ALL IN A LIFE-TIME

HENRY MORGENTHAU

ALL IN A LIFE-TIME

BY
HENRY MORGENTHAU
IN COLLABORATION WITH
FRENCH STROTHER

ILLUSTRATIONS
FROM
PHOTOGRAPHS
GARDEN CITY NEW YORK
DOUBLEDAY, PAGE & COMPANY
1922

COPYRIGHT, 1921, 1922, BY
DOUBLEDAY, PAGE & COMPANY
ALL RIGHTS RESERVED, INCLUDING THAT OF TRANSLATION
INTO FOREIGN LANGUAGES, INCLUDING THE SCANDINAVIAN
PRINTED IN THE UNITED STATES
AT
THE COUNTRY LIFE PRESS, GARDEN CITY, N. Y.
First Edition
TO
MY DEVOTED COMPANION
MY WIFE
WHO ORIGINATED SOME,
AND STIMULATED ALL,
OF MY BEST ENDEAVOURS

CONTENTS

LIST OF ILLUSTRATIONS

ALL IN A LIFE-TIME

CHAPTER I
NEW WORLDS FOR OLD

I WAS born in 1856, at Mannheim, in the Grand Duchy of Baden. That was the old Germany, very different from the Prussianized empire with which America was to go to war sixty years later, and very different again from the bustling life of the western world to which I was to be introduced so soon and in which I was to play a part unlike anything which my most fanciful dreams ever pictured.

Indeed, those were days of idyllic simplicity in South Germany and especially in that little city on the Rhine. The life of the people was best expressed by a word that was forever on their lips, gemütlich, that almost untranslatable word that implies contentment, ease, and satisfaction, all in one. It was a time of peace and fruitful industry and quiet enjoyment. The highest pleasure of the children was netting butterflies in the sunny fields; the great events of youth were the song festivals and public exhibitions of the “Turners” and walking excursions into the country; the recreation of the elders was at little tables in the public gardens, where, while the band played good music and the youngsters romped from chair to chair, the women plied their knitting needles over endless cups of coffee, and the men smoked their pipes and sipped their beer and talked of art and philosophy—of everything in the world, except world politics and world war.

To us children who had seen no larger city, but had visited many small villages in the neighbourhood, Mannheim seemed quite an important town. It was at the point where the Neckar flows into the Rhine, and as this river flowed through the Odenwald, it constantly brought big loads of lumber and also many bushels of grain to Mannheim, which had become a distributing centre for various cereals and lumber, and was also a great tobacco centre. My father had cigar factories at Mannheim and also in Lorsch and Heppenheim and sometimes employed as many as a thousand hands. Nevertheless, the entire population of Mannheim was scarcely 21,000, and the thoughts of most of its inhabitants were bent on the sober concerns of their every-day struggles and on raising their large families, without ambition for great riches or hope of higher place. None but the nobles dreamed of such grandeur as a carriage and pair; the successful tradesman only occasionally gratified a modest love of display or travel by hiring a barouche for a drive through the hop fields and tobacco patches surrounding the city to one of the near-by villages. Those whose mental powers were of a superior order exercised them in a keen appreciation of poetry, music, and the drama; Schiller and Goethe were their demi-gods, Mozart and Beethoven their companions of the spirit. The Grand Duke’s fatherly devotion to his subjects’ welfare had won him their filial affection; with political matters they concerned themselves almost not at all.

My childhood recollections reflect the quiet colours of this atmosphere. My father was prosperous, and our home was blessed by the comforts and little elegancies that his means made possible; it shared in the artistic interests of the community by virtue both of his interest in the theatre and my mother’s passion for the best in literature and music. I was the ninth of eleven living children, and I recall the visits of the music teachers who gave my sisters lessons on the piano and taught my eldest brother to play the violin. We children learned by heart the poems of Goethe and Schiller and shared the pride of all Mannheimers that the latter poet had once lived in our city and that his play, “The Robbers,” was first produced at our Stadt Theatre.

Those who like to reflect upon the smallness of the world will find it amusing to read that among the various friends of my family were quite a few with whom we are now on the most cordial relations in New York. Our physician was Dr. Gutherz, one of whose daughters married my neighbour, Nathan Straus. Their son and mine are intimate friends, and, in turn, their sons, Nathan 3d and Henry 3d, are now playmates in Central Park.

Among such associations the first ten years of my life were passed. We studied hard, but we played hard, too. Nor were our muscles forgotten: we were given regular exercises, and great was my pride when I passed the “swimming test” one summer’s day, by holding my own for the prescribed half hour against the Rhine current and so winning the right to wear the magic letters R. S.—“Rhine-Swimmer”—on my bathing suit. Life was indeed gemütlich in the Mannheim of that period.

It was not long, however, before the faraway world of America began to knock at our quiet door. A brother of my father had joined the gold rush to the Pacific and settled in San Francisco; he wrote us tales of the wild, free life of California, its adventures and its wealth. Strange gifts came back from him—a cane for the Grand Duke, its head a piece of gold-bearing quartz; for us children queer mementoes of an existence that seemed all romance. From time to time, this “Gold-Uncle,” as we called him, gave American friends touring Europe letters of introduction to my father, and these visitors enhanced the charm of the United States. One such especially filled our minds with narratives of easily won riches; Captain Richardson, a bearded Forty-niner, whose accounts of the land of opportunity were so much more moving than our fairy tales as to affect even my father’s mature fancy.

For my father heard them at a moment when, by an odd coincidence, an act of the American Congress had caused him great damage. In 1862 a tariff had been enacted by the United States which greatly increased the duty on cigars. For many years the largest part of his production had been exported to the United States. Father had a representative in New York, and his brother in San Francisco attended to the distribution on the Pacific Coast—they both had urged him to rush over all the cigars he could and land them before the law should go into effect. Unfortunately, the slow freighter that carried the last and biggest shipment arrived one day too late. Had she docked in time, my life might have been spent differently. That day’s delay meant the difference between profit and disaster to my father; the cigars, which, when duty free, would have yielded him a good return, were a dead loss when to their cost was added the burden of the new tariff charges. These changes in any event would have compelled him to seek a new market, as they closed America forever to goods of the cheap grade of German tobacco. That might have been arranged, but when the necessity to seek new fields was coupled with the crushing loss sustained upon this shipment, his finances were so weakened that he realized he would have to start afresh and on a smaller scale.

This was a heavy blow to the pride of a man who had achieved a great business success and was a leading citizen in his community. The instinct to seek another field for the fresh start was fortified by the stories of opportunity in the land whose laws had just dealt the blow. He resolved to emigrate to America.

I remember vividly the excitement in our household that was provoked by this momentous decision. Whatever may have been the doubts and heartburnings of our parents, to us children all was a joyous vista. We were happy at the thought of travelling to that far land of golden promise and strange people; we had visions only of adventure, and we were the envy of our playmates who were not to share with us the voyage across the Atlantic Ocean or the excitement of life in America.

The two eldest brothers and one of my sisters went ahead of us and established a home in Brooklyn. They wrote back their first impressions of New York; its great buildings and its crowded wharves; its masses of busy people hastening through the maze of streets and the novelty (to us) of horse cars pulled through the streets on railroad tracks. These letters gave us fresh thrills of emotion and new material for our active fancies. Then my father abandoned his now unprofitable business, sold his factories and home, packed our household goods and furniture, and possessed of about thirty thousand dollars in cash—all that remained of his fortune—led his wife and remaining eight children upon the expedition.

I well remember the journey down the Rhine to Cologne, where we visited the beautiful cathedral before we took the train to Bremen; the solemn interview in the latter city at the offices of the North German Lloyd, where the last formalities were disposed of; and finally settling in our cabins of the slow old steamer Hermann as she put forth on her way across the wide Atlantic.

My memories of the eleven-day voyage itself are rather vague. I recall playing around the deck with the other family of children on the ship. The daughter of one of those little playmates is now conducting a private school in New York City which three of my granddaughters attend. I remember, too, that on the stormiest day of our passage, I was proud of being the only child well enough to eat his meals, and that the Captain honoured me with a seat beside him at his table.

Now, the newcomer to America, arriving at New York, stands on the deck of a swift liner and is welcomed by the Statue of Liberty and overwhelmed by the vaulting office-buildings springing high into the blue. I shall tell later how I have contributed to the creation of some of them. But on that June day of my arrival, in 1866, I simply felt that one of the momentous hours in my life had come, when I found myself stepping ashore into a vast garden of unlimited opportunities.

CHAPTER II
SCHOOL DAYS

MY family took up their residence at 92 Congress Street, Brooklyn, which my elder brothers and two sisters, our pioneers, had prepared for us, and though handicapped as we were by our small knowledge of English, we younger children began our studies at the De Graw Street Public School in the September following our arrival. Eight months later, on the first day of May, 1867, we moved to Manhattan.

It was a very simple New York to which we came. In domestic economy, portières were unknown, rugs a rarity; ingrain carpets, costing about sixty cents a yard, were the usual floor coverings; when the walls were papered, it was with the cheapest material; the only bathtubs were of zinc, and one to a house was the almost universal rule. Our home was No. 1121 Second Avenue, corner of Fifty-ninth Street—a three-storey, high-stoop brownstone house, rows of which were then being erected. It still stands there, the high stoop removed from it; stores are in the basements; the district has deteriorated to one of cheap tenements and small retail businesses. But in those days there was an effort to make Upper Second Avenue one of the chief residential streets of the city. The householders were mostly well-to-do Germans—people who had prospered on the Lower East Side and had outgrown their quarters there. The monotony of the thoroughfare was relieved only by the old-fashioned horse car that rumbled by every four or five minutes. Like the letter carriers of that period, neither the drivers nor the conductors wore uniforms. The line ended at Sixty-fourth Street where the truck-gardens began. On our way to Sunday School, at Thirty-ninth Street near Seventh Avenue, we would make a short-cut across the site where the first Grand Central Station was being erected.

I had my little difficulties in school: I well remember how one of the boys told me that he deeply sympathized with me, because I would have to overcome the double handicap of being both a Jew and a German. So I greatly rejoiced when I saw the steady disappearance of the prejudice against the Germans after they had succeeded in winning the Franco-Prussian War in 1871.

About the most picturesque and artistic parade that had ever taken place in New York was arranged by all the German societies and their sympathizers, the singing clubs and the turn vereins participating. Non-Germans lent their carriages. Among the generous people was the famous Dr. Hemholdt, of patent medicine fame. He owned a rather fantastic vehicle, which was drawn by five horses decorated with white cockades and which he lent for the occasion to an uptown club of which my brother was the secretary. I was permitted to fill in, so that I saw with my own eyes and was deeply impressed by the crowds that lined the streets and vociferously and heartily, for the first time, gave their unstinted approval of the Germans.

We children did not lose a day in our pursuit of education; for on the very day of our removal to Manhattan, I attended Grammar School No. 18, in Fifty-first Street near Lexington Avenue. At recess-time we boys used to play “tag” on the foundations of St. Patrick’s Cathedral, the construction of which had been stopped during the Civil War. I have very pleasant recollections of my early grammar school teachers, and especially of one who later was for years Clerk of the Board of Education, the efficient Lawrence D. Kiernan, who, while at School 18, was elected to the Assembly as a candidate of the “Young Democrats” and whose talks to us pupils on civic duty seemed like great orations and gave me my first impression of independence in politics.

Nevertheless, I laboured under two disadvantages—one was my English; the difference in structure between my native and my adopted language gave me considerable trouble; so did the pronunciation of the letters w and d, but my greatest difficulty was the diphthong th, and to overcome it, I compiled and learned lists of words in which it occurred and for weeks devoted some time, night and morning, to repeating: “Theophilus Thistle, the great thistle-sifter, sifted one sieve-full of unsifted thistles through the thick of his thumb.” However, as the greatest stress was laid on proficiency in arithmetic, and as I had a natural aptitude for that study, my proficiency there balanced these deficiencies and took me into the highest class at the age of eleven.

It was a general belief that all “Dutchmen” were cowards, and on the playground this idea was acted upon with considerable spirit. I was made the target of many a joke that I took in good part, until I realized that something positive was required of me. Then when a husky lad taunted me with being a “square-headed Dutchman,” and refused my demand that he “take it back,” my fighting blood was roused, and I administered a sound thrashing, the result of sheer, unscientific force. Nothing evokes the admiration of the gallant Irish so much as a good fight, and the result of that battle was the liking of my comrades, and especially one of the leaders among them, John F. Carroll, later familiar to New Yorkers as a leader in Tammany.

