CHAPTER LXXXI.

THE CRISIS OF 1907 AND ITS CAUSES. WAS PRESIDENT ROOSEVELT TO BLAME?

Footnote 9:

An address to the Cleveland Chamber of Commerce, Cleveland, Ohio, Tuesday evening, January 28th, 1908, by Henry Clews.

It gives me great pleasure to meet the members of the Chamber of Commerce of the city of Cleveland.

Next to New York—being from New York I have to make this distinction—next to New York, I consider Cleveland the home of the most worthy set of business men in the United States. Your forefathers chose well when they elected to settle in this beautiful spot. The wisdom which they displayed is proven by the twenty miles of docks on your water front and by the fact that your people own the largest tonnage on the lakes.

The natural resources of your surroundings have made you masters of trade in coal, iron, and petroleum. Your harbors are commodious, and what they lacked in natural formation you have supplied by the famous breakwaters which have been built. Your city is not only a natural business center, but also a railroad center.

Your Euclid Avenue is spoken of in the East as a model to be copied by the lovers of beauty.

Fifty years ago Cleveland was a village. If you continue to thrive as you have, where will you be fifty years hence?

It was in the soil of Cleveland that the seed was planted that has grown and developed into the greatest business plant in the world. To-day the Standard Oil Company commands trade in every country on the face of the globe, and as a body are the greatest merchants that the world has ever known.

Ohio has robbed Virginia of the right to be known as “the mother of Presidents,” and I predict that the Republican Convention to be held this summer will present as its candidate your most famous and honored citizen, Hon. William H. Taft, who will be elected by an overwhelming majority. I suggest that he and Mr. Roosevelt change places—Taft as President and Roosevelt as Secretary of War, or still better, Secretary of the Navy. Then we will be ever alertful and prepared for eventualities both on our Atlantic and Pacific coasts. In this way we will retain the services of both.

I will begin by saying that the elimination of the Godly Motto on our gold coin many people may think means-“In President Roosevelt we trust, but in God we distrust”; but I am sure the great mass of the Americans do not think that way. They believe in trusting both God and the President, and if the President will put back “God” on the American coin they will put him back in the White House after his present term—thus making our Motto: God first, our Country second, Theodore Roosevelt third (term). The Three together one and inseparable for the next four years.

It is my belief that there is not an intelligent man in the United States who sincerely questions the “honesty of Theodore Roosevelt’s motives.” Whatever he has done he has done to promote the public good and the nation’s welfare, whether his speeches have helped to cause distrust or not. He is an honest man, and an honest man is said to be the noblest work of God. But, of course, as we cannot expect perfection even in honest men, they may sometimes make mistakes in their judgment of consequences, however good their intentions are. That we all allow for.

You ask the question: Is President Roosevelt’s policy towards capital sound? In other words, has he, in denouncing and instigating the prosecution of law-breaking railway corporations, and industrial Trusts, menaced the prosperity of the country? I contend that he has not. He certainly had no intention to do so, for, while he was instrumental in turning on the light, he was not responsible for the abuses of power that the light revealed, and it is the revelation of graft and illegal methods, on the part of certain railway and other corporations, through the acts of their responsible managers, and controlling capitalists, that has undermined public confidence in many of them.

It is true that the marked change in conditions and public sentiment, especially in the stock market,—from the great optimism, buoyancy and high prices of last year to the great depression and low prices of this year of panics,—has caused many unthinking critics of the situation to ascribe it to the influence of President Roosevelt. The speculative capitalists and Trust magnates who have lost heavily by the depression in stocks have this impression of the effect of his policy and speeches in exposing corporate wrongdoing.

But it is an idea that needs to be controverted, or at least is open to question, and his course is generally approved by popular opinion all over the country. In other words the people generally are in favor of the policy represented by all that the President has done to correct corporate abuses and illegal methods and raise the standard of business morality.

Before entering further into the subject, however, I will say that gatherings of this kind, where the burning questions of the day are discussed in a frank and friendly way, are productive of good fellowship, and good results. Different minds view important events from different standpoints, and any association that meets for this purpose with a desire to obtain by mutual discussion, the fairest and best understanding relating to public measures, is doing a patriotic service, and is worthy of the highest commendation. It is particularly so at a time like this, in view of the prevailing depression and distrust.

It is very fortunate that a presidential election did not take place last year, as the people were in such a state of uncertainty and apprehension that many well-meaning men would not, I fear, have voted with a desire for their country’s good, but be biased by personal interest or a determination to obtain revenge for what they have lost by the great and prolonged decline in the stock market and the disturbance of credits.

