THE PEOPLE AND THE TRUSTS HIS is the third instalment of a notable series now appearing in the REVIEW of Re"Big Business and the Citizen" was published in June and July. articles to follow include "The Laborer," "The Investor," "The Middleman," and "The Captain of Industry." This series will do much to clarify the public mind on the vital questions now before the people of the United States. The present article does much to clear the atmosphere, now clouded by hysterical denunciation on the one hand, and vigorous denials on the other. Calmly and dispassionately, without exaggeration, Mr. Atwood sets down indisputable facts and draws logical conclusions. While he finds no evidence of formal organization among the masters of capital, he does find (1) that the control of credit is concentrated to an astounding degree, and (2) that those in whose hands this stupendous power rests are not responsible to the public, as are those with similar powers in Europe. THE BORROWER AND THE "MONEY TRUST" BY ALBERT W. ATWOOD FOUR years ago Robert M. La Follette stood up in his place in the United States Senate and announced that one hundred men controlled the money centers of the country. He called them by name and declared that they had the power to create artificially periods of prosperity and panic. Thereupon arose a great laughter. Newspaper wits turned their merriest darts upon him. The New York Sun described the Senator's "lion mane" and his tragic look as he read off the list. No one took him seriously. Yet to-day figures and cold statistics show that more power is lodged with a dozen men than La Follette, four years ahead of his time, dared ascribe to his famous one hundred. No one smiled when last winter Chairman Henry of the Rules Committee of the House of Representatives declared that "more than 75 per cent. of the country's financial resources, banks and bankers, and industrial and railroad corporations are now controlled and dominated by not more than four small groups of capitalists composed of not more than ten or twelve individuals." sentatives that it delegated to one of its most important standing committees the Gargantuan task of inquiring into the affairs of 30,000 banks to discover whether such a condition does exist. To describe the supposed power a new and significant expression was coined-the "Money Trust." What is the "Money Trust," and how does it affect the Borrower? A great proportion of all business is made possible by borrowed money, or credit. Credit is the lifeblood of industry. If the power to extend it is so closely concentrated-then we have a state within a state-a power greater than the government itself. If these things exist they should be known. The people not only should, they must take cognizance of them. The Most Logical of Trusts These articles treat of the Trusts and the People. Some trusts are denounced because of their attitude toward their employees. Many trusts are efficient or inefficient beBoth statements may be disputed and the cause of the way their millions of laborers accuracy of the lists may be questioned. But work. But let us be fair to Big Business. so momentous and so grave was the impres- Why not examine its one branch where labor sion which the charge of Congressman Henry is almost absent, where there is no brawn and and others made upon the House of Repre- all brain? A bank in New York City gave its em- that two small steel companies failed to raise ployees a Christmas present equal to half funds in troublous times because the banks their annual salary. The bank had assets of to which they applied stood in awe of the $100,000,000. A fine example, you say, to Steel Corporation? What benefit is there to other great business concerns! But the bank the people in concentrated banking power if had only fifty employees. In the entire these and similar charges are true? country there are probably not more than 100,000 persons engaged in banking, either directly or indirectly. The banker has, relatively speaking, no human factor to consider. And that factor with a concern like the United States Steel Corporation or the Pennsylvania Railroad is mammoth, almost baffling. The banker deals not in the production or distribution of wealth itself (in both of which much labor is needed), but solely in the paper representatives of wealth, money and credit. Thus he can apply far more directly than the manufacturer or railroad manager the economies and efficiencies of Big Business. Banking-the business of dealing in money and credit-is the most logical of trusts. And in practice it has justified the theory. Where banks have become larger they have become stronger, where coöperation and concentration have gone far, there safety and effectiveness have reached a high pitch, as the facts presented in this article will prove. Banking is the one central business of all it is the business of businesses. So if it has become more efficient as the trust idea, or at least the principle of concentration, has gained sway, how can we have too much concentration and who is there to complain? How About the Borrower? Possibly there is not a scintilla of truth in any of them, or in the less definite insinuations which are whispered about. If the subcommittee of the Committee on Banking and Currency of the House of Representatives, headed by Representative Arsène P. Pujo, which is investigating financial and monetary conditions, succeeds in sifting them to the bottom it will be doing a valued public service. But suspicion of the integrity and fairness of the American system