Tom Watson's Magazine, Vol. I, No. 3, May 1905

by Various

In a series of magazine articles, which contain much that has the appearance of being exaggerated, untrue and vindictive, but which also contain much that is true and susceptible of verification, Mr. Thomas Lawson has been arousing the public to a sense of the dangers of the Financiers’ System, the System by which the banks, the insurance companies, the trusts and the Stock Exchange are employed by so-called Captains of Industry to despoil the people. After explaining how the game is conducted, he shows that even those who refrain from gambling on the Stock Exchange, and who may have no financial transactions beyond keeping a bank account or insuring their lives, are drawn into it, against their knowledge and will, and robbed of all the fruits of their labor and abstinence.

Lawson began his articles by accusing certain persons and putting up bluffs; a mode of argument which he soon found was not convincing. He now perceives that the fault lies in the System, and that at the bottom of the System lies the subject of Money. The whole series of transactions which, he alleges, have in the course of a few years taken several thousand millions out of the pockets of the masses and transferred them into those of a few cunning and unscrupulous operators, hung upon this single question: Shall the Government of the United States exercise its Regalia of Money or not? Mr. Lawson keeps up the interest of his readers by promising them a remedy for the disorders he describes. Should the remedy not include the regulation of Money, I hazard nothing in predicting that it will prove an entire failure and delusion.

What is the Regalia of Money? Is it some new-fangled notion about the coinage, some argument which turns upon the obscure meaning of Value, some phase of the tiresome Silver Question? Nothing of the kind. The Regalia of Money is a prerogative of government, familiar to every jurisconsult; a well-known, clearly defined and necessary attribute of Sovereign Power. It is laid down in all the great law books, in Budelius, Grotius, Puffendorf, Vattel, Molinæus, Grimaudet, Wheaton, Martens, and a host of other authorities. It is described as “a power which the state reserves to itself, for its own safety and welfare”; the power to create money, give it denomination and control its issues. Like the power to make war, peace and treaties, and to establish uniform weights and measures, it is called regalia, because it belongs to and must be exercised alone by sovereign states, as a prerogative which is necessary to their welfare, and essential to their autonomy, dignity and authority.

When the American Republic was established the Regalia of Money was exercised by all of the Colonies which united to form the Federation, whereupon, and as a matter of necessity, they all surrendered it to the general Government, which, under the Constitution, alone has the power to issue money and regulate its value or denominations. It was a misfortune that when the Union was formed it was so poor that it was obliged to tolerate the issuance of money by a private corporation, the Bank of Pennsylvania. Out of that bank grew all of the so-called state banks of a subsequent period, and out of those state banks, during the Civil War, grew all of the so-called National banks. Every one of these banks, both “state” and “National,” were all, and are yet, private banks, their titles in every case being misnomers. It is not intended to say a word against banks as guardians and lenders of money; on the contrary, they are recognized as highly useful and even indispensable institutions. As a rule, they are conducted by respectable and honorable men, and it cannot be disputed that they have done much to promote the progress of industry and the prosperity of trade. Whether they would have done more or less in these directions had they not been permitted to usurp the Regalia of Money, which act forms no necessary part of a banking business, it is not proposed to discuss. Said Mr. Jefferson: “I have ever been the enemy of banks; not of those discounting for cash, but of those foisting their own money into circulation, and thus banishing our cash.” What influence, whether for good or evil, which this usurpation of the Regalia exercised in his day it is now too late to examine.

But the time has come when the relinquishment of the Regalia to the banks can no longer be tolerated. The bankers have had a century of profitable innings; the people now demand theirs. The state laws of incorporation are so contradictory, loose and pliable that there have grown up under them companies and institutions so constituted that, in combination with banks usurping the Regalia, it is in their power—and this is what Mr. Lawson has shown very effectively—to strip the nation over and over again of its earnings, and eventually to absorb its entire wealth. It is scarcely too much to say that unless the United States Government resumes this Regalia, and absolutely prohibits the circulation of any money, whether of metal or paper, not of its own immediate issuance, we will find ourselves in the course of very few years hopelessly in debt to a band of absentee millionaires, who, having shown us their heels, will next show us their teeth.

