They then use these banks and trust companies, which exist because of the people's savings, in stock gambling enterprises, speculations as unsafe and as frenzied as those of the wildest plunger of Wall Street. I will give one ill.u.s.tration:

The New York Life Insurance Company's directors and managers created the New York Security and Trust Company. $1,000,000 capital; $500,000 surplus--in all, $1,500,000. $150 per share, of which the insurance company held about two-thirds. The Trust Company soon secured deposits to the extent of about $50,000,000, and these it loaned out by "financing" new and old enterprises. Among them was the New Hampshire Traction. The Trust Company flourished. Its stock advanced in price to over $1,300 per share, or over $13,000,000, and its different speculative ventures prospered exceedingly. New Hampshire Traction kept pace with the rest and simultaneously with them bounded upward in value until the amount of this stock owned by the Trust Company represented a value of between $5,000,000 and $6,000,000. There came a time when the directors of the New York Life Insurance Company decided to dispose of their stock in the Trust Company, and did so to a syndicate composed of their own members, headed by John D. Rockefeller, at $800 per share.

Afterward the stock disposed of at $800 per share advanced to over $1,300, or, with the third which had not been owned by the insurance company but by the "insiders" and their friends, to a total of over $13,000,000. Then came the slump, and the price of the New Hampshire Traction fell to twenty-five cents on the dollar, and the Trust Company's stock to less than $600.

If in all the histories of the wildcats of the wild catteries of Wall Street a wilder case of "frenzied finance" can be discovered, I don't know it, and yet this is only one of many I could quote, selected at random. Boiled down, it means that what was bought at $150 went to $1,400 and back to $590, and that it changed hands at $800 before it got to $1,400, and that the plunger in this transaction, which made this plunging possible, was one of the most conservative life insurance companies in America.

I will answer "Buffalo's" question by asking another:

Suppose all the insurance companies have been doing business on the same scale, and have tied up billions of the people's money in such schemes as New Hampshire Traction, and the people, learning these facts, should demand their savings to the extent of the $9,000,000,000 which they have deposited in banks and trust companies, what would happen? What would happen to the undigested securities, the insurance companies, the people's savings, and the policies such as "Buffalo" says he has purchased for the benefit of his family?

This statement precipitated a perfect flood of letters and queries, growing more urgent as the month wore on. It was impossible to answer all of them. I contented myself with replying to the letter of a prominent Philadelphia church-man, a policy-holder in the New York Life, who wrote as follows:

PHILADELPHIA, September 23, 1904.

MR. THOMAS W. LAWSON, Boston, Ma.s.s.

_My Dear Sir_: I have just finished reading the current article on "Frenzied Finance," and like "Buffalo" I am astounded at your statements regarding the "New York Life."

I, too, have a policy in that company and have been led to believe that I was not only insured in the best and most conservative company, but that I had a first-cla.s.s and perfectly _safe_ investment as well. This particular company claims that not a dollar of its a.s.sets is invested in stocks of any kind, and yet, to quote from your article:

"The insurance companies use the billions the people have placed with them to buy or create banks and trust companies, the stocks of which are a large part of their a.s.sets."

Either you are manifestly unfair or else the company is guilty of deliberate falsehood for the purpose of deceiving the public.

As a policy-holder and prospective sharer in the surplus of the "New York Life," I am much interested in knowing whether its statements in regard to its investments are to be relied upon.

Will you take just a moment to answer the following question? Is the "New York Life" telling a falsehood when it states that not a dollar of its a.s.sets is invested in stocks of any kind?

Very respectfully yours, ---- ----

I replied: The transaction in regard to the New York Security Company and the New Hampshire Traction stocks was exactly as I set it forth. I can imagine no one but an absolute idiot who would dare to set it forth unless he knew he was dealing with facts.

Your high position in the church should, in my opinion, peculiarly fit you to answer fairly your question, "Is the New York Life telling a falsehood when it states that not a dollar of its a.s.sets is in stocks of any kind?" when I unqualifiedly state the fact that the New York Life owned the millions of the New York Security Company's stock; that it paid $150 a share for them and sold them to a syndicate of its own directors at $800 per share, and that the stock afterward sold at over $1,300 per share, and still afterward dropped to less than $600 per share. I did not wish to be unfair to the New York Life, or I should have stated, what I shall endeavor to show before my story is ended, that at the time the New York Life parted with these shares to their own directors at $800 per share they were actually worth and could have been sold for hundreds of dollars per share more.

THE HONESTY OF THE ONE MAN

At this the big insurance companies uncovered their guns, and soon the air, the newspapers, and my mail were full of underwriting explosions.

