Читать книгу All in a Life-time - Henry Morgenthau Morgenthau - Страница 8

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I HAD suddenly been catapulted from my comparatively unknown law office into the very midst of high finance. I was president of a board of directors in which but a few weeks ago I should have rejoiced to have been the junior member. My associates were all leaders in their various pursuits, and gloried in the power and wealth that they had accumulated while struggling to reach these eminent positions.

At first I was but a silent observer amongst a lot of gladiators. Here was a set of dominators watching a newcomer who also had dared to try to reach the top, and had the good sense to court their coöperation. To most of them real estate was a closed book. They had looked upon it as what might be called a frozen commodity, while they had dealt in liquid assets. They were anxious to see whether this novice could capitalize real estate equities. Stories of the successes that I had had in real estate had been told and exaggerated until, even to these big money-makers, they seemed attractive. Each one prided himself that his joining the other eminent leaders in this enterprise increased its chances of success. The fact that the stock was selling at double its issue price within three months showed that the public was ready to discount the possibilities. They bought me on my past performances. To them I was just a new machine which must demonstrate its capacity. I simply had to make good, or be displaced.

My position as president of this company involved me in a series of financial encounters with the biggest men in Wall Street, encounters that are worth describing because they illustrate the methods by which the great fortunes of the greatest period of expansion in American finance were made. I have not heard of any man who had intimate business relations with the financial giants of that period, who has described, from his own experience, the intrigues and passions, the personalities and methods, of those men who dominated the financial structure of America. My experiences with them were not connected with their biggest deals, but they were thoroughly representative of all their operations—and, as such, I feel they are of historical interest and especially so as they are exceptional revelations of a type of exceptional men whose business activities have influenced the great development of American Commerce. I might almost entitle this chapter: “How Big Financial Deals Are Made.” It is a very human story—full, I mean, of human nature, with its foibles of ambition, jealousy, hatred, pride, and cunning.

When, as president of my Board of Directors, I sat at the head of the table at our meetings, and looked down either side of the table, my eyes fell upon at least half a dozen of the greatest financial giants of the day—men who, as heads of enormous and often clashing interests, represented nearly every element in the epic struggle for the financial supremacy of America—that savage struggle which the public at large sensed but vaguely, and which it saw clearly only at the great moments of climax, as when the veil was lifted by the famous life insurance investigation, and later by the Pujo investigation. About this board were six representative financiers. These men were as diverse in their appearance and character and their methods as the interests they personified. The battle between the banks on the one hand and the trust companies on the other, was represented by James Stillman and Frederic P. Olcott. Stillman, as became the champion of the older type of institutions, the banks, was a perfect example of the well-built man of the world, sartorially correct, soft spoken, with a tendency toward cynical humour, and with a tongue capable of devastating sarcasms, while Olcott, as became the representative of the more recent competitors in the general banking business, the trust companies, was a type of the rough-and-ready, physically powerful, hard-spoken, tumultuous fighter. There was nothing conciliatory in his make-up. He rather enjoyed wrangling with his competitors, and prided himself on never having become money-mad, and looked commiseratingly on those who had. He was more interested in this financial struggle as a test of intellectual prowess, but wanted to remain an amateur gladiator rather than to become a professional wealth accumulator. Olcott’s burly figure, carelessly clad, surmounted by a huge, bucket-like head, adorned with unbelievably big and protruding ears, and illuminated with eyes that could glare terrifyingly, was in striking contrast with Stillman’s smooth-buttoned figure, his keen, distinguished face, and eyes that menaced by their subtlety and gleam of concentrated will, but whose whole manner betokened a measured, studied self-restraint.

The war between the sugar trust and the independent sugar refiners was represented by Henry O. Havemeyer and James N. Jarvie. They never sat on the same side of the table, but always facing each other—Havemeyer big, florid, and blustering—displaying in every move the consciousness of long-exercised power, and resenting that the combination of all the sugar interests should be compelled to defend its monopoly which was threatened by the intrusion of a mere coffee concern, Arbuckle Bros., in which Jarvie had infused such a vigorous, aggressive spirit—Jarvie who had no prior generations of successful men to point to, but had risen from the bottom and was then the leading spirit of his firm—a much courted man for director in leading corporations—a man who not only directed the investments and loaning out of the Arbuckle fortune, but was also a leader in all the companies with which he was connected. Possessed of all the strong and best points of a real Scotchman, caution, cumulativeness, and stick-to-it-iveness, he was like an eager bull terrier worrying at the haunches of a mastiff, and watching every instant for a chance to spring.

