As time went on new "trust" possibilities were discovered and other inst.i.tutions linked up--corporations of all kinds, insurance companies and national banks and savings-banks, were brought together for the benefit of the "System" and the detriment of the public. The end of the trustification of the inst.i.tutions of the nation is not yet, but the people are to be shown a way by which the plundering process can be reversed and through which they can make their freedom complete and absolute by the complete and absolute enslavement of the "System"

itself.

CHAPTER V

HOW THE "SYSTEM" DOES BUSINESS

To follow the various steps in the crimes of Amalgamated, my readers should know how the securities of a corporation are manufactured, how "put upon the market," how admitted to the Stock Exchange, how prices are made in the Stock Exchange, how fict.i.tious and fraudulent quotations are created and disseminated, until the very shrewdest members of the Stock Exchange cannot distinguish those which are real from the fict.i.tious in cases outside their own manufacturing. Then there is an elaborate and ingenious procedure by which public opinion is moulded, that is, by which people are made to believe that the prices at which they buy and sell the stocks and securities are bona fide; and this is a procedure as compact and as well understood by the "System's" votaries as are the methods of the bank-breaker or burglar--who sends his "pals"

ahead to "pipe" the lay of the land--by felony's votaries. When I have shown these things, about which little is known to-day by the public, my readers will have no difficulty in comprehending what I shall lay before them of the actual robberies in the case of Amalgamated and other notorious enterprises.

The underlying principle of the several organisms through which the commerce of the country is conducted is the protection at once of the interests of the individuals composing them and of the public with which they do business. Provided this principle is adhered to, no harm can be wrought to either. Most of the contemporaneous swindles through which the people have been plundered were perpetrated through the agency of corporations, and this organism has become a sort of synonym for corrupt practice. Yet the original corporation invention as I have described it was devised to meet a real want of the people, and it has merely been diverted from its proper use by the lawless votaries of the "System."

Consider the inst.i.tution as we now understand it. Certain individuals decide to conduct their business in railroads, mines, manufactories, patents, etc., in the form of a corporation and apply to the community--the State Government--asking authorization to do so. They are compelled first to conform to the rules and regulations laid down by the State for the control of corporations, which say in one form or other:

"We create you for the purpose of doing those things that are best for the many, not the few, and if we knew you would use our authority to oppress the many in the interest of the few we would not create you."

The fundamental privilege of incorporation is the legal authorization to issue paper t.i.tles of ownership to the business just incorporated. These are in the form of stocks and bonds. Whoever owns these paper t.i.tles shall possess the property and the business as the individuals did before they incorporated, and the law presumes that they shall manage and control that business, receive the benefits which come from it, and suffer any loss arising from its conduct, and that all these benefits and responsibilities shall be as laid down in the law. It follows that no harm other than that the law expressly prescribes penalties to prevent can come to any one from corporations thus created, always provided the laws are what they appear and what the people intended them to be, and that they are enforced as the people intended they should be.

It is most important to all concerned in a corporation that the paper ownership shall represent the real value of the property on which it is based, and no more. When the people exchange their savings for these authorized paper tokens, they should be able to rest confident in the State's guarantee that they are worth what they purport.

There have probably been jailed in the United States during the past twenty years thousands and thousands of American citizens whose aggregate stealings do not amount to one-tenth the total taken from the people by either the Amalgamated, the United States Steel, the American Tobacco Company, or a score of other fraudulently organized or fraudulently conducted corporations.

There are various ways of organizing corporations and issuing their stocks and bonds. Sometimes a company is organized to acquire a property; individuals and inst.i.tutions set down their names to take and pay for the shares or bonds. With the money thus obtained the property is purchased. _Or_ the individuals who own the property which is to be the basis of the corporation exchange it for all or part of the stocks and bonds. In the latter event those original owners usually sell to the public the tokens thus acquired.

