Fifty years in Wall Street

by Henry Clews

This is speculation, yet perfectly legitimate, and I think that if President Roosevelt and Mr. Bryan knew more about these markets and the N. Y. Stock Exchange from actual experience, they would see the injustice of much that they have said in decrying the evils of speculation. Black sheep and exceptional wrongdoing should not be held up as examples of all and everything in Wall Street; and because unscrupulous men sometimes embezzle in order to get money to speculate with, Wall Street should not be held responsible for their crime, any more than a river should be blamed for a man’s suicide because he jumps into it to end his troubles. There is nothing illegal or against public welfare in a broker buying and selling stocks and bonds for his customers in conformity with the rules of the N. Y. Stock Exchange, nor can there ever be; and I know that such business is just as honorable and legitimate as the buying and selling of iron, dry goods or real estate on credit. It is credit that keeps alive the business world.

The attacks on the financial center of this country are indiscriminate, and I am sorry that President Roosevelt, who has done so much good in other respects, should have nipped the bud of reviving confidence in the stock market in the way he did, for his denunciation of Wall Street, coupled with Mr. Bryan’s wholesale and wild condemnation of the Stock Exchange, led to a renewal of liquidation in the stock market, and a fresh decline in prices through creating fresh distrust of their holdings among investors.

The New York Stock Exchange is a great national and international market, and its 1100 members compose a very honorable and wealthy body of men, whose integrity in all their business transactions is unquestioned. They are bound not only by the rules of the Stock Exchange to be absolutely honorable and strictly honest in their dealings, but their own interests and their relations with their fellow members and their customers compel them to be so, and to be also above suspicion. Summary punishment, even to expulsion from membership, would follow any dishonorable or dishonest act on the part of any of them, and such instances are of extremely rare occurrence. It is therefore unjust to stigmatize these men, these bankers and brokers of good business standing and good social position, in the manner they have been stigmatized recently by Mr. Bryan; and again I think that if he knew Wall Street better than he does he would have been more discriminating, and would have confined his severest criticism to the speculative capitalists who have probably at times abused the Stock Exchange by the manipulation of stocks.

The so-called practice of “washing” is strictly prohibited by the rules of the Stock Exchange, but as it is very hard to detect and prove, in some instances, doubtless it may possibly have gone unpunished. The Stock Exchange, however, earnestly endeavors to ferret out and prevent and severely punish all violations of its rules.

After every great panic, the Stock Exchange has been made a scape-goat, and unjustly assailed as the main cause of the trouble. The fact however that the two great opposing forces in national politics are now united in their attacks upon Wall Street is unusual, and foreshadows more attacks of the same disturbing character during the presidential campaign. This is a depressing factor in both the financial and trade situation, and we see evidence of it in all directions. It is, of course, a factor that retards recovery from the crisis by retarding the growth of confidence, and how far its influence will extend we have yet to see. But of one thing we may be sure, and that is, we shall be reminded of it very forcibly from time to time from the batteries on both sides of the political battle ground until after the November election; then the guns will cease to belch their thunder. Hence we must be prepared for it in the interval and make the best of it, remembering the old adage-“Forewarned, Forearmed.” But never before has politics hurled its javelins so fiercely against Wall Street, and that practically means all the Stock Exchanges in the country. The joint attack is against stock speculation, and no Stock Exchange in the world ever was or ever can be free from that. It would obviously be absolutely impossible to distinguish investment from speculative transactions on the floor of the Stock Exchange, or tell whether long or short stock was being bought and sold. Because speculative capitalists in control of large corporations have managed them dishonestly for their own benefit, and in furthering their schemes and speculations employed stock brokers and used the Stock Exchange, it and its members should not be held responsible for the wrongdoing of these men, as it is a market open to all the world, just as is the London Stock Exchange or any Bourse in Continental Europe. To restrict its scope and operations by law would be to lessen its usefulness to investors and corporations issuing securities, and destroy its utility as a free market for all.

Wall Street being not only a local but a national and international financial center, the whole world, not only the whole country, is tributary to it, and it is indispensable to the whole country. Yet it is made the target at present for all sorts of political abuse, and various schemes have been urged for suppressing trading in stocks, all of which are of course chimerical, for as long as we have securities, there must, in justice to the millions of holders, be a market for them. Without it there would be a sort of chaos of confusion and abnormal prices, for it is the speculator who is often the most keen and discriminating in judging the true value of securities. The much maligned “bear” is the safety valve of the market. He often prevents the manipulation of the price of a stock to an unfairly high figure by exposing the weak points in the situation, which is a protection to a prospective buyer.

A great deal of shallow abuse is still being showered on the Stock Exchange from all parts of the country. This always follows a panic. It pleases a certain class of ignorant and misguided people to hear Wall Street denounced and maligned on every opportunity. It matters little whether the accusations are right or wrong. So pessimistic is public opinion that the worse the charges the more numerous the believers. No one looks on the other side; no one is told of the manifold services and advantages of Wall Street as a financial center. No one is taught that Wall Street is merely a central market for capital, just as Chicago is for wheat, Boston for wool, New Orleans for cotton, etc. How many appreciate the fact that Wall Street is as essential to the business life of the country as is the Legislature at Washington to our political life? How many realize that Wall Street is the primary nerve center of the American business world; that a blow struck there is an injury to the whole financial and business fabric of the nation? How many forget that in Wall Street the investor can deal with greater advantage to himself, as a rule, than in any other financial market? How many understand that there the country can best settle its accounts; send its savings, and make its investments more readily and on better terms than anywhere else? The very individuals who most violently abuse Wall Street are often among the first to go there for financing new enterprises or to pick up cheap investments. Thither, also, these same grumblers hasten in order to “get rich quickly.” When they succeed nothing is heard about the “wickedness” of Wall Street, and they flatter themselves as to their own superior shrewdness. But when these same individuals lose, then Wall Street is nothing but a “gambling hell and a cesspool of iniquity.” They fail to recognize that their losses are the result of their own cupidity, or inability to discriminate between sound and unsound investments. They usually lose because of their own bad judgment; but nevertheless, there is no end to their objurgations.

Now Wall Street after all is little different from any other department of business and industry. Its makeup naturally includes men with similar failings and similar impulses to good and evil that exist everywhere; men who are better than the politicians who make capital by abusing Wall Street; men who are better than some of the trusts or the unions which aim to selfishly and often relentlessly grasp all within their power. It may also include a very few who unscrupulously manipulate property for their own advantage and at every opportunity. But it also includes a vast majority of men of high principles, of great foresight and of enlightened self-interest; men who recognize that their own welfare is dependent upon their regard for the welfare of others. Most of such men are rarely heard of, and their good deeds and honorable achievements are not exploited in the daily press, which is naturally interested in the search for the abnormal. Wall Street probably contains a much larger percentage of strong brainy men than any other community, because right there centers the management of large affairs and great organizations which demand the highest ability. True, Wall Street attracts some men of unscrupulous and predatory instincts because of the great opportunities for accumulating wealth by devious and often improper methods. The occasional flotation of questionable schemes and the improper use of funds held in trust undoubtedly are sometimes among the greatest evils connected with Wall Street. They are evils that its best men are most anxious to see eliminated, and it is satisfactory to know that strong efforts are being made in this direction. It cannot be too strongly stated that many of the abuses which aggravated the late panic could not be repeated, and have been stopped forever. Whatever defects remain, the business standards of Wall Street are upon a distinctly higher plane than existed some time ago. In spite of troubles and pessimism the world is growing better and better. But so long as fools with money are to be found, just so long will there be sharpers ready to take the one and leave the other. It is useless to expect the millennium. Human nature changes slowly, and the only means of checking abuses is to establish rules and standards of a high order, and to keep alive a public opinion that will insist upon their enforcement. An alert and vigorous public opinion is often more effective in preventing evil than the punitive measures which are applied after the wrong has been done.