About this time I made up my mind to enter City College and, to prepare for that, I began looking about for a school which ranked higher than No. 18. There were a number of these, foremost among which were the Thirteenth and Twenty-third Street schools. I applied at both, but they were full. The next in rank was No. 14, in Twenty-seventh Street near Third Avenue, where they admitted me to the fourth class. I gladly accepted this comparative demotion, so as to utilize advantageously the two years remaining before I reached the college-entrance age, began my studies there in March of ’68, under Miss Rosina Hartman, a fine old spinster and a good teacher, and finished both her class and the third class before I was twelve.

I was hardly settled in my seat in the second class when the following incident took place:

Mr. Abner B. Holley, who taught the first class, came into the room and complained about the mathematical shortcomings of the boys just promoted into his care; he explained that in his method of teaching arithmetic, it was essential to have someone for leader, as a sort of spur for the pupils. He gave us fifteen examples: speed and accuracy were to be the tests; and the boy who solved them most quickly and correctly was to be promoted. I finished first and handed up my slate. Holley carefully compared my answers with those on his slip and, before any other pupil was ready to submit his work, rapped for attention, and said:

“As these answers are all correct, there is no need of any other boy finishing. Morgenthau wins the promotion.”

Being too young to graduate in ’69, I remained under Holley until June, 1870. He was an excellent instructor, and it required no effort on my part to keep the lead in mathematics. In fact, he took pride in displaying my efficiency, and whenever any trustee, or other visitor, came to school, they would have a general assembly of all the pupils and then he would have me solve promptly some such problem in mental arithmetic as computing the interest on $350 for three years, six months, and twelve days at 6 per cent. Thus, as I required little of my time for what was, to most of the boys, our most exacting study, I devoted all my spare time to improving my pronunciation and mastering the spelling of English which is so hard for a boy not born to the language. I won 100 per cent. perfect marks throughout my second year and when, with about nine hundred other boys, I took my City College entrance-examination, I was well up among the three hundred selected for admission.

I always look back with pleasure on those years in Public School No. 14. Iron stairways, modern desks, and electric lights have been installed since my day; the Irish and German pupils have passed, the Italian tide is ebbing; on the student list Russian, Ukrainian, Greek, and Armenian names now predominate—there is sometimes even a Chinese name to be found. At exercises there, attended by three of my classmates and by Dr. John H. Finley, New York’s Commissioner of Education, I celebrated, in 1920, the fiftieth anniversary of my graduation; I took the 1,900 pupils to a moving-picture show, and commenced my now regular custom of giving four watches twice a year to members of the graduating class; but as I then reviewed the past and looked at the present, I felt that the old spirit had been well preserved and that, whatever the nationality of the children who enter the old school, they all leave it American citizens.

When I left there, I had my eyes longingly fixed upon the City College, but the law was then already my ultimate aim and wages were essential, so I spent my “vacation” as errand boy and general-utility lad in the law offices of Ferdinand Kurzman, at $4.00 a week. In those days little was known of “big business”; there were no vast corporations requiring continuous legal advice, and so the lawyers clustered within three or four blocks of the court-house; Kurzman’s quarters were at 306 Broadway, at the corner of Duane Street.

My early duties were the copying and serving of papers, but the time soon came when, young though I was, I was sent to the District Court to answer the calendar and, occasionally, fight for an adjournment. Stenographers and typewriters being practically unknown, the lawyer would dictate and his clerks transcribe in longhand, make the required number of copies with pen and ink and then compare the results and correct any errors. It was only when more than twenty copies were required that printing would be resorted to.

Such was my existence from June 21st until September 16, 1870. All the while, I tried to further my education. I had joined the Mercantile Library in the previous February. Within a short time, I was attending the Cooper Institute classes in elocution and debating, and later secured instruction in grammar and composition at the Evening High School in Thirteenth Street. I tried to do as much good reading as I could, and I find that my list for 1871 ranges from Cooper’s “Spy,” “David Copperfield,” and “The Vicar of Wakefield” to Hume’s “History of England,” Mill’s “Logic,” and “The Iliad.”

Of my life at City College I wish that I could write more, because I wish I had been privileged to graduate with the Class of 1875. There were 286 of us, and I remember very vividly some of the incidents of my brief stay. The halo of military distinction that encircled the brow of the president, General Alexander S. Webb, is still bright for me, and bright that day when the great Christine Nilsson came to our classroom and sang for us. Of the faculty, Professor Doremus remains especially vivid in my memory; electricity for illuminating purposes was at that time confined to powerful arc-lights; he tried to explain to us the possibility of some inventor some day subdividing the power in one of those lamps so that it could be used to illuminate private houses. Though “stumped” in anatomy and chemistry through my unfamiliarity with the long words employed, I stood well on the general roll and was No. 11. My college career was rudely ended on March 20, 1871, when my father withdrew me and put me to work. His difficulty in mastering the English language and American commercial methods were handicaps too severe for him. He lost most of his original money, and his unreinforced efforts could not support us all.

Early in our occupancy of the Second Avenue house, the back parlour had to be rented as a doctor’s office, and shortly after my mother decided that it was her duty to take in boarders. I cannot speak of my mother as she was during these trials without the deepest emotion. There is nobody to whom I owe so much; there was no debt which so profoundly affected my entire career. In Mannheim her position had always been one of comfort. I had seen her there with good friends, good books, good dramas, and good music; she was the mistress of a commodious house, with a corps of competent servants, in a city with every custom and tradition of which she was intimately familiar; respected by the community, the mother of thirteen children, she was calm, philosophic, considerate of every domestic call upon her, not only supervising our education, physical and mental, but also finding time to add continuously to her own broad culture. Now a complete change had come. She was a stranger in a strange land; most of her friends were new; the city of her husband’s adoption was a puzzle, its manners foreign, its language long almost unknown; there was small time for amusement; there was, on the contrary, the ever-constant and ever-pressing strain of helping, by her own endeavours, to make both ends meet.

All of this deeply affected my young and impressionable mind. I feared lest my mother, who was my idol, and who was so superior in accomplishments and knowledge to the people that boarded with us, might, in the course of her duties, be compelled to render quasi-menial services. Luckily, two things prevented this. On the one hand, her wonderful poise and tact and her extraordinarily sweet nature won so prompt a recognition that the least gentle of our lodgers instinctively became worshippers at her shrine. On the other hand, my sisters, themselves bred to comfort, rivalled one another in a friendly struggle to shield her from every possible annoyance. High-spirited girls as they were, they did not hesitate to assume everything that might in any way hurt her sensibilities, and their devotion and self-sacrifice are among my tenderest memories.

Appreciating how things were at home, I became quickly reconciled to abandoning textbook education, and instead, to plunging into the rough school of life.

The influence of the beautiful spirit of my mother had early given me good ideals and a love of purity, and the ebb of the family fortunes developed an irrepressible ambition to accomplish four things: to restore my mother to the comforts to which she had been accustomed; to save myself from an old age of financial stress such as my father’s; to give my own children the chances in life that were all but denied to me, and to try to attain a standard of thought and conduct consonant with the fine concepts that characterized my mother’s mind and lips.

My experiences were not unique, nor were my high resolves exceptionally heroic; they are found in the life history of most men. Nevertheless, such histories are not often told at first hand, so that what may have been commonplace in the happening becomes interesting in the narration. Forsaking the chronological order of my story, let me look backward and forward in an attempt to present this phase of my mental development.

I was full of energy, and had tremendous hopes as to my future success, which gave me a certain assurance that was often misconstrued into conceit, but which was really a conviction of the necessity to collect religiously a mental, moral, physical, and financial reserve guaranteeing the realization of my best desires.

Accordingly, I pursued a rather carefully ordered course. At the age of fourteen I had taken very seriously my confirmation in the Thirty-ninth Street Temple, and now I formed the habit of visiting churches of many denominations and making abstracts of the sermons that I heard delivered by Henry Ward Beecher, Henry W. Bellows, Rabbi Einhorn, Richard S. Storrs, T. De Witt Talmage, and Dr. Alger, and many others of the famous pulpit-orators who enriched the intellectual life of New York. It was the era when Emerson led American thought, and I profited by passing my impressionable years in that period whose daily press was edited by such men as Horace Greeley, William Cullen Bryant, Charles A. Dana, Henry T. Raymond, and Lawrence Godkin.

There lived with us a hunchbacked Quaker doctor, Samuel S. Whitall, a beautiful character, softened instead of embittered by his affliction, the physician at the coloured hospital, who gave half his time to charitable work among the poor. I frequently opened the door for his patients and ran his errands, and we became friends. I remember his long, religious talks, and how deeply I was impressed by Penn’s “No Cross, No Crown,” a copy of which he gave me. Largely because of it I composed twenty-four rules of action, tabulating virtues that I wished to acquire and vices that I must avoid. I even made a chart of these maxims, and every night marked against myself whatever breaches of them I had been guilty of. Looking over this record for February and March of 1872, I find that I charged myself with dereliction in not heeding my self-imposed admonitions against indulgence in sweets, departures from strict veracity, too much talking, extravagance, idleness, and vanity—a heavy indictment!

The fact is that I had acquired an almost monastic habit of mind and loved the conquest of my impulses much as the athlete loves the subjection of his muscles to the demands of his will. In my commonplace book for 1871 I find transcribed two quotations that governed me. The one is from Dr. Hall’s “Happy Old Age” and runs:

Stimulants ... are the greatest enemies of mankind; there is no middle ground which anyone can safely tread, only that of total and most uncompromising abstinence.

The other is from a sermon of Dr. Channing on “Self-Denial.”

Young man, remember that the only test of goodness is moral strength, self-decrying energy.... Do you subject to your moral and religious convictions the love of pleasure, the appetites, the passions, which form the great trials of youthful virtue? No man who has made any observation of life but will tell you how often he has seen the promise of youth blasted ... honorable feeling, kind affection overpowered and almost extinguished ... through a tame yielding to pleasure and the passions.

I took these warnings very seriously.

How the state of mind engendered by these forces affected me in a purely material way, we shall soon see. From the outset of my business career, when an errand boy in Kurzman’s office, I found myself surrounded by employees, not perhaps more vicious than most, but certainly sharing the vices of the majority. They gave, at best, only what they were paid for, and not an ounce of energy or a minute of time beyond.

I shrank from the possibility of becoming a mere clock clerk and gave all of my best self and held back nothing. I made mistakes, I had my failures from the standard that I had set; but my purpose held fast and I cheerfully pursued the rugged uphill road to success.

CHAPTER III
APPRENTICED TO THE LAW

WHEN I left City College, my father wanted me to become a civil engineer, but a brief experience in an engineer’s office convinced me that I lacked the requisite mathematical foundation, so I gave it up and accepted a position as assistant bookkeeper and errand boy at $6 a week in the uptown branch of the Phœnix Fire Insurance Company.

In September, 1871, I improved myself by securing a $10 position with Bloomingdale & Company, who were then in the wholesale “corset and fancy-goods” business on Grand Street near Broadway. I kept the books and also helped to pack hoop-skirts, bustles, and corsets until the firm’s financial difficulties gave me an excuse for turning my ambition again to the law. I returned to Kurzman’s office, January 16, 1872.

Though Kurzman’s perspicacity could pierce directly through the intricacies of any tangled case, his accounts were shamefully neglected. His check book was his only book of entry—he trusted his memory to keep track of what his clients owed him—so I voluntarily and without informing him arranged a regular system of accounts, and shall never forget his surprise and appreciation when, at the end of the year, I showed him what he had earned and the sources and also the amounts still due him.

The most important branch of his practice was the searching of titles, and this gave me my early taste for real estate. This department was under the able management of Alfred McIntire, who graciously initiated me into the intricacies of his work.

We were then in the midst of a real-estate boom mostly participated in by the recently created middle class. Houses were dealt in almost as freely as merchandise, the only hindrance being the delay occasioned by the searching of titles, which was still confined to the lawyers, as there were no title insurance companies. Contracts would frequently be assigned twice and sometimes thrice, before the great event, “the closing of the title.” Then the various couples involved—the seller, the assignors of the contract, and the final purchaser—would all troop into our offices. The women invariably were the bankers and pulled out their roll of bills and sometimes Savings Bank Books, rarely checks, to consummate the transaction. The moneys invested were seldom taken out of the business, but were mostly the savings of the thrifty housewives. When everything was completed, all adjourned to a neighbouring wine cellar, to be treated to a bottle or two of Rhine wine by the vendor, and frequently I had to go along to represent Kurzman, and as the youngest listen attentively to the real estate stories told with all kinds of embellishments.

