Fifty years in Wall Street

by Henry Clews

The Census Bureau in its final report for the season tells us the total crop ginned up to the first of March last was 11,261,163 bales, including “linters”; and it estimates that 127,646 bales remained unginned on March 1. Allowing for the usual under-estimating of the cotton ginned in the reports to the Government, it follows, from the figures, that the spinnable cotton from the last season’s crop will aggregate no more than 11,500,000 bales. This is with the average net weight of a bale, 501½ pounds.

The statistical or technical position of cotton is therefore bullish, notwithstanding the very large falling off in consumption and the requirements of spinners, this year, both here and in Europe, as the indications are that there will not be a very heavy or unmanageable load of cotton to be carried over into the new crop year, which begins on the first of September.

One very hopeful sign of the times is the check that has been given to radical state legislation concerning railway corporations by the Supreme Court of the United States, declaring the rate laws of Minnesota and North Carolina in certain respects unconstitutional. The decision practically denies the right of a State to enact and enforce rate laws against interstate railways. This takes the wind out of the sails of a good many Western and Southern political agitators, and makes the State courts more definitely than ever subservient to the Federal Courts. The clash as to jurisdiction between the two courts which we witnessed in the South last year is therefore not likely to recur.

The decision was based mainly upon the unreasonable penalties prescribed by the North Carolina and Minnesota statutes, but it sustains beyond all question the contention of the railway companies, which are now held to be at liberty to refuse to obey any State law reducing rates upon their making affidavit that it would reduce their earnings to an unreasonable extent. Upon such an affidavit a judge of the United States Circuit Court can order a suspension of the operation of the law until the law can be shown in court to be reasonable.

This is a protecting bulwark against radical and confiscatory State legislation, resulting from the inflammatory appeals of demagogues. By protecting the railways it protects investors, and adds to the security of railway property, which, in turn, strengthens confidence in that property, and confidence is what is most necessary to recuperation. Let us therefore help to increase it.

It is the desire to promote confidence, and clarify the business situation, that has inspired the recent utterances of President Roosevelt, and dictated the course of the Federal law department. This is commendable and has had a good effect.

The most spectacular event of the crisis, and its most sensational starting point, in New York, was the failure of the Knickerbocker Trust Company under a wild rush to withdraw its deposits on the 22nd of October, 1907, and the subsequent suicide of Charles T. Barney, its president; and the most satisfactory event in its later career was its resumption of business on the 26th of March, 1908, after many trials and tribulations. On that day, too, it received $1,500,000 of deposits more than it paid out, a remarkable contrast to the heavy run before the suspension. This, and the almost simultaneous payment in full of the depositors of the Oriental Bank, a New York State institution, were reassuring influences that did much in helping to pave the way to general recovery, and stimulate the rise in the stock market, which of itself had a good moral, if not material, effect upon the business situation.

It was not till the fourth day after the Knickerbocker’s suspension, namely, on Saturday, the 26th of October, that the New York Clearing House committee decided to issue Clearing House certificates to the banks in the Association needing them to pay their Clearing House balances. Then their issue against satisfactory collaterals deposited with the Clearing House, began at once. This was the signal for every other clearing house in the country to do likewise simultaneously.

On the same day the detailed weekly bank statements were suspended, and these were not resumed till the 8th of February, 1908. Meanwhile a hundred and one millions of the Clearing House certificates had been issued and redeemed, except some that were held by the National Bank of North America, the Mechanics and Traders Bank, the Bank of New Amsterdam, and the Oriental Bank, which had all failed. But these were all redeemed before the end of March.

It was in the third week of November that the issue of Clearing House certificates reached its maximum. But the banks had reached their largest deficit in reserve in the first week of November, when it rose to $54,100,000, a prodigious amount of which the public was in ignorance.