Fifty years in Wall Street

by Henry Clews

This hoarding, and consequent stringency, apart from the issue, in all, of $81,000,000 of Clearing House loan certificates, was responsible for the premium on currency, which at one time was quoted at four to five per cent, for it practically forced the banks to a partial suspension of payments involved in requiring checks to be made payable through the Clearing House, except in cases where they were willing to accommodate depositors with small amounts of currency. But fortunately the premium, which had dwindled to ¼ @ ⅜ on the 31st of December, disappeared at the beginning of 1908. Meanwhile, all through the crisis, large employers of labor had found great difficulty, and incurred much expense, in obtaining currency enough to pay wages; and in Pittsburg and other labor-employing centers, wages were paid largely in scrip issued by the banks or employing corporations. This scrip was so generally issued that in Pittsburg all the street car lines accepted it for fares.

No wonder that these conditions seriously checked buying of all kinds, and caused demoralization and semi-paralysis in industrial corporations, and that hundreds of thousands of operatives were thrown out of employment by the stoppage or curtailment of work in mills and other manufacturing establishments. But the storm being over, and the money market again easy, there is every prospect of gradual, if not rapid, recovery to a normal standard of prosperity in our trade and manufacturing industries. It was not till January 11, 1908, that the Clearing House reported the deficit in the bank reserves wiped out, and a surplus of $6,084,050 accumulated against a deficit of $11,509,550 on January 3d, and at one time of $81,000,000.

It should not be thought, because we imported a hundred millions of gold from Europe to relieve the monetary stress produced by the crisis, that we thereby placed this country under obligations to any other country. The gold we imported we bought and paid for from our own resources, equivalent to cash, in the shape of exports of cotton, grain, petroleum, copper, and other American produce.

These commodities were even more necessary to Europe than the gold we purchased there was to us. So the transactions on both sides were mere matters of bargain and sale, no favor being shown on either side. Indeed, both England and France did all they could to restrict our importations of gold. The extraordinary advance of the Bank of England rate to seven per cent, and its retention there till we discontinued our purchases of gold, furnished practical proof of this. This was justifiable, of course, as a defensive and protective measure for the bank, but none the less it was an obstacle placed in our path.

Its proclaimed purpose was to prevent our taking gold from Europe as much as possible, yet in the face of this heavy handicap we bought and paid for and imported all the gold we wanted, and it was not till after we had stopped buying that the Bank of England lowered its rate to six per cent. This showed that we controlled the Bank of England more than the Bank of England controlled us. We were not assisted; we assisted ourselves, and neither asked nor received favors.

This important fact testified to the strength and wide sweep of our resources, both financial and commercial, and also to the solidity and soundness of our business position, and the foundation on which it rested. The firmness, too, with which we bore the enormous strain of the crisis, and the good order and condition in which we emerged from it, were equally eloquent in testifying to the same effect, and showing that ours is indeed a great country—the greatest of all nations in its material resources and acquired wealth.

The advantage of this is largely shared by us with the rest of the world, both in our enormous foreign trade and the vast amount of money spent every year by American tourists in Europe. If the hundred and fifty millions of dollars spent by them there in 1907 had been kept at home, it might have obviated the necessity of our importing gold to relieve the crisis. Europe has good reason to return thanks for all it gets from us; and what would the trade and commerce of Europe be, in this progressive age, without the United States of America?

The strength, the resolution, and the courage with which the country, as a whole, bore the brunt of the crisis of 1907 augurs well for a rapid recovery from its effects, and paves the way to renewed prosperity and progress; and there is every probability that it will recuperate more swiftly from the great and trying ordeal than it did from the memorable panics of 1812, 1837, 1857, 1873, 1884, and 1893, for its wealth, population, and general resources are now so vastly greater than they were at any of those periods that comparisons are out of the question.

The growth of our banking system alone since 1873 is indicated by the fact that in the very severe panic of that year the New York Clearing House issued only $16,000,000 of Clearing House certificates to the banks belonging to it, whereas in the panic of 1884 it issued $21,000,000, in the panic of 1893 $41,000,000, and in this last panic of 1907 no less than $81,000,000. The crisis was severe but it was purifying, and eliminated a vast amount of unwholesome and dangerous, if not dishonest, speculative elements from the management of many of our banks and large railway and industrial corporations, and left in its place the legacy of a higher standard of business morality than we had before. Hence, perhaps we may say, with Shakespeare, all’s well that ends well, and, with the Bible, out of evil cometh good. At least we have plucked the flower Safety from the nettle Danger.

This view of our country, and the situation, is shared by the banking community of the Old World, who also absolve President Roosevelt from blame or responsibility for the crisis. In this connection a leading London banker, Mr. H. H. Raphael, a member of Parliament and one of the most influential and popular financial men in Great Britain, said, in December: