Robert Marion LaFollette (1855-1925), addressing the Senate, 1908 March 24

The VICE-PRESIDENT. The Chair lays before the Senate the unfinished business, which is Senate bill 3023.

Mr. LA FOLLETTE. Mr. President, I ask leave to have printed, without detaining the Senate to read at length, a protest against the Aldrich bill by the Boston Chamber of Commerce, and a like protest from the Wilmington Board of Trade, of Wilmington, Del.

Mr. La Follette. Mr. President, in the beginning of my remarks I directed attention to the industrial reorganization the country has witnessed within the last ten years. It was made clear that our industrial and commercial life has passed into the hands of a few men. I produced in evidence the names of certain men and the directorships they hold, showing community of interest and centralized control of all the great national industries. I stated that control was lodged in less than one hundred of those named. That was a very conservative statement, Mr. President, but it has been assailed by a section of the press, as a sensational invention, to create prejudice for political advantage.

Mr. President, there was no occasion for the organs and claquers of the System to become frenzied over my statement, so easily proven by the directorates of trusts and combinations controlled by the System.

I am able to cite to-day an authority they will not dispute. The significance of reorganization and consolidation was so manifest that economic and financial writers have discussed it for years. Permit me to quote one that even Wall street must accept.

Mr. Sereno S. Pratt, editor of the Wall Street Journal, and the author, sir, of a most excellent economic study of Wall street, as a great financial and market center, published in the World's Work, a little more than two years ago, an article entitled “Our Financial Oligarchy.” Among other things he said :

Notwithstanding the fact that stock may be widely distributed, the method of control by a very limited number is thus stated by Mr. Pratt :

Mr. Pratt then submits a list of seventy-six men and denominates them “our business rulers.” He states that these seventy-six men were, at that time, holding, in round numbers, sixteen hundred directorships in the trusts and combinations of the country. Of this list he states, and I quote further :

As illustrating the centralization of railroad control, the author cites eight men, who control two-thirds of the railway mileage of the country, and nine billion of the thirteen billion of railroad capitalization as it then stood. The men named as masters of transportation were : J. Pierpont Morgan, A.J. Cassatt, James J. Hill, E.H. Harriman, George J. Gould, W.K. Vanderbilt, W.H. Moore, and William Rockefeller. Of these eight men he says further:

The author discusses further the control of banking, insurance, and industrial organizations of the country, by various small groups within the list. Running through these groups, however, is seen the “tie that binds,” through individual ownership, and through those who serve as agents or attorneys for others, representing allied interests.

While the editor of the Wall Street Journal expressed the belief that there were “signs” of revolt, division, and declining power in this oligarchy, yet events which have since transpired, such, for instance, as Harriman's still further combining great railroad systems and the United States Steel absorbing Tennessee Coal and Iron, indicate the ruling tendency for still greater centralization and control in the hands of a yet more limited number of men.

That such consolidation has gone forward more rapidly since the publication of Mr. Pratt's article is abundantly proven, as I shall presently show.

In the list which I have prepared, and shall incorporate in the printed record of my remarks, there will be found practically all of the names selected by Mr. Pratt, with additions thereto, resulting from such investigation as I have been able to prosecute. It was my purpose to err upon the side of making the list too large, rather than too small, as representing the control of the business interests of the country. I did this well understanding that critics would point out the names of those having the least power and influence as typical of the entire list.

But any fair presentation of the subject requires that there should be embraced within such list not only the men powerful through individual ownership, but those who serve as agents or attorneys for others representing allied interests.

Some of the men whose names appear on this list seem sensitive about it, as though they were personally assailed. Some of them have even grown violent in denunciation and denial.

It was no surprise that Mr. Forgan, of the First National Bank of Chicago, and Mr. Dawes, of the Central Trust Company of Chicago, should both protest and deny. They declare that they do not share in any such control of the business of the country. In a way they state the fact. They do not control, in the sense that they are even an infinitesimal part of the real, dominant power. They are at the head of two System institutions. They are “mere bank presidents,” as they would be designated by the head of the System. Their position is well understood anywhere in Wall street. They take their orders from higher up. Even a glance at their directorates shows the System connections.

Upon the directorate of Mr. Dawes's trust company you will find a Standard Oil railroad, the beef trust, and other special interests represented. Among the directors of Mr. Forgan's bank you will find men who serve in the same capacity upon the directorates of Standard Oil and Morgan railroads, transit companies, trust companies, insurance companies, industrial trusts, and System banks. G.F. Baker, a portion of whose testimony during the Armstrong investigation I have placed before you, president of the First National Bank of New York, the principal national bank in the Morgan group, is found upon the board of directors of Mr. Forgan's Chicago bank.

Dawes and Forgan are a part of the business control of the country, as the ward boss is an essential part of the machine control of a city. Their positions are of no more importance than those of some others in the list who serve as mere “dummies” or “fillers-in” in various places for the System. They were all named as necessary to show the general plan of government which these financial masters have set up over us. It would have served a useful purpose to have still further enlarged the list from this class, as it would have aided to a better understanding of the real interests of some apparently disinterested capitalists.

On the other hand, Mr. President, it would have much reduced the list had I named only those who constitute the real governing power. I repeat, sir, I was very conservative in making the list and the statement with which I presented it to the Senate.

In naming the men who controlled the trust power of this country in 1905, Mr. Pratt cited Mr. John Moody as to the magnitude of this power. John Moody is the author of publications which are consulted every hour of the day in Wall street as a guide to investors in railroad, industrial, and other securities. I doubt, Mr. President, if there can be found in the United States a man equally well informed upon the subjects concerning which he writes. Mr. Moody's work, from which Mr. Pratt quoted, gave the statistics as of January 1, 1904. Since that time an enormous increase in trust consolidation has taken place.

Mr. President, Mr. Pratt thought he saw symptoms or “signs,” as he expressed it, of possible division among these great organized groups that were in control. All signs fail, Mr. President. Statistics prove that centralization has never made greater progress in the history of this country than it has made since the article was printed by Mr. Pratt.

Mr. Moody has just prepared a revision of these statistics, bringing the figures down to January 1, 1908. I have been fortunate in obtaining the proof sheets of this revision, and present in the following table the figures for 1904 and 1908, in parallel columns :

This table shows an increase in trust consolidation and capitalization almost beyond human comprehension. It shows that in these four years the trust capitalization was increased by these few men in control of the big business of the country more than $11,000,000,000, or more than 55 per cent. This $31,000,000,000 of industrial, franchise, and transportation trust capitalization in 1908 does not represent all the corporate power in the hands of the Standard Oil-Morgan combination. It does not include their financial consolidations—their banks, trust companies, and insurance companies.