It is, of course, greatly to be deplored that some of the men high in command in the industrial and railroad companies have abused the trust reposed in them and made it imperative for the President to instruct the attorneys of the national government to investigate their doings, and prosecute those corporations and their officers charged with using their corporate powers to do illegal acts, like rebating, and such chicanery as that of the Chicago & Alton reorganization. The fact that, in nearly every such instance of Government prosecution, the guilt of the parties accused has been proved on their trial, justifies President Roosevelt in his action.

While capital may continue timid until the whole truth is known and confidence in corporate management restored, the agitation, will, in the end, prove beneficial to the country; for it will purify it by eliminating the unlawful evils complained of. This will inspire foreign capitalists as well as our own with confidence; and they will invest heavily in American securities, just as soon as they feel assured that the surplus earnings of our railway and industrial companies will be fairly divided among the stockholders under honest management, regulated by law, and subject to Federal and State supervision.

Recent events have shown that drastic action was necessary to insure a square deal for all. Mr. Roosevelt is not attacking capital, but he is attacking those in control of corporations who have misused their power and position to do illegal acts and presumably for their personal profit. Confidence received blow after blow from this source, before getting another rude shock through the exposures resulting from the Metropolitan Securities investigation, and the action of the New York Clearing House with regard to the Heinze and Morse banks.

It is now over two years since public disclosures of this kind as well as of railway rebating began, followed by the collapse of the copper manipulation and, very recently, by the scandals connected with the New York Traction situation. No wonder, therefore, that confidence is seriously disturbed. And who is responsible? Not President Roosevelt and Mr. Hughes, the famous life insurance investigator, who have been instruments of exposure, but the individuals who conceived and conducted these unlawful operations. Of course the guilty protest against financial house cleaning; and they endeavor to ward off official investigations on the plea that these disturb confidence, and make the innocent suffer. But the whole responsibility should be placed where it belongs—upon the perpetrators of misdeeds, and not upon those who, in the discharge of the duties of their high office, have been the means of turning on the light and preventing future operations of the kind. Those who have trifled with the public interest, and displayed a blind disregard of the people’s rights, are the real transgressors.

It becomes daily more evident that when all our railway and industrial corporations are known to be honestly managed, and when stockholders and investors get their due, values will be more stable, and American credit, which is now at a low ebb in all the great financial centers of the world, will be restored to its rightful place.

Throughout all these disclosures of illegal methods and wholesale graft there is one gleam of encouragement, and that is, that public opinion is aroused and will insist upon clean as well as capable corporate management in the future, and thus these disclosures will result in the raising of the moral standard of corporate management. Meanwhile, the public is disturbed by these revelations, and wonders what financial irregularity will be brought to light next. The action of many corporate managers has seemed to indicate that they think little of violating the laws, and that, if they are broken by one high in authority, or in social life, immunity must be granted; or some subordinate be made to suffer instead of themselves. If a poor man commits a crime, he is sent to jail. Sympathy for his family may sometimes make the judge lenient as to the time of his incarceration, but, however short the term, it generally brings sorrow and want to the family for which he is the sole provider. Thus, the innocent have to suffer with the guilty in such cases.

In corporate matters, if a manager or controlling capitalist breaks the law, justice should punish him, as it would anyone else. The law should be no respecter of persons.

Sodom and Gomorrah were destroyed because the people broke Nature’s laws; and this government, although the best known to man, would be destroyed in the course of time, if the rich and unscrupulous were permitted to break the laws with impunity, while the poor were punished for much less serious offenses. This invidious distinction has caused those who have suffered by the corrupt and illegal practices of corporations and their managers to unload their grievances upon the President. In their communications they tell him that, while many from their ranks are being sent to prison, they fail to see any of the rich being sent there, although the evidence against them is unquestionable. This unjust distinction, if it continues, I repeat, cannot fail to have an unsettling effect upon the American people, and may finally result in something more, as this is a government of the people, for the people and by the people, and a discrimination in favor of the wealthy—whether corporations or individuals—will not be very long permitted by the plain people, who are largely in the majority.