The rivalry between the insurance companies was represented by A. D. Juilliard and James Hazen Hyde. Juilliard, the distinguished merchant, philanthropist, and patron of music, personified the Mutual Life Insurance Company, of which he was one of the directing spirits; and young Hyde, the perfumed dandy and spoiled child of quickly gotten riches, personified the Equitable Life Insurance Company and its astonishing rise to financial greatness.

By a strange irony of fate, my association with these men was destined to make me one of the key figures in the life insurance investigation of 1905, which hurled young Hyde from a dazzling financial eminence and limitless possibilities and transferred him to Paris among the expatriates there, and which, by the legislation that followed the exposure of corrupt financial practices, altered the whole financial structure of America.

I shall tell that story at its proper place in this chapter, but, first, I propose to give the reader a picture of the way in which some financial deals were made in “Wall Street,” and the control of corporations bandied about by a nod of the head, frequently given as a reward for a personal favour, or withheld as punishment for a personal slight.

The following incidents in my own financial transactions will illustrate this system which I by no means indiscriminately condemn, as it is an essential requirement of the broader development of the commerce of the United States, but which, unfortunately, has again and again been shamefully abused, so that the reputation of the deserving had suffered almost as much as that of the evil doers.

In 1901 we bought some property from a client of D. B. Ogden, the vice-president of the Lawyers’ Title Company, who mildly remonstrated with me by saying:

“You are one of the original subscribers to the Lawyers’ Title Company, yet you do all your business with the Title Guarantee & Trust Company. Why not with us?”

I said:

“In all our large transactions, we have to borrow money on mortgages; we do not want to wait until you offer them around and try and place them. The other company with their enormous resources and backing gave us a prompt answer. If you want to enter this very profitable field of large loans, let me double your capital of $1,000,000 and also secure for you similar backing to that possessed by your competitor. Though your stock is selling below book value, I am willing to take the extra issue at book value, and place it with interests that will give you a credit of $5,000,000 and thus enable you promptly to handle the biggest transactions, which are now monopolized by the Title Guarantee & Trust Company.”

Within an hour Edward W. Coggeshall, the president of the Lawyers’ Title Company, called and asked me to repeat my proposition directly to him. I did so, and he said to me: “When can you make a definite binding offer?” I inquired whether he wanted my personal, or the Company’s offer, and when he agreed to deal with me personally, I asked him to wait until I dictated the proposition in his presence, and he did. Two days later he informed me that his Board of Directors desired to offer 3,000 shares of the new stock of their stockholders, and could therefore only sell me 7,000 shares, and hence they would be satisfied with a credit of four million dollars. I consented to this change and immediately called on the officials of the Equitable Life Insurance Company and arranged with Mr. Squires, the chairman of the Finance Committee, that they would buy 2,000 shares of the stock, and agree to loan the company two million dollars on mortgages. I suggested that Mr. Thomas N. Jordan, their comptroller, should act as one of the experts to fix the value of the stock.

I next called upon Mr. Olcott, who would not obligate the Central Trust Company to make any definite loan, but authorized me to agree on behalf of the Central Realty Bond & Trust Company to loan one million dollars on mortgages and to subscribe 2,000 shares of the stock.

I then called up Mr. James Stillman and was informed that he was at home nursing a cold. Within half an hour Mr. Stillman telephoned me to inquire if it was something old or new that I wished to see him about. When I answered “New,” he requested me to come to his house at three o’clock that afternoon. I was dilating upon the matter for fully twenty minutes when I suddenly became aware that Stillman had not asked a single question, and I so told him, and asked whether this was because he was not interested in the matter. He answered: “I have but one question: how large an interest am I to have?” I offered him 1,500 shares if he would agree to loan the company one million dollars. He said that he would take the stock, as he thoroughly believed in the Title Insurance business and that the City Bank would be glad to make the loan to the Title Company if the latter would keep a balance with them which would justify them in doing so. So I had secured the required credit and placed 5,500 shares of the stock. That same day Coggeshall and I closed the matter. The 1,500 remaining shares were distributed among some of our friends who we thought could help the Lawyers’ Title Company. A few days later Mr. Olcott sent for me, and told me that my handling of the increase of the Lawyers’ Title Company’s capital stock had raised quite a tempest amongst the Mutual Life crowd: that its president, Richard A. McCurdy, had asked Olcott at a directors’ meeting of the Bank of Commerce why the Mutual Life had not been invited to participate in this increase.

When Olcott explained to him that we had felt that the Mutual Life was so largely interested in the Title Guarantee & Trust Company that they would hardly be of much help to its greatest competitor, while the Equitable Life was unattached in that respect and would prove a good ally. Then McCurdy said: “Well, why was not I personally offered a few hundred shares, as I understand that you and Jarvie and Juilliard have received some?” This aggravated Olcott, and with a very emphatic designation of McCurdy’s character, he said to him: “So, that’s your size?” and that, of course, was pouring oil upon the flames.