for extending credit is grave enough to make a study of the facts more than worth while. What Are the Facts in the Case? In the beginning we are met by the statement that the money power is by no means new. "The so-called Money Trust is the same old bogey with which demagogues have frightened the Simple Simons of all ages," says Joseph French Johnson, Dean of the School of Finance of New York University. "Apparently its blood-sucking tentacles are no longer, nor more numerous, than when under the name of Julian, in the second century of the Christian era, it bought the Roman Empire, or than when, under the disguise of a Venetian banker, it financed the Crusades in return for a first mortgage on Christendom." True, there has always been money power But if there is a Money Trust-what does wherever there was money dealing. Money, this mean to the borrower? What of the or the control of it, is always power. Every banks which have been closed overnight, so town and village which boasts of a bank feels their directors say, merely because a small the money power. When a village is too committee of men whose acts were subject small to have a bank, some good old Deacon to no judicial review, disliked the personnel Jones, who has laid up money and is willing of their officers? What of the railroad whose to lend it on good security, is the money promoter has asserted, in and out of season, power. The best illustration is the average that his efforts to build a great transconti- small country town in which the richest man, nental railroad were thwarted by the money and also the largest owner of stock in the one kings allied with the railroads already in bank, is also the owner and operator of the existence? What of the steamship promoter local sawmill or other small manufacturing who declares that his efforts to raise capital enterprise. Needless to say, the promoter of for a company to operate through the Pana- a rival sawmill may have difficulty in securing ma Canal met with a like fate for like reasons? funds from the bank. Is there a village in What of the half-veiled charges against the this country where there is no money power? bankers of a great city in connection with But this proves nothing except that power efforts to compete with the present shoe machinery trust? What of the allegations, one openly brought forward in a lawsuit, and the to lend money is power to lend money, and that power is not always unselfish. What this article seeks to discover is how far this which are capable of making or breaking terminal, express, steamship and telegraph enterprises of a national scope. companies capitalized at more than one and Even if the bankers have, faithfully and a quarter billion dollars, and in industrial well, handled the trust of extending credit to the limit of their ability, yet when the president of the second bank in size in the country acknowledges himself to be one of about a dozen men in whose hands the power of extending credit is, in the last analysis, concentrated-then it is high time, seriously and fearlessly, to consider the subject. Nor does the statement of this same man that the words "money power" should be used in this connection rather than "money trust," which imply combination, collusion and manipulation, in the least alter the rigorous necessity for turning on the brightest light. Senator La Follette was the first who tried to name the men into whose hands central banking and financial control is supposed to have fallen. Here are a few of the later attempts, presented with varying degrees of information and reliability and with varying motives: 1. Before the Pujo committee the manager of the New York Clearing House Association testified that what is known as the Clearing House Committee of his association, a sort of executive body consisting of five men, has absolute and autocratic power in the association. This association, it may be added, typifies the banking power of New York and the entire country. These men are Frank A. Vanderlip, James G. Cannon, Walter E. Frew, Richard Delafield, and Otto T. Bannard, all presidents of banks or trust companies. As the clearings of the association exceed one hundred billions of dollars a year it may be seen that this committee is a powerful body. But the personnel of the committee changes yearly, and, while the temporary power of these men is vast, it differs not a whit from that exercised by like committees of like associations in other financial centers of the world. 2. In a railroad rate case involving a subsidiary company of the United States Steel Corporation, and also in the exhibits prepared by the so-called Stanley Committee of Congress which investigated that corporation, statistical data were adduced to show that the directors of the corporation were also officers or directors in more than half the railroads of the country, in banks and other financial institutions with assets of three and corporations with capital of nearly three billion dollars. The directors of the United States Steel Corporation are J. P. Morgan, Henry Phipps, J. P. Morgan, Jr., James A. Farrell, Elbert H. Gary, George W. Perkins, Edmund C. Converse, Alfred Clifford, Samuel Mather, Daniel G. Reid, William E. Corey, George F. Baker, Gardiner M. Lane, Clement A. Griscom, Henry Walters, Robert Winsor, Charles Steele, William H. Moore, Norman B. Ream, Peter A. B. Widener, James H. Reed, Henry C. Frick, and Percival Roberts, Jr. Now it would be absurd to say that these and other companies in which they are men actually control all the banks, railroads, directors, but nevertheless much of the vast influence and power of the Steel Corporation might with reason be ascribed to the other connections of its directors. The entire board of directors meets rarely and the actual power rests with a small Finance Committee consisting of E. H. Gary, George W. Perkins, Henry C. Frick, George F. Baker, Henry Phipps, Norman B. Ream, J. P. Morgan, Jr., Percival Roberts and Peter A. B. Widener. One of these men, George F. Baker, is a director in companies with a capital of seven and a half billion dollars. 