Harriman, too, had his reverses: during this period the “Rock Island crowd” of promoters, consisting of the Moore brothers and Leeds and Daniel G. Reid, took the Chicago and Alton Railroad away from him by the very method he had used in trying to capture the Northern Pacific—a surprise attack in the open market. (This Rock Island crowd, by the way, had just completed an experiment in corporate architecture which modestly anticipated a favorite design of the nineteen-twenties. In reorganizing the Rock Island road in 1902 they formed a holding company to control it, and so arranged the voting privileges of the stock of this company that they were able to dictate the use of a property capitalized at several hundred millions by keeping their hands on a block of preferred stock worth in the open market only some twenty millions.)
The rich men’s panic was short-lived, as we have seen. By 1905 the financial digestion had been restored by enforced rest. The price-level was rising; Europe was prosperous and European financiers had money to invest in the future economic destiny of the young giant of the west; there were bumper crops on the prairies to gladden a farm population to whom bumper crops did not yet mean disastrously low prices; corporation profits began to climb with the price-level; there was a lively real-estate boom; the dance of the stock-market speculators began once more; and the sunshine of hope—which outside the dark canyons of the financial district had merely been dimmed during 1903 and 1904—flooded the whole country, Wall Street included. The captains of finance began again to extend their spheres of influence. The day of reckoning was not yet.
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The outlines of these spheres of influence were far from clear. Indeed it may be remarked parenthetically that even in 1913, when as a result of the Pujo inquiry they were diligently mapped by economists and politicians and journalists, they were not as clear in fact as they were on paper. To have representatives on a board of directors is not always to dominate the policy of a company; even to have a potentially controlling power is not always to exercise it, or to know how boldly it may prudently be exercised. The conception of a well integrated empire of controlled corporations implies that a thoroughly devised and generally understood and flexible policy can be imposed upon them, and this is too much to expect of mortal men with limited foresight and only occasional contact with one another. Even when the influence is recognized, those who wield it or are subject to it are not always sure to what extent it is based upon financial control, and how much upon personal respect, upon general harmony of ideas, or upon a mere desire to avoid bringing up troublesome issues. A chart showing lines of command running from a banking house down through the interlocking directorates of banks and corporations to other banks and corporations can sometimes be just as persuasively false to the truth as a spider’s web chart of radical influences running from Moscow down through the interlocking directorates of radical organizations to liberal societies.
Nevertheless certain alignments were already pretty clearly defined by 1905 and 1906.
In the first place, as we have already noted, the tendency toward economic consolidation, especially through the medium of holding companies, was bringing more and more businesses under the influence of the men who sat in the counting-houses of Wall Street and State Street and Fourth and Chestnut Streets and LaSalle Street. The investment bankers who promoted the new combinations and sold their securities, the commercial bankers who financed their day-to-day operations, spoke with authority in countless directors’ meetings.
Again, consolidation was slowly taking place in banking as well as in industry. Big banks were taking over smaller banks. The investment bankers were putting some of their rich profits from promotions into the purchase of stock in commercial banks and insurance companies, not without an eye to making them willing customers for future issues of securities. The biggest investment houses had eager allies in the lesser investment houses which wanted very much to share in the business of distributing Steel Corporation stock or Union Pacific bonds. And so the influence of these largest investment houses was immense and pervasive, although often vaguely defined.
The House of Morgan, for example, had the First National Bank as its unswerving ally. They owned stock in, or otherwise were influential in, a number of other New York banks such as the National Bank of Commerce, the young Bankers Trust Company, and the Liberty National. George W. Perkins, now a Morgan partner, still held his old position as vice-president of the New York Life Insurance Company. The House of Morgan was supreme in the financial counsels of the Steel Corporation, the International Mercantile Marine, the International Harvester, the General Electric, and many other sizeable corporations; among the railroads it and its like-minded associate, the First National Bank, dictated more or less positively to the directors of the Southern, the Reading, the Northern Pacific, the New Haven, the Erie, and others.