Kurzman at that time took as his partner George H. Yeaman, who had been a member of Congress from Kentucky and, more recently, American Minister to Denmark, and subsequently became a lecturer at the Columbia Law School. His native Southern chivalry had been polished by his experience at the Danish court; he was a man of splendid education and wide culture. I was fortunate in being chosen to take his dictation. I was amused in 1916 when, as Ambassador, I visited Dr. Maurice Francis Egan at our Legation in Copenhagen, and looked through the records made by Yeaman in 1865 while he was the head of that Legation.

My private life I continued to order along the lines that I had laid down for myself. I would get up at 6 A. M. and go to Central Park. Then if I had not exercised at home, I would take a long walk; otherwise I would sit under the trees and read. The hour that the horse car consumed in wending its way from the Park to Duane Street I would devote to my books, and I was so thrifty that I did not even buy a newspaper. I kept myself so busy that I did not even see one, until, going home for the night, I unfolded and read such as had been left in Kurzman’s office during the day.

Thrift was, indeed, a necessary virtue. I had left commerce for the law at something of a sacrifice: in 1872, my accounts, which I kept scrupulously all this while, bear evidence of how careful I had to be of my scanty income. “Carfare, 10 cts.; Dinner, 15 cts.; Sundries, 2 cts.” That is a typical day’s expenditure.

No man that lived through the Panic of ’73 can ever forget it and on me it made an indelible impression. At the root of the trouble was railway over-expansion. The successful completion of the Union Pacific in 1869 caused the projection of many other roads. Jay Cooke launched the Northern Pacific; Fisk and Hatch, the Chesapeake & Ohio; Kenyon, Cox & Co., the Canadian Southern. The eminent New York banking concerns floated the bonds; the large rate of interest promised—N. P. paid 8½ per cent.—attracted buyers, largely clergymen, school-teachers and small professional men—and prices advanced until optimism bordered on hysteria. Issue followed issue. Then, in the May of ’73, a panic on the Vienna Bourse stopped European consumption and threw back on the New York financiers obligations that strained their credit. Early in September, after one unfortunate bank-statement followed on the heels of another, call-money was at 7⅙ and commercial paper at from nine to twelve per cent.

Minor failures were numerous in the week of September 8th. Kenyon, Cox &. Co. failed on the 13th; the Eclectic Life Insurance Co. on the 17th. On the 18th, the big bolt fell; word ran round that Jay Cooke & Co., in many respects the greatest house of its time, was tottering. This news greatly startled Kurzman, who had been a persistent purchaser of Northern Pacific bonds. “On the floor of the Exchange,” said the Times, “the brokers surged out, tumbling pell-mell over each other in the general confusion, and reached their offices in race-horse time.” Those were not the days of telephones; when the panic-stricken men had got their orders, they ran back to the floor, on which absolute confusion reigned. Men shouted themselves hoarse, contradicted themselves and collapsed. A moment was enough to ruin many a dealer. Any one with money to lend was beset by a mob of lunatics. Almost immediately the effect was felt all the way down the financial line; smaller companies went the way of the big ones and many of the smallest were tottering after the smaller.

That week I took as usual all that I could spare from my scant salary and went, according to my custom, to the German Uptown Savings Bank to deposit it along with the little fund that I was laboriously setting aside. There was a big line of confident depositors bent on similar errands; many were ahead of me, and waiting my turn, as I looked into the teller’s cage, I saw the president of the bank in a very earnest conversation with three other men. Of course, I could not hear what they were saying, but I thought the president seemed worried, and that those with him also showed uneasiness.

I turned my head to find that the shuffling line had brought me before the window that was my goal. The clerk behind it was both a receiving and a paying teller. On a sudden impulse I thrust my dollar bill that I intended to deposit back into my pocket, presented my pass-book, and told the clerk that I wanted to withdraw the entire $80 that was to my credit.

Three days later that bank closed. The other depositors ultimately got about fifty cents on the dollar.

The real estate market had been as badly inflated as the stock market, and foreclosures were the order of the day. Properties like the block bounded by Park and Madison Avenue and Seventy-first and Seventy-second streets went under the hammer. John D. Crimmins and his father had paid $475,000 to James Lenox, who repurchased it for $374,150 at the foreclosure sale under the mortgage. Equities disappeared like the snow in spring-time. Where we had once been almost rushed to death with the drawing of mortgages to consummate the many sales, we were now hard pressed to keep pace with foreclosure proceedings.

I took charge of this work for Kurzman, who gave me 10 per cent. of the net fees; the commission was most acceptable, the experience invaluable, but a more depressing task it has never been my lot to perform. The proud and prosperous men that had been our best clients from 1871 to 1873 now returned to shed their wealth and, with it, their self-reliance. One who had owned eight or ten houses was reduced to borrowing $100 from Kurzman for temporary relief. I made up my mind never to “plunge”; if I had not lived through the Panic of ’73, I should to-day be either many times richer than I am or, what is far more likely, penniless.

The bad light in the Kurzman offices had injured my eyes, and, just after the panic had subsided, my doctor ordered a sea trip. I sailed on the barque Dora for Hamburg—thirty days for $35, and no extra charge for the excitement that was thrown in.

We were undermanned and underprovisioned. The first mate was ill when we set out from Jersey Flats; because of that, two of the crew had deserted, leaving only eight men aboard. There was no doctor among these, and the Captain and I read a thumbed work on medicine that adorned his cabin, studied the remedies that it suggested, and nearly emptied the medicine chest in trying to cure the poor fellow, who lost sixty pounds under our ministrations and, at the voyage’s end, went home with his disease still undiagnosed.

Meanwhile, the crew were dissatisfied on account of the extra work forced on them by the inactivity of the mate and the absence of the deserters, and also with their rations. They won the second mate to their side, and, on a day of storm when they declared themselves too few to handle the sails, he led something like an old-fashioned mutiny. They crowded toward the Captain.

“Run and get a pistol!” he whispered to me.

I obeyed. As I returned and slipped him the weapon, the mutineers were just coming to a pause before him.

The Captain levelled his pistol. He made short work of the difficulty. He offered them cold lead or hot grog. The crew, like sensible men, chose the latter, but they continued to grumble at the food—which was mostly hard-tack and cornmeal—until, on a day when we were becalmed in the North Sea, we caught several dolphins weighing over 150 pounds. I have rarely eaten anything better than that dolphin steak.

This is not to be a record of travel, but one phase of that early journey of mine is well worthy of notice: I saw Germany just as she was entering on the imperialistic career that ended so abruptly when her crestfallen representatives signed the Treaty of Versailles. The Franco-Prussian War had just ended in triumph; the German Empire had been reborn. Its people were not the easygoing people that I remembered from my earlier boyhood in Mannheim. Everywhere there were the beginnings of commercial and military activity; everywhere there was preached the doctrine of world power.

I passed several weeks at Kiel; I lived well on less than a dollar a day. I had some difficulty in becoming friendly with a pensioned wounded army captain because he held me personally responsible that American ammunition had been sold to the French. The same complaint was made to me by the German Ambassador, Baron Wangenheim, in Constantinople, in 1915. I saw the launching of the new Empire’s first battleship, the very beginning of that colossal preparation for war which, at the cost of so many millions in lives and money, was finally to bear its bloody fruit in 1914. A wrinkled old man wearing a small military cap made the speech on that occasion. It was the famous General von Moltke. I listened intently to what he said. His words reached everyone in that crowd, which was attentively listening to the great hero of the Franco-Prussian War; and when I looked into his piercing eyes, I found that they seemed to penetrate right through me, and I could understand the frequently made statement that officers used to quiver in his presence, and that his questions, accompanied by one of his fixed looks, always elicited the exact truth.

On my return to America, I entered the law office of Chauncey Shaffer, who was a leader of the New York Bar and had a nation-wide reputation. He had been retained in many important cases, and some romantic. His offices were first on the third floor in an old-fashioned private house at No. 7 Murray Street, and later, he moved into the Bennett Building, one of the city’s first modern office buildings.

In our new, well-lighted quarters, we had some interesting neighbours, and these, along with many another, were constantly dropping in on Shaffer. I still recall with pleasure my acquaintance in those surroundings with Gildersleeve and Purroy, with Butzel and Bourke Cochran.

Henry A. Gildersleeve had been born on a farm in Dutchess County, and in early life was the handiest man with his fists in all that district. In the Civil War he organized a company and was elected a captain. He returned from that to complete his education and become a lawyer, but he became a crack shot, too, at the international rifle matches; and when he first visited Shaffer’s office, it was as an Apollo of a man with romance in every feature of his face and every particle of attire.

He was offered by both parties the nomination as Judge of General Sessions and came to consult Shaffer about it. I was in the room at the time.

The scene is still vivid. Shaffer never forgot his Napoleonic pose when there was anybody present to observe it, and now he moved about with one hand under his coat tails and the other thrust into his breast. The harder he thought, the harder he chewed his tobacco and the more frequent were his expectorations. Finally he stopped short in front of Gildersleeve, who had been waiting patiently for this queer oracle to speak.

“If you have to go down in this fight,” Shaffer said, “go down in good company: take the Fusion nomination.”

Gildersleeve accepted that advice. He remained on the bench until he was seventy years of age. He is in his eighties now and as keen of intellect as in those far-off days when he used to visit Shaffer. He is still one of my favourite golf companions.

On many Saturdays we did little work; the coterie met in Shaffer’s office, and we talked; it would be nearer to the mark to say that one of us talked and entertained the others by his endless flow of good stories and sparkling reminiscences. He was a student under Shaffer, and his name was Bourke Cochran. I never saw him poring over Blackstone or Kent, but on Saturday when freed from his duties as principal of the Public School at Tuckahoe, this exuberant young instructor would either practise his future orations on us or pour out his flood of Cochranisms and anecdotes. Not getting my name at the first meeting, he dubbed me “Mortgagee” and still calls me so. He thrilled us with the account of his early struggles at Dublin University, roused our enthusiasm by his plans to restore oratory to the New York Bar, and evoked our applause by his determination to Patrick Henryize the Assembly at Albany. The Democrats promised him a nomination to the Assembly, but withdrew the promise when they discovered that he was not yet twenty-one.

It was while at Shaffer’s that I began to find out how human great men really are. The names of Benjamin F. Butler—the redoubtable Butler of Massachusetts—and Preston Plumb of Kansas used to move me to awe. One of my employer’s important cases involved some grants of land to the Atchison, Topeka, and Santa Fe Railroad and was brought by John Leisenring, of Pennsylvania, whose attorney-of-record, Congressman-at-large Charles P. Albright, of the same state, had, in addition to Shaffer, associated with him in the affair, Butler and Plumb. The latter used to dash into our office without a necktie and then chafe at the former’s unpunctuality and indifference in the matter of keeping appointments.

“It’s all very well for Butler to behave like this just now,” he would say. “Wait a few more years. Then he will still be a mere Congressman, while I’ll be a United States Senator! We’ll see who’ll kowtow to the other then!”

Although Plumb was elected to the Senate not long after and served there many years, I did not hear of Ben Butler doing any kowtowing.

In the summer of 1875 I felt that obtaining a knowledge of the law in this scrappy, unsystematic fashion was unsatisfactory, and that, therefore, I would leave Shaffer’s employ, attend Columbia Law School to get a thorough grounding of the law, and arrange for future easy access the odd bits of legal knowledge that I had absorbed in the offices. As I needed an income to enable me to do this, I secured a position as night-school teacher at $15 a week in the school on Forty-second Street near Third Avenue.

At that time Forty-third Street had not yet been cut through, and on top of the rocks was a shanty-town occupied by squatters. As I had the adult class, my pupils were from eighteen to forty-five years old, some of them denizens of the rocks, while others were hardworking carpenters, brakemen, butchers, factory workers, a plumber’s assistant, a coachman, and a blacksmith.