Mark you, sir, four years ago the consolidation of industrial, franchise, and steam railroad corporations aggregated, in round numbers, $20,000,000,000. To-day, in four short years, just those three lines of consolidation aggregate over $31,000,000,000. Men may treat with indifference this tendency. To me, sir, and I believe to the awakened interest of the great American public, it is becoming the one question, the one issue. System ownership and control of business is of course approved by all who profit by it directly or indirectly, but to the independent American citizen who is thinking of the welfare of his country it assumes a grave and portentous aspect.

Along with this enormous increase in trust power has gone a steady process of centralization in the control of that power, until now the entire situation is dominated by the Standard Oil-Morgan combination. Mr. Pratt named seventy-six men. I named nearly one hundred, because I wished to include in my list enough men to show the method and connections of the System. When you begin the process of elimination to reach the real source, the true fountain head of control over the business life of the people of this country, you come down, sir, to two names :

All feuds between these two great powers have been put aside. Mr. Morgan's picture hangs on the wall of the inner room of the Rockefellers, at 26 Broadway. This union was inevitable unless stayed by the strong arm of Government. In combination to-day they are steadily absorbing the smaller powers. Some gentlemen in this country may feel content with the present situation. Wait a little, Mr. President, the hour will strike for them. Mr. Hill has been taught that he must not oppose the big ones. The Gould interests are being swallowed up by the combine. Morse and Heinze were neatly pocketed during the recent panic. The smelter trust was given a drubbing and started in the same direction. The Vanderbilts can not long retain their important control, and themselves see the handwriting on the wall.

In the list of men who may still be said to be in control of the country's business, there are only fourteen who can treat with the Standard Oil-Morgan combine on anything, even remotely approaching a footing. These men may be roughly classified and described in groups. We have the men of large means and considerable independent control who, a few years ago, might have been, in combination, a potential menace to either Standard Oil or Morgan, but to-day they find their only success lies in maintaining harmony with the big ones. These men are :

In the foregoing group are found big operators and men of large power and interest in their own right. Here are also found the big independent bankers; Jacob Schiff, James Speyer, and August Belmont. The two latter have a special element of strength in the support of foreign money. They all find that existence depends upon maintaining the most cordial relations with the Standard Oil-Morgan combine. These fourteen men are, next to Standard Oil and Morgan, the great powers in the control of our industrial and commercial life.

The balance of the list may be divided roughly into two classes. The first class comprises men of large wealth and real power, nearly every one of whom would fit into the group I have just given, except that they are stars of lesser magnitude. Some are “mere bank presidents” who, for the most part, take orders; others are attorneys and representatives of the combine of the same rank. These men are :

The balance of the list, embracing thirty-five names, are the handy men of the System. They have little or no power except that which is delegated. In so far as they have any power at all they exercise it in a representative capacity. This group contains the attorneys, the bank presidents of lesser order, the dummy directors, the fillers-in, the figureheads. These men are :

Mr. President, any man with ordinary intelligence, who sees the same names repeated over and over again on the various directorates which, in a national sense, dominate the great industries of this country, will understand how the important business interests are in fact welded and fused together into one mass under one control.

Sir, I have named certain individuals from time to time in the course of my argument upon the pending bill. If I am understood as making war upon these men, I disavow it here and now, I do not direct my attack against a Rockefeller, a Morgan, a Harriman. They are but types. They but embody an evil. Back of these men is the THING which we must destroy if we would preserve our free institutions. Men are as nothing; the System which we have built up by privileges, which we have allowed to take possession of Government and control legislation, is the real object of my unceasing warfare.

Mr. President, the statement that the business of the country in a national sense is controlled by less than 100 men—by less than 50 men—aye, by a mere handful of men, requires the citation of no authority further than the list of directors of transportation, industrial, and financial trusts, combinations, and corporations of the country. The official records of those institutions are in themselves the proof.

The business of the country is transacted by corporations and combinations of corporations. The control of corporations rests of necessity with a board of directors, the executive committee, and the officers of the organization. It is therefore only necessary to take the great controlling transportation and business organizations of the country, analyze the directorates, and the truth is ascertained. When the most significant names in the Standard Oil-Morgan groups are distributed with their allpowerful influence on the boards of directors controlling in a broad way transportation, industrial institutions, mining, iron and steel, coal, gas, electric light, shipping, copper, and other natural products and the industrial life resting upon them, together with the great insurance companies, and an overbalanceing control of the banking institutions of the country, no amount of denunciation and personal abuse, from whatever source it may come, can by any possibility obscure the facts. So long as the official records of these controlling bodies stand as published to-day, the proof stands, and the case is made.

I apprehend, Mr. President, that in the near future in the various volumes entitled “The Directory of Directors” for the great industrial and commercial centers of the country, after the publicity which these names and their manifest connection and control have evoked, more “dummies” will be found [laughter], and that it will be a work requiring more industry and research to root out the control of the men whose names appear and what they represent. But it can be done. It will be done.

Mr. President, in the course of my discussion of this momentous question I have produced official records to prove that the massing and centralization of this great money power in the hands of these few men, coupled with the operation of the national banking laws, has resulted in gathering into a few great group banks in New York City practically all the surplus money of the entire country. I have produced record evidence to prove that commercial banking is being swallowed up in financial and speculative banking. I tried to suggest something of the enormous danger threatening our business integrity resulting from this change. I traced briefly the story of the recent panic; showed that legitimate industry was prosperous; that commercial reasons for a panic were wanting; but that there were other reasons sufficient for its promoters-speculative, political, and legislative reasons. To accomplish these several purposes the panic was carefully planned and skillfully staged. It was eminently successful. It removed obstacles in the highways of finance, settled old scores, made money for its managers, rebuked the “square-deal” Administration, disposed of the “third-term” menace, weakened support for political policies inimical to fictitious capitalization, and prepared the way for emergency currency legislation. Accordingly, we have this bill before the Senate.

Mr. President, will not this bill invest the few masters of Wall street finance with still greater power ? Will it not give them five hundred million more dollars of emergency money with which to play their Wall street game ?

With the vast capital at their command they can still further extend their centralized banking power already established in the chief business centers of the country.