It was necessary then to line up my forces and to go at the attack seriously. So, having carefully thought out a campaign which my knowledge of the men whom I was antagonizing taught me would bring results, I began, in December, as follows:

When I began to write "Frenzied Finance" I specifically stated that I should not concern myself with men, but with principles. I held that to put an end to the plundering of the people required more than the denunciation of individual criminals; that the real peril lay in the financial device through which the plundering was done and the "machine"

developed for their operation. The "machine" is the tremendous correlation of financial inst.i.tutions and forces that I call the "System," and the most potent factor in the "System" is the life insurance combine--the three great insurance companies, the New York Life, Mutual Life, and Equitable, with their billion of a.s.sets and the br.i.m.m.i.n.g stream of gold flowing daily into their coffers. That I should have to discuss the relation between the "System" and these great inst.i.tutions was inevitable; but, knowing how vitally interested the public is in the preservation of the gigantic structures its savings have erected, I had thought to treat this phase of my subject later on, when my readers should be absolutely convinced by what had preceded it of the honesty and fairness of my purpose. Moreover, it did not seem possible to touch on life insurance conditions without involving the men who direct the three great companies, and whom policy-holders and the people at large have been taught to regard as men of wellnigh miraculous sagacity, integrity, and beneficence. With these men I have had none but the pleasantest relations, and determined as I am on the performance of my task, I go about it with the reluctance a surgeon feels when, in order to save a friend's life, he must amputate his limb.

A contingency has now arisen which compels me to depart from my rule and to discuss much more frankly than I had purposed at this juncture, the New York Life Insurance Company, the system which controls it, and its president, John A. McCall, the "System's" representative.

In reply to the inquiries of an anxious policy-holder, who had taken alarm at my statement that the funds of these great corporations were under the control of the "System," I stated in the October issue of _Everybody's Magazine_ that the New York Life was, as well as its so-called compet.i.tors, the Equitable and the Mutual, as much a partic.i.p.ant in the frenzied speculation of the period as were the plunging Wall Street stock gamblers; but in giving an ill.u.s.tration of its methods (the New York Security and Trust Company and the New Hampshire Traction Company) I selected a case which would not unnecessarily alarm nervous people, for the transaction showed an enormous profit as the result of a wild stock plunge, instead of an enormous loss--some of the New York Life's other deals were much less fortunate. When I stated that the New York Life disposed of its interest in the Security Trust Company to its directors for four millions of dollars, which represented a gain of over $3,000,000 on its original investment, I was careful not to state that the shares for which they paid $800 each were worth at the time $1,300 each, or $7,000,000 for what was sold for $4,000,000--particularly careful to state that they were afterward worth this additional amount.

Policy-holders in the three great life-insurance companies may argue: "The man who is known to us policy-holders as the real head of the New York Life is John A. McCall, its president. All that you may say about the 'System's' votaries being in control may be so, but we depend on the integrity and the character of this one man to protect our interests. He is our representative, not the 'System's,' and our savings are surely safe in his strong hands."

There is the point. In the great insurance corporations that are "one-man run," the hundreds of thousands of policy-holders have but one protection. This, notwithstanding the protection of the State laws, the guardianship of the Insurance Department of the various States, and the provisions of the company's charter and by-laws.

However impregnable may seem the safeguards which the law has built round the administration of our great insurance companies, the fact absolutely is that the honesty of "the one man" is the one potent protection policy-holders may depend on. The others may be juggled with as are the rules of the Stock Exchange, which say in thunder tones, "All within our sacred walls is honest and honorable," when in reality if the microbes of dishonor and dishonesty generated within Stock-Exchange walls each busy week of every year should be collected and disseminated throughout the land, they would give typhoid of the soul to our eighty millions of Americans. So it becomes the duty of every policy-holder to find out by such tests as he can apply, "Is 'the one man' who runs our company an honest man or is he a dishonest man?" If "the one man" stands their tests, if he emerges from their ordeal clean, strong, honest, as they believed, then they may rest awhile in patience. But if he is revealed as dishonest, then it behooves the policy-holders of that company to take measures for the protection of their interests. The welfare and happiness, perhaps the very lives of their mothers, their wives, and their children depend on their action.

I was recently waited upon by an important man.

"Lawson, what are you doing in life insurance?" he asked.

"Giving facts about the life-insurance branch of a 'System' which is foully plundering the people," I answered.

"What are you trying to do?"

"Educate the millions of life-insurance policy-holders to their present peril; after they are educated, arouse them to quick, radical action."

"What are you going to do?" he asked.

"I am going to cause a life-insurance blaze that will make the life-insurance policy-holders' world so light that every scoundrel with a mask, dark-lantern, and suspicious-looking bag will stand out so clearly that he cannot escape the consequences of his past deeds, nor commit new ones."

"Have you figured the consequences to yourself?"

"Having no interest in what the consequences may be to myself in performing what I have decided is a sacred duty, I have not."

"Let me show them to you. First let me ask, do you intend to confine your criticisms to the New York Life Insurance Company?"

"I intend to bring out the facts, particularly as to the New York Life, the Mutual Life, and the Equitable Life; and, so far as in my power lies, as to every other life-insurance company in America that is connected with the 'System.'"

"Are you actuated by any selfish motives--gain, revenge, or friendly interest in certain life-insurance companies or banks or trust companies?"

