CHAPTER XXXVI
THE SHIP FOUNDERS
December 17, 1895, will ever remain in the memory of business men, at least of this generation, as the day when President Cleveland transmitted to Congress his Venezuelan message, a piece of jingoism which was entirely uncalled for and resulted in disastrous consequences to the commercial interests of the country. It came as a flash of lightning from a clear sky. It was the direct and immediate cause of a stock and money panic in Wall Street which, while it added largely to the wealth of certain individuals, brought disaster and ruin to many.
If, my reader, you do not already know, ask any well-informed stock broker of that period who it was that sold the market short on an enormous scale during the few days prior to the message, and when he tells you the name draw your own deductions. You will not require to be a Sherlock Holmes.
We knew just before this fateful day that at last we had undertaken an operation which was to result in loss, and a heavy one, but we never dreamed it was to be our Waterloo—nor would it have been except for the acute stringency in the money market, the result of that Venezuelan message.
Our commitments for the end of December and first week of January were unusually heavy. We met them with increasing difficulty until the twenty-eighth of December and then came our failure.
I was dazed at the extent of the catastrophe. I could not realize that a business which I had built up from nothing to a volume of nearly fifteen millions a year with more than eight hundred active accounts on the books, and out of which I had made a fortune, was swept away, leaving me only a mountain of debt.
Alas, it was only too true. The liabilities were nearly one and one-half millions. Of course, there were large assets, mostly merchandise, but everything was gone, and my wife threw in "Redstone," which had cost me forty thousand dollars, with the rest.
As soon as I recovered myself, I had a meeting with my creditors, all of whom were most kindly disposed, and my statement was accepted without any examination of the books of the firm. Outside of our regular bankers we had heavy loans in which there were large equities. Arrangements were made and these loans taken up at once.
Our position had been so prominent and our holdings were so large, the news of the failure caused a heavy decline, which carried the price down to almost the lowest figure in the history of the trade; but not one ton of our stock was thrown on the market and we ourselves liquidated the business over a period of several months.
Our former clerk, the broker, George Norman, also failed, claiming our failure as the cause.
In our operations it was often necessary to cover our identity by using a broker's name, an established custom in many lines of business. We had favored George largely and our business had been very profitable to him. We did not know at the time, but learned a little later, that prices on the contracts made through him were on our books in excess of the prices he had paid the seller, whereas they should have agreed. This really made him a principal instead of a broker. Actually he had bought of sellers for his own account at one price and sold to us at a higher price, he making the difference in addition to his commissions. His representations to us were always that the price we were paying him was the lowest the seller would accept.
Norman also had been operating on his own account, and by failing escaped his losses. The general opinion of the trade was that he really made money by his failure.
On our books at the time of the failure were a number of discretionary accounts. All of these clients were our friends, and most of them had been with us for many years and had received their investments back in profits over and over again. In order to do justice to all we had to syndicate these accounts. The combined capital was large and the operations had always been very profitable.
These clients had come to us without our solicitation and it was distinctly understood from the start that their investment was at their own risk. All this money was now lost. We had no legal liability, but we did feel, as they were friends, that there was a moral responsibility and we told them one and all we would accept it.
We did something else for them; a few knew it at the time and showed their appreciation. Some of them will not know it until they read it here.
Every one of those clients could have been held as an undisclosed partner, for a very large part of our losses were made in the December operations for the syndicate. Morally, they were not responsible, for they never intended assuming any such liability, nor would we have allowed them to; but legally, technically, they were liable, and we saved them, keeping the burden where it had fallen, on our own shoulders. We had one discretionary account that was not in the syndicate. It was the account of Albert Caine. This was operated under our guarantee against loss, we taking half the profits as compensation for the guarantee. Although this account stood in Albert's name, it was his wife's money and her investment. It had been running for a long time and profits had been paid her to the extent of about forty-seven hundred dollars.
Although we had not the affection for the Caines we had for others in our circle of friends, we were extremely intimate. I have told of our amusement fund and of how residing near each other we were meeting them continually. They had visited us at "Redstone," at Great Neck, and at Monmouth Beach, and I hardly expected they would be the first to desert us. They were—and worse.
As soon as Caine heard of the failure he began a search for property to attach. He told a mutual friend that papers were being drawn to attach the horses and carriages and the house furniture. For some reasons he changed his mind, which was just as well, as all were beyond his reach.
Then he made a statement reflecting on me, giving as his authority my bankers, on whom he had called. This I took up at once. I knew it was false.
Without letting him know the object, I arranged an interview at my lawyer's office, which he attended, accompanied by his lawyer. I had asked George Todd to be there as a witness who could relate an account of the interview to our mutual friends. Caine, when he saw Todd, objected to his presence, but he remained.
My lawyer repeated the statement and asked Caine if he had made it. He replied, "Yes." He asked him if the banker had told him this, and he answered, "No."
Then Todd said, "Albert, do I understand you to say that this statement you made and said you had heard from the bankers, you admit having made, and now say that you did not hear it, and that it was a lie"? To which he replied, "Yes," and burst into tears. That ended the interview and thereafter the Caines were ostracised by our circle of friends.
A little later Mrs. Caine commenced suit. Just to tease her I fought the case, claiming that while guaranteeing against loss, I had not guaranteed profits, and that these should be deducted. After keeping her on the "anxious seat" for about two years she secured a judgment for the full amount, and she owns to-day the only judgment against me. She would have had more money now had she remained a friend.
There were two of my liabilities that distressed me far more than the others and one of these caused me the keenest anguish of mind. At the time of the settlement of the Slater estate, Mr. Pell, Mrs. Slater's father, was a creditor for fourteen thousand dollars. Frank had been using this money and had paid Mr. Pell ten per cent. per annum on it, not regarding it as a matter of interest, but merely to give the old gentleman, who was out of business and becoming feeble, a certain amount of income. Mr. Pell asked me as a favor to take this money and do the same for him as Frank had been doing. I did so, and later he added two thousand dollars to the amount, so that I owed him in all sixteen thousand dollars.
The other liability was for twenty-five thousand dollars due to Mrs. Slater. There had been a time a year or two back when temporarily my resources were pretty well tied up, and I then borrowed this amount of Mrs. Slater. When I asked her at the time if she wanted to help me out, she replied, "I am only too delighted, Walter, to do anything you ask," and she meant it. The loan was made without security and was an act of purest friendship. To make it she had to withdraw the money from her invested funds and of course I told her this would not diminish her income.
It was this liability to Mrs. Slater that caused me such torture of mind. The one thing that slightly relieved this feeling was the knowledge that neither she nor Mr. Pell wanted the money. If the income could be kept up, and this I hoped to accomplish, I could take my own time for repayment of the principal.
My mail was crowded for days with letters of sympathy. Practically all our out-of-town customers wrote us, and to their kindly expressions of regret for our disaster was added the hope that we would continue in business, and promises of hearty support in the matter of sending us their orders.
With our competitors it was different. One or two called on us and were sincere in their regret. Others, as we met them, talked the same way, but we knew they did not mean it; and one, a Sunday-school teacher whom I described in an earlier chapter as doing business on a paving-stone heart, was reported to me as having made derogatory remarks regarding us.
As soon as this report reached me, I went at once to his office, and while his face crimsoned in his confusion at being confronted, he denied that he had made the remark. I accepted his denial, though I did not believe him. I had no more use for him than for the sort of Christianity of which he is an example, and thereafter I treated him with the barest civility.