No one in the debate has undertaken to demonstrate that there is well-grounded business need for a $500,000,000 emergency currency. It has been assumed that the need of money to move the crops is the high function of this $500,000,000. It is convenient to seize upon some subject of human interest to promote or to defeat legislation that can not stand by itself.

Speak of railroad-rate legislation, and the railroads at once threaten a reduction in wages to elicit sympathy for the employees, whose wages, it is claimed, “must be reduced”—who may, indeed, “be thrown entirely out of employment.” Nothing is said of reducing dividends on watered stock.

So the panic, originating primarily in reckless promotion and speculation, is attributed to lack of money to transport wheat and corn and cotton.

But the West was not begging to borrow Eastern money last October. It was asking for its own money. It was praying to get back the savings of Western farmers, the product of Western industry, which, under the reserve system, had been drawn into New York and tied up in Wall street.

Not more than $200,000,000 is needed to move the crop. When some basis is required upon which to predicate any legitimate need for this elastic addition to the currency, we are always referred to the moving of the crops. Why, sir, it lies in the mouth of no man of fair intelligence here or elsewhere in this country to contend for a larger per capita circulation than we have already for ordinary business transactions. But there comes a time each year, a brief period, when a temporary demand is created for additional money for the moving of the crops. But this demand does not exceed in amount $200,000,000. No authority of standing has made a higher estimate.

The country banks of the Southern, Western, and Middle States—the principal crop-producing States—demanding such money, at or about the same time had on deposit elsewhere with reserve agents August 22, 1907, $124,630,240. The reserve cities in these same States had on deposit elsewhere in central reserve cities $150,607,745. Allowing for duplication, and allowing that some of this amount was on deposit in central reserve banks of Chicago and St. Louis, I believe these figures will warrant the assumption that fully half of the $410,000,000 which New York national banks owed the country last fall belonged to the cropproducing States of the South and West. If this money had been retained in the Western and Southern banks and not forwarded to Wall street, it would have moved the crops. This fallacious excuse would not now be offered for a $500,000,000 “emergency currency.”

Let it not be said, sir, that this money that the country banks had on deposit in New York was lawful reserve money and that it could not have been used to move the crops had the banks in the crop-producing States retained it in their own vaults. I contend, sir, that the discretion of the Secretary of the Treasury could be exercised to allow these banks to impair their reserves in time of need, if they had been retained at home, with as high justification as he could permit New York banks to allow their reserves to fall below the statutory limitation. If the banks of the crop-producing States were required to keep the money they send to New York, it would move the crops without taking anything from the amount of money which they are now required by the reserve system to keep on hand.

All that can be urged for the relief that might be expected from this legislation must be predicated upon the claim that it will impart elasticity to our currency system. This it is argued will be secured by taxing the circulation. But, Mr. President, will there be any tax under this bill ? That depends upon the machinery provided for its enforcement. The bill provides that the banks shall make monthly return of the amount of their notes in circulation, and the tax is to be determined accordingly. No penalty is provided for failure to report correctly. This opens the way to evade the tax on this circulation and leaves these bankers free to inflate and contract the currency at will.

Mr. President, this is precisely the manner in which we assessed railroads in Wisconsin. The officers of the roads were required to report under oath their gross earnings in the State each year. When we examined their books we discovered that for years they had systematically falsified their sworn reports, and defrauded the State out of millions of dollars. When the State brought suit to recover these taxes, the roads went into the circuit court and stipulated that they had so falsified their reports and went to the supreme court on the legal question whether the acceptance of the reports by the State officials did not bind the State and bar the recovery.

Mr. President, I believe the evidence I have quoted in this discussion from the Armstrong committee and other sources will show that the men in charge of the great financial banks are of no higher moral character and of no higher business ideals than the railroad managers who falsified their reports of gross earnings to escape taxation in Wisconsin.

But, sir, why did not the Committee on Finance in reporting out a measure take up this question of the reserves, around which so much of this debate has centered, in which, according to all the judgment and opinion of the leading financial writers of this country, lies so much of the weakness of our present system, and deal with that as one of the leading features of the bill ?

It had a little place in the bill originally; it was stricken out; and we are told that some time, somewhere, later on, we may get something on this subject of reserves. We are about to vote upon this bill. We should know what its provisions are. I say, sir, the matter of reserves, together with some other subjects to which I shall call attention, should have had early and thorough consideration in any bill framed in the public interest pretending to avert the recurrence of conditions that gave rise to the panic of 1907.

As first proposed the bill contained no provisions which pretended to secure a distribution of the proposed currency issue equitably throughout the country.

The criticism of that defect of the measure compelled an amendment which on its face might seem to insure an equitable distribution of the increased circulation which the bill contemplates. I say that on its face this bill looks as if it might provide an equitable distribution of the $500,000,000, but every piece of legislation must be considered in contemplation of existing conditions. What are the existing conditions ? What is the power of a limited number of men to-day with respect to such additional currency as this bill provides for ? The Standard Oil group and the Morgan group have their connections through their investments in banks wherever it serves their interests throughout the Union. You need but take the bankers' directory of the country and study it to be convinced of this. You will be able to spot banks all over the country into which the control of those two groups extends. The Riggs Bank here in this city is one of them. I have called attention to two Chicago institutions. You can follow it over the country and trace it to a certainty, with sufficient investigation.

Morgan and Standard Oil have the financial power to extend that connection practically without limit. They have their own trust companies associated with their banks wherever located. They already hold the very securities for which this bill provides. They have the ability to acquire a practical monopoly of such securities. Their resources and profits from the control of all the great banking, transportation, and industrial institutions of the country not only put it within their power but make it worth their while to invest in such securities, where banks of small capital can under no circumstances afford to carry them. The control over the emergency currency that the possession of the specified securities, especially in time of panic, when call-money rates in Wall street run to 100 per cent, would make it well worth while for the big banks to acquire directly and indirectly a substantial monopoly of these securities. The smaller banks engaged only in commercial banking could under no circumstances compete with them or afford to acquire them.

Need I remind the Senate of the statements of former Secretary Gage, of former Secretary Shaw, of the many Western and Middle Western and Southern bankers who have sent their protests here that such banks do not hold and can not acquire these securities ? Need I remind the Senate again that the chairman of the Finance Committee only one short year ago declared that municipal bonds, the very securities designated in this bill as a basis for this emergency currency, were so widely fluctuating that no prudent banker could afford to invest in them ? He stated particularly that small banks could not afford to make such investments. He argued that such securities were held only by the bib banks of New York and of other principal money centers.