It is not alone the people who are in danger of being impoverished by the System, it is not alone that the Government will be jeopardized; it is also that the banks, the insurance companies and numerous other classes of trade corporations will themselves be drawn into the nets that are being spread for them, nets strewn with their own bird-lime, and delivered over to the scheming millionaires who are preparing to plunder them. Mr. Lawson wholly neglects this phase of the subject. His ardor is all for the dear people, to arouse whose righteous indignation, he informs us, he is expending a fortune. Such reckless munificence, on the part of a man who ostentatiously advertises himself as the manager or director of several corporations, goes far toward indicating the correctness of our position. It is not doubted that Mr. Lawson sympathizes with the people and is anxious to point out the dangers that threaten them. On the other hand, it cannot be supposed that he is indifferent to the fate of the banks and other companies with which he is connected. The fact is that, having thoroughly skinned the people, the Captains of Industry are now prepared to skin the corporations, and that it is going to skin them with weapons plucked from its victims. These weapons are the notes which the banks have issued in defiance of the Regalia of Money.

The banks will perhaps more fully appreciate the sort of people they are dealing with if we interpolate at this point a few words touching their humanity. The principal, almost the sole lever with which the Captains of Industry are “working” this nation, is the issue of “National” bank-notes, and the elastic feature conferred upon it by law. This system was established by Salmon P. Chase, ex-Governor of Ohio, ex-Senator of the United States, then Secretary of the Treasury, and afterward Chief Justice of the United States; a man of the highest integrity, and perhaps for that reason wholly incapable of coping with Mr. John Thompson and the other Chevaliers of Industry of the last generation. It will naturally be supposed that had this class of men the slightest taint of humanity they would at least have taken care to honor the memory of their principal benefactor. Well, we will show you how they did it. Judge Chase, after serving his country in many capacities during a long lifetime, expired in poverty and in debt; his daughter died of grief and starvation; his grandchildren are at present living in very humble circumstances; his personal effects, his books, even the petty keepsakes and trinkets of his children, were exposed to the gaze of the vulgar and sold at a public auction in New York to satisfy his creditors, the rapacious Captains of Industry; while the body of this great but guileless man lies today in an obscure churchyard, without a tombstone over it. Such is the humanity of the Captains of Industry.

It is an essential part of the merry game which these Captains are permitted to play that they shall always have in their hands the means alternately to inflate and contract the currency, at any given point, say, for example, New York. With the mints restricted to the coinage of metal for private persons, and the hands of the Government tied to a fixed issue of greenbacks, while their own hands are free, the mischievous elasticity which they employ for the success of their operations is easily acquired by getting command of the principal banks of issue. The moment they press their fingers on this button the market immediately responds by throwing its stocks overboard; and the moment they release the button, up rise the stocks again. It is by means of this simple mechanism that the public has been plundered, and that it is now planned to plunder the companies. That there is no longer any art in the trained motorman’s vocation is proved by the small wages he commands. The art is in providing the power and controlling the mechanism which drives the cars. In the Captains-of-Industry game the power is derived from the elastic bank issues: the mechanism consists of certain banks and insurance companies and the Stock Exchange. Given the power and mechanism which these establishments furnish, any bandit could work the game and have plenty of leisure to spare. The System is automatic.

In contemplating this scene of legalized robbery, euphemistically termed “finance,” it will not do to lose our heads. There are banks and banks, there are insurance companies and insurance companies, there are trade corporations and trade corporations. They are not all alike. Some are in the game, as vassals and creatures of the Captains; some are in it, hoping, alas! but vainly, to outlive the Captains and profit by their fall; while others are out of it altogether; good, sound companies, safely managed and cautious to avoid contamination. The banks and other companies last named will not suffer from collapse, they will always continue to be solvent; but they will suffer from a forced conservatism and from an unduly small share of business, until our deluded people wake up and smash some furniture, or until the banks themselves recognize the dangerous part which their own issues play in this pandemonium of rascality. They will then be glad voluntarily to surrender them into the hands of the Government.