No king, on being crowned, was ever prouder or happier than I, when I first stepped on the floor of the New York Stock Exchange as a newly elected member. The pride that I felt at that time has grown and increased every year since that day, so long ago, as I have seen the Exchange grow in influence and moral power. There is no body of men in the world superior to the members of our Exchange in honor, integrity and truthfulness. Every transaction on the floor is done on word of mouth. Sales involving millions of dollars are consummated without a scrap of writing, and it is a rare occurrence that even a dispute arises over a transaction, and even then, unless a witness can be found to the transaction, the matter is settled usually by each party assuming one-half the loss, as both the buyer and the seller know that the other is just as square and honest as he is, and that the dispute is over a misunderstanding and not a misrepresentation. Many people are wont to worry over the nervous strain under which their friends in the Stock Exchange are laboring in busy times. Their worry is unnecessary, as the busy time on the “Street” is the happy time. Many people pretend to be shocked at the want of dignity which prompts the members to skylark and act like boys. Don’t be shocked. This is the recreation which offsets the strain and keeps the members young. One of the most impressive scenes that can be witnessed is viewed from the gallery on the morning of a very busy day. At five minutes to 10 the members are seen quietly gathering in little groups around the different “posts,” chatting and smiling—at 10 o’clock exactly a gong sounds which announces that business can begin. Every man on the floor commences to yell and paw the air, and one who did not understand would think that he was watching the working room of bedlam. But if he watches closely he will see that order reigns in seeming chaos. Automatic signals on the walls, quickly moving pages and telephone clerks in the booths at the side of the Exchange room, all work in harmony, and the great machinery “moves in a mysterious way its wonders to perform.” Almost everything in the country, yes in the world, has its influence in this great market. The grains of wheat, the kernels of corn, the bolls of cotton, the chinch bug and the boll weevil: each has a vote. The miner deep in the bowels of the earth and the crew on a swiftly moving railroad train, the track walker and the laborer are all exercising indirectly an influence. All the great railroads and industrial corporations come to Wall Street in their time of need, and if their object is worthy they do not leave with their wants unsupplied. Wall Street proper, as represented through the New York Stock Exchange, is the barometer of the country. Every man, woman or child who has a dollar invested or deposited in a savings bank is interested in the good or bad times which prevail in the Street. In times of great disaster or need, the members of the Exchange are the leaders in contributing to the relief of the afflicted. There is a lot of good in Wall Street that outsiders know nothing of; if you are one of them, find out the truth. Be sure to hear witnesses on both sides. Honor and truthfulness are the cornerstones on which the whole fabric of business in Wall Street is built, and confidence is the keystone of the arch that covers all transactions. The fact that a weak spot is occasionally uncovered proves the strength of the general structure. There is no place in the world where the measure of confidence between employer and employee is so large and where loyally to each other is so marked. In whatever business a young man intends to embark, a year or two in Wall Street is a good training, as he will learn much that will benefit him in after life. He would realize the necessity of close attention to work and the true application of the principles of the Golden Rule. In these times of reckless denunciation of Wall Street a general application of this rule by those who attack by innuendo and without a scintilla of truth would help to restore confidence and give evidence of fair-mindedness on their part. Men in high places prefer charges and the very wording of their complaint proves that they are beyond the depth of their knowledge. Wall Street will survive all attacks, and the refutation of these attacks by well-meaning but mistaken men will in the long ran redound to its lasting good. This is a time of trial by fire in both business and private life, and those who have nothing to fear will come out of it unscathed, and the New York Stock Exchange will be in the front rank of those declared guiltless and worthy.

Possibly there are a few abuses undiscovered on the Stock Exchange that should be remedied. Nevertheless, I affirm without fear of contradiction that there is no business institution in the United States where standards are as high or where the integrity of its members is equal to that prevailing on the Stock Exchange. Therefore, let the people and our Legislatures come to their senses, and awake to the fact that in striking at the financial district they are hurting themselves quite as much as those whom they seek to destroy, and that the evil transactions are small in comparison with the good. Let them understand that in fomenting discontent of this sort they are intensifying the general depression, adding to the number of unemployed, driving capital into hiding and generally interfering with that recovery in commerce and industry which is now so earnestly desired. The present antipathy to Wall Street savors largely of public hysteria, bogyphobia and political dementia. Apparently, it is a disease which must run its course; if so, the best cure will be a period of reflection in which to cultivate calmer and more rational views.