I particularly remember the latter three, because the plumber’s assistant came to the school to inveigle some of the other boys to play cards with him in one of the rear seats, and to amuse himself by throwing tobacco quids and beans while I, with my back turned to the class, would be engaged in explaining things on the blackboard. I was nineteen years of age, husky, weighing 180 pounds, and unafraid even of a plumber’s boy. As my weekly stipend of $15 was my sole support and its retention depended upon my being able to maintain discipline and keep up the attendance, I was not going to permit this loafer’s antics to defeat me—and one evening when I caught him playing cards, I forcibly ejected him from the classroom. Thenceforth my tenure of office was assured and continued to the closing day exercises, at which I had the pleasure of rewarding the coachman, Morgan O’Toole, with a prize for the greatest advancement made by any pupil. This man was very anxious to learn fractions. During the first three weeks of the session, every Friday evening I had succeeded in teaching them to him. Every following Monday evening his mind was an absolute blank as to fractions, and the fourth week I asked him to come to my house both Saturday and Sunday, and gave him private lessons. His joy on the next Monday when he found he had retained his knowledge is still a vivid memory in my mind.

The blacksmith, a man named Whitney, had been a fellow pupil of mine in Fifty-first Street School, and had been one of the best penmen. I was surprised to see him come to reacquire that ability, which he had lost through wielding the hammer and pulling the bellows.

One of the carpenters wanted to learn duodecimals. As I knew nothing about them, I told him that I wanted him to brush up on ordinary fractions for two days. In the meantime, I learned duodecimals and then taught him.

It was really a great experience to divide impartially two hours every evening so as to satisfy the twenty-five earnest seekers after knowledge.

I deeply sympathized with these men who, wearied from their day’s labour, preferred to forego needed rest or amusement and devote their evenings to extricate themselves from the ignorance in which they had been compelled, probably through poverty and the early need of self-support, to live the better part of their existence.

It spurred me to still greater efforts to increase my own knowledge and I was no longer content merely to perform my allotted tasks at the Law School, but spent several hours a day at the Astor Library and drew deep drafts from that fine well.

During that period I devoted all the daylight hours to study, principally at the Law School, sitting in the midst of these hundreds of men who had come from all parts of this country and Japan, to imbibe from the lips of this great teacher, Professor Theodore W. Dwight, the basis of the law of the land.

I joined the Columbia Club and was elected one of the team to debate with the Barnard Club, all of whose members were college graduates, while we had not had that advantage. I studied the subject of the debate, “Whether Participation in Profits or Agency Is the Correct Test of Partnership,” more thoroughly than I ever did any case on which I was retained during my practice of law. Professor Dwight, who presided, praised our thorough preparation and fine team work and declared us the winners. When our class graduated, we had the great honour of having that famous leader of the Bar, Charles O’Connor, come out of his retirement to bid us “Godspeed” on our way.

I was formally admitted to the bar on June 1, 1877.

During my second year in Law School I did not teach night school, but supported myself by accepting a position from that fine Southern gentleman, General Roger A. Pryor, who had been Congressman, Minister to Spain, and finally became a Judge of the Supreme Court of the State of New York.

An interesting episode that occurred at that time was my representing General Pryor at several meetings of the owners of the Greenwich Street property, who had retained him to seek an injunction to prevent the continued use and extension of the first Elevated road, which was on their street and was propelled by a chain. They claimed that their property would be ruined for private residences, and it was. They did not visualize, however, that this was the first step forward in the solution of the transit problem of New York, which was then totally dependent upon its horse-car system; and that someone had to suffer for the general good.

A very important and valuable after-effect of my connection with Pryor’s office was my becoming acquainted with Mr. Valentine Loewi, for whom I searched the title in a mortgage transaction. Loewi doubted my experience and when Pryor confronted me with this, instead of resenting the criticism, as Loewi expected me to do, I recognized its justice, and satisfied Loewi by having my work checked up by Mr. McIntire. He became my permanent friend and one of my firm’s first clients, and through his recommendations we secured some of the most valuable clients we ever had.

A little later came the uproar consequent upon Tilton’s entering the wrong berth in a sleeping-car. He came to Pryor, and I acted as secretary while these two prepared the Tilton statement for the newspapers. Curiously, both these six-footers had the habit, when thinking intensely, of striding across the room with swinging arms, and were that day doing it in opposite directions. I was constantly on the alert for a collision. Tilton would dictate a phrase. Pryor would stop and suggest another word. Tilton would weigh and test it, and would make still further corrections. Not even my weightiest diplomatic notes from Constantinople received the care and attention that these few lines were given by these two masters of English.

In the summer of ’77, as Mr. Kurzman was going to Europe, he requested me to come back to Kurzman & Yeaman, and as they offered me a well-lighted office, I did so. Still associated with Kurzman was Alfred McIntire to whom I have already referred, and with whom I had kept up the pleasantest of relations during my clerkships with Shaffer and Pryor, both of which positions he had secured for me. McIntire was a New Englander of the very best type, considerably older than Mr. Kurzman, and recognized as one of the best conveyancers of the City of New York.

One Sunday while I was visiting McIntire, we went rowing on the Harlem River, and discussed plans for a prospective partnership. He was about six foot two in height, and weighed fully 250 pounds, and I was to do the rowing. Our skiff had not proceeded fifty yards before I discovered that I could not pull such a load and get anywhere. I took this as an omen, and then and there resolved that when I did select a law partner, he should be of my own age and weight, so that he could do some of the pulling.

During this summer, one of the old clients of the office, Henry Behning, got into very serious differences with his partner Diehl. The matter became greatly complicated, and the more complicated it became, the more excited Behning grew, and the more excited he was, the more incoherent and less comprehensible was his English, so that Mr. Yeaman, who was acting as his counsel in Mr. Kurzman’s absence, despaired of understanding him. A climax was reached one day when Diehl’s attorneys had secured the appointment of a receiver. Behning was accusing the lawyers, and the judge, and everybody else of all kinds of conspiracies, and Yeaman was so bewildered that he called me in to tell Behning that he did not think he could do justice to him because he could not understand his speech, and that he had better secure a German-speaking attorney. Upon my explaining this to Behning, he said: “All right, I’ll take you.” I explained the proposition to Mr. Yeaman, and he said that if Behning would be contented to do all his consulting with me he would be very glad to steer the legal proceedings. I discovered that some of Behning’s fears of conspiracy were justified, and concluded that the only way to counteract them was to throw the firm into bankruptcy. I prepared the necessary papers, and had them signed by the judge of the United States District Court. I then communicated with the pompous ex-judge who represented Diehl, and had the tremendous satisfaction of having completely checkmated him. A prompt settlement resulted. The creditors realized that if they kept on fighting, the lawyers would be dividing the assets, and therefore consented to have Behning and Diehl divide them, and each continue in business for himself, and each assume half the liabilities.

Behning greatly appreciated what I had accomplished. He wanted to give me something to prove it. As he had no spare cash, he offered, and with Yeaman’s consent I accepted, one share of the Celluloid Piano Key Company stock. At that time, Arnold, Cheney & Company had cornered the word’s ivory market, driving up the price of ivory for piano keys to $30.00 a set. The piano manufacturers tried alabaster and other substitutes with small success, when Behning thought of using celluloid and formed the Celluloid Piano Key Company, securing for it the exclusive right for the use of that substance in piano and organ keys.

The company was so successful that its president began to intrigue for its control. The president was an Englishman, the treasurer a Dane, the secretary an American, and most of the rest Germans. Themselves densely ignorant of the manipulations of corporations, they finally feared that the president was in a fair way to get the company away from them, whereupon those representing over 70 per cent. of the stock held a hurried meeting, but they could not agree on a common policy because each mistrusted the others. I proposed that they all give their proxies to one man who should obligate himself faithfully to represent the interests of all against the president; they replied that this was excellent, but they could not agree on the one man.

Then Behning spoke:

“What’s the use of fencing any longer? The only one we all trust is Henry. Let’s give him all our proxies.”

They did so, slated me for secretary, and as I wanted to prevent any mischief until the next annual meeting, I called on the president, told him I had the proxies of 70 per cent. and, with the audacity of my years, warned him that, if he did anything improper for the remainder of his term, I would bring him into court.

He asked me:

“Are you going to be an officer?”

“I am to be secretary,” I said.

“Will you protect my interest, and see that I get my proportionate share of the profits?”

I went back to the others and obtained the authority to give him this assurance, which I did.

“All right,” he declared, “make out my proxy to you and I’ll sign it.”

I had bearded a lion in his den and brought a lamb out with me. My connection with this concern, in one capacity or another, continued through two decades, and I was its president when I left it.

This adventure in celluloid put me in a position where it was possible to realize my ambition to stop clerking and start for myself.

It was settled most unexpectedly. During my attendance at Law School, Abraham Goldsmith, Wilbur Larremore, son of Judge Larremore, and I used to hold weekly quizzes at my house. In that way I had renewed my friendship with Goldsmith, who had been my classmate in the City College. One evening, early in December, 1878, Goldsmith called and informed me that Samson Lachman and he contemplated starting a law firm. I had always been very fond of Goldsmith, and Samson Lachman had won my unlimited admiration when I listened to his Commencement Day oration and saw him receive eleven prizes, which were about all that one man could take. Hence, Goldsmith found me very receptive, and before we separated that evening, our partnership was an accomplished fact. We both agreed that Lachman was entitled to head the firm. As Goldsmith expressed indifference as to his position, and as Lachman, Morgenthau & Goldsmith sounded more euphonious, that order was adopted. We agreed to start on January 1, 1879. Our average ages were twenty-three. We hired offices at No. 243 Broadway at an annual rental of $400. Our net receipts for the year 1879 were $1,500.

Our practice, as well as our income, grew steadily, but I shall abstain from relating many details, as most of the matters involved were not of public interest.

A rather interesting affair, because some of the participants are well known to the public, was the dissolution in February, 1893, of the firm of Wechsler & Abraham, of Brooklyn. We represented Wechsler, and William J. Gaynor, afterward Mayor of the City of New York, represented Abraham. Their partnership agreement contained a very peculiar dissolution clause. They were to meet on February 1, 1893, and bid for the business, and a bid was to be final only if the non-bidding partner had failed to increase it during a term of twenty-four hours. When we met, I drew attention to the fact that if we acted under the contract, either side could prolong the matter indefinitely, and recommended that we amend the agreement by reducing the limit to one hour. This was agreed to on condition that both parties would deposit $500,000 as an earnest of their intentions to complete their bid, the unsuccessful bidder to have his check returned to him. Isidor Straus pulled out a certified check of $500,000 and I instructed Wechsler to make out his check. When Wechsler admitted that he did not have that much in the bank, I showed them an underwriting that I had secured from the Guaranty Trust Company and the Title Guarantee & Trust Company, to finance our purchase to the extent of $1,000,000. The auction then proceeded, and both factions were cautiously watching each other. Gaynor, Abraham, and the Strauses several times retired to the other end of the room for conference, Nathan Straus constantly pulling at one of his big cigars and pretending that they had about reached the limit of their bidding. I had arranged definitely with Wechsler that we would bid an amount that would produce $500,000 for the good will of the business. So, finally, when they came within reach of about $100,000 of it, I bid the exact amount that would produce the desired result. They saw what I meant, and, as it turned out, had their last conference, which lasted about ten minutes, and raised us $100. I then informed them that we would take our hour. We (Wechsler, Mr. MacNulty, who was the manager of the store, and myself) went to an adjoining restaurant to discuss the matter. Wechsler devoted fully forty minutes of the hour in trying to persuade me to reduce the fee that he had agreed to pay me. He and I had agreed that if he purchased the property, and we had to complete the financing of it, my firm’s fee was to be $25,000, while if Abraham bought him out, we were to receive $10,000. Wechsler thought we had earned it too quickly, and begged for a reduction. I was absolutely firm and finally told him the story of the dentist who, with his modern methods, had painlessly extracted two teeth for a farmer in two minutes, and when he demanded his fee of $2.50, the exorbitancy of the charge was objected to by the farmer, who stated that when he had his last tooth extracted, the dentist had pulled him around the room for half an hour, and then only charged him 50 cents for all that work. I said to Wechsler that I could have protracted this matter for thirty days, and this delay would have been most injurious to him on account of his diabetic condition. He wanted me to bid another $10,000 so that Abraham would have had to pay the fee, and he would have a net $250,000 for his good will. I was firm in my advice that he was unwise to run the business alone and should not risk securing it. We returned before the hour had expired, got Wechsler’s check back, and his half interest in the business became the property of Isidor and Nathan Straus, for whom Abraham had in reality been bidding. Immediately thereafter they dropped Wechsler’s name and created the well-known firm of Abraham & Straus.

Incidentally it may be of interest to the public to know that, when Isidor and Nathan Straus divided their interests, Isidor and his sons secured the business of R. H. Macy & Co., which they owned in common, while Nathan and his sons secured the half interest in Abraham & Straus. No doubt a good share of Nathan Straus’ munificent charities are financed to-day by his share of the profits from that business.

