, early associations of, 359- New York Journal, started by Peter Zenger, 12. New York Life Building, associations of, 358. New York State, early area of, 2 ; first settlement by white men, 3; contri- bution of men to Civil War, 34 ; turns scale in national elections, 52; signi- ficant vote for Fremont in 1856, 52; Presidents and Vice-Presidents elected from, 54; Secretaries of State from, 55; other cabinet officers from, 56; policy towards industrial combinations, 225. New York University, building of, 316. New York Water Works Co., sales of stock, 61. INDEX 421 Nicholson, Francis, acts as lieutenant- governor, 10. North American Review, origins of, 388. Northern Pacific Railroad, supported by Jay Cooke & Co., 74; connection with panic of 1873, 75; issues bonds for Burlington stock, 162; corner in shares in 1901, 166, 232, 296. Northern Securities Co., potential power of, 177; sued by government, 182; dissolved by Supreme Court, 183. O O'Brien, Morgan J., becomes trustee o Equitable Life Assurance Society, 180; character of, 325. Odell, Benjamin B., Jr., elected governor, 42. Oelbermann, Emil, business career of, 334- Oelrichs, Herman, occupies downtown offices, 315. Ogden's Ltd., acquired by American Tobacco Co., 210. O'Gorman, James A., elected senator, 44. Ohio Life Insurance & Trust Co., failure of, 66. Oriental trade, development of, 102. Ottendorfer, Oswald, character of, 324. Paine, Thomas, death of, 316. Panama Canal bonds, offered to public in 1907, 252. Panic of 1837, losses in, 278. Panic of 1857, suddenness of, 285; effects of, 368. Panic of 1873, causes of, 71 ; conference of bankers with President Grant, 130. Panic of 1874, failures in, 371. Panic of 1893, causes of, 77; promoted by Sherman law, 135; effect on the railways, 152. Panic of 1907, relation to monetary reform, 145; origins of, 227; issues of new securities prior to, 229; reduc- tion of bank reserves, 234; effect of gold production, 237; failures, in Germany, 240; exhaustion of capital by war, 241 ; suddenness of the crash, 243 ; issue of clearing house certificates, 245; action of Treasury Department, 247; general policy of the Treasury, 253; refusal to interfere with gold movement, 257; turning point of the panic, 258; causes of, 298. Parker, Alton B., candidate for Presi- dent, 43; sends gold telegram to Democratic convention, 84. Patti, Adelina, appearance at Niblo's, 358. Paulding, James K., literary career of, 397- „ , „ Payne, Sereno E., career of, 46. Peabody, George Foster, makes home in Brooklyn, 313. Periodical press, development of, 381; effect of producing paper from wood pulp, 383; improvement in presses, 385; number of publications in 1873, 387; early monthlies and quarterlies, 388; influence of Putnam's Magazine, 390; development of the newspaper press, 391; origins of the Atlantic Monthly, 392; influence of Washing- ton Irving, 396; careers of Cooper and Bryant, 397; modern story writers, 401 ; influence of "muck-raking, " 403 ; development of the popular magazines, 406. Perkins, George W., profit-sharing plan for United States Steel Corporation, 221. Petroleum and Mining Exchange, 378. Phelps, Anson G., business career of, 350. Phelps, Royal, career of, 345. Philadelphia, early financial supremacy over New York, 60; relations of, to New York Stock Exchange, 270. Philippines, acquired from Spain, 154. Piatt, Thomas C, resigns from Senate, 38. Poe, Edgar Allan, contributions to periodical literature, 389. Pomeroy, Theodore M., secures pay- ment of interest on public debt in coin, 125. Pools, character of, 191. Population, growth of, 48. Post, James H., enters sugar refining industry, 202. Prices of commodities, rise between 1897 and 1907, 171; rapid rise in Russia in 1899, 239. Prime, Ward & Co., failure of, 282. Printing, improvement in methods of, 384- Promoter, common use of the name on American markets, 158. Public money, distribution of, in 1907, 249. Putnam's Monthly, origins of, 389. Queens County, early history of, 314. R Race-track betting, 45. 