All in a Life-time

by Henry Morgenthau; French Strother

With the Dreyfus trial fresh in my mind, I urged Colby that he should be the man who would Americanize the “J’accuse” and charge Hyde with these various malfeasances against the policy holders.

A few days later, Mr. Stillman called and told me that he wanted to warn me to be very cautious in my activities of this policy holders’ committee; that public opinion was so excited and might easily be fanned to fever heat if the conditions in the Equitable were published; and that the people might demand investigations of all financial institutions, and thereby create a panic. He also asked me to discuss the matter with Mr. E. H. Harriman. I had no objection to doing so, and a conference was arranged. Harriman asked me what the committee wanted, and I told him that although Hyde owned a majority of the stock, the assets belonged to the policy holders; and that they had enough accusations which would condemn him before any court; and that the committee demanded the removal of Hyde and control of the executive committee which controlled the company. I told him that it would be much better for them to make terms with us, who were reasonable men, than to try to persuade any of our committee to compromise, because the proxies we had would be taken from us and given to people who would see that justice would be done. He saw the force of my argument and suggested my meeting Mr. Elihu Root. We met the next day and went over the whole situation. Mr. Root laid great stress on the fact that it was unheard of to displace a man owning the majority of the stock of a company. On behalf of the policy holders, I told Mr. Root that we were going to arouse public opinion against the impropriety of having the funds of widows and orphans subjected to the whims and fancies of a quasi-irresponsible young man, and I also referred to the grave danger that the whole financial fabric was being exposed to by permitting the vast power that went with the control of the Equitable and its subsidiary companies, to pass by inheritance, and not by election.

It finally was arranged that no one was to be placed on the executive committee who was personally objectionable to Hyde. The new directors were not to represent any faction, but all the policy holders. Thus we got control of the board and the policy holders were allowed to elect a majority of the executive committee and Mr. Hyde’s control was wrested from him.

Thus, my action in standing fast with the committee of Equitable policy holders, demanding their rights, was an essential prelude to the famous life insurance investigation of 1905. The success of that investigation, once it got under way, is, of course, to the eternal credit of Charles Evans Hughes. His masterly grasp of the intricacies of the whole situation; his extraordinarily logical mind which enabled him to bring out the testimony in such a way as to build up an overwhelming and complete sense of the right and wrong of the matter, made his conduct of this investigation one of the most brilliant performances in the history of American law, and placed Mr. Hughes in the front rank of public servants. My own testimony at the investigation was useful in establishing confirmatory evidence of the corrupt manner in which life insurance moneys were used, as evidenced in the purchase, by Mr. McCurdy, of stock in other companies with policy holders’ money, but to the personal profit of the officers of the Mutual instead of to the Mutual itself. The outcome of the whole investigation is, of course, familiar to the public. It resulted in the enactment of laws which made these corrupt practices impossible, and thereby took the insurance company funds out of the speculative and promoting fields of American finance.

The other needed reform—to clip the power of the New York bankers to control the credit resources of the country—was delayed until, under the compulsion of Woodrow Wilson’s leadership, the Federal Reserve Act was passed, and the power of Wall Street over credit for ever crushed. That Act democratized credit, and made it impossible for any man, or group of men, to concentrate and control it.

Young Hyde was shorn of his glory. He was compelled to sell his majority of ownership in the Equitable for two and one half million dollars—whereas but a few years before I had been authorized by James Stillman to offer him ten million dollars for the control of the Equitable and its connections—and to remove himself from all authority in its affairs, and from all influence upon finance in general. He retired to that luxurious obscurity which was his natural level. Disgusted with America, which did not “appreciate” him, he returned to France where he had already spent several years, and there devoted himself to a life of pleasure and of mild intellectual avocations.

I did not see him again until 1917 when the United States had entered the World War, and I was visiting Paris. This third encounter with young Hyde had in it the dramatic elements of a Greek comedy. Later in this book, I describe how I made Hyde vice-president of the Metropolitan Opera Company, and facilitated his ambition to become a social leader in New York. Unappreciative of this service I had rendered him, and eager for yet greater social opportunities, Hyde had not been content to await the natural termination of my directorship, and had had the impudence to ask me to resign in favour of one of his friends. I had indignantly refused this preposterous request, and served out my term of office. In the insurance investigation there had been, therefore, a certain element of poetic justice in my being the instrument in the hand of destiny to give the little essential fillip to the events that caused his headlong fall from financial eminence. Our meeting in Paris in 1917 supplied the final touch of classic irony. There, Hyde, out of touch with his native land, somewhat chastened by contemplation of his abrupt fall from financial heights, found himself almost a man without a country in the midst of the World War, unable to gratify his ambition to be always in style—and now the style was to be in the military uniform of one’s country.

I visited France soon after the entrance of America into that conflict, and during a brief interval of rest at Aix-les-Bains, I chanced upon John G. A. Leishmann and his vivacious daughter, who was Hyde’s wife. She had heard of my political association with President Wilson, but evidently she had forgotten, or was unaware of, my part in the financial downfall of her husband. She confided to me young Hyde’s and her own unhappiness that he had no active part in the service of his country, and begged me to use my influence to obtain for him some position in the American service where he could do his bit. I promised to do what I could.

Upon my return to Paris, young Hyde himself called upon me with words of warm appreciation, both that I had been willing to overlook our late unpleasantness, and that I had not mentioned its existence to his wife. He was anxious to serve, and almost pathetically eager to convince me that he could serve. He had been refused a position on General Pershing’s staff, and wanted me to secure for him a commission from the American Red Cross. He declared that he could obtain for me or others an immediate audience from any person in the French Government, no matter how exalted, and pointed out that by virtue of this capacity he could be of indispensable service. He wished me to name any French official whom I cared to meet. I said I should like very much to meet M. Painlevé informally, and Hyde thereupon, hardly waiting to bid me good-bye, hastened away to make the appointment. He easily made good his boast, so that two days later I had dinner at Hyde’s house, and had a most interesting conversation with Painlevé. I was so impressed with Hyde’s earnestness and with the possibilities of usefulness that lay in his remarkable affiliations with the best French society, that I did intercede for him with Major Murphy and Major Perkins, the heads of the Red Cross, and prevailed upon them to make him a uniformed officer. He was attached to the Paris headquarters of our Red Cross work in France, and, I was afterward told, rendered very useful service.

As I stated at the beginning of this chapter, the object of the formation of the Central Realty Bond & Trust Company was to provide an accumulation of capital for the purpose of dealing in real estate on a large scale. I shall describe a few of the company’s transactions to illustrate how the corporate form of operation gave wider scope than was possible to an individual operator. One of our first transactions illustrates this very point.