One of the greatest surprises in our practice was when Judge Horace Russell retained me as a business lawyer to advise him what to do about the affairs of Hilton, Hughes & Company, who had succeeded to the business of A. T. Stewart & Company, and who, in turn, were later succeeded by John Wanamaker. Judge Russell’s brother-in-law, Mr. Hilton, had been increasing the volume of the business rapidly, but his expense ratio was increasing much faster in proportion, so that, at the end of the year, he showed a tremendous loss. Some of the biggest banks in New York were refusing to renew the notes, even though Judge Hilton was willing to endorse them. They said they felt safe on all the paper they had then with Judge Hilton’s endorsement and collateral, but they feared that if they permitted the losses to continue much longer, it might even engulf Judge Hilton in the unavoidable catastrophe. I finally advised him that he should sell out the business and take his loss. He retained Mr. Elihu Root as counsel. The three of us went over the whole situation. I explained that, owing to the very large general expenses due primarily to the excessive salaries which Hilton had agreed to pay under five-year contracts to his buyers, heads of departments, and even the superintendent of the engine room, and the bad credit in which the firm then stood, the only wise course was to sell out the business. We concluded to do so, but in the meantime decided that it would be necessary to make a general assignment to preserve the assets and secure a reasonable settlement with the men who held long contracts. When the assignment was finally prepared, it had to be executed the following day, and Root, Russell, and I first dined together, and then remained in Russell’s office until five minutes past midnight, when young Hilton, in our presence and that of Mr. Wright, the assignee, and a notary, executed the document.

While waiting, Mr. Root told us of several cases in which he had recently been retained, where the younger generation dissipated big fortunes in a very short time. He laid particular stress on the case of Cyrus W. Field, who, in his lifetime, prided himself that he had an income of $1,000 a day, which at that time was enormous. I also recall Root telling me that night that it was unwise for any lawyer to devote himself entirely to politics, that he should, when called upon, render a public service, complete it, and then return to his profession, but be ready for any further calls that might be made upon him. Root has pursued that course most successfully.

I felt a strange sensation to be present at this midnight dénouement of the great business of A. T. Stewart & Company. I could not help but think of the causes. Judge Hilton had offended the Jews in America because his hotel, the “Grand Union” in Saratoga, had refused to accommodate Joseph Seligman, whom both the New York Chamber of Commerce and Union League Club honoured by electing as one of their vice-presidents. Hilton did not then realize that this act not alone involved the loss of his Jewish customers, but it would also influence a great many of his Christian patrons who would resent such discrimination, and withdraw their custom from his firm. Most of this trade went to the rising firms of B. Altman & Co. and Stern Bros. and so strengthened them that they became great competitors of Hilton, Hughes & Company, and precipitated their downfall. John Wanamaker bought the lease and stock of goods. I remember distinctly with what satisfaction, when the transaction was closed, he told me that this was the first time that he had ever heard of so valuable a franchise being given away for nothing. Wanamaker shrewdly disregarded the short existence of Hilton, Hughes & Company, and advertised John Wanamaker as the successor of A. T. Stewart & Company.

CHAPTER IV
REAL ESTATE

MY first purchase of real estate was No. 32 West Thirty-fifth Street, a twenty-two-foot, white marble, high-stoop building. I bought it for the modest sum of $15,000 and resold it at an advance of $500, and thought I was doing well. To-day it is worth at least $110,000. This, however, was not my first experience with real estate, for that was in 1872 when, at the request of my preceptor, Mr. Ferdinand Kurzman, I undertook for an extra compensation of $5 a month to collect for him the rents of No. 218 Chrystie Street.

The tenants of this building in 1872 were Irish and Germans, and one of the stores was occupied as a saloon by an Irishman named Ryan who catered to the worst element of the neighbourhood. Kurzman, failing to get rid of him in a peaceful way, and knowing that there was a political feud between him and Anthony Hartman, the odd though popular Justice of the District Court, waited for the first of May, when only a three-hours’ dispossess notice was required. Circumstances favoured the plan because on that day the Thomas Ryan Association were giving a picnic. So the notice was served by nailing it on the door at twelve o’clock. Judge Hartman opened court at three o’clock, called the cases of Kurzman vs. Ryan, took Ryan’s default, signed the dispossess warrant, and adjourned the court, compelling all other litigants to wait for their justice until the next day. Instead of the usual one marshal, all those attached to the court, with their assistants, were hurried to No. 218 Chrystie Street, and within two hours had removed everything to the sidewalk.

By that time word had reached Ryan, and he and some of his henchmen returned. They were thoroughly aroused but quite helpless. As there was no court in session, and the marshals were in possession of the premises, Kurzman was rid of Ryan for good and all. This was the first exhibition I ever saw of how justice might be travestied.

The next day Ryan’s attorneys appeared before Hartman and attempted to have the proceedings reopened, and upon Hartman’s refusal to do so, attacked him bitterly. The Judge said that if the learned counsel would not at once stop his impudent remarks, the court would forget its dignity long enough to leave the bench and “punch him in the jaw.”

My next experience brought me in contact with even a worse element. Kurzman had foreclosed a second mortgage on some houses on West Thirty-ninth Street between Tenth and Eleventh avenues. They were part of the block that was called “Hell’s Kitchen.” Many of the tenants owned only a mattress and a few chairs, and no kitchen utensils of any kind, and frequently paid their rents in instalments of less than one dollar. Twice I saw women carried out of the buildings the worse for the “exciting arguments” they had indulged in with some of their visitors. It would not have paid us to dispossess these people, as the new ones would have been no better. We collected the rents for a few months longer until the first mortgages were foreclosed.

This condition was very general throughout the City of New York. The boom days of real estate had disappeared, and with them, the optimistic speculators. Real estate was unsalable, and those who had received mortgages in payment of some of their capital and all their profits were confronted with the choice of either abandoning their mortgages or foreclosing them and again assuming control of their property. The conferences between the delinquent owners and the mortgagees to adjust these matters reminded one as much of funerals as the joyous meetings in the wine cellars had of weddings. These middle-class investors whom I met in ’72 and ’73 were completely wiped out and never came back. Quite the contrary was the case with most of those intrepid builders and operators like John D. Crimmins and Terrence Farley, who forgot their losses and went at it again with fresh vigour and new courage as soon as the liquidation had ended. In 1879, when specie payment had been resumed, the superintendents of both the insurance and bank departments urged institutions under their supervision to market their real estate as soon as possible. Their efforts and those of other recent plaintiffs to dispose of their holdings started a new active period. Real estate again became fashionable, and the plucky operators and builders who had survived the drastic punishment they had received were soon reinforced by a new set of men, of whom I was one.

In 1880, I turned my attention to Harlem where nearly all the brownstone and brick houses that had been built in the seventies were in the hands of mortgagees, and where the owners of the old frame houses were thoroughly discouraged and could see little hope in the future. Nearly all of Harlem was for sale. I bought plots of three to five adjoining houses at a time, and quickly resold them at small profits. This activity stopped when President Garfield was shot. The suspense during his illness caused a complete cessation, so I, too, rested until October, 1885. I was then worth only $27,000, and as a large part of that was represented by my interest in the Celluloid Piano Key Company, I had but little working capital.

My brother-in-law, William J. Ehrich, agreed to operate with me in real estate, he to contribute $40,000 capital and I to do the work. All profits, after paying him interest, were to be divided equally.

At that time my mother lived on One Hundred and Twenty-sixth Street in a house I had purchased, a 17-foot brown-stone house with a pleasant yard which she personally transformed into a delightful little garden. In my frequent visits there I became impressed with the prospective importance of One Hundred and Twenty-fifth Street. It was the first broad street north of Forty-second that ran from river to river, and I foresaw its future value, particularly of the block between Seventh and Eighth avenues. It seemed to me like the neck of a funnel into which the entire neighbouring population was daily poured to reach the Elevated station at One Hundred and Twenty-fifth Street and Eighth Avenue.

Ehrich and I concluded to secure some property on this block. The first that we obtained was the lease of seven lots for which, at the beginning, we paid the annual rental of $4,000. We still own this leasehold, and the gross rental now is $44,500. We subsequently purchased the adjoining plot of five lots, improved the same, and were delighted when we were enabled to sell it to the Knickerbocker Real Estate Company among whose stockholders were Solomon Loeb, of Kuhn, Loeb & Company; Henry O. Havemeyer, John D. Crimmins, and John E. Parsons, at a price which netted us a profit of $100,000. This was in 1899. Subsequently, I repurchased this plot jointly with my partners, Lachman & Goldsmith, for $250,000, and within two years thereafter sold it to Mr. Louis M. Blumstein for $425,000. This was the most profitable, but not the only transaction we had on this street. With various associates I owned, at one time or another, one half of the property on the south side of that block, so that I made good use of my early judgment as to its future value.

Our operations on One Hundred and Twenty-fifth Street were not confined to that block alone. We had also purchased various plots between Fifth and Sixth avenues and, with a friend, I had collected a plot of eight lots between Lexington and Fourth avenues. This made Oscar Hammerstein one of my customers.

One day the optimistic Oscar came into my office with his serious, flat-footed walk, his French silk hat on his head, and his eternal cigar between his fingers. He had just completed the Harlem Opera House on West One Hundred and Twenty-fifth Street, and he told me that, for his success there, it was essential to have also a theatre on the East Side, and he negotiated for the eight lots that we had collected on One Hundred and Twenty-fifth Street near Park Avenue. We spent several hours arranging the details of the lease of our property, with privilege to buy, which was what he wanted. He argued me into giving it to him on a 4 per cent. basis while the building was being constructed. When he was all through, I said:

“Do not think that you have deceived me as to your real aim. You want to secure this property and pay down as little as possible until your building is completed! All of us who own property on One Hundred and Twenty-fifth Street between Seventh and Eighth avenues greatly appreciate the fine theatre you put there, and the consequent increase in the value of our property, and I am therefore willing to help you make this enterprise a success. I will at once give you a deed, and as there is no broker in the transaction, you need only pay the equivalent of six months’ rent on account of the purchase price.”

Hammerstein gratefully accepted the offer and, subsequently, told me how he financed that entire operation without any capital. He struck a sand-pit and saved all costs of excavation, besides realizing over $30,000 for the sand. That furnished him nearly all the cash for the building.

A little later Hammerstein got into difficulties about an office building next to the Harlem Opera House. He wanted to borrow $25,000 on a second mortgage. He practically put a pistol to my head, and said:

“You folks must lend me this money, or I can’t finish the building—and that will force me into bankruptcy.”

I looked at him and saw not the optimistic Oscar, but the harried Hammerstein. He went on:

“You don’t know what that will mean. If I go into bankruptcy, the Bank of Harlem will also have to go. I owe them over $50,000 and they have agreed that, if I can finish the building, they will buy it from me, giving me back my notes in part payment.”

“But that bank,” I protested, “has only $100,000 capital! How could it lend you $50,000?”

“One day,” he said, “as I was seated in my little office underneath the steps of the Harlem Opera House, the president of the Bank broke in, and leaning over my shoulder, handed me a blank note, and asked me, for God’s sake, to make it out to the order of the Bank for $10,000. ‘Don’t ask any questions,’ he whispered, ‘but just do what I want, and do it quick.’ I complied with his request, I didn’t stop to put on my hat and coat, but followed him to the Bank; and just as I expected, there were the bank-examiners!”

He paused in his narrative to give me one of those knowing, piercing looks of his. This was still another Hammerstein: he was the accomplished actor awaiting applause for securing such an extensive and undeserved line of credit from so unexpected a source.

“Does that,” he asked, “explain to you how I could pull his leg?”

The impresario did not then go into bankruptcy. A few of us combined and lent him the money. My activities in Harlem also included the purchase of two solid blocks of lots.

In 1887 Ehrich and I bought from Oswald Ottendorfer the entire block bounded by Lenox and Mount Morris avenues and One Hundred and Twentieth and One Hundred and Twenty-first streets. I induced the Ottendorfers to split the transaction and content themselves with our buying the Lenox Avenue front outright and their giving us an option on the Mount Morris front. This option was sold for $10,000 profit, to Walter and Frank Kilpatrick, and our total profits, which we divided in May, 1887, were $43,424.10. I always remembered the numbers because of the sequence, 43, 42, 41.