422 INDEX Railroad stocks, fluctuations of, 296. Railways, beginnings of, 26; extension of, prior to 1857, 65; new construction prior to 1873, 72; placed in hands of receivers in panic of 1893, 153; issues of collateral trust bonds by, 162. Raven, Anton A., president of Atlantic Mutual Insurance Co., 366. Reading stock, early activity in, 283; collapse of combination, 294. Real estate title companies, origins of, 324- Reed & Sturges, business career of, 343. Reform Club, early history of building, 335- "Regency," origin of, 26. Reid, Whitelaw, career of, 40. Reis, Philip, invents form of telephone, 347- Republican party, organization of, 32. Reserve deposits in New York, 88. Resumption of specie payments, pro- vided for by act of 1875, 131. Revolutionary War, first conflicts in New York, 17. Richardson, William A., Secretary of the Treasury, 129. Ridgely, W. Barret, recommends cen- tral bank, 145. Robinson, Lucius, elected governor, 37, Rockefeller, John D., organizes oil re- fining business, 193; shares in indus- trial organization, 295; member of Stock Exchange, 304. Roelandsen, Adam, first schoolmaster from Holland, 46. Rogers, Henry H., career of, 86, interest in Standard Oil Co., 194. Roosevelt, Theodore, early career of, 42 ; controls state convention of 1910, 44; candidate for President in 191 2, 45; policy towards corporations, 181. Roosevelt, Theodore, Sr., father of President, 349. Root, Elihu, career of, 41; influence as Secretary of State, 55. Root, L. Carroll, perfects report of Monetary Commission, 142. Rugglcs, Samuel B., founds Gramercy Park, 316. Russo-Japanese War, absorption of capital in, 241. Ryan, Thomas F., career of, 84; share in supportng Judge Parker, 84; finan- cial power of, 85 ; buys majority stock of Equitable Life Assurance Society, 180; becomes factor in tobacco busi- ness, 208; arranges agreement with Imperial Tobacco Co., 210; shares in industrial organization, 295. Ryswick, Treaty of, 4. Sage, Russell, death of, 81. St. John's Park, a center of society, 316. St. Nicholas Hotel, associations of, 358. San Francisco earthquake, effect on speculation, 297. Schiff, Jacob H., secures appointment of Committee on Currency Reform by Chamber of Commerce, 144; char- acter of, 325. Schley, G. B., owner in American To- bacco Co., 213. Schurz, Carl, character of, 324. Schuyler, Philip, home of, 316. Schwab, Charles M., valuation of ore properties, 219; president United States Steel Corporation, 220. Scott, Gen. Winfield S., victories at Chippewa and Lundy's Lane, 22. Scribner's Sons, building of, 357. Second Street, occupied by Germans, 324- . Securities, foreign issues of, 148; new issues of, in 1899, 158; issues of 1896- 1906, 228; quoted in 1792, 268. Scligman, James, member of Stock Ex- change, 305. Seligman, Jesse, subscribes for govern- ment bonds, 127. Seligman & Co., J. & W., development of, 97; beginnings of, 373. Seney, George I., business experience of, 378. Seward, William H., enters politics, 29; candidate for President, 30. Seymour, Horatio, career of, 25; elected governor 1862, 33; candidate for President, 35. Shaw, Leslie M., Secretary of the Treasury, 140. Sherman, James S., career of, 44; death of, 46. Sherman silver purchase law, invokes a crisis, 134. Shipman & Corning, failure of, in 1833, 276. Short selling, prohibited by law in 181 2, 276. Signs, curious character of, 360. Silver certificates, must be received by Clearing House, 133. Silver, relations of Guggenheims with London market, 214. Simmons, J. Edward, chosen president of Stock Exchange, 292. Sloan, Samuel J., character of, 325. Smith, Charles Stewart, career of, 337. Soughter, Henry, arrives as governor, 11. South Africa, gold production in, 155. INDEX 423 South African war, cost of, to British Government, 241. South Street, decadence of, 322. Southern merchants, action in 1861, 330. Spain, effect of war with, 153. Spanish-American war, absorption of capital in, 241. Spanish war loan, 154. Spaulding, E. G., connection with first greenback issue, 120; prepares bank currency bill, 121 ; supports bill in House, 125; recommends change of system after close of the war, 12 . Speculation, outburst of, in April, 1901, 163; causes Northern Pacific corner, 166; spectacular development of, in I9°5. 