What such dictation sometimes implied was suggested by the fact that when President Roosevelt decided to settle the anthracite coal strike in 1902, and the coal operators were unwilling to negotiate, the man with whom he had to deal was Morgan—because Morgan was a powerful factor in the management of railroads which controlled most of the anthracite coal business. Banks and lesser investment houses took securities assigned to them by the House of Morgan for sale and did not waste time arguing about it. “You can stay out,” Morgan would say with blasting finality if a lesser banker hesitated to market an issue of bonds, “but do not think you will share with us again.”
When a representative of the House of Morgan appeared at a reorganization meeting, his word was usually law. A Boston manufacturer has told of having attended one of these meetings as a young man and of having naïvely refused to subordinate the claims of his company to those of the Morgan firm. “They looked at me as if I were a leper,” said he. What Pierpont Morgan wanted to be done was usually done—because of his reputation among the financiers for fair dealing, because of the terrifying impact of his personality, but also because the whip which on rare occasions he deigned to crack could descend on a recalcitrant underling with cutting force. “Wherever Morgan sits on a board is the the head of the table, even if he has but one share,” said a railroad president to Clarence Barron in 1905.
During these years James Stillman’s growing National City Bank was sometimes associated with the Morgan interests, but not so closely as after 1907. It was more often the instrument or the ally of the Standard Oil millionaires. The Standard Oil company was an empire in itself, impregnable and worldwide. The holdings of the men whom it had endowed with great fortunes ramified into another vast network of influence, less compact than that of the Morgans and less responsibly directed, but very rich.
The National City Bank and the Standard Oil men and George Gould (son of Jay Gould) and Kuhn, Loeb & Co. generally stood behind Harriman in his grandiose schemes of conquest; and the little man with the spectacles was now enlarging his sphere very rapidly. His influence in the Northern Pacific and the Great Northern and the Burlington, so dearly bought in the battle of 1901, waned after the Northern Securities decision of 1904, for the plan of dissolution which was adopted was a Morgan plan and left Morgan and Hill in the seats of power and Harriman protesting in the outer cold; yet he was supreme in the Union Pacific and Southern Pacific and their subsidiaries, he owned a half interest in the San Pedro route, and in 1906 and 1907 he sweetened the uses of adversity by putting his Northern Securities money into the purchase of a part ownership in no less than nine other roads. Harriman seemed on his way to become dictator of American railroading; and meanwhile he was negotiating in the Far East in the hope of building up, piece by piece, a transportation line that would circle the whole earth.
It is unnecessary to do more than mention the lesser spheres of influence in the endlessly complex map of financial influence in 1905 and 1906—those which surrounded the investment houses of Kuhn, Loeb; of Speyer; of Lee, Higginson and of Kidder, Peabody in Boston; those which represented the power of the invested millions of the Vanderbilts and centered in the Ne
w York Central Railroad; those of the “Chicago crowd” and the “Rock Island crowd” and miscellaneous roving bands of capitalists and promoters and speculators; those of the traction magnates and the gas light magnates. One sphere, still relatively insignificant yet of future importance, may be noted in passing, however, as a reminder that in any period the seeds of the future are being sown: in 1905 the General Electric Company modestly organized the Electric Bond and Share Company, to manage its interest in various utilities which it had helped to finance or in which it had otherwise acquired a holding.
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What manner of men were these who so bestrode the American business world? How far did their influence reach beyond business? What was the effect of this influence upon the quality of American civilization? What did they think of America and their role in it?
A hundred such questions leap to the mind of any one who studies their lives and enterprises. It is not enough to say that they were neither the plaster saints depicted by dutiful official biographers, nor the black conspirators depicted by radical critics and Nebraska politicians; for to say merely this is to imply that they should be painted in shades of neutral gray, and neutral gray was surely not their color.