Honest men in forming a corporation make publicly known the character and worth of the properties or enterprises they are organizing, what they have cost, what their profits are, and what may reasonably be expected by investors. The tricksters and the "System," with whom incorporation is generally but the first step in a conspiracy for plunder, surround the proceeding with an air of mystery and refuse information usually with: "We do our business quietly and in silence, and those who do not like our ways may keep out of this scheme." Their whole procedure is of that high and mighty order which impresses the ordinary mortal with a sense of confidence in the independence of its users and a conviction that their scheme must be so good that they do not care whether they sell or not. This is just the effect it is intended to produce.

The next step is to lead the people toward the shambles. This is done by "moulding public opinion," and for this interesting function the "System" and Wall Street have an equipment of magical potency. Public opinion is made through the daily press, through financial publications of various kinds, and through "news bureaus." Every great daily has a financial editor and a corps of experts in finance who spend their days on "the Street" cultivating the friendship of the financiers. At night they are round the clubs and hotels where the brokers and promoters congregate, debating the events of the day and organizing those of the morrow. There are also the strictly financial papers--daily, weekly, and monthly--whose corps of editors and news gatherers live on "the Street," and know and care for nothing but finance. And lastly, there are the news bureaus, with runners out everywhere to gather in items of news affecting stocks, Wall Street or finance. These are printed on small square sheets of paper, and delivered by an army of boys at brief intervals while the Stock Exchange is open at the offices of the bankers, brokers, insurance companies, and hotels; or the same matter is disseminated by means of an automatic printing machine called a news-ticker. For this service the offices pay the bureaus from $1 to $2 a day. News bureaus form an important cog in the machinery for making stock-markets, as it is through the news they furnish to the Stock Exchange and to the offices where investors and speculators gather together that the big operators affect the market. A decision to buy, sell, or "stand pat" is often based on the _on dits_ of these printed slips.

The first step toward "moulding public opinion" is taken when the "System's" votaries send for the dishonest chief of a news bureau, a man usually up in every trick of the trade. I will later describe one of them, a scoundrel so able and experienced that, to use the vernacular of the gutter of "the Street," he can give cards and spades to the frenziedest of frenzied financiers. To this man the "System's" votary will say something like this: "We are going to work off blank millions of blank stock; it costs us thus and so, and we want to sell for so and so many millions." Nothing is kept back from this head panderer and procurer, for it would be useless to attempt to deceive him, and, to quote his always picturesque language: "Never send a sucker to fish for suckers or he'll lose your bait, so spread out your bricks and I'll get the 'gang' to polish up their gildings." After the quality and amount the "System" intends to work off in exchange for the people's savings are explained, that part of the plunder which is to come to the head news-bureau man is settled upon. The amount varies with the size and quality of the robbery to be perpetrated. In some cases as high as a million dollars in cash or stock or their equivalent has been paid to a "moulder of opinion" for simply so shaping up a game that the people might be deceived into thinking one dollar of worth was four, six, or eight dollars.

The head of the news bureau, having taken the contract to lay out and carry through the deceptive part of the scheme by which the people are to be buncoed, now begins operations. First, bargains are made with conscienceless financial editors of the daily and weekly newspapers, whereby for so much stock or for "puts" or "calls" or both,[17] they agree to insert in their paper's financial column whatever yarns are fed them by the bureau man, regardless of their truth or falsehood. To justify the attention paid the subject by each editor, a certain amount of money is spent in advertising, in the newspaper that employs him, the merits of the enterprise. The financial journals are dealt with about on the same basis. In return for straight advertising or for "puts" or "calls" they agree to insert the manufactured news. The news-bureau man then puts his entire staff to work inventing fairy tales of one kind or another to excite the interest and attention of the people, and these tales must be so concocted that the public is drawn into believing that the statements disseminated represent actual conditions. I shall, later, give real instances of the working of this nefarious game of "moulding public opinion," and present it in the lime-light necessary for its appreciation. To show the extent to which this "moulding" process is carried, I know in one instance of a high-priced financial scribe being sent to live in St. Petersburg for no other purpose than to send certain "news items" to a confederate located in Germany, who would get these items to a reputable English banking-house through whom they were given out in London as news: the whole object of this complicated system being that the news items might be sent back to New York without Wall Street suspecting they were bogus.

