Shortly after the memorable “corner” in Hannibal & St. Jo., in 1881, another attempt was made by the Legislature to force Wall Street matters under the jurisdiction of Albany lobbyists and “scalpers.”
The newspaper articles on the subject of the “corner” had attracted the attention of the Legislature then in session, and naturally suggested to some of the wiseacres of that dignified and incorruptible body that the “corner” afforded an excellent opportunity, when the public mind was excited on the subject, to raise an outcry against the shocking immorality of such huge speculations.
A Senate Committee on “corners” and “futures” was therefore appointed, and various Wall Street men were summoned to appear before it, and give their testimony on this interesting subject. I had the honor of being one of the witnesses cited. I promptly obeyed the subpœna in preference to taking the risk of being hauled up for contempt and sent to durance vile. I appeared before the Committee at the Metropolitan Hotel, and not only answered all questions put to me, without any fashionable lapses of memory, after the manner of certain other financiers, but I regaled the Committee with a little dissertation on the subject of investigation. I had letters from members of the Legislature afterwards complimenting me for having made the points very clear. So I can say, “Praise from Sir Hubert is praise indeed,” and therefore I am encouraged to reproduce that effort in this volume, not so much from an intense desire to go down to posterity as a successful orator, as from a disposition to record my approval, in more permanent form, of the soundness of the legislative judgment on my explanation of “corners.”
When the applause had subsided, I spoke as follows:
“Gentlemen of the Committee on Corners and Futures: Speculation is a method now adopted for adjusting differences of opinion as to future values, whether of products or securities. This is more common now than in former years because the facilities for procuring information have increased with the greater intelligence and celerity with which all business is now conducted, and also from the greater rapidity with which such information can be transmitted by telegraph and cable.
“In former years the results of a crop were known only when it came to the market. Now almost everything affecting its future value is known with a fair degree of accuracy before the crop is harvested. This advanced information naturally becomes the subject of speculative transactions which could not have existed in former times.
“Speculation brings into play the best intelligence as to the future of values. It has always two sides. The one that is based principally on the facts and conditions of the situation wins in the end, and the result of the conflict is the nearest possible approach to correct values. The consequences of speculation are thus financially beneficial to the country at large.
“Speculation for a fall in prices is based upon the presumption of an over-supply. If it succeeds, the production of the particular product is checked until prices recover, and in the meantime production is diverted to articles less abundant. Thus speculation proves a regulator both of values and production. Speculation for a rise in prices is based upon a presumption of scarcity or short supply, and its direct effect is to quicken production and restore the equilibrium of prices.
“‘Corners’ usually come from running speculation to an excessive length, by which the seller becomes responsible for deliveries beyond what he can possibly make. He thereby places himself at the mercy of those with whom he has made the contracts. These exigencies chiefly affect the speculators themselves, and the community at large but little.
“Extreme prices usually grow out of them, but they are only momentary, and have small effect upon regular or cash transactions, which sympathize very remotely with these temporary and artificial quotations.