President Roosevelt took the oath at his inauguration to be guided by the Constitution, and as the Constitution requires that the Executive of the nation shall enforce the laws, he would have been derelict in his duty and unfaithful to his oath if he had not taken the action he has, to compel corporations to conform to the Interstate Commerce and Sherman Anti-Trust laws and their amendments. Whenever evidence has reached him, through the complaints of people who have suffered in consequence of the violation of these laws, he has very properly handed the material received over to the Attorney General to make the necessary investigation, and as in every case thus prosecuted the results have justified all he has done as to these, he deserves great credit. The so-called indiscriminate attacks that are claimed to have been made by him upon corporations and business interests have no sound basis. So far as his intentions go, he has only attacked dishonesty and law-breaking. While I fully approve of what Mr. Roosevelt has done in the way of reform, I confess I do not fully approve of his too oft repeated passionate utterances on the subject during the recent period of distrust. It undoubtedly has helped to unsettle the minds of timid investors and weak-minded depositors. The President has probably been a little too outspoken at a time when silence would have been golden. There are periods when the least said the better; still, I applaud his good intentions and his excellent deeds, which cannot fail to prove fruitful in the end. We should all be willing, therefore, to overlook his recent volubility and frequent reiterations.

A short time ago France stood ready to invest large sums in American bonds and stocks. But just after her first venture in Pennsylvania Railroad bonds our corporation scandals filled the air with their unpleasant odor and French capital was locked at once against everything American.

When all the old evils have been exposed, and wrongs righted, and foreign as well as home investors again seek investments for their funds in our securities, we may rest assured that, having undergone rigid investigation, they will be looked upon as the best in the world.

That President Roosevelt should be blamed in any way for the banking troubles, business failures and losses that have been made in the stock market is unfair; but it is always the case that the Executive in office bears the brunt of whatever disasters of the kind occur during his administration.

Those of us whose hair is no longer black, brown, sandy or red,—or very abundant,—can well remember the calumny and evil reports that were heaped upon the broad shoulders of the well beloved Abraham Lincoln. The noble cause he fought for cost millions of lives and billions of dollars, and of course there were very many who suffered at that time by the war. Of these many were most bitter in their denunciation of President Lincoln, and this nearly broke the heart of that great man, but did not for a moment cause him to desist in the work he saw it was his duty to perform to the end. To-day, those who traduced him join freely with the whole nation in doing honor to his memory. President Roosevelt may be severe in the frankness with which he reiterates his intention to punish those who break the law; but, in the distant future, the world at large will remember him as one who dared to suffer under unjust denunciation for the sake of right, and even now the great mass of the people are with him in his efforts to improve and purify business conditions.

Those capitalists who have lost money largely by this year’s decline in prices of stocks, and the monetary disturbance, are naturally bitter and resentful; but even the majority of such, down in their hearts, grant that in principle President Roosevelt is doing his plain duty, though in his speeches he may have said too much too often. If what he has done is wrong, it is the fault of the law, for he has urged no greater punishment than the enforcement of the law. But the man would be daring, indeed, in the face of the exposures already noted, who would presume to say that the law is unjust. It aims at equal justice for all, and we are a law abiding people.

In view of all the wrong doing in corporation management it must not, however, be forgotten that the majority of our corporations are ably and honestly managed in the interest of the stockholders. It is not surprising that black sheep have crept into some of them, for a certain percentage of people in every walk of life and every association, church or social club, are bad at heart, and show up in their true colors, when subjected to the temptation to commit wrongs which will tend to their personal advantage. The assumption that now prevails, that all corporation management is dishonest, is, therefore, unjust and has been causing much of the hysteria that has prevailed in Wall Street and elsewhere.

To protect minority stockholders, especially in the Interstate Railroads, they should have at least one representative in the board of directors, and he should be elected by the minority at each annual meeting. If such a director was a cool-headed, honest business man, certain abuses, which have been prevalent in the past, could not have occurred and would be prevented in the future.

It is much to be regretted that to aid personal schemes, some of the men in power, even in some of our large National Banks, have resorted to methods which have caused loss of confidence in them, which resulted in their retirement, practically under compulsion, as officers and directors. It is almost needless to say that, of all corporations, our National Banks should be the last to be used for illegal purposes, or to promote personal gain or speculations.

When a man in power imperils the solvency and good reputation of one of our banks, he is a public enemy, and as mean and guilty as one who attacks the virtue of a virtuous woman. To destroy confidence in that woman and her good name is to do her an irreparable wrong. Destroy confidence in a bank and you destroy that which is one of the corner-stones of business prosperity. Those who invest in railroad stocks, or stocks of Industrial corporations, risk only the cost of their investment, but the holder of record of a National Bank stock is liable for an additional amount equal to the par value of his holdings.

Publicity is the greatest safeguard of the prosperity of any corporate enterprise, and the best preventive of irregularities and frauds. Many men will do in secret what they would fear and refuse to do under the public eye; and if hitherto secret ways are, in the future, made known, and seen of all men, there will be less breaking and unfaithfulness among many classes of business men in high places.