I must not be understood as meaning to say that all financial editors, news gatherers, or news bureaus are engaged in this, one of the lowest forms of swindling, for such is not the case. _On the contrary, there are many of them whom no amount of money or influence could make waver in their allegiance to the truth and to honest dealings._ With some of the others I hope to deal specifically later, and I shall not hesitate to set forth in detail certain transactions in which they have been engaged.

FOOTNOTES:

[17] A "put" is the right to sell to a certain firm or individual shares of stock at a stated price for a stated period, and a "call" the right to buy under the same conditions. The holder of the "put" or "call" is under no liability, as he can use the "put" as margin to buy stocks, or the "call"

as margin to sell stocks, or he can hold them for the profit there may be in selling or buying the stock after it has declined or risen below or above the price named in the "puts" or "calls" he holds.

CHAPTER VI

HOW WALL STREET'S MANIPULATIONS AFFECT THE COUNTRY

What is the connection between the "System" and the minor financial inst.i.tutions throughout the country which are owned and controlled by groups of st.u.r.dy men who know not Wall Street and its frenzied votaries, and who are ignorant of "made dollars"? Let us see. We will take five national banks in different parts of the country, each having a capital of $200,000 and deposits of $2,000,000. One is in the farming district of Kansas; another is in Louisiana in a cotton district; a third is in the orange groves of California; in the mining district of Montana is a fourth; the fifth in the logging and lumber country of Maine. These $10,000,000 of deposits represent savings earned by the type of men who have made America what it is, and who laugh when they read in their local papers: "Panic in Wall Street; stocks shrink a billion dollars in a day." "Fools and their money are easily parted," they say, "but Wall Street gets none of our honestly earned money." Now the officers of these five banks are honest men and they know nothing of the "System,"

yet the day of the panic they each telegraph to their Illinois correspondent, the big Chicago bank, "Loan our balance, $200,000, at best rate." That day the Chicago bank with similar telegrams from forty-five other correspondents in various parts of the country, wires its New York correspondent, the big Wall Street bank, "Loan our balance, $2,000,000, at best rates."

Thereupon the great New York bank sends its brokers out upon "the Street" to loan on inflated securities of one kind or another which its officers, the votaries of the "System," have purchased in immense quant.i.ties at slaughter prices the millions belonging to the Chicago bank and to other correspondents of its own in Cincinnati and Omaha and St. Louis and other big cities. The decline is stayed, and then the world learns that the panic is over and that the stocks, of which the people have been "shaken out" to the extent of a billion dollars, have recovered in a day $500,000,000 of it, and that probably in a few days more will recover the other $500,000,000. Who has _recovered_ this vast sum? The people who had been "shaken out"? No, indeed! The votaries of the "System" have made it--they and the frenzied financiers whose haunt is Wall Street, and whose harvest is in such wreckage.

The part that the five little banks innocently played in this terrific robbery was unimportant. What is important is that it was the funds of their depositors and others like them which the "System" used to turn the Stock Market and make an immense profit out of the recovery of values. It is true the banks received but two and one-half or three per cent. for the use of their balances, and their officers would scorn the suggestion that they had put any of their money in jeopardy in a Wall Street gamble. But what I have outlined happened, and has happened many a time before and since, and goes to prove my a.s.sertion that every financial inst.i.tution which is taking the money of the people for the ostensible purpose of safeguarding it or putting it to use for them, is a part of the machinery for the plundering of the people.