Now, going a step further, sir, to see the effect, I do not say the purpose of this legislation, but the effect of it, you have these two groups. You can not brush aside the overwhelming testimony of their existence. The slightest investigation on the part of Senators will convince them, will overcome all doubt. This centralization has gone on and on. I cited the warnings of some of the leading economists of the country five years ago of the dangers of it. Now you have it. Its ramifications extend into every State in this Union. At a given word their banks, acting together for any section or for the entire country, can be first in line, offering their securities for this so-called emergency circulation, and through the power of their nation-wide organization they can impress upon the Secretary—any Secretary of the Treasury, whatever his politics may be—the necessity for such an issue. It is an awful situation in which to place a Secretary of the Treasury. They can pour their telegrams upon him. They can send upon every train men of ability and influence, an army of them, to plead with the Treasury that the hour has come, that a panic threatens, that an issue of emergency currency is needed to ward off disaster. If need be, they can create, whenever it suits their interests, the very conditions which, upon the theory of this bill, would call for an issue of emergency currency.

Nay, more than that, so vast are their resources, so complete their domination of the markets whenever trouble comes, that the assurance which this bill gives of panic money issued to order will serve to make the ordinary commercial business of the country more completely the prey of this mighty power. Talk about the equitable distribution which this bill provides for—

The VICE-PRESIDENT. Does the Senator from Wisconsin yield to the Senator from Michigan ?

Mr. La Follette. I do for a brief question. I am anxious to conclude my remarks to-day, if possible.

Mr. SMITH. I should like to ask the Senator whether in his suggestion that the banks of the country could not get these municipal and State securities as the basis of circulation he has considered the fact that already, under laws that have been in force for many years, the savings banks of New England have purchased these securities in large quantities and hold them as legal investments ?

Mr. La Follette. I think I have considered that, Mr. President; and let me say to my friend the Senator from Michigan that a thorough study of this subject will convince him that these great interests are not limited in their organization to national banks. They take in by purchase of stock or exchange of securities banks of whatever kind and trust companies wherever located.

The holdings of these securities by the State, private, and savings banks and trust companies under their control would be at the command of their national banks for securing circulation. Only national banks could take out circulation. Independent national banks engaged in commercial banking could not compete with the System banks over the country for control of these securities, even those held by other independent concerns.

The thought which I wish every Senator to keep in mind throughout the consideration of this question is that there is a mighty power to be dealt with here which will be the special beneficiary of this legislation, and that is a standing menace to the business of this country, a menace to legislation everywhere, and to the industrial and commercial independence of the people.

The VICE-PRESIDENT. Does the Senator from Wisconsin yield further to the Senator from Michigan ?

Mr. SMITH. I have been under the impression that the placing of this class of securities in an emergency measure might tend to localize their purchase. If the securities now enumerated in the bill are issued by municipalities, it has seemed to me that the local banks and local investors would purchase them because of their added value and convertibility, and that the tendency of this legislation now would be to reduce the rate of interest that the municipalities now pay, because of the additional value given to their securities for this purpose, and that it would operate to decentralize rather than to centralize their market.

I should like very much to hear the Senator from Wisconsin upon that phase of this question, because it goes directly to the merits of the question itself.

Mr. La Follette. Let me suggest to the Senator from Michigan that it does not lie with a little bank in Allegan, Mich., or anywhere else, to enter into competition with this System in bidding for municipal bonds, local or otherwise. What power, compared with the power of these group organizations, have the independent banks to gather in by purchase or otherwise the control of these securities ?

Just look, Mr. President ! On the 14th day of February, 1908, the report of the condition of the National City Bank of New York showed among its liabilities fourteen millions of borrowed bonds. It lies in the power of those great institutions, with their connections, to control the placing of these bonds. It seems to me that is too patent for argument.

Mr. SMITH. On that particular point, if the Senator will indulge me, I have had the impression and have given it some thought and study, that latterly Western banks and Western communities are investing in their own bonds; that it has become the custom of cities of the size of the one in which I live and of other cities in the West to buy their own securities at home. I think the same custom prevails in many Western States, and that the Eastern market is not left alone to bid, without opposition or competition, for these securities. A very recent issue of securities in my own home city illustrates that point. Our citizens and bankers bought them at what seemed to be the most favorable rate for that investment.

If I am wrong in that, if this bill will not tend to decentralize rather than to centralize these securities and their market, it puts an entirely different phase upon the situation than has heretofore been my view.

Mr. La Follette, I am very glad to have the Senator say so, for he must surely see that this bill, if passed, will place a premium on these securities, that it will give them an added value when it invests them with the control of a currency issue. He must also see that this added value will be realized only by banks which can with profit use the securities to take out this emergency currency. This value will be far greater to those interests which can use this currency to make the enormous profits only known to Wall street in times of tight money. Legitimate commercial banking could earn no such profits. Does the Senator suppose that the little banks of Wisconsin or of Michigan or any other State can ever compete for the control of these securities with this mighty centralized money power ? No; not for a moment, and I am sure the Senator must see that.

Mr. President, whatever the purposes of this bill, is it not manifest that it must inevitably aggravate the very conditions that now afflict commercial banking, whose office it is to promote all of the business transactions in this vast country between the. producer and the consumer ?

Sir, I would wrong no man. I would not unjustly decry Wall street or ignore the necessity of a great central market to provide capital for the large business undertakings of this country. I recognize the rights of capital and the service which capital can render to a great producing nation such as ours. But this Government guarantees equality of opportunity for all men, and it likewise guarantees equality of opportunity for all capital. Corporations and combinations of corporations, with their centralized banking and extending branch connections from State to State, are not entitled to special favors in legislation. This is not a bill for country banks, under which they can have equality of opportunity with city banks. It is the universal testimony, without, so far as my observation and correspondence extend, one dissenting voice from country bankers, that this bill is not for country bankers. It is not a bill even for the city banks engaged in commercial banking. It is a bill distinctively and specially for financial banks and trust companies speculating in securities.

The VICE-PRESIDENT. Does the Senator from Wisconsin yield to the Senator from Oklahoma ?

Mr. GORE. I ask the Senator if this bill might not hold out a temptation or a reward or a premium of $500,000,000 to those who can control the securities, for with a panic they can get the money and without a panic they can not.