"My only interest is to perform a duty in righting a startling wrong, and I would not undertake the terrible task if I could possibly avoid it."

"I am sent to ask you these questions, to find out whether, if you are only seeking to serve the policy-holders, and the insurance companies can absolutely prove to you that your making public your facts will cause terrible destruction to policy-holders' interests, you will consent to forego the life-insurance branch of your story?"

"I know the facts. I have calmly, and I believe intelligently, reviewed the effects of their being given to the world, and have concluded that the damage to policy-holders and the people would, in any circ.u.mstances or conditions, be greater because of my not doing what I have decided to do than by my doing it. Therefore I will not in any circ.u.mstances consent to stop until I have laid before the world those things I consider it should know."

"Well and good. Let me show you what you are up against. The Equitable, the New York Life, and Mutual Life Insurance Companies, and their affiliated inst.i.tutions and individuals, are to-day by all odds the greatest power in the world, greater by all odds than any power that can possibly be gathered together from those outside themselves, a power so great that the effort of no man nor party of men outside themselves can possibly prevail against their wishes."

"Stop where you are for a minute," I answered, "and let me run over to you what I know I am up against, and then you can judge whether I appreciate the difficulties of my task:

"First, the three companies I have named have absolute possession of property and money in the form of a.s.sets of over $1,000,000,000--more than half the combined a.s.sets of all the insurance companies of America--and indirectly, through their affiliated inst.i.tutions, of an additional sum, the aggregate of which is much greater than the a.s.sets of all the national banks of America and the great financial inst.i.tutions of Europe, such as the Banks of England, France, and Germany. The three have a ready cash surplus of almost $200,000,000, which is greater than the combined capital of the four greatest inst.i.tutions of Europe--the Banks of England, Russia, France, and Germany. The income of these three companies is, each year, $100,000,000 greater than the combined capitals of the Banks of England, Russia, France, and Germany--or about $250,000,000, $200,000,000 of which is taken each year from their policy-holders in the form of premiums. Yet from out of this income there is returned to their policy-holders each year in dividends less than $15,000,000, and in total payments of all kinds not over $100,000,000. And yet these three companies pay out each year in what they call expenses to keep the concerns running $50,000,000, paying to the officers of the companies $3,000,000 in salaries, almost $1,000,000 to their lawyers, and a number of millions in various forms of advertising.

"Second, the three companies are absolutely steered and controlled from a common centre, and the men who do the steering and controlling are the 'System's' foremost votaries, Henry H. Rogers, William Rockefeller, James Stillman, and J. Pierpont Morgan through George W. Perkins, a partner in J. Pierpont Morgan & Co. Mr. Rogers, vice-president of the Standard Oil Company, is a trustee of the Mutual Life and a director in one of the largest trust companies owned by the three great insurance companies, the Guaranty Trust Company of New York. William Rockefeller, vice-president of the Standard Oil Company, is a trustee of the Mutual Life and director in the National City--the 'Standard Oil'--Bank. James Stillman is a trustee of the New York Life, and president of the National City--the 'Standard Oil'--Bank of New York. George W. Perkins, partner of J. Pierpont Morgan & Co., is vice-president and trustee of the New York Life and a director in the National City--the 'Standard Oil'--Bank; while John A. McCall, the president of the New York Life, is a director in the National City--the 'Standard Oil'--Bank.

"These great inst.i.tutions own a majority of the capital stock or have absolute control of a number of the leading banks and trust companies of New York and elsewhere; and such ownership shows conclusively the linking together of the three great insurance companies. For instance, the Equitable owns more than a majority of the stock of the Mercantile Trust Company of New York, of a book value of about $4,500,000 and a market value of almost $13,000,000; and of the Equitable Trust of New York, of a book value of $5,500,000 and a market value of $9,000,000; and of the Bank of Commerce of New York, of a book value of about $8,000,000 and a market value of over $9,000,000; and in the directory of the Mercantile Trust of New York and Equitable Trust is E. H.

Harriman, one of the leading 'Standard Oil' men and one of the active votaries of the 'System,' while in the directory of the Bank of Commerce are the president of the Mutual Life and seven other trustees of the Mutual Life and three of the trustees of the New York Life.

"The Mutual Life owns stock of the Bank of Commerce, of a book value of $4,500,000 and a market value of $7,500,000; of the United States Mortgage & Trust Company, of a book value of $2,000,000 and a market value of $4,500,000; and of the Guaranty Trust Company of New York, of a book value of $1,250,000 and a market value of $5,500,000. The directors of the United States Mortgage & Trust Company consist of eight trustees of the Mutual Life, including its president, and two trustees of the Equitable Life, while in the Guaranty Trust directory is the president of the Mutual Life, Henry H. Rogers, and E. H. Harriman, 'Standard Oil'

votary and director in the Equitable.

"In addition to these financial inst.i.tutions, the Mutual Life has about $20,000,000 of its funds invested in the stock of twenty-five other trust companies and national banks, while the Equitable has about $10,000,000 invested in some fifteen other trust and banking inst.i.tutions.