Sooner or later, every dollar taken by the "System" through Wall Street's manipulation of stocks directly affects every man, woman, and child in the United States. Let us, for example, see how a stock slump in New York affects the owner of a small life-insurance policy in Wyoming. The shares of the American and English ocean steamship companies were bought up by the "System" at double their worth and converted into a "trust." New stocks and bonds to a number of times their value were issued and sold to the public. The great insurance companies bought many millions worth of these securities, using for the purpose the money they had collected from the policy-holders, a dollar at a time. This "investment," at the moment it was made, actually represented a loss to the purchasing insurance companies of millions of money, for millions more than the property was worth or could possibly be made worth had gone to the people who formerly owned the steamship properties, and many millions more to the "System" as its share of the swag. And it should be remembered that the men who organized the steamship trust were the men who invested the insurance company's money in its securities.

The policy-holder in Wyoming knows about the steamship trust and about the terrible loss sustained by those who invested in its securities. He does not realize, however, that his insurance company has been buying such poor stuff, for he is persuaded it is a great and n.o.ble inst.i.tution, and far above Wall Street and its rash gamblers. Even when he and his kind find their yearly dividends on their policies growing less and less and their premiums rising "because of the tremendous increase in the expense of doing business," they do not dream of connecting these misfortunes with the "System's" trustifications of inflated securities; nor do they a.s.sociate them with the glowing accounts of the half-million-dollar seaside palace built by the insurance company's officer who entered the employ of the inst.i.tution a few years before, with his salary for his fortune, and who is now pointed to as an example of thrift, being worth from ten to fifteen millions.

CHAPTER VII

ECONOMICS OF COPPER

A thorough familiarity with the facts and conditions set forth in the preceding chapters will help my readers to an understanding of the series of complicated transactions through which the snaky course of Amalgamated must be pursued. Its flotation was the most tremendous and public ever even attempted, much less successfully carried out, and in its market career the full resources of stock jugglery were exercised on its behalf. The crimes of Amalgamated are to the delinquencies of Bay State Gas as the screaming of eagles to the chirping of crickets. From its birth this great enterprise went hand-in-hand with fraud and financial dishonor, and the facts I shall proceed to reveal are so formidable in their indictment as to startle even those calloused to the trickery of modern stock deals.

An armistice followed that last desperate battle of the gas fight in the Delaware court-house, and gave me time to turn my whole attention to the plans I had long been maturing in my mind in connection with quite another project--"Coppers."

For sixty years past Boston had been the home of the copper industry.

From it great fortunes had been derived, and there was in course of development a copper aristocracy which threatened the supremacy of the East India aristocracy that had so long lorded it in Boston society.

Indeed, so far had the rival contingents progressed that there was a serious searching of the pretensions of any new-comer whose origin had to do with other enterprises. "Coppers" were respectable, were genteel, and, above all, were not "trade," for the average old-time Bostonian affects the Anglo-Saxon contempt for the traffickings of retail commerce.

For the benefit of those in the outer darkness, to whom the ways of Boston are strange, it may be explained that the East India trade goes elsewhere under other less euphonious names, and consisted in the swapping of New England rum, made from mola.s.ses, water, and other things, for human cotton-pickers. It was a most profitable industry, with a spice of adventure to it, and in which at the time it flourished a gentleman might honorably engage. It may be said that with the paradoxical conscientiousness characteristic of the Puritan mind, the first outcry against the personal ownership of human chattels was voiced by New England, and her leading citizens generously devoted the incomes of the fortunes their forefathers had ama.s.sed in the slave traffic to releasing their colored fellow-creatures from bondage. That, however, is still another story.

To return to "Coppers." In my young days in "the Street" in the early '70s, the first task I remember performing was making deliveries of copper stocks traded in by "the house" which was ent.i.tled to my twelve-year-old services in return for the three large dollars which I received each Sat.u.r.day with far more honest pride than any three millions I have since handled. As I grew up I watched Calumet and Hecla advance from a dollar to 450 (it afterward sold at 900) because of its real worth, and imbibed the conviction, which all true Bostonians entertain, that money acquired through copper is at least 33 per cent.

better than money from any other source. I sympathized with the State Street code which declares, or should: "Gold can be found in a day by any one with eyes, silver in a week by any one with hands, and money in a year by any one with sense enough to save it, but no man gets into copper without capital, fort.i.tude, patience, and brains." As a matter of fact, it requires, even to-day, with all of to-day's facilities and rush, $5,000,000 in money and five years of spending it after a copper deposit has been found before it can be made to yield returns. Is it surprising that a project requiring so much money for so long a time should appeal to Boston's regard for endurance, expensiveness, and exclusiveness? Could there be found an enterprise better calculated to discourage the upstart?