Mr. La Follette. I will say to the Senator from Oklahoma that I have aimed to make it clear by my whole argument that the great and immediate danger back of this bill is that it offers a premium to the Interests that can make profit out of a panic. It would furnish them, sir, it seems to me, with every incentive to promote the conditions which would bring on panics, when you consider how wide their control is and how large a proportion of this so-called “emergency currency” they could command. They could take out this circulation through their System-controlled banks in the various States, and once it is in their control it can be sent to Wall street, where panic money brings a hundred per cent on stock-market loans.

What is the duty of government in this legislation ? The Government control of banks invites confidence because it increases business. The fact that a bank is a national bank carries with it the sanction of national protection.

Betrayal of the public by a Government-controlled bank is the Government betraying its own.

If the Government name is used in connection with a bank, its control should be sufficient, at least, to provide for decently honest bank management.

Mr. President, in the light of the panic, what legislation was demanded to meet the emergency ? Legislation providing an abundance of quick money on which to run other panics or legislation taking banks, over which the Government had supervision, out of speculation; legislation which would contribute to private interests or legislation which would contribute to public interests ?

Mr. President, I have not at any time discussed this subject professing an expert knowledge of banking and currency, but from the standpoint of experience in securing laws in the public interest, opposed by Special Interests.

I do not know how many Senators, on looking over their papers a day or two ago, saw an interview with the Deputy Comptroller of the Currency. It is an awful thing to put into the RECORD. Deputy Comptroller of the Currency Kane, in an interview in the Washington Post of March 21, says :

The details of legislation are always possible when the basic principle is once determined. If it is once settled that Government-controlled banks are to be controlled in the public interest, the details can then be wrought out.

Figures from the official record show how the massing and centralization of the money power, coupled with the operation of the national banking law, has resulted in gathering into a few group banks in hew York City practically all the surplus money of the entire country, for use there in promotion and stockmarket manipulations.

It clearly appears that these great group banks, as approved reserve agents for other national banks, gather the money reserves of the country in ever-increasing millions. The official figures of the Treasury Department show that the national banks of New York City owed the banks of the rest of the country during the panic a net balance of more than $410,000,000. Of this the country banks were unable to withdraw more than 5 per cent in their time of direst need. The payment of even this meager 5 per cent was made possible, or morally forced, by the deposit of Government money with the New York banks. While the official records are imperfect evidence of the growth of financial and speculative banking in recent years, they do show its trend and extent. They show, as I have before said, that the ratio of bank investment in stocks and bonds to individual deposits increased from 8.9 per cent in 1890 to 28.2 per cent in 1907 and that the aggregate of such investment is now more than $3,690,000,000.

Yet this bill does not provide that sufficient reserves in lawful money—not watered stocks and bonds—shall be kept where they will subserve the interests of legitimate business and the depositors to whom they belong. There is no provision to prevent the money of the country being absorbed by the System and managed by the bank groups to carry on great speculating and promotion schemes.

The official records of the Armstrong report and the Interstate Commerce Commission proved beyond all question that men at the great national-bank center and in control of banking and the money system were engaged in operations in violation of their trust obligations and in contempt of public interest and statutory law.

I want to lay before the Senate a simple comparison between the manner in which bank funds and deposited money are invested by one of the leading financial banks of New York and by a large bank of London, England.

Mr. E. Clarence Jones, a New York banker, who is opposed to financial banking, before the joint committee on banks of the New York legislature February 18, 1908, made this comparative statement of the ratio of investment in stocks and bonds of the First National Bank of New York (December 3, 1907) and the London City and Midland Bank (Limited) (December 31, 1907):

Permit me to quote briefly from this banker's argument in analysis of these figures :

This comparison brings out in a most striking way the proportions to which financial banking in this country has attained. Here we have the First National Bank of New York, one of the great banks of the Morgan group, with nearly 60 per cent of its depositors' money invested in stocks and bonds more or less speculative.

How much more of the bank's and depositors' money was tied up in collateral loans on this same kind of security I do not know. I can only draw certain inferences from the fact that when I asked for this particular information as to this and a few other of the leading New York banks I was informed that the Comptroller's office felt bound to guard these facts in secrecy, lest their publication “raise havoc with the banks.”

But this bill has no provision requiring publicity as to the affairs of national banks; as to their loans and investments that will safeguard in some measure the interest of stockholders and depositors; as to what banks are engaged in legitimate commercial banking and what banks are engaged in financial banking; as to what banks not themselves engaged in financial banking are forwarding the money of their depositors to other banks which are engaged in financial banking, in stockjobbing, and speculation.

There is nothing in this bill prohibiting bank officers and bank directors from engaging in underwriting and promotion syndicates; nothing to prevent their investing the funds of the banks which they manage and their deposits in the stocks and bonds of other corporations which they are promoting, or have promoted, or in which they are interested.

And yet, Mr. President, one of the bank failures in this very panic time cried to heaven for such legislation. Receivers found millions of its deposits invested in worthless promotion ventures in which the head and management of the bank was engaged. One would have supposed, if this were real emergency legislation, that it would have had something written in it providing for emergencies of that character.

There is nothing in this bill prohibiting officers and directors of national banks from borrowing the funds of the institutions which they control, the funds of their depositors, on securities which would not be accepted by an independent bank in which they would not have like authority andvinfluence as in their own.

Whether Senators agree with me or not, that the panic of 1907 was deliberately planned for speculative, political, and legislative reasons, candid men reviewing the situation must conclude that unusual circumstances and strange conditions accompanied it. The country was materially prosperous. There were no commercial reasons for a panic. It was charged on high authority that there were political reasons. There is overwhelming proof of speculative reasons.

The situation at least calls for inquiry, for official investigation to obtain facts upon which to prepare a measure commensurate with the evils shown to exist.

I submit that at least one new here, might have expected that a committee charged with preparing legislation on the heels of such a panic as that, would have made an investigation before reporting a bill.

No steps were taken for an investigation until a resolution was offered by the Senator from South Carolina (Mr. TILLMAN], and that very recently.

The Aldrich bill does not provide the manifestly needed amendments to the penal statutes for the punishment of wrongdoing of officers of national banks—punishment which, added to the assurance of an occasional impartial investigation by a Federal grand jury of their conduct and management, will do much to keep men in important trust positions mindful of their obligations and the duties imposed by law.

Legislation along these lines, Mr. President, is the sort of emergency legislation most urgently demanded to prevent the recurrence of panics of the kind that terrorized the country last October.