This doctrine of publicity I have preached for years, and it was the topic of an address I delivered before the Wharton School of Political Economy in the University of Pennsylvania eighteen months ago. I saw then what was going on in corporate corruption and grafting, and railroad rebating, but, of course, had no tangible evidence or legal proof of these misdoings.

During the intervening time, however, so much of this came to light that there was no alternative for the national government, as well as many of the states, but to take drastic action to stop these evils, and probe right and left to locate and convict those responsible for them. President Roosevelt led the way to this laudable end. He is not in favor of persecution, however; but he is in favor of the prosecution of those known to be guilty; and I firmly believe that his courageous stand in this movement to correct and punish corporate abuses will overshadow, in the history of his Presidency, all his other achievements.

Remember: he would punish only the guilty and protect property interests in every way possible, so that the innocent may not suffer with the guilty, or at least suffer as little as possible.

The lawyers engaged to defend wealthy corporate wrongdoers may sometimes prevent their conviction and punishment; but the people are entitled to the protection which comes from an equal administration of justice.

In these days the truth of the biblical saying, that “the wicked flourish like a green bay tree, but they shall be cut down,” has become evident to us in certain instances applicable to corporations.

Some ancient cities and empires, including the great Roman Empire, were ruined by the lawlessness and unscrupulousness of their rich men—the great oppressors of those days—and our America was fast falling too much under control of large corporations and corporation capitalists; but, the plain people of this country are for equality, equal rights, and fair play for all, and opposed to a plutocracy.

In his address at Memphis, this year, President Roosevelt said:

“I will no more stay my hand because a wrongdoer masquerades as a labor leader than if he masquerades as a captain of industry.

“I am against undesirable citizens when they are great capitalists who win a fortune by chicanery and when they are men who, under the guise of standing for labor, preach and encourage violence and murder.”

To show that he recognized the sensitiveness of certain corporation capitalists who are cast into a frenzy by his most common sense remarks, he once said: “It has come to a point where my saying that honesty is the best policy is liable to lead to a run on the banks.”

In discussing the cause of the present panicky contraction and disturbance in the business and financial world, nothing, however, could be further from the truth than to charge it all to the great corporation exposures and prosecutions.

There were many other things that contributed to bring about this year’s depression and disturbance, and to cast over the brightest sky that ever shone the heavy clouds of distrust, reaction, and panic.

The clouds in the financial sky can remotely be attributed in a large measure to the effect of the tremendous railroad, industrial and commercial development of the last ten years, which brought about capital requirements in excess of the ability of the country to supply them.

Naturally and necessarily, this resulted in precautionary steps being taken by bankers and others to limit demands that capital could not supply.

This conservatism and consequent contraction of the overwhelming volume of business, will, it is believed, prove the strongest force in averting further trouble and disaster. I have for some time been urging the application of this brake, or safety valve, of conservatism, and it is really imperative.

In an effort to meet the demands of the enormous business offered them, the great railway and industrial corporations sought to enlarge their equipment at vast expense. In this they acted unwisely. They overtraded. To use a common saying, “they bit off more than they could chew.” It was, perhaps, excusable, not very long ago, when confidence was in its zenith and credit superabundant, to attempt the financing of mammoth undertakings. But unexpectedly and like a bolt out of a clear sky, came the startling insurance and other exposures, and gradually timidity took the place of confidence. Then capital, which is always more timid than usual at such times, began to contract, and many railway and industrial corporations found themselves unable to borrow the large sums needed to meet their extraordinary expenditures.

The banks in many instances, having already over-extended credits, were unable to provide the necessary funds, and new securities, owing to excessive supplies and other causes, ceased to find the ready market that they had enjoyed for so long a period. Investors took wing. Curtailment, therefore, in every direction became a necessity, so President Roosevelt can no more be blamed for the existing depression and panicky disturbance than he can be credited with all the great prosperity that preceded the crisis.

That this reaction, culminating in a panic so severe, came just at the time it did, is largely if not wholly coincidental. It cannot be denied, however, that the startling disclosures of wholesale wrongdoing on the part of many of the great railway and industrial corporations disturbed the confidence of the public to the core and paved the way to it.

The indictment and prosecution of the rich and powerful corporations that had been violators of the law were but the necessary and legal consequences of their own guilty conduct.

Article II, Section 1, of the Constitution of the United States requires that before he enters on the execution of his office the President shall take the following oath: “I do solemnly swear that I will faithfully execute the office of the President of the United States, and will to the best of my ability preserve, protect and defend the Constitution of the United States.”