Immediately after we had sold the Ottendorfer block we purchased the block to the north, also for $325,000. In this purchase the Kilpatricks joined us. I had a peculiar experience when it came to drawing the contracts. As the Ottendorfers had agreed to take back separate mortgages on every four lots, I wanted the Astors, owners of this block, to do the same. Mr. Southmayd, the partner of William M. Evarts and Joseph H. Choate, attorneys for the Astors, refused to do so, and insisted that we give him one mortgage for the entire $240,000 which they had agreed they would allow to remain on the property. All my pleadings were in vain. He even refused to take back four mortgages on eight lots each, saying that he could not tell which was the most valuable, and we might retain one or two of the plots and forfeit our equities on the rest.

Mr. Southmayd told me that just prior to the Panic of 1857, when farms of 160 acres in Brooklyn were being sold at very inflated prices, an old German truck-farmer was asked what he wanted for his 160 acres. He demanded $50,000, the prevailing price at that time; $35,000 cash and a $15,000 mortgage. When they argued with him that he had reversed the order of things, Hans still adhered to his terms, as he claimed that the property was not worth over $15,000, and when asked why he then insisted on $50,000, he answered, “because you paid that amount to my neighbour Peter for the same size farm.” Southmayd sneeringly added that after the Panic of 1857 Hans got his property back for his mortgage.

I would not submit to being balked by Southmayd. I made up my mind to talk to the famous John Jacob Astor himself.

I had never met him, but he had often been pointed out to me, as, shortly before 9 o’clock, he walked with his son, Waldorf, down Fifth Avenue, from their home to their office in Twenty-fifth Street. Astor was a portly figure with impressive side-whiskers. I watched for them and followed them to their office and asked for an interview. My plain statement of facts made no apparent impression on them. I tried again: I told Southmayd’s story of Hans: a smile broke the severity of the elder’s face.

“Mr. Astor,” I concluded, “you must admit that it’s unfair to your property to compare the Harlem of to-day with the Brooklyn of 1856.”

“You’re right,” said Astor. “You make me a proposition of what relative values you put on the various plots, and what will be the amounts of the separate mortgages, and I will have it checked up.” I submitted my figures and they were accepted without any change. The mortgages were paid long before they were due, as all the property was promptly improved. I believe this was the first time that the Astors broke away from their policy of not selling any of their holdings.

While these activities were going on in Harlem, a great many builders had erected rows and rows of private houses on the West Side, principally between Central Park West and Amsterdam Avenue, so as to be adjacent to the Elevated roads. In 1887 and 1888 there was a considerable slump, and over three hundred new private houses were unsold and unoccupied. Everything looked very gloomy. All of us who were interested in the West Side were terrified when an announcement came that there would be an unrestricted auction of the Joshua Jones Estate on Seventy-fourth and Seventy-fifth streets from Central Park West to within a few hundred feet of Amsterdam Avenue.

Ehrich and I attended the auction, and when the first lot on Seventy-fourth Street was put up with the privilege of the balance of the block, we astonished the auctioneer and all present by taking all twenty-four lots.

That afternoon Ehrich and I went up to look at our purchase. As we walked over the lots a couple of men shouted at us to get off the property. We asked them why, and they said: “Don’t you see our traps? We are catching birds here.”

There is not much bird-trapping in that neighbourhood to-day!

Success breeds enterprise. When we had disposed of these various plots at a good profit, I was ambitious to undertake still larger transactions. The original Rapid Transit Commission was then laying out the routes of the first subway, and I, in search of another One Hundred and Twenty-fifth Street, began to prospect for the district in which the Commission would be likely to locate a northerly spur, concluding that if Washington Heights were made accessible, One Hundred and Eighty-first Street would become the important thoroughfare of that neighbourhood.

There were four hundred lots owned by Levi P. Morton, then Vice-President of the United States, and George Bliss, of Morton, Bliss & Company, for which I had practically concluded my negotiations in September, 1890, when the Old World was shocked by the failure of Baring Brothers, the largest banking house of England. All negotiations were stopped. But, in February, 1891, about eighty lots located in this vicinity were successfully disposed of at auction. Peter F. Meyer, who conducted that sale, assured me that less than one half of the bidders had secured lots.

On the strength of this success, I asked L. J. Phillips to ascertain whether, owing to the financial stress of the times, the owners, Morton and Bliss, would take $900,000 for their property, for which they had formerly asked $1,000,000.

Phillips’s report was brief: “Nothing less than a million.”

This was what I really expected, and my directions were briefer: “Go close it!”

On March 26th I signed the contract. I paid $50,000 down and agreed to pay $300,000 more on May 27th. I then interested about fifteen people in the syndicate, many of whom were very prominent in real estate. We were granted special facilities to open One Hundred and Eighty-second Street, and had all the work done before the auction.

This arrangement gave us sixteen complete blocks with sixty-four corners, a most unusual percentage.

There were a number of fortuitous circumstances which helped to make for success. James Gordon Bennett having large possessions in that neighbourhood, directed that our sale receive generous attention in the Herald. There had been a secession of some of the auctioneers from the Real Estate Exchange, which then occupied its own building at No. 65 Liberty Street. Their manager called and said that their Board of Directors were ready to do almost anything that I would ask to secure the sale. They allowed me to display in the salesroom during all of May a sign 60 feet wide and 20 feet in height, and they also agreed that they would permit no other sale on May 26th.

We had numerous conferences, and none of my associates agreed with me that it was possible to sell so many lots at one session, but I was absolutely firm and insisted that it be tried. I conceded that I would stop the auction if I found that the purchasers had been exhausted, or that the lots were being sold at a loss. Thousands of people visited the property on the preceding Saturdays and Sundays. We could have sold the property on the 26th of May without having made our final payment, and could have used the proceeds of the sale for that purpose, but to avoid any possible question as to whether we had taken title or not, we closed the title on the day before the sale. As we were about leaving Morton, Bliss & Company’s offices, both Bliss and Morton expressed the wish that we might have a great success the next day, and the genial Vice-President of the United States added: “If there is anything I can do, please call upon me.” In response, I asked him whether he would come over to the auction-room and if necessary, to convince the public of our authority to sell the property, whether he would make a statement from the auctioneer’s stand. He consented to do so and waited at his office until I notified him that there was no need of his remaining any longer.

When the auction started, the entire floor as well as the auction stands and gallery were crowded to capacity. The bidding was very lively, and when some of the One Hundred and Eighty-first Street corner lots sold for over $10,000, there was considerable applause.

The auction lasted until seven o’clock, and every one of the 411 lots was sold. Ex-Register John Reilly had paid the highest prices: he bought the entire front on the west side of St. Nicholas Avenue from One Hundred and Eightieth to One Hundred and Eighty-first streets, and he afterward confided to me that he had succeeded where we failed in finding out that the Subway was to go through St. Nicholas Avenue, and that there was to be a station at One Hundred and Eighty-first Street. The corners of One Hundred and Eighty-first Street and St. Nicholas Avenue are to-day the most valuable on Washington Heights.

Our syndicate was well satisfied with the result, as we divided a profit of $480,000 amongst the men who had invested $300,000. They showed their appreciation of my work by presenting me with a magnificent silver service, which was greatly admired by my Turkish visitors in Constantinople.

I was quite carried away with my success, and my enthusiasm made me an easy prey to the temptation of participating in a still larger scheme—the development of the Town of Bridgeport, Alabama. A few years prior to 1891 there had been a great boom in Birmingham and Anniston, so that I was easily persuaded by the firm that had been associated with me in the purchase of the Astor Block to go in with them to develop Bridgeport.

All of us in the North felt that the South was “coming back” and Bridgeport was near coal and iron fields and had good water power. We started development, stove- and iron-pipe companies, a hotel, and a bank. We believed, with energetic New Yorkers back of it, this little town on the Tennessee River could be made a great manufacturing centre; we all forgot that it was very far from Broadway. Before I knew it, I had sunk more than my Washington Heights profit, and I am still paying taxes on some of the land that I bought at that time.

The loss of that money was a wholesome lesson, and I resolved to stick to New York. I broke this resolve on only one other occasion, and that was my venture into the Bamberger-Delaware gold mine: we took out plenty of gold—something like $600,000 a year, but it cost us more than that to do so. That investment also proved a total loss.

In the winter of 1891 we began an operation which was to result in winning the record for rapid construction up to that date. Our tenants in the Hoagland property at Fifteenth Street and Sixth Avenue failed. We concluded to tear down the old buildings and erect a new one. We had been negotiating unsuccessfully with Baumann, the furniture dealer, so we planned with our architect to put up a four-story building. I was in the architect’s office the latter part of January, when in walked Mr. Baumann and told me that if I would guarantee to finish the building by April 30th, he would pay the price I asked.

I consulted my architect, Albert Buchman.

“It’s impossible,” he declared, “four and a half months—June 15th is the earliest date conceivable.”

“Even if we use double shifts?”

“Even if we use double shifts.”

“Well,” I said, “I’m going to chance it.”

Buchman’s allotment for the excavation was fifteen days. I sent for Patrick Norton, who had done some excavating work for me in Harlem.

“Pat,” I asked, after I had sketched the case, “is there any objection to working twenty-four hours a day?”

“That depends,” said he.

“Well, if you went at it on that basis, couldn’t you finish this job in seven instead of fifteen days? I’ll pay for the light, and I’ll give you 25 per cent. extra.”

Norton belonged to the type of bluff, enterprising contractors. The novelty appealed to him, and he accepted it on the spot and completed the job on time.

Everything else went with similar speed. We were told that it would take some time to get the iron posts required for the cellar; I showed our plans to a man from Jackson & Company, and asked him whether, for an extra consideration, he could have the posts required for the job finished within a week. Within three days he made his deliveries. We changed our specifications and substituted wooden ceilings for plaster. We had the building finished and the elevators running on April 27th. The building was a four-story structure with an iron front covering five full lots, and we erected it for a trifle under $110,000.

I had another but less satisfactory experience with Pat Norton:

In the Winter of ’97 I bought from Collis P. Huntington a tract of land running from One Hundred and Thirty-eighth to One Hundred and Forty-first streets and from St. Ann Avenue eastward. The Title Company discovered that Huntington did not own as large an area as was described in the contract, so I called on him to ask for a reduction. It was a memorable sight to behold this great old gentlemen, 6 feet 3 inches in height, over eighty years of age, with as keen an intellect as a man of thirty, trying to fathom my motives and playing with me as a cat plays with a mouse. He leaned forward to get close to me, adjusting his little skull cap a bit, and said:

“Suppose I make you no concession at all! Are you going to throw up that contract, or take the property?”

“I will take the property because I expect to make a profit,” I said, “but I am going to rely on you to do the fair thing by me.”

He sat back in his chair and told me his experiences with Trenor W. Park, who wanted to buy a railroad from him. A dispute arose about it, which resulted in a law-suit. Afterwards, Park wanted to settle and buy him out. Huntington fixed the price, and as Park hesitated, he told him that for every day he delayed in accepting the offer he would add $100,000 to his price, and as seven days had expired since his first offer, the price was $700,000 more that day. Park agreed to that figure before he left the room.

“My experience,” said Huntington, “is that no man benefits by law-suits, but that no man can succeed if he is afraid of them. Now, what do you really think would be the fair thing for me to do in your case?”

I mentioned a sum, and he said:

“Strange to say, that is the figure I had in my mind.” He dictated a letter then and there, agreeing to the reduction.

We were anxious to dispose of the Huntington property at auction, and hurriedly prepared it. There was a stone fence running diagonally over the southerly part of the property, and I thought it would improve the appearance of this place to have the stones removed, and as Norton was putting through the streets and laying the sidewalks, I made a contract to have him do so for $800. The next morning I was impelled to visit the Huntington property. I was amazed to find 150 Italians working shoulder to shoulder, digging a trench alongside the stone wall, and dumping the stones into it. I stopped them and sent for Norton. When he came, instead of being ready to apologize, he wore a broad grin and said that he never expected me to come there, as I always came alternate days: by the second day no trace of that trench would have been left—what difference would it make to me, as long as it had disappeared, where it had gone?

We advertised an auction of this property for April 5, 1898. Because of the expectation of a war with Spain, a number of people asked me to abandon the sale. I agreed with their arguments that the sale would not succeed, but I wanted to see if my analysis of the psychology of prospective buyers was correct, which was, that some persons expecting big bargains would come to the sale and would buy. So I concluded to put up a few of the least valuable lots—those that had considerably more rock above the surface—and then try some of the St. Ann Avenue fronts. Just as I expected, the rock lots brought a very low price, but really all they were worth, and were purchased by one of the shrewdest dealers in New York. We stopped the sale after thirty were sold.