175; development of, in 1902, 232; origins of, 261; evolution of, 265; purpose of, 267; hazards of, in early times, 273; methods of, in 1848, 281 ; violence of, during Civil War, 288, Speyer & Co., development of, 98; subscribe for government bonds, 127. Spinner, Francis E., Treasurer of the United States, 46. Spreckles, Claus, enters field of sugar refining, 201 . Stadt Theatre, early history of, 359. Standard Oil Co., prosecution of, 184; fined by Judge Landis, 185; develop- ment of, 193; export business of, 195; dissolution of, 196. State banks, at beginning of Civil War, 68; development of, after 1897, 236. State debts, effect of Federal assumption, 262. Staten Island, changes in character of, 3H- Steel construction, development of, 353. Steiger, Ernest, prepares periodical ex- hibit for Vienna Exposition, 384. Steinway, William, business career of, 348. Stevens, John A., residence of, 316. Stevens, Mrs. Paran, widowhood of, 365. Stewart, A. T., career of, 318. Stillman, James, career of, 85. Stimson, Henry L., career of, 44. Stock Exchange, New York, increase of transactions on, in 1901, 163; history of, 261 ; agreement of brokers in 1792, 264; constitution of 1820, 271; organization of, in early times, 272; rents rooms in Wall Street, 275; transactions quoted in press, 277; moves to Howard's Hotel, 279; meth- ods of early trading, 280; quali- fications for, in 1848, 281; condition of, in panic of 1857, 285; development of, after 1861, 286; character of, in 1861, 287; night exchanges started dur- ing Civil War, 288; change in organiz- ation of, in 1869, 289; effect of Chicago and Boston fires, 292; establishes system of stock clearings, 293; effect of President Cleveland's Venezuelan message, 294 ; epoch of consolidations, 295 ; influence of Northern Pacific cor- ner, 296; fluctuations in price of seats, 297; changes in machinery of, 299; new building in 1903, 300; rules of, 301; prominent members of, 305; bond dealings on, 306; character as a test of values, 309; methods of, 369. Stock exchanges, extent of, in United States, 303. Stock transfer tax, collections in 1906, 270. Storrs, Richard S., preaches in Brooklyn, 3i3- Stranahan, J. S. T., residence in South Brooklyn, 313. Straus, Isidor, supports sound money in Congress, 138; member of Committee on Currency Reform, 144; career of, 326. Straus, Oscar, character of, 325. Stuart, R. L. &. A., develop sugar business, 342. Sturgis, Frank K., member of Stock Exchange, 305. Stuyvesant, Peter, Dutch director- general, 5. Stuyvesant Square, old residences in, 316. Sugar, decline in price of, 204; early American market for, 341; German refiners, 342. Sulzer, William, elected governor, 45. Suspension of specie payments in 1861, 118. Susquehanna River, takes rise in New York, 2. T Taber, Charles C, business career of, 351- Tammany Hall, supports Van Buren, 24, Taylor, John W., elected Speaker of National House, 24. Taylor, Moses, business career of, 341. Taylor's Saloon, patronized by ladies, 317- Taxation, increase recommended by Chamber of Commerce in 1862, 119. Tea duty, protest against, 17. Telegraph, influence in causing panic, 67 ; relations to the stock market, 106; application to Stock Exchange oper- ations, 288. Telephone, utility of, to big men, 106, origins of, 347. 424 INDEX Terminal facilities, development of, 104. Terry, John T., career of, 343. Thomas, R. H., president of Stock Exchange, 306. Thomas, Theodore, director of American Opera Co., 344. Thompson, John, publishes Bank Note Detector, 366. Throop, Enos, elected governor, 27. Thurber, H. K., business career of, 344. Tilden, Samuel J., attacks canal ring, 36; nominated for President, 36; resi- dence of, 316. Titanic, loss of Benjamin Guggenheim on, 214. Tobacco industry, report of Com- missioner of Corporations on, 206. Tompkins, Daniel D., defeats Clinton for President, 21. Tontine Coffee House, used for stock transactions, 268. Tracey, Charles, defends sound money in Congress, 138. Transportation system, development of, 61. Transvaal Republic, declares war on England, 155. Treasury certificates, issued in 1907, 255. Treasury Department, increases deposits in banks in 1907, 246; offers Canal bonds and Treasury certificates, 252. Treasury notes, authorized by House bill, 122; opposed by New York bankers, 123; urged by Secretary Chase, 124; authorized by Congress, 125; effect on public credit, 