My Adventures with Your Money

by George Graham Rice

THE TIME WHEN MONEY TALKS

Some of our brokers in San Francisco now demanded an independent bank guaranty that the drafts on us would be honored. We asked for a line of credit at the State Bank & Trust Company. It was promptly given. As fast as the brokers asked for a guaranty, the State Bank & Trust Company telegraphed them formally that it would honor our paper to the extent of $20,000 or $30,000 in every case. To protect the bank and in order to be able to borrow a large sum of money, should we need it in the event of another selling movement starting in, we deposited stocks of a market value of $1,500,000 with the State Bank & Trust Company, which signed a paper that this collateral was to stand against loans for any amount which the State Bank & Trust Company might make to us on open account.

A few days later we borrowed from the bank $300,000 in cash, and it was agreed that should we need $300,000 more on the same collateral, it would be promptly placed at our disposal. We did not yet need the money, but I realized the desirability of assembling cash in an exigency such as that. Nor was this an unusual proceeding. There was a time during the Manhattan boom when the overdraft of the Sullivan Trust Company in the Nye & Ormsby County Bank was $695,000. The bank held against this overdraft Sullivan stocks at the promotion price. Nearly all of these stocks at that early period were as yet unlisted.

The idea of withdrawing support and letting the market go to smash did not occur to me at all. As already stated, I believed the stocks were worth the money. But that was not the chief reason for my stubborn market position. I took great pride in the fact that every listed stock of the Sullivan Trust Company showed a big profit to stockholders. I considered the greatest asset of the trust company to be, not its money, but its prestige, and I entertained big ideas as to a future I had mapped out for the corporation. I did not suspect that an organized campaign was on to destroy us and that the dominant interests of the camp were reaching out for everything in sight. Nor did I have any use for money for hoarding purposes. The only thing that seriously nettled me was the fact that the Sullivan Trust Company had been compelled to turn borrower.

Before the first selling movement started in, our assets were $3,000,000 more than our liabilities. But this $3,000,000 was not all cash. In fact, it was represented in part by stocks which we had purchased in the market with the idea that they were good stocks to own and would show the trust company a big profit, as they had. We could have cleaned up $3,000,000 in cash, but we had not done so. Now, within a month, all of our available cash had been put into fresh lines of our own securities, we had been compelled to sell other lines out, and the corporation was a borrower. I was stubborn—too stubborn for a man who boasted of so little experience in such a big game. It was a pet belief of mine that obstacles create character. I was in the heat of a battle and fighting my way against tremendous odds. I rather liked the sensation.

Another dominant trait which, deep down, has in recent years been the keynote of my actions is the fact that my philosophy teaches me that you can't down the truth, that a lie can't live, and that justice will be finally done. Had I always put the accent on the "finally" and mixed with my philosophy a little "dope" to the effect that while justice is always finally triumphant, injustice is often victorious for a while, I might have fared better.

In a previous chapter I stated that "Wall Street deals for suckers" and that "thinkers who think they know, but don't" are the suckers for which Wall Street casts its net. I also stated that Wall Street promoters realized that "a little knowledge is a dangerous thing" and that this "little knowledge" leads astray this particular kind of sucker. In "falling" in Goldfield for the philosophy that "justice is always triumphant in the end," by swallowing it whole, and in making no allowance for the fact that justice is sometimes tardy, even though it does prevail in the end, I here decorate myself with a medal as a top-notcher in the sucker class—in the academic sense—which I have described, and which is the usual sense in which I use the term "sucker."

Again the selling ceased, and it looked as if the Sullivan Trust Company would be compelled to wait only for a general turn in the market to relieve itself of money-pressure by disposing of some of the large blocks of stock it had accumulated during the periods of heavy liquidation.