What may loosely be called the Wall Street influence was of course exercised by hundreds of men of varying character and talent and opinion; to attempt to generalize about so many men is to confront endless contradictions and confusions. Perhaps the easiest way of simplifying one’s study of the men of Wall Street and their influence is to use as a sort of touchstone the study of a small group of the most powerful and vital of all. I have selected ten for this purpose—not necessarily the ten most important men of the Wall Street of the early years of our century, but among the most important. Their varied qualities may offer some clue to the qualities dominant in the financial world as a whole.
These ten are J. Pierpont Morgan; his fidus Achates, George F. Baker, president of the First National Bank, solid, tenacious, and silent; James Stillman, the brilliant and cold-blooded president of the National City Bank; Edward H. Harriman; John D. Rockefeller, who was already in retirement but was still a potent factor by reason of his huge and growing wealth; William Rockefeller and Henry Huddlestone Rogers, Standard Oil financiers, as to whose prowess in the world of promotion and speculation we have heard the awed testimony of Henry Clews; Jacob H. Schiff, the shrewd and kindly head of the banking house of Kuhn, Loeb & Co.; William K. Vanderbilt, the indolent chief representative of the influence of a family still powerful in the railroad and investment world; and James R. Keene, a stock exchange operator of commanding skill and prestige.
Other men might of course be chosen as substitutes for some of these ten. Perhaps Hill belongs in such a group, or Gary, or Andrew Mellon of Pittsburgh, or Yerkes of Chicago, or Frick, or Schwab, or Daniel G. Reid, or Thomas Fortune Ryan, or Elkins, or any one of a dozen others. One might include in it men of such contrasting qualities as Major Henry Lee Higginson, whom Barrett Wendell called “perhaps the most generous and hearty benefactor of his time in New England,” and the gambler John W. Gates. However, the group is reasonably representative as it stands; it is convenient for analysis because all ten men lived in New York; let us narrow our focus for a moment and regard these ten men.
Considering the authority which they wielded, they were astonishingly little known to the nation at large. This was partly due to the fact that most of them shrank from the public gaze (by reason either of innate modesty, or of a fear that their wealth would make them a target for cranks and crooks and for the envious clamor of the less fortunate: George F. Baker, for example, never permitted any of his possessions to be photographed if he could help it.) Partly the public’s ignorance of the big financiers was due to deliberate concealment of their operations, some of which could hardly stand the glare of publicity. Partly it was due to laymen’s difficulty in understanding the real meaning of complicated manoeuvres described in the paralyzing language of finance. Partly it was perhaps due to a certain lack of romantic appeal in a career dedicated to the amassing of money. After all, there are few things as dull as greed. When, for example, one reads of the youthful Frick strolling up Fifth Avenue with his friend Andrew Mellon, and looking at the Vanderbilt house with admiration, and figuring that a fortune of six million dollars would finance such an establishment, and saying to Mellon, “That is all I shall ever want,” one recognizes that the motive is human and natural, but feels, perhaps, that a life ruled by such a motive is not likely to be gallant.
Whatever the cause of the public’s ignorance, it is suggestive to note the number of lines in the Reader’s Guide to Periodical Literature given to listing magazine articles about these ten men during the years 1900–1904, compared with the number of inches given to listing articles about ten leading politicians of the time:
Not one of these ten financiers had had a college education except Morgan, who spent two years in study in Gottingen in Germany. It must of course be recalled, by way of partial explanation of this fact, that by 1905 they were mostly elderly men: Morgan, the eldest, was sixty-eight; Stillman, the youngest, was fifty-five. The years when they might have been going to college fell in the eighteen-fifties and eighteen-sixties, when American colleges were comparatively small and few in number, and prepared men chiefly for the professions. (Incidentally, it may be remarked here that although six of the ten men were in their twenties during the Civil War, not one of them saw service in the army; for whatever reason, each was concentrating on business.)