3. Before the Senate Committee on Interstate Commerce it was asserted last winter by Mr. Bernard F. Baker, a Baltimore capitalist, who formerly owned a majority of the stock of the Atlantic Transport Line of steamers, that he had been blocked in his plans to build a line of steamships to operate through the Panama Canal independently of the transcontinental railroads by certain Wall Street bankers. Later he named J. P. Morgan & Co., Kuhn, Loeb & Co., the National City Bank, Seligman & Co., and Salomon & Co. Mr. Baker's charges were denied by the parties immediately concerned and with the utmost explicitness. But Mr. Baker's list of men or firms capable of blocking his enterprise is of value in that several of the names are the same which in the opinion of others perhaps better fitted to judge are among the more powerful financial groups. 4. Mr. John Moody, for many years a well-known student of statistical and financial subjects, has stated that seven men are the masters of American capital. He names J. P. Morgan, John D. and William Rockefeller, James Stillman, chairman of the National A bank in New York City gave its employees a Christmas present equal to half their annual salary. The bank had assets of $100,000,000. A fine example, you say, to other great business concerns! But the bank had only fifty employees. In the entire country there are probably not more than 100,000 persons engaged in banking, either directly or indirectly. The banker has, relatively speaking, no human factor to consider. And that factor with a concern like the United States Steel Corporation or the Pennsylvania Railroad is mammoth, almost baffling. The banker deals not in the production or distribution of wealth itself (in both of which much labor is needed), but solely in the paper representatives of wealth, money and credit. Thus he can apply far more directly than the manufacturer or railroad manager the economies and efficiencies of Big Business. that two small steel companies failed to raise funds in troublous times because the banks to which they applied stood in awe of the Steel Corporation? What benefit is there to the people in concentrated banking power if these and similar charges are true? Possibly there is not a scintilla of truth in any of them, or in the less definite insinuations which are whispered about. If the subcommittee of the Committee on Banking and Currency of the House of Representatives, headed by Representative Arsène P. Pujo, which is investigating financial and monetary conditions, succeeds in sifting them to the bottom it will be doing a valued public service. But suspicion of the integrity and fairness of the American system for extending credit is grave enough to make a study of the facts more than worth while. What Are the Facts in the Case? Banking the business of dealing in money and credit-is the most logical of trusts. In the beginning we are met by the stateAnd in practice it has justified the theory. ment that the "money power" is by no Where banks have become larger they have means new. "The so-called Money Trust is become stronger, where coöperation and con- the same old bogey with which demagogues centration have gone far, there safety and have frightened the Simple Simons of all effectiveness have reached a high pitch, as the ages," says Joseph French Johnson, Dean of facts presented in this article will prove. the School of Finance of New York UniverBanking is the one central business of all—sity. "Apparently its blood-sucking tentait is the business of businesses. So if it has cles are no longer, nor more numerous, than become more efficient as the trust idea, or at least the principle of concentration, has gained sway, how can we have too much concentration and who is there to complain? How About the Borrower? But if there is a Money Trust-what does this mean to the borrower? What of the banks which have been closed overnight, so their directors say, merely because a small committee of men whose acts were subject to no judicial review, disliked the personnel of their officers? What of the railroad whose promoter has asserted, in and out of season, that his efforts to build a great transcontinental railroad were thwarted by the money kings allied with the railroads already in existence? What of the steamship promoter who declares that his efforts to raise capital for a company to operate through the Panama Canal met with a like fate for like reasons? What of the half-veiled charges against the bankers of a great city in connection with efforts to compete with the present shoe machinery trust? What of the allegations, one openly brought forward in a lawsuit, and the when under the name of Julian, in the second century of the Christian era, it bought the Roman Empire, or than when, under the disguise of a Venetian banker, it financed the Crusades in return for a first mortgage on Christendom." True, there has always been money power wherever there was money dealing. Money, or the control of it, is always power. Every