My daily round of errands led me from broker to broker and from bank to bank, and always I heard talk of copper. It is not remarkable that my youthful mind became impressed with the profound importance of the metal and all pertaining to it. I picked up a great deal of information on the subject, which I fortified later with a careful study of copper the metal, copper the mine, and copper the investment. As I mulled over the immense returns obtained from their ventures by the men I knew had their money in copper, it struck me as extraordinary that this industry should be so much more profitable than others. Here was a great staple, a necessity of the people, which had been in use since men began to sit up, and would be needed until Father Time smashed his gla.s.s, that returned 100 per cent. gross profit on the business done in it, while the business done in any other staple did not return, gross, over ten to eighteen per cent.; which gross profit gave to the capital invested in copper a net profit of sixteen to twenty-five per cent., while that invested in the other staples returned a net profit of only three and three-fourths to four and one-fourth per cent.[18] The value of money had decreased with the world's development; the cost of the great commodities of life had all come down with the decline in interest--all but copper, which kept its old places throughout all the changes that had occurred in the relations of capital to labor and business. I realized that copper, in that year, would afford a gross profit of 100 cents on each $2 worth produced; that this great gross profit was legitimate, was not brought about through unfair restrictions or forced combination, or evasion of the country's laws, but was wholly natural, being founded on the fact that the supply was so limited that the demand prevented the price dropping below a certain figure, and that this under ordinary circ.u.mstances represented at least 100 per cent. of gross profit to the producer after he had paid for labor and material the highest ruling prices.

No better ill.u.s.tration of the main facts about copper can be found than the condition of the industry to-day, in 1905. The metal is now fifteen and a half cents per pound, and the consumption so great that the price still advances, yet if through an agreement among the producing mines this sales-rate should be dropped twenty-five per cent., it would so increase consumption as to force back the price to a point that would again discourage consumption; and yet in the old mines the cost of producing the metal sold at fifteen and a half is but six to seven and a half cents, in some even lower.

Compare these conditions with those existing in the steel industry.

Therein unlawful combinations and unnatural restrictions are essential if those engaged would show a gross profit of even fifteen per cent. on their gross output. If more than fair or going returns are earned, then new capital flows into compet.i.tion and the surplus again shrinks to an uninviting point. The same is true in wheat, corn, and cotton--big prices invite fresh investments and the planting of broader acreage.

Hence the sorry spectacle of the cotton planter who, in 1905, will receive no more for his twenty per cent. increased crop, coming from over two millions increased acreage planted last year, than for his smaller one of the year before.

That my readers may quickly, and once for all, grasp the point I wish to make, I will ill.u.s.trate:

The Steel trust in 1904 did a gross business of $432,000,000, upon which they made a profit of $71,400,000, and yet this vast amount was only five per cent. upon the trust's inflated capital of $1,400,000,000 odd; and as the "System," in regulating the capitalization, arranged that the preferred stock (and bonds), which represented the "System's" profit, should receive seven per cent., there was not a dollar in dividends for the $520,000,000 of common stock which had been sold to the people for, in round figures, $300,000,000.

At the same time the Calumet & Hecla Copper Company produced and sold over $10,000,000 worth of copper, upon which it earned, net, over $5,000,000, which enabled it to pay to the people who had invested in its 100,000 shares of stock (par value, $25), 160 per cent., or a total of $4,000,000, and, at the same time, carry an enormous amount to its surplus.