I undertake to say, that, except the Special Interests—with whose predatory operations it might interfere—there would be found in behalf of legislation such as I have suggested a “substantial consensus of opinion.”

This much could be done at once. To work out a thoroughgoing revision of our banking and currency laws will require preparation; I concede that.

It is quite generally admitted, that our currency and banking laws need revision. In my reading I have found no authority to the contrary. Throughout this debate there has run a note of apology and excuse for this bill; that it is, granting all that its author and friends claim for it, but an expedient for extreme and perilous situations. It is admitted to be a makeshift.

A review of the debates of recent years touching our banking laws shows that necessity for revision has long been recognized. The subject has recurred from time to time whenever forced upon the attention of the Senate by some financial or commercial disturbance, but not otherwise. Propositions are always forthcoming, timed to fit some particular trouble, calling for some specific action, and usually resulting in benefit to the Special Interests. It would appear that we might learn much from countries in regard to bank management and currency legislation.

For my own part, Mr. President, I believe this subject one of supreme importance, requiring study and research, such as no committee of this body will bestow upon it. I do not believe that any other great nation in the world situated as we are would fail to create a suitable commission for investigation and report. Such a commission should be composed of men representing not the banking interests of the country alone, representing not the banking interests engaged in speculative banking at all, but representing commercial banking interests, representing transportation interests, representing producers and consumers, to which should be added a Government expert who has served in the office of the Comptroller of the Currency, and one or more eminent economists who have made a special study of Government finance.

Mr. President, in conclusion I would remind Senators that when the bill first came here the character of securities, especially railroad bonds, proposed as a basis for currency issue, was criticised. Their speculative and uncertain character was pointed out, and the absence of any safeguards in the bill as to the ascertainment of the value of the securities was called in question.

It was with manifest reluctance that for the time being the railroad provision was abandoned.

Will not this surrender of the main provision of the bill be looked upon as a confession that it was not defensable, and that the bill as a whole was of the same character ?

It is still proposed to allow the issue of this emergency currency on other securities which the chairman of the Finance Committee a year ago arraigned in this Chamber as unstable and “widely fluctuating in value,” and to create an inducement for honest bankers to go into financial banking and invest in these securities, in which the Senator then declared “no prudent banker could afford to invest.”

Mr. President, this bill is of a piece with other legislations enacted in recent years. It is not concerned with the interests of depositors—the public interest. It does give added power and privilege to the financial banks. It does reduce reserve requirements for favored banks. It carries a provision for taxation of emergency currency that puts a premium on fraud. It did provide for working the securities of overcapitalized railroads into the currency system. It did propose to put a premium on railroad-rate extortion. It did attempt to give the banks a free hand for the contraction of the circulating medium. It sought to place the Government in an attitude toward the watered securities of railroads that would forestall railway valuation.

Mr. President, I have talked in vain if I have not made plain the thought that there is just one issue before the country today. It is not currency. It is not tariff. It is not railroad regulation. These and other important questions are but phases of one great conflict.

Let no man think he is not concerned; that his State or his constituency is not interested. There is no remote corner of this country where the power of Special Interests is not encroaching on public rights.

Let no man think this is a question of party politics. It strikes down to the very foundation of our free institutions. The System knows no party. It is supplanting government.

Mr. President, I think I may say without risk of being misunderstood, at least by those of whom I speak, that I know something of the sentiment of the people of this country.

I have found no difference of opinion among them as to existing conditions and the causes underlying it all. In Wisconsin, and from New York to the Pacific States, the people I have met hold one opinion, have one conviction.

They are deeply concerned. They understand. Men back of the System seem to know not what they do.

In their strife for more money, more power—more power, more money—there is no time for thought, for reflection. They look neither forward nor backward. Government, society, and the individual are swallowed up in the struggle for greater control. The plain man living the wholesome life of peace and contentment has a better perspective, a saner judgment. He has ideals and conscience and human emotion. Home, children, neighbors, friends, church, schools, country, constitute life. He knows very definitely the conditions, affecting the rights guaranteed him by the Constitution, but he longs for expression, he longs for leadership.

This makes plain, sir, the powerful hold of President Roosevelt and of Mr. Bryan upon the confidence and affection of the American people. This makes plain why the President and Mr. Bryan each have, not the Republican party alone, not Democratic party alone, but the whole people in sympathy with their purposes.

Whatever the difference in party policy, whatever the difference in personality, they are striving, each in his own way, for certain fundamental truths that the American people demand shall be settled right, and shall be settled soon.

Whatever mistakes Mr. Bryan may have made in policies, whatever mistakes the President may make in compromising legislation, they are beloved of the people because they are both fighting to preserve, for the people the principle of government, by the people.

Blind indeed is he who does not see what the time portends. He who would remain in public service must serve the public, not the System. He must serve his country, not Special Interests. I believe this bill will strengthen the power that grows every day a greater menace to the industrial and commercial liberty of the American people. I believe this bill will strengthen the very element that is undermining the commercial banking of the country.

I appeal to the progressive men in the Senate not to allow this measure to pass; not to be misled by any false conception of party obligation. The highest official obligation is to serve the public interest.

APPENDIX

Extracts from public records showing the participation of bank managers and directors in promotions and stockjobbing operations, with comment and explanation.

It is well known that there exists a community of interest between the large financial institutions of New York and the banking and other financial institutions of other large cities of this country. As the members of the directorates of the New York banks and the banks themselves are engaged in speculative flotations, so also are the directorates of large financial institutions in other cities of the country engaged in like transactions and have been and are associated with the great manipulators of the stock market of New York. In this connection I desire to call attention to the testimony of Edward H. Harriman before the Interstate Commerce Commission. The testimony which I give is taken from the print published at the instance of the Union Pacific Railroad Company, which certainly is not a source unfriendly to Mr. Harriman. It is taken from pages 23 and 24 of this report :

Mr. Kellogg. Was there a circular sent out asking for a deposit of stock of the Chicago and Northern Railroad Company for the purpose of selling it ?

Mr. Harriman. My recollection is that Kuhn, Loeb & Co. issued a circular asking for a deposit of Chicago and Alton preferred, to be left in their hands to be sold under the control—I believe it was under the control, or under conference with a committee.

Mr. Kellogg. Who was the committee ?

Mr. Harriman. Myself—I beg pardon for putting myself first—I should have said Mr. Stuart (Stewart).

Mr. Kellogg. We do it.