126. Treasury system, adopted under Van Buren, 114. Trust companies, origin of, 91; friction with national and state banks, 98 increased reserve requirements, 99 re-entry into Clearing House, 100 changes in organization, 101 ; develop- ment of, after 1897, 236. Trust Co. of America, subjected to heavy run, 245. Trusts, origin of, 192. U Underwriting syndicates, connection with insurance companies, 178. "Undigested securities," term invented by J. Pierpont Morgan, 296. Union Club, early location of, 312. Union Pacific Railroad, development of, 86; grants wide powers to Edward H. Harriman, 166. Union Tobacco Co., acquired by Ameri- can Tobacco Co., 208; character of, 222. Union Trust Co., suspension of, in 1873, 3.71- United Cigar Stores Co., relation to American Tobacco Co., 211. United Drygoods Companies, organiza- tion of, 223. United Lead Co., relations with Ameri- can Smelting Co., 215. United Metals Selling Co., acquired by Amalgamated Copper Co., 205. United States, value of security issues in, 230. United States Bank, fails to control commercial credit, 64; recommended by Hamilton, 112; office of New York branch, 274. United States Steel Corporation, organi- zation of, by J. Pierpont Morgan, 162 ; suspends dividends on common stock , 169; origins of, 215; preferred stock conversion ,217; capitalization of , 2 1 8 ; management of, 220; relation of Carnegie with, 221; decline of com- mon stock in 1903, 232. Unlisted securities, permitted on Stock Exchange, 293. V Valuation of State, in 1909, 49. Van Buren, Martin, career of, 24; blamed by supporters of Crawford, 26 ; elected President, 27; secures adop- tion of sub-Treasury system, 114. Van Cortlandt, Pierre, chosen lieutenant governor, 18. Van Dyck, Assistant Treasurer, 128. Van Hoffmann, early methods of, 372. Van Twiller, Governor, brings first schoolmaster from Holland, 46. Van Wyck, Cobbe & Townsend, busi- ness career of, 339. Vanderbilt, Commodore, small fortune of, in 1845, 66; seeks to develop Hudson River Railroad, 69; share in speculation, 291. Vanderlip, Frank A., vice-president National City Bank, 86; member of Committee on Currency Reform, 144. Venezuelan message, effect of, on stock market, 294. Vietor, Frederick, career of, 335. Volunteer firemen, 364. Vreeland, Edward B., aids in framing currency law, 146. W Wall Street, early connection with stock transactions, 268; begins to figure in the press, 273; referred to in diary of Philip Hone, 275. INDEX 425 Wallack, Lester, gives English plays, 359. Warburg, Paul M., part played in New York finance, 96. Washington lla.ll, sessions of Stock Exchange in, 271. Washington Place, early associations of, 359- Washington Square, old residences in, 316. Waterways, growth and cost, 24. Webb, Silas D., becomes president China & Japan Trading Co., 102. Weed, Thurlow, political power at Albany, 26. Wesendonck, Otto, career of, 333. West India Co., builds Fort Orange, 4. Westminster, Treaty of, 7. Wharton, Edith, literary character of, 401. Wheat crop, in 1897, 149; large yield of, in 1906, 170. Wheat, high price of, in 1898, 154. Wheeler, William A., nominated for Vice-President, 36. Wheelock, William A., supports payment of public debt in coin, 125. Whiskey trust, effort to influence prices, 225. White, Horace, report on Stock Ex- change, 300. White, Horace, becomes governor, 44. White, S. V., corner in Lackawanna, 293- Whitney, William C, career of, 83; re- moves opposition to Cleveland in 1892, 134; becomes factor in tobacco business, 208. Widener, P. A. B., becomes factor in tobacco business, 208. Wild-cat banking, methods of, 367. Williams, George G., career of, 369. Willis, Nathaniel Parker, characteristics of, 394- Wilmerding, Christian W., business career of, 338. Wilson, Woodrow, receives vote of New York, 46. Witthaus, R. A. &. G., origin of, 323 Woerishoffer, C. F., bear operations of, 293- Wood, Fernando, proposes secession of New York, 330. Woolworth, Frederick W., career of, 356. Woolwortb Building, features of, 355. World's Fair of 1853, 347. Wright, Silas, career of, 29; relations with President Polk, 31. Yiddish Theatre, origin of, 359. York, Duke of, blockades the Hudson, 6. Zouaves, formed by Colonel Ellsworth, 364- A* r >. i SU^'