In the commercial world copper occupies an impregnable position. To compete, it is first necessary to find a copper deposit; then to lock up a vast sum of money for a long term of years before returns begin to accrue. And new copper deposits are as rare and few and far between as Lincolns and Roosevelts in politics or Grants and Lees in war. In the last eight years, or since the metal has been prominently before the world of capital, but two great producers of copper have been created--the Copper Range at Lake Superior, Michigan, and the Greene Consolidated in Mexico--and these two mines have only, at the end of six years, after an immense expenditure of millions (Copper Range, with a capital of $38,500,000, 385,000 shares, par $100, which sold in the open market a few years ago at $6, now selling at $75, and Greene Consolidated, with a capital of $8,650,000, 865,000 shares, par $10, now selling in the open market at $25), reached the point of profitable production. Their combined output, while reaching the (for young mines) unprecedented amount of one hundred and odd million pounds of metal per annum, const.i.tutes but a fraction of that which Mother Earth has given up during the period of their development, namely, 2,500,000,000 pounds, all of which has been disposed of and cannot again be used to satisfy a ravenous consumption.

It seemed to me, then, a curious anomaly that, while capital was chasing investments which promised but four per cent., it eschewed copper which yielded from sixteen to twenty-five per cent., and my investigations told me that a producing copper-mine is the surest business venture a man engages in, for, by the time it begins to produce profitably, it must be so far developed that its owners are certain of ore to work on for decades ahead. A good copper-mine is really a safe-deposit vault of stored-up dividends, which cannot be stolen nor destroyed by fire, flood, or famine. Calumet & Hecla, for instance, though it cost its first owners but a dollar a share, has paid out $87,000,000, or $870 per share, or 3,480 per cent. on its par value of $25, and while it has been paying dividends over thirty-five years, it paid last year $40 per share, and has more in sight than it has yet paid. And Copper Range, though but six years old, will be producing soon as much as Calumet & Hecla, and has now in sight ore to keep it going fifty or sixty years.

Having pieced together all the facts and circ.u.mstances in this connection, I was sure that I had grasped a principle of great commercial value, and I set about finding a cause why the world of capital should for so long have overlooked the tremendous potentialities of this industry. I found the cause in Boston herself, in the characteristics of the city, which was head-quarters for copper, and which had grown in financial power with the revenues her mines earned for her investors. Boston controlled and managed the copper industry, and had since the days when copper-mining was a hazardous pursuit, in which only bold and speculative souls dared engage. In the early days the canny Bostonian demanded for the honorable dollar his parent had earned--exchanging five-cent rum for human beings worth $1,000 apiece--at least twenty per cent. interest, and having acquired this habit, it became a principle, and such principles as these are clung to in Boston with the zeal of a miser for his h.o.a.rd or of a martyr to his faith. Looking back over the years, I still recall with chagrin the quiescent hilarity of the scion of a Back Bay family whose good father had been one of the most successful and most brutal of all the "East India traders," when I suggested to him that he was fortunate in obtaining twenty per cent. on some copper ventures about which he was grumbling. (My readers must not confuse a Boston grumble with the ordinary e.j.a.c.u.l.a.t.i.o.ns of discontent indulged in by the inhabitants of other portions of the world remote from the Hub of the Universe. A Boston grumble consists of an upward movement of the eyebrow, a slight twitch of the mustache and a murmur cross-bred from "Deuce take it!" and "Scoundrelly!") "Young man," he said, "my father said that such a hazardous venture as copper should return at least thirty per cent. to be safe, and I feel if I receive but twenty per cent. that something is radically and unpardonably wrong with the management of the mine." I did not pursue the argument, for I knew he inherited with his fortune a line of Boston reasoning, and I remembered once having watched a country boy put his tongue on a frosty iron door-k.n.o.b. I knew better than to invoke again that wintry Boston smile, which in a Western or Southern community would be used to _frappe_ mint-juleps or cold-storage hogs with.