Mr. Harriman. And Mr.—you have it there—I think it was Mr. Mitchell and myself—John A. Stuart (Stewart), John J. Mitchell, and myself, was it not ?

John A. Stuart (Stewart) is a director of the Merchants' National Bank and chairman of the board of trustees of the United States Trust Company of New York. Edward H. Harriman—I will not mention his railroad connections, but I desire here to mention a few of his banking connections—is a member of the board of directors of the National City Bank, the Night and Day Bank, and the International Banking Corporation, of New York. He is a trustee of the Equitable Trust Company, and director of the Guaranty Trust Company, and director of the Mercantile Trust Company. John J. Mitchell, of Chicago, is the president of the Illinois Trust Savings Bank of Chicago. He is also director of the First National Bank of New York. Mr. Walsh is also director of the New York Trust Company, of the Chicago and Alton, the Chicago, Burlington and Quincy, the Chicago, Rock Island and Pacific, the Kansas City Southern, the Rock Island Company, and the Pullman Company, so it can be seen how closely he is allied to Mr. Harriman in other ways than merely an interest in the banking business.

Mr. Kellogg. I offer in evidence an agreement dated December 23, 1903, for the deposit of Chicago and Alton stock. Under this agreement the preferred stock owners of the Chicago and Alton Railway Company, I believe, in a general way, are assumed to deposit their stock with the bankers, Kuhn, Loeb & Co., subject to sale ?

Mr. Harriman. That is right.

Mr. Kellogg. The price to be fixed by John A. Stuart (Stewart), Edward H. Harriman, and John J. Mitchell ?

Mr. Harriman. That is right.

Mr. Kellogg. Did you fix the price at which that stock was sold to the Union Pacific Company ?

Mr. Harriman. I joined in it.

Mr. Kellogg. You joined in it ?

Mr. Harriman. Yes, sir.

Mr. Kellogg. What was the price fixed. Eighty-six and one-half, was it ?

Mr. Harriman. That is right.

Mr. Kellogg. Two and one-half per cent commission ?

Mr. Harriman. Well, we didn't pay 2½ per cent commission.

Mr. Kellogg. Well, taken out of that. Eighty-six and one-half was the gross sum paid ?

Mr. Harriman. Net price to the Union Pacific ?

Mr. Kellogg. Net price to the Union Pacific; yes, sir. How much did the owners of the stock get ?

Mr. Harriman. Eighty-four.

Mr. Kellogg. Have you the list of stockholders who deposited their stock with Kuhn, Loeb & Co.?

Mr. Harriman. I have not.

* * * * *

Mr. Kellogg. Who has the list ?

Mr. Harriman. That I don't know; that I had nothing to do with.

Mr. Kellogg. You fixed the price ?

* * * * *

Mr. Harriman. The committee fixed the price.

Mr. Kellogg. Did you own any that was so deposited ?

Mr. Harriman did not answer this question. Mr. Milburn, his attorney, entered an objection. The question involved the right of the executive officers of railroad companies to purchase stock of another railroad company as individuals and to sell that stock as individuals to themselves as executive officers of the railroad and the right of the Interstate Commerce Commission to inquire into such a transaction. Mr. Harriman did not answer, and only a few days ago, upon appeal, Judge Hough decided that he must answer this and other questions which will throw light upon the methods of these high financiers, of these trusted agents who have control of the banking machinery in this country.

I desire to offer some testimony given on pages 42 and 43 of the hearings of the Interstate Commerce Commission, February 25 to 28, 1907. I desire again to call attention to the banking connections of Mr. Harriman. Mr. Mortimer Schiff, of the firm of Kuhn, Loeb & Co., was a director of the Mercantile Trust Company, of the Provident Loan Society, and the United States Loan and Trust Company—one of the principal Standard Oil financial institutions; George J. Gould, the director of the National Bank of Commerce, the great Morgan institution; and James Stillman, the financier of the Standard Oil institutions, the president of the National City, and the director of the Bank of the Metropolis, Bowery Savings Bank, Columbia Bank, Farmers' Loan and Trust Company, The Fidelity Bank, The Fifth Avenue Safe Deposit Company, The Hanover National Bank, The Lincoln National Bank, The National Butchers and Drovers' Bank, The New York Trust Company, The Riggs National Bank of Washington, the Second National Bank of New York, and a member of the clearing-house committee of the New York Clearing-House Association. These, with Mr. Harriman, were members of a syndicate. The following is from the testimony :

Mr. Kellogg. In 1899 you organized a syndicate to buy the Chicago and Alton stock, did you not ?

Mr. Harriman. Let me see. Was I the one that did that ? I think so; I had a hand in it, anyway.

Mr. Kellogg. I think you did. That syndicate was composed of yourself, Mr. Mortimer Schiff, George J. Gould, and James Stillman, was it not ?

Mr. Harriman. I am not sure about Mortimer Schiff.

Mr. Kellogg. Was it some representative of Kuhn, Loch & Co.?

Mr. Harriman. Whatever was done was published at the time, and I presume you have all those papers. There was no concealment of what was done.

Mr. Kellogg. I understand that. I am only asking the general questions, Mr. Harriman. The statement shows that George J. Gould acquired 54,534 shares of stock, E.H. Harriman 54,535. Mortimer Schiff 54,535, and James Stillman 54,535. That is substantially correct, is it not ?

Mr. Harriman. I think so.

Mr. Kellogg. There may have been a few shares in the names of directors. In other words, this syndicate acquired all but about $436,000 ?

Mr. Harriman. About 97 per cent, if I recollect right.

Mr. Kellogg. About 97 per cent, that is right, of the capital stock of the Chicago and Alton Railroad Company. That capital is about $21,000,000, is it not, par value ?

Mr. Harriman. I think it was $22,000,000.

Mr. Kellogg. Well, $22,000,000, par value. You became president of the company immediately thereafter, did you not, and were president for a short time—perhaps a year ?

Mr. Harriman. That I don't recollect—that I have ever been president of the Chicago and Alton.

Mr. Kellogg. The record shows you were president until Mr. Felton became president.

Mr. Harriman. That may have been.

Mr. Kellogg. You were chairman of the board of directors or of the executive committee, or both—both, I think—until October last, were you not ?

Mr. Harriman. That is so.

Mr. Kellogg. And during that time you had charge of the financial operations of the railroad company, did you ?

Mr. Harriman. Through the executive committee and board, yes, or subject to their control.

