When Russell Sage died in July, 1906, within a few days of his reaching ninety years, leaving not far from a hundred millions of money, he left a will which reflected his sagacity as a money saver, for he left all he had, except a few unimportant bequests, to his wife. He did so, I infer, instead of distributing his great wealth himself, because he knew that the State inheritance tax would only be one per cent. on what he gave her, while it would be five per cent. on what he left to such relatives as he had surviving, as well as to all others.
It was, to a certain extent, “the ruling passion strong in death,” for, of course, he knew that his wife had no use or desire for so much money. Although his bequeathing it to her was a tribute to her goodness and a symbol of their happy married life, she would probably have preferred to shoulder a much lighter load of wealth. Its distribution will be no ordinary task, although it will doubtless be a labor of love with Mrs. Sage.
Russell Sage, in his manner of life, all now agree, set a good example of frugality and industry in an extravagant and pleasure-loving age, and hence he is held by many to have been a public benefactor. His unusually economical and plain habits, together with his great wealth and great age, naturally made him conspicuous and also a target for the wits, and in this way he became better known through caricature than matter-of-fact description. But that was one of the penalties of publicity. He passed from poverty to great wealth entirely of his own creation without being spoiled by it, and remained one of the plain, unpretentious people till the end.
He owed all he had to Wall Street, and his career illustrated, more than any other has ever done, how fertile a field for fortune making Wall Street may prove to a sagacious man, of untiring industry, who knows how to cultivate it, and can see and avail himself of its splendid opportunities. His rise from extreme poverty to immense wealth, through his own unaided exertions, shows how one man, single-handed, may do wonders and turn all he touches to gold, and that, too, in Wall Street. We are living in a stirring and rapidly progressive time, and the great and growing importance of the New York Stock Exchange was reflected by the rise in the price of a membership in it in 1906 to not very far from a hundred thousand dollars.
The year 1906 was one of immense activity and prosperity in trade. Prices were high and still advancing, and profits large, particularly those of industrial corporations. At the same time a mammoth bull movement was running its course on the Stock Exchange, and the grain crop turned out larger than ever before in our history, while enormous issues of new securities were announced by both railway and industrial corporations. These new issues severely taxed the resources of the money market, already being too heavily drawn upon by the “big men” of the Street to promote their wild bull campaign in stocks, and spasms of stringency were frequent. Indeed, the year 1906 from beginning to end witnessed a continuation of those inordinately heavy demands for money from Wall Street and corporations, and these led to the disturbed monetary conditions which were first felt in September, 1905. It was an eventful year, a year of immense activity on the Stock Exchange, in which much that was unprecedented occurred. It was a year in which the stock market, after touching high record prices and violent ups and downs, went gradually, in an excited speculation, from bad to worse, in a limited sense, or from one critical stage to another, till it reached the year’s end. Then it averaged only nine per cent. below the highest prices. But it became, in spite of the boldest bull manipulation, gradually weaker and more demoralized. The bull movement at length met its Waterloo in the spring of 1907, because the plunging millionaires who had been bidding them up found no buyers for their stocks. So they had to liquidate heavily, like the rest. It was another rich man’s panic.
From a slow and irregular decline stocks good, bad, and indifferent passed into the rapids of a bear market, with the bears, emboldened by success, recklessly aggressive, and on March 14th prices broke from ten to twenty-five per cent. under their fierce attacks, and relentless hammering, supplemented by an avalanche of long stock forced for sale under stop orders that had been reached, or through weakened and exhausted margins, or by holders unwilling to take any further loss.
Yet enormous as was this paniclike fall in prices on that disastrous day, many stocks went still lower in the breaks that followed the sharp rally that succeeded it. So March, 1907, ended as it began, in gloom and depression, which was followed by comparative dullness but little recovery in April and May. In June, however, it became evident that liquidation had exhausted itself, and all unfavorable factors had been discounted by the decline. Hence, although the market was almost entirely professional, with the outside public as apathetic as ever, it began to develop an upward tendency, notwithstanding the sharp rise in grain and cotton due to the extensive damage done by an unusually cold spring, and the fact that we shipped $15,000,000 in gold to France in June.
This vast and thorough liquidation had been mainly by the bull pools and richest speculative capitalists in Wall Street, and involved tremendous losses. These leaders of the bull movement had been caught overloaded with stocks, carried over from the previous boom that they had recklessly engineered. They were forced to sell because the banks were either calling in their loans, which they were unable to replace, or calling from time to time for more margin to offset the decline in prices. Thus their cash resources were being constantly impaired.
Meanwhile, money loaned at abnormally high rates, and five times in the spring, autumn, and winter of 1906 the New York banks showed a deficit in their reserve. Money, therefore, was very hard to borrow, because these giants of speculation had overtaxed the banks’ resources by borrowing too much. Coincidently the outside public held aloof from the stock market, owing to the great activity of trade and the wild speculation in land, mines, building, and other new enterprises all over the country.
This speculation from Maine to California absorbed an immense amount of money, of which Wall Street saw nothing, and it left the large speculative holders of stocks without any market for them, except among the professional traders. No wonder they staggered, and finally, in the spring of 1907, succumbed under the heavy loads they were carrying, which they had mistakenly bid up to excessively high prices in a vain attempt to bring in the public as buyers. Wall Street was then the only blue spot on the map of the United States.