town and village which boasts of a bank feels the money power. When a village is too small to have a bank, some good old Deacon Jones, who has laid up money and is willing to lend it on good security, is the money power. The best illustration is the average small country town in which the richest man, and also the largest owner of stock in the one bank, is also the owner and operator of the local sawmill or other small manufacturing enterprise. Needless to say, the promoter of a rival sawmill may have difficulty in securing funds from the bank. Is there a village in this country where there is no money power? But this proves nothing except that power to lend money is power to lend money, and that power is not always unselfish. What this article seeks to discover is how far this which are capable of making or breaking terminal, express, steamship and telegraph enterprises of a national scope. companies capitalized at more than one and a quarter billion dollars, and in industrial corporations with capital of nearly three billion dollars. The directors of the United States Steel Corporation are J. P. Morgan, Henry Phipps, J. P. Morgan, Jr., James A. Farrell, Elbert H. Gary, George W. Perkins, Edmund C. Converse, Alfred Clifford, Samuel Mather, Daniel G. Reid, William E. Corey, George F. Baker, Gardiner M. Lane, Clement A. Griscom, Henry Walters, Robert Winsor, Charles Steele, William H. Moore, Norman B. Ream, Peter A. B. Widener, James H. Reed, Henry C. Frick, and Percival Roberts, Jr. Even if the bankers have, faithfully and well, handled the trust of extending credit to the limit of their ability, yet when the president of the second bank in size in the country acknowledges himself to be one of about a dozen men in whose hands the power of extending credit is, in the last analysis, concentrated-then it is high time, seriously and fearlessly, to consider the subject. Nor does the statement of this same man that the words "money power" should be used in this connection rather than "money trust," which imply combination, collusion and manipulation, in the least alter the rigorous necessity for turning on the brightest light. La Follette Only a Pioneer in Pointing out the Leaders Senator La Follette was the first who tried to name the men into whose hands central banking and financial control is supposed to have fallen. Here are a few of the later attempts, presented with varying degrees of information and reliability and with varying motives: 1. Before the Pujo committee the manager of the New York Clearing House Association testified that what is known as the Clearing House Committee of his association, a sort of executive body consisting of five men, has absolute and autocratic power in the association. This association, it may be added, typifies the banking power of New York and the entire country. These men are Frank A. Vanderlip, James G. Cannon, Walter E. Frew, Richard Delafield, and Otto T. Bannard, all presidents of banks or trust companies. As the clearings of the association exceed one hundred billions of dollars a year it may be seen that this committee is a powerful body. But the personnel of the committee changes yearly, and, while the temporary power of these men is vast, it differs not a whit from that exercised by like committees of like associations in other financial centers of the world. 2. In a railroad rate case involving a subsidiary company of the United States Steel Corporation, and also in the exhibits prepared by the so-called Stanley Committee of Congress which investigated that corporation, statistical data were adduced to show that the directors of the corporation were also officers or directors in more than half the railroads of the country, in banks and other financial institutions with assets of three and Now it would be absurd to say that these men actually control all the banks, railroads, and other companies in which they are directors, but nevertheless much of the vast influence and power of the Steel Corporation might with reason be ascribed to the other connections of its directors. The entire board of directors meets rarely and the actual power rests with a small Finance Committee consisting of E. H. Gary, George W. Perkins, Henry C. Frick, George F. Baker, Henry Phipps, Norman B. Ream, J. P. Morgan, Jr., Percival Roberts and Peter A. B. Widener. One of these men, George F. Baker, is a director in companies with a capital of seven and a half billion dollars. 3. Before the Senate Committee on Interstate Commerce it was asserted last winter by Mr. Bernard F. Baker, a Baltimore capitalist, who formerly owned a majority of the stock of the Atlantic Transport Line of steamers, that he had been blocked in his plans to build a line of steamships to operate through the Panama Canal independently of the transcontinental railroads by certain Wall Street bankers. Later he named J. P. Morgan & Co., Kuhn, Loeb & Co., the National City Bank, Seligman & Co., and Salomon & Co. Mr. Baker's charges were denied by the parties immediately concerned and with the utmost explicitness. But Mr. Baker's list of men or firms capable of blocking his enterprise is of value in that several of the names are the same which in the opinion of others perhaps better fitted to judge are among the more powerful financial groups. 4. Mr. John Moody, for many years a well-known student of statistical and financial subjects, has stated that seven men are the masters of American capital. He names J. P. Morgan, John D. and William Rockefeller, James Stillman, chairman of the National |