Olcott told me that McCurdy intimated that he would expect Jarvie, Juilliard and Coleman to resign from our company unless the Mutual Life were taken care of in this matter. Olcott strongly advised me to defy and fight them, while on the other hand Juilliard and Jarvie told me that it was as much Mr. Olcott’s manner and forcible language as my neglect in taking care of the Mutual Life interests that had aggravated Mr. McCurdy. Juilliard told me that it would be a pity to break up our happy little family, and that if I would use my tact, I could satisfactorily adjust the matter. Although our company had progressed very nicely, in my opinion it was hardly strong enough to antagonize so important an interest as the Mutual Life. I, therefore, consented to let Juilliard arrange an interview between McCurdy and myself. I was ushered into the well-known throne-room and McCurdy told me at great length of his connections with the Title Guarantee & Trust Company and that as the Mutual Life was the largest lender on mortgages and some of its best directors were on my board, I should have given the company an opportunity to participate in this matter. He said that the company could have divided their allegiance and have done business with both the title companies. I informed him that I regretted that I had not known his desire and that now it was too late, but that I was arranging to increase the capital stock of the Lawyers’ Mortgage Company and would gladly put the Mutual Life on the same basis as the Equitable Life. That did not seem to satisfy him. He wanted to be interested in the Lawyers’ Title Company. He was insistent that he wanted some of the stock of the Title Company and rather spurned the Lawyers’ Mortgage stock.

Coggeshall and I finally concluded that we would try to have Mr. Stillman sell some or all of his stock to the Mutual Life. Stillman absolutely refused to do so when first requested, and he made me accept it as a personal favour when he finally consented to sell 1,000 shares for which he had paid $174,000 for $350,000 to the Mutual Life. Stillman thought that if the Mutual and Equitable were going to fight for the control of the Lawyers’ Title Company, as he put it, the stock would go to $500 a share. While I was arguing with him as to the splendid profit this was, he said to me: “Morgenthau, you don’t understand what profits we are in the habit of making,” and told me that when the Northern Pacific was levying a $15 assessment, William Rockefeller and he had agreed to pay the assessment on all the stock on which the stockholders would default, and by so doing, had secured about 270,000 shares, had agreed not to sell it until it showed them a profit of $100 a share, which it did, and he said that even then they regretted that they had sold it before the corner in Northern Pacific had occurred, because thereby they lost a very big additional profit that they might otherwise have made.

McCurdy urged me to try and consolidate the Title Guarantee & Trust Company and the Lawyers’ Title Company, as this would have given him a larger interest in the new company than the Equitable Life possessed. As the leading spirits in neither company were very keen about it, it failed of accomplishment; thereafter we consummated the increase of the stock of the Lawyers’ Mortgage Company from $300,000 to $1,000,000. I personally agreed to buy from the company 5,500 shares of an increase of 7,000 shares of the stock at $125. The Equitable Life interests received 1,500, and 1,000 shares went to the Mutual Life interests. It was the distribution of these shares and the method in which they were finally purchased by the respective companies that were material factors in the condemnation of Messrs. McCurdy and Hyde by the Armstrong Committee, but our company made excellent connections with both the Lawyers’ Title and the Lawyers’ Mortgage companies, and made very substantial profits in later on disposing of the stock.

After these two connections had been made, Grant and I felt that to complete our circle we would also require a construction company.

The Fuller Company had made a great success in the West and was invading the East. Mayor Grant was very much impressed with the scheme, but not so Olcott, Brady, and Crimmins, who had serious objections to a contracting company. Before abandoning the scheme, however, we submitted it to Mr. James Stillman. He listened attentively, and then told us that if we adhered to it, notwithstanding the opposition of Olcott, Brady, and Crimmins, he would join us, with the distinct condition, however, that he was not to dispose of any of the stock, or be asked to interest any one in the enterprise. But he agreed that, as his contribution to the matter, he would finance Grant and myself by loaning us the full amount that was required at a very reasonable rate of interest, and carry us for the life of the transaction.

A few days afterward Stillman sent for me and asked me how much of the preferred stock we had actually sold. When I told him the amount, he said: “Do not sell any more. As I was bicycling up Park Avenue yesterday, I was constantly thinking of Mr. Black’s statement, that New York had to be rebuilt, and the more I looked around me, the more convinced I became that he was right. We ought to secure a substantial share of the work at a profitable commission,” he said, “and therefore we ought not to sell any more of the preferred stock.”