Not that these ten men did not come in time to appreciate the advantages of higher education: with singular unanimity they sent their sons to college. Between them they had fifteen sons who lived to college age, and of these, eight went to Harvard, four to Yale, one to Brown, one to Amherst, one to Columbia. They showered benefactions upon the colleges, too: one needs only to recall Morgan’s gift to the Medical School at Harvard; Baker’s gift of a playing field to Columbia and of a chemical laboratory to Cornell, and his five millions to the Harvard Business School; the Stillman Infirmary and the Stillman professorship at Harvard; Schiff’s founding of the Semitic Museum at Harvard; and John D. Rockefeller’s vast gifts to the General Education Board and the University of Chicago.
They were mostly self-made men. Only two of them, Morgan and Vanderbilt, began their careers with the advantages of assured wealth. Morgan’s father was a renowned international banker and a millionaire; the young Pierpont’s first job was in his father’s office in London. Vanderbilt inherited over fifty million dollars from his father, William H. Vanderbilt, son of the redoubtable Commodore, and other millions from other relatives. Schiff’s upward progress was probably somewhat eased by his acquaintance with German-Jewish bankers in his native Frankfort-on-Main, and by his marriage to a Loeb within five months of his entering the young firm of Kuhn, Loeb & Co. in New York. Stillman’s father was a man of means and had accumulated a million dollars by the time he died, and Harriman had well-to-do relatives and wealthy friends; but both Stillman and Harriman began their careers in small positions at an early age: Stillman went into the cotton business at sixteen, and Harriman’s first job was as a five-dollar-a-week office boy for a broker. Other members of the group pushed their way up from the bottom or very near it. John D. Rockefeller began as a clerk in a forwarding and commission house in Cleveland; Baker, as a clerk in the New York State Banking Department at Albany. At the age of seventeen William Rockefeller was keeping books for a miller. Rogers’s first salary was three dollars a week as a clerk in a store at Fairhaven, Massachusetts. Keene came to America from England at fourteen and began to earn money by selling milk, teaching school, caring for horses, working on newspapers, and engaging in other varied occupations in Shasta County, California; he got his real start speculating in silver mines.
When these men talked of working one’s way up from the bottom, they knew what the words meant. They also knew the merits of frugality for a young man of financial ambition. Rockefeller beg
an earning money at seven, and hoarding it in a blue bowl; at the age of ten he lent fifty dollars to a neighboring farmer at seven per cent interest. When Baker married, he was earning ten thousand a year and saving half of it.
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One of the most striking things about this group of men—and one of the things in which they were representative of their financial generation—was their piety. At least seven of them were churchgoers; six were actively interested in church affairs.
Morgan was perhaps the most prominent layman in the whole Protestant Episcopal Church—that affluent denomination in which (according to John T. Flynn) half of the seventy-five multi-millionaires in the New York of the nineteen-hundreds were communicants. He loved to attend the General Conventions of the Church as a lay delegate from New York; to convey a few well-chosen bishops thither in his private car and entertain them royally in the convention city at a house which he rented for the purpose, and which was always referred to as “Syndicate House.” He gave nearly five million dollars to the Cathedral of St. John the Divine; he gave a new rectory and parish house to St. George’s, his own church in New York. It was Morgan who in 1904 persuaded the Archbishop of Canterbury to come to America, and made a special trip from Wall Street to Bar Harbor to make arrangements with Bishop Lawrence for the English prelate’s visit. During the summer of 1908, when three bishops visited Morgan at his splendid house in Prince’s Gate, London, each day began with family prayers read by Bishop Doane in the Library. Every week the head of the House of Morgan breakfasted with Doctor Rainsford of St. George’s Church; the meetings of the vestry were customarily held at his house, and there is a characteristic story to the effect that Morgan once objected to the election of a vestryman who he felt would not socially be quite suitable to such gentlemen’s gatherings.
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