In the winter of 1894 great excitement was caused among the real estate men by mysterious efforts to secure the block on the east side of Sixth Avenue between Eighteenth and Nineteenth streets. I was keenly interested because if the east side of Sixth Avenue was to be developed it would injure our Hoagland property, especially if it were a retail concern, which would throw the travel from Macy’s on the east side. I, therefore, called on my old friend William R. Rose, who was acting as attorney in the matter. On my assuring him that I wished to benefit by my information without interfering with his scheme, he told me that the site was being collected for a retail drygoods store with a main entrance on Sixth Avenue, and it finally turned out to be Siegel-Cooper & Company. I immediately negotiated for the properties on the east side of Sixth Avenue adjoining this block and secured for Lachman, Morgenthau & Goldsmith from William Waldorf Astor the Nineteenth Street corner now occupied by the Alexander Building, and for myself alone the entire block from Seventeenth to Eighteenth street to a depth of 180 feet, from some of the descendants of John Jacob Astor. Simultaneously with the completion

Mr. Morgenthau playfully refers to this picture as the Morgenthau dynasty

of the Siegel-Cooper Company, I modernized the block front from Seventeenth to Eighteenth Street, and we erected a new building on the corner of Nineteenth Street, and sold it to Andrew Alexander.

One evening Alwyn Ball, Jr., told me that Henry Parish wanted to sell his house at the corner of Fifth Avenue and Nineteenth Street. I suggested that I would buy the property if Mr. Parish would take in part payment the second mortgage of $100,000 that Alexander had given us on his corner. The Astor Estate held the first mortgage of $100,000. Ball looked aghast.

“Why,” he said, “that’s a preposterous proposition! The idea of offering a second mortgage on a leasehold for the fee of a first-class Fifth Avenue corner, and to make it to so conservative a man as Mr. Parish! He has never even had a telephone in the offices of the New York Life Insurance & Trust Company, of which he is president! You must want me to be kicked downstairs.”

“You’re absolutely mistaken,” I answered. “Mr. Parish is constantly buying mercantile notes for his Trust Company, and will know that this personal bond of Andrew Alexander’s, guaranteed by me, is as good as any note that he has in his wallet. His office is on the ground floor—you needn’t be afraid of being kicked downstairs.”

Ball presented the offer and Parish accepted it. The mortgage was paid on its due date: I made a small profit on the Parish house and disposed of an almost unmarketable mortgage without any loss; Ball made a good commission, and so all were happy.

Shortly after I had another deal with William Waldorf Astor. It involved a part of the Semler farm on the east side from Fourth to Tenth streets. My negotiations with Charles A. Peabody, now president of the Mutual Life Insurance Company of New York, were drawn out for over six months, as his letters had to follow Astor all over Europe. After we had come to a definite arrangement, war was declared with Spain. Peabody surprised me one day when he came unannounced to my office to ask me whether I was still willing to make the purchase. I told him that I was convinced that the war would not affect the thirty Germans who were occupying these houses, and to whom I expected to sell the fees; and that I would be more pleased if he would sell me one hundred houses instead of forty. We entered into a contract to purchase forty lots on which the leases expired within a year. There was tremendous excitement among the tenants; protest meetings were called and cables sent to Astor. This brought me another visit from Mr. Peabody.

“Now, Morgenthau,” he said after sketching his predicament, “will you try to help us out?”

“I am perfectly willing,” I said, “to take other property of Mr. Astor’s, and let him deal direct with the objecting tenants, but I want a corner plot for a corner plot, and an inside avenue plot for an inside avenue plot and as many inside street lots as I was to have had. Although you have no properties on which the leases terminate the same time as these for which I am under contract, I am willing to buy them on the same basis,”—which was multiplying the annual ground rent by twenty.

Peabody said that this was eminently fair; he would try and show his appreciation, which he did, by selling us forty-four plots instead of forty. We consummated the transaction on July 18, 1898. The deed that was given was the first in which William Waldorf Astor failed to describe himself as “of the City of New York.” It was a very satisfactory transaction, as all but three of the tenants availed themselves of the privilege we gave them to buy the property from us at a reasonable profit.

The year 1898 marked the twentieth anniversary of Lachman, Morgenthau & Goldsmith. As I was leaving for my summer vacation, my partners urged me to plan out how we could celebrate that event. While I was fishing in the Thousand Islands, the infrequency of the bites of the black bass left me ample time for reflection, and I concluded that instead of a celebration, it would be a separation. I had felt so inclined for many years, but the delightful association with my partners, the extreme consideration they constantly showed me, the deep affection we felt for one another, had caused me to delay, and their persuasion not to do so had prevented my taking the final step. Here during these uninterrupted hours on the St. Lawrence, I was able to look at myself objectively and from both a retrospective and prospective point of view.

The success of my real estate operations had won me away from the exclusive devotion to the law which is so essential to rise in that profession. In figuring the profits that had been made by the various real estate syndicates that I had managed since 1891, I was surprised at the total, and realizing that at no one time had I had the use of more than $500,000 of my friends’ and my own money, I concluded that if I had had a company with that amount of capital, and could show the profits that had been made as surplus, the good will of such a company would be very valuable and would be reflected in the selling price of the stock. So why not induce some leading financiers to join me in the formation of a real estate trust company, which would do for real estate what the banking institutions have done for the railroads and industrials?

I wrote my partners of my decision, and told them that I would withdraw from the firm on January 1, 1899.

Among others with whom I discussed my scheme were Frederick Southack and Alwyn Ball, Jr., who had surprised me by informing me that they had had a similar thought and had already secured from the New York Legislature a special charter granting the privileges that would fit my scheme.

They asked me to join them and accept the presidency of this company. I accepted conditionally, telling them, however, that I would aim very high as to my associates and would insist that as chairman of the executive committee there be secured either the leading banker, J. P. Morgan, or the leading bank president, James Stillman, or the leading trust company president, F. P. Olcott.

Southack and James H. Post, who was a director in the National City Bank, presented the scheme to Mr. Stillman, who kept it under advisement for several weeks, but finally declined because he had been advised that some of our operations might be too speculative. In the meantime, Southack and Ball had, in addition to Mr. Post, interested Henry O. Havemeyer, John D. Crimmins, and several others. They then presented the matter to Mr. F. P. Olcott, president of the Central Trust Company, who was a trustee of the estate of Southack’s father. Olcott listened to the outlining of the plans of such a company, and when they proposed me as president and told him of the great profits I had made in real estate, he said that when it came to any proposition involving real estate, he was entirely guided by Hugh J. Grant, whose office adjoined his.

Grant had, while Mayor of New York, appointed Olcott to the first Rapid Transit Commission, and when he was appointed receiver of the St. Nicholas Bank, Grant called on Olcott and availed himself of an offer theretofore made him by Olcott to be of service to him. He told Olcott that he was very anxious to make a record as receiver, and asked an immediate loan of as much as the assets of the bank justified to enable him to declare promptly a substantial dividend to the depositors. Olcott not only did this, but was so pleased with the manner in which Grant handled the receivership, that he urged him to abandon his railway advertising business. He did so, and took offices next to Olcott and above those of Brady, and became the third member of that famous combination—Brady, the creator of the schemes; Olcott, the financier; and Grant, the expert in political and municipal affairs.

He called Grant into the office. Grant listened most attentively to the proposition, and then said:

“Morgenthau has been too successful to be willing to work for a salary and accept the presidency of a company.”

As Southack and Ball insisted that he was mistaken, Grant, with his usual directness, came right over to see me. That visit was a very memorable one for me. We carefully canvassed the entire proposition and concluded then and there that not only was I to take the presidency, but that Grant should take the vice-presidency, and become a visible figure in finance and cease being known as an unattached associate of Olcott and Brady.

Grant’s greatest faculty was in being able to “sniff” success, and through his tremendous amiability—which had made him so popular a man in New York—he was able to appeal to successful men, who heartily welcomed his coöperation on equal terms with themselves in their various enterprises. He also had watched me during my career, and realized the wisdom of a combination with me from his point of view; while I realized that a close coöperation—a supplementing of one another—would benefit us both, so we fell into each other’s arms. Grant and I then and there agreed to join forces. He agreed to take 1,000 shares for himself, 1,000 shares for Mr. Olcott, and within an hour telephoned me to note also Anthony N. Brady’s subscription for 1,000 shares. That afternoon when Southack and Ball came in and heard of the subscriptions, they each insisted upon the right to subscribe for 1,000 shares.

This disposed of one half of the stock. I wanted one half of the remaining 5,000 shares, but unfortunately for me, the others insisted that I should content myself with 1,000, and that the other 4,000 should be distributed amongst the rest of the directors, and amongst lawyers and real estate operators and brokers, whose interests would produce business for the company. There was a tremendous scramble for the stock, and it was impossible for us to satisfy the demand.

A few days later Grant introduced me to Olcott, who gave me quite a dissertation on how to run a trust company. He said that the most important thing was to have no men around who had any “yellow” in them and that the president must get the business and leave it to the other officers to execute it and carry out the details. He laid the greatest stress on the fact that the head of a company must disregard details entirely.

“He ought constantly to have his mind,” said Olcott, “on the larger matters, and should abstain from doing any work that can be done by any expert help that can be hired.”

On my part, I gave to Olcott a sketch of how I thought the company should be developed, explaining to him that the prejudice of the big trust companies and banks against real estate was not justified, and that the financial interests of New York had so far failed to recognize the increased stability of real estate, due to the enlarged population of the city and to the definite fixation of certain trades in certain neighbourhoods. I instanced the financial centre in Wall Street; the jewellery centre in Maiden Lane; the retail centres, and the definite northward development of Broadway. I also explained how many very substantial men had entered the real estate field, and how the general prosperity of the country had improved values in New York City.

“Now,” I said, “this group of successful men can only handle the large units that the exigencies of the time are demanding if they have additional financial facilities given them. Those facilities our company should provide.”

I explained how many groups of men had formed real estate corporations, only to discover that even then their resources were inadequate to handle all the profitable business that was coming to them. I told of some of my own larger transactions; how I always had to get others to help me finance them, and how, therefore, such a company as the one we proposed forming would undoubtedly become the syndicate manager of some of the larger operations. I told him if he had no objections, we could secure large deposits. Olcott replied that my plans would in no way conflict with his corporation, and that I should do any business that I deemed profitable. He asked me whom I wanted on the board, and I told him that I should like to have some representatives of the Mutual Life Insurance Company, who were then the largest investors in mortgages on New York City real estate, and suggested Messrs. Juilliard and Jarvie, the two best known and most influential members of its board.

We settled on a number of other directors, and a few days later Stillman sent word that he wanted some of the stock. Olcott agreed that he should only be given some of the stock if he consented to serve on the Executive Committee. Post and Southack, who had brought the message, hesitated to deliver this answer, as they thought we ought heartily to welcome Stillman’s interest in our corporation, and when they put the proposition to Mr. Stillman, he asked them, in his mystifying manner, whether this was an ultimatum. They hesitated to admit it. They were really afraid of him, and he was simply tantalizing them about his acceptance, which he finally gave them. He was allotted only 200 shares, and within a year he sent for me and in his peculiar teasing way told me that he was dissatisfied with his connection with the company. When I asked him why, he said that he had not a sufficiently large interest. I had to coax Olcott to sell 300 of his 1,000 shares for as much as he had paid for his entire 1,000. I doubt if I could have persuaded him to sell to any one else. It was simply, as he put it, that he wanted the satisfaction of making “that smart neighbour of his”—as he often called Stillman, their offices in adjoining buildings—“put him on velvet in this transaction.”

I shall tell later on how, several times, I had to go on bended knees to have some of these men accept what seemed to me tremendous profits.

I was now ready to proceed to business, as president of the Central Realty, Bond & Trust Company.

CHAPTER V
FINANCE

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.”

We did not do so until about ten months later when Black made us a proposition on behalf of Charles M. Schwab, who was willing to exchange U. S. Steel Preferred for Fuller Preferred, on even terms. Black strongly recommended it, as he thought we might secure prompter deliveries of our steel, which at that time were very slow and unsatisfactory, if Mr. Schwab were interested in our company. Grant and I immediately disposed of the 2,500 shares that each of us had taken and it was rather amusing to have Stillman ask us in that knowing way of his whether he was justified in concluding from the observations he had made of the sales of U. S. Steel Preferred as recorded on the tape that we had disposed of all our stock. We told him we had. A few days later, at a meeting, he told us with great satisfaction that by letting us rush ours off first, he, through careful selling, secured on an average of three quarters of a point more than we had.

Mr. Schwab became a member of our board, and I had never before met any one who equalled him in that extraordinary capacity of intelligently reading and conclusively analyzing a financial statement at a single glance that seemed hasty and superficial.

The foregoing incidents are samples of the minor tactics on the field of battle in the vast struggle which was waging for the financial control of America. I shall now outline the major strategy of that struggle as it impressed me from my slight contact with it.

The decade from 1896 to 1906 was the period of the most gigantic expansion of business in all American history, and, indeed, in all the history of the world. In that decade the slowly fertilized economic resources of the United States suddenly yielded a bewildering crop of industries. Vast railroad systems were projected and built into being with magic speed. The steel industry sprang with mushroom-like rapidity into a business employing half a million men, and yielding the profits of a Golconda. The Standard Oil Company spread its production and sales to the ends of the earth. In every field of manufacture, expanding companies were brought together into great trusts to unify their finances and to stimulate their production.

All these swift growths demanded money: money for new plants—money for expansion—money for working capital. The cry everywhere was for money—more money—and yet more money. Wall Street was besieged with a continual supplication for capital—that priceless fluid to water the bursting fields of pulsing prosperities. It is an old law that he who has what all men seek may make his own terms, and in that decade Wall Street controlled the money of America. No wonder, then, that the financiers of Wall Street leaped to a power greater for a time than the power of presidents and kings. No wonder that heads were turned, that power was abused, that tyranny developed, and that finally the nation, sensing a life-and-death struggle between capitalism and organized government itself, arose in fear and anger, and put shackles on the money power that made it again the servant, and no longer the master, of the people.

Let me trace briefly how this magic power was concentrated. Under the old banking system, before the passage of the Federal Reserve Act, the need for a common banking centre through which to “clear” inter-community and inter-state debits and credits, following upon the exchange of goods and the sale of crops, led the “country” banks all over the United States to maintain in some New York bank a considerable deposit of their funds, so that interbank transactions could be settled expeditiously and without cost by the simple device of drawing a draft against the New York account. The sum total of these country bank deposits in the metropolitan banks placed in the control of the New York bankers a vast reservoir of liquid capital. What should have been done with this money was to use it as the basis for financing the movement of crops in the fall and the exchange of commodities during the rest of the year. What frequently was done with it was to lend it to New York financiers for speculation in the price of crops and commodities, preventing the farmers and country merchants and small industrials from securing money at the times they needed it. Another use to which this reservoir of capital was put, was to lend it to the great industrial groups battling for supremacy in the fields of sugar, steel, textiles, railroads, and the like.

But there were other reservoirs of capital, and these, too, centred in New York. The great insurance companies were like pools at the bottom of a great valley: down the hillsides from all directions trickled the tiny streams of policy holders’ premiums—each in itself but a few drops of the precious fluid but all together, when gathered in the pool, a vast golden shining mass tempting the eyes of the speculative builders of industry. The insurance company presidents, therefore, became, like the bank presidents of New York, arbiters of financial destiny, because by their nod of favour, or disapproval, they could grant or withhold the golden stream of credit for which all men were begging.

Thus arose a natural struggle between the banks and the insurance companies for the control of the finances of the country. If the bankers could control the insurance companies, they would be masters of the situation. If the insurance companies could control the banks, then the insurance company presidents would be the great men. It may seem odd to suggest that the insurance companies might have controlled the banks, but I can easily demonstrate that this was quite within the realms of possibility. One man with enough shrewdness and enough force, and possessed of not more than $100,000,000, could at that time actually have controlled the banking system of America. On August 5, 1899, when I entered “Finance” with the organization of our company, the capitalization of all the banks in the Clearing House was only $58,000,000, and their total undivided profits were 77 millions—making their entire resources 135 millions; the selling price of their stocks was about 200 millions. One man with a private fortune of $100,000,000, or McCurdy or Hyde controlling an insurance company with assets greatly in excess of that amount, or the Standard Oil group might have been shrewd enough to have bought a majority interest in all the important banks in New York, and this majority interest would have placed in his control, by virtue of the system I have described above, practically the entire banking power of America. We should then have had a financial octopus in the person of one man, with even weirder potentialities of sinister control of American life than the only less dangerous small group which actually did dominate the country financially in the early years of the present century.

What actually happened was that the banking power, instead of being all in the hands of one man, was held jointly by a group of a few men who, although they fought incessantly and bitterly among themselves, nevertheless often united for common profit. It may interest the reader to be reminded of these groups and their leaders.

Towering above them all in the public mind, although in fact but little more powerful than several of the others, was the massive figure and threatening eye of J. Pierpont Morgan. Morgan ruled less by virtue of his wealth than by the overpowering force of his character. Men feared him, but they trusted him. Nearly every enterprise he financed turned to gold, and his leadership became the most impressive fact in American financial life. A close second to Morgan was James Stillman. Elected president of the National City Bank in July of 1901, Stillman, then forty-two years of age, heir to a profitable cotton brokerage business that made him financially independent, had partially retired from active business life, and was enjoying his cultivated tastes in semi-leisure. When Percy R. Pyne, president of the National City Bank, retired from office, and found that his two sons had no ambition to succeed him, he offered Stillman the presidency, and Stillman accepted. The policies which Stillman inaugurated at the National City Bank soon gave evidence of that genius which was shortly to place him at the very top of the financial world. Stillman previsioned the vast expansion of American business, and took steps at once to share in the control of it. He bought all the stock of his bank that came on the market, and then he made it a leader in the financing of industry by attracting to his Board of Directors the heads of the greatest enterprises in the country. These men brought to his bank not only money for deposit, but they brought what the subtle Stillman prized even more, and that was their knowledge and their brains. At his board meetings Stillman learned, at first hand, the inside facts about every business in the country, and this priceless information gave him the key to all the mysteries of financing that lay at the bottom of his success, and at these meetings Stillman had for the asking the advice and counsel of the shrewdest business men in the land. He once confided to me that by this simple device of putting these men on his directorate he had secured their services at the absurd price of about $400 a year apiece. As he expressed it: “These men attend a board meeting once a week, and receive $10 for their attendance, and for that price I am free to pick their brains.”

Stillman was allied with the Rockefeller family by the marriage of his two daughters to the two sons of William Rockefeller, and through this alliance gained all the direct and indirect advantages of a favoured position with the Standard Oil Company and its measures.

Another group in the financial oligarchy was Kuhn, Loeb & Company, originally clothing manufacturers in Cincinnati, then note-brokers and finally bankers. Their great feat was taking over from the U. S. Government Receivers the Union Pacific Railroad and reorganizing it. They then made their famous alliance with E. H. Harriman and established themselves in the first rank of American financiers, through the success of this joint financing of the Union Pacific Railroad, one of the most profitable of all the feats of financial legerdemain ever accomplished.

The trust companies entered the ranks of the financial oligarchs by virtue of a peculiar provision of the banking laws which permitted them to accept deposits and grant the checking privilege against them which was enjoyed by the banks without being required to maintain the cash reserve against deposits which was exacted of the banks. By paying interest on daily balances they attracted the best—the non-borrowing accounts.

Under this anomaly of the law, the trust companies rose rapidly to financial eminence. Their progress was bitterly contested by the banks, but under the leadership of Frederic P. Olcott, the trust companies became so powerful that they were taken into the oligarchy before the laws were finally revised, placing them on a parity with the banks. Olcott, as president of the Central Trust Company, had a hand in nearly every one of the reorganizations of the railroads, a process through which almost every railroad in the country was carried during the period from 1878 to 1890. This experience had made Olcott an expert in every detail of railroad finance, and his rugged honesty, his utter fearlessness, his profane disregard of any man’s importance, no matter how much it might have awed others, had placed him at the front as a power to be reckoned with under all conditions.

So much for the bankers. The insurance companies were the other great powers in the financial oligarchy. Hyde of the Equitable, McCurdy of the Mutual, McCall of the New York Life—each of these men controlled the lending of hundreds of millions of dollars of money taken in as premiums. Before the eyes of each was laid the dazzling opportunity of using this power to further speculative financing of industry with the prospect of enormous profits. Some succumbed to these temptations, and used some of this money, which was entrusted to them for the most sacred of all financial purposes—the payments of death benefits to the families of policy holders—as if they had been their own funds to be risked in private speculation.

The case of Hyde is doubly appropriate for mention here, because he was a representative sinner in these corrupt practices, and because it was my fate to cross destinies at three critical moments in the life of his son and heir, and to be, at one of these crises, the Nemesis for his undoing.

Henry B. Hyde had organized the Equitable Life Insurance Company years before as a private stock company, capitalized at $100,000, of which he retained ownership of slightly more than $50,000 worth of the stock. The Equitable had prospered until it was one of the five great insurance companies. Its assets had risen to over $500,000,000, its surplus to an enormous sum. It was a moot question as to whether the stockholders or the policy holders owned the surplus. Though the stock was restricted to a 7 per cent. dividend, nevertheless its price had risen to $3,000 a share, which showed the value that experts placed upon opportunities for profit—whether legitimate or otherwise—that accrued to the possessor of the majority of the stock—and the control of the company. The insurance investigation conducted by Mr. Hughes showed the various methods by which the men in control of this and other insurance companies had abused this power and had personally enriched themselves.

When Henry B. Hyde died, he left to his son, James Hazen Hyde, his controlling interest in the Equitable. It would be hard to over-state the dazzling opportunity that now lay within reach of this boy of 24. If fate had given him the vision of Stillman, or the wisdom and over-mastering will of Morgan, or the rugged force of Olcott, young Hyde might easily have become dictator of financial America. The method of quick profits from the use of other people’s money had been demonstrated for him by his father, and young Hyde himself was clever enough to perceive the opening that lay in acquiring control of the majority stock in banks and trust companies. He had the vision which I have described above, of the possibility of controlling the banking system of America by the use of one single fortune.

Destiny, however, had another fate in store. Fortune had indeed given Hyde the means and the vision to attain preëminence. But her hand withheld one essential gift—the gift of character. Reared to the unrestrained enjoyment of pleasure, Hyde had never been disciplined, and so had never had occasion to learn those amenities which, even in the most powerful characters, temper the masterful assertion of authority. With the pettish temper of a child, Hyde could not brook opposition; his theory of action was the crude one of “rule or ruin.” Where tact would have propitiated an antagonist, he tried giving orders. In rapid succession, he antagonized the most powerful men in America—men who had earned their spurs on the field of financial battle before he was born, and who were not of a temper to brook the insolence of a youngster merely because he had inherited a fortune. Their deep resentment long boiled below the surface, and it was only when Hyde tried to wrest from the presidency and transfer to the vice-presidency, which he was then occupying, the main executive powers of the company that the opposition to him became organized. President Alexander retained Bainbridge Colby, who was then in partnership with his son, and also Frank Platt. The latter by using the agents of the United States Express Company, of which his father was president, secured the proxies of over 90,000 policy holders. They then tried to secure prominent and trusted men who would act as a committee for the policy holders to force an investigation of the management of the company. This task they found more difficult. Several times they thought they had their committee completed when Hyde and his associates exerted such pressure that these men withdrew their consent to serve. Finally, a group of them put this situation up to me. They pointed out that I owed a duty to the public to clear up this lamentable misuse of the public’s funds.

I debated long whether I had a right to do this service. For myself, personally, I had no fear of Hyde, but as president of a trust company, I had the interests of my stockholders and depositors to consider. To resolve my perplexities, I brought the matter up at a board meeting. I wanted to accept, but I felt it my duty to explain the situation to my directors, and I told them that if they felt I was jeopardizing their interests, I would resign from the Trust Company, and serve on the committee. Olcott resolved the question. With characteristic honesty and force, he said: “If you feel that way, stay and serve, and let whoever deserves, be hurt.”

I informed the attorneys of the committee of my inclination, but told them I would not serve until they had submitted to me the evidence they possessed. It was an interesting evening that Frank Platt and Bainbridge Colby spent in my library. They brought a satchel full of documents, and in a short time convinced me that their case against Hyde was complete. They were very anxious to have me pledge myself to stay to the end, which was to be the displacement of Hyde, and I exacted from them a similar promise, so that we came to an understanding that this was to be a fight to the finish.

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.