Mr. Kellogg. The property was bonded at that time—at the time you bought it—for about eight and a half millions, was it not ?

Mr. Harriman. Something like that—eight and a half or nine millions.

Mr. Kellogg. Yes; somewhere about eight and a half or nine millions. You immediately placed a mortgage of $40,000,000 upon the property, did you not ?

Mr. Harriman. Yes; and sold $32,000,000 out of it.

Mr. Kellogg. You sold those $32,000,000 of bonds to the stockholders for $650 a bond, did you not, or 65 cents on the dollar ?

Mr. Harriman. That is right.

Mr. Kellogg. And this syndicate got substantially all of the bonds, all but about $436,000 ?

Mr. Harriman. Was it that syndicate ? I think there was a subsequent syndicate formed, composed of 100 different individuals.

Mr. Kellogg. No; I think the bonds were divided among that syndicate.

Mr. Harriman. That is, it was divided with the stockholders, whoever they were.

Mr. Kellogg. Yes; but the syndicate—

Mr. Harriman. Yes; I know, but that does not bear on this question. It is a question whether they did not represent a large number of subscribers to a syndicate other than themselves.

Mr. Kellogg. I do not know anything about that.

Mr. Harriman. I think the records show that.

Mr. Kellogg. The record shows that the bonds were sold—

Mr. Harriman. To the stockholders.

Mr. Kellogg. To the stockholders, of which these four men whom I mentioned got substantially all ?

Mr. Harriman. They were the largest holders; yes.

Mr. Kellogg. Eight millions of those bonds have not been sold, have they !

Mr. Harriman. I think they have been pledged.

Mr. Kellogg. They have been pledged as collateral security to a $5,000,000 note of the railway company ?

Mr. Harriman. That is so.

Mr. Kellogg. Then $32,000,000 of those bonds were sold and substantially all of them went to these four gentlemen ?

Mr. Harriman. Went to the stockholders.

Mr. Kellogg. They were the stockholders, were they ?

Mr. Harriman. Went to the stockholders.

Mr. Kellogg. Well, these men were the stockholders, principally, were they not ? There were no other stockholders except of small amounts ?

Mr. Harriman. You have shown that. They had 97 per cent. They were the stockholders.

Mr. Kellogg. You sold some of those bonds immediately thereafter, did you not ?

Mr. Harriman. I think not.

* * * * *

Mr. Kellogg. Did you sell your bonds ?

Mr. Harriman. Some of them.

Mr. Kellogg. Did you sell all of them ?

Mr. Harriman. I think I did.

Mr. Kellogg. And $10,000,000 of them went to the New York Life, did they not ?

Mr. Harriman. I don't know whether they did or not !

Mr. Kellogg. Ten million dollars of them were sold for 96, were they not ?

Mr. Harriman. I think they were. I don't know whether they were my bonds or not.

Mr. Kellogg. And thereby the stockholders, you gentlemen, reaped a profit of over $300 a bond ? Is that correct ?

* * * * * *

Mr. Harriman. I have not seen the list, Mr. Kellogg.

Mr. Kellogg. Very well. It purports to give the total number of shares of the Chicago and Alton Railroad as 222,102, and as owned by George J. Gould, 54,534, and the same amount by each one of the other three gentlemen. Yourself, Mr. Schiff, and Mr. Stillman, and the amount of the $40,000,000 subscribed by each, amounting to $39,978,360 altogether, and you gentlemen subscribed for substantially all of it.

Mr. Harriman. Thirty-nine million dollars ?

Mr. Kellogg. Yes; originally subscribed for.

Mr. Harriman. Oh, yes.

Mr. Kellogg. And you four gentlemen owned substantially all the stock ?

Mr. Harriman. We were the Chicago and Alton Railroad, practically.

Mr. Kellogg. That is it; and you sold those bonds to yourselves for 65 cents on the dollar ?

Mr. Harriman. We sold them to the stockholders, whoever they may be. I don't know whether other people were interested in mine or not.

* * * * * *

Mr. Kellogg. As a matter of fact, the Chicago and Alton Railroad Company had paid its accumulated profits from year to year in the form of dividends at 8 per cent and over, had it not ?

Mr. Harriman. It had paid some of them.

Mr. Kellogg. The books of the Chicago and Alton Railroad Company showed no surplus of any considerable amount at the time you bought the property, did they ?

Mr. Harriman. That I don't remember.

Mr. Kellogg. As a matter of fact, they showed less than $200,000, did they not ?

Mr. Harriman. The books may have—

Mr. Kellogg. They did not show any $6,000,000 surplus, did it ?

Mr. Harriman. Mr. Kellogg, as I remember it, there was a recasting of the statements of the Chicago and Alton, and it was shown that there had been appropriated out of income to the Chicago and Alton, and expended on the road, more than $12,000,000.

Mr. Kellogg. Yes, sir.

Mr. Harriman. And this syndicate, or this body of stockholders, readjusted the finances of the Chicago and Alton and distributed to the stockholders about half that amount which had gone into the property from profits.

* * * * * *

Mr. Kellogg. Is it not a fact that from year to year, during the management of the prior Chicago and Alton, whatever had been charged against its income and spent upon the road had been closed each year by the board of directors ?

Mr. Harriman. I presume so, but under the former management the Chicago and Alton was drying up very fast, and so was the railroad itself.

Mr. Kellogg. It certainly has not dried up since.

Mr. Harriman. No, sir; it has not.

Mr. Kellogg. There was water enough to satisfy anybody.

Mr. Harriman. Yes; and business enough to satisfy.

Mr. Kellogg. Would you think distributing $6,669,000 as a 30 per cent dividend to the stockholders who had already had 8 per cent would prevent if from drying up ?

Mr. Harriman. Combined with the other methods of financing which were adopted by the Chicago and Alton; yes.

* * * * * *

Commissioner Clements. Mr. Kellogg, what is the date of that 30 per cent dividend in that case ?

Mr. Kellogg. The 30 per cent dividend was paid on May 7, 1900, shortly after the acquisition of the property by Mr. Harriman and his syndicate, $6,669,180. It may have been declared before. I think it was.

Mr. Kellogg. You understood, didn't you, that this $12,000,000 had already been charged against operating expenses ?

Mr. Harriman. I did not understand it at all. All I know was we went into the affairs of the Chicago and Alton and found that $12,000,000 of the profits of the company had been expended for improvements and additions to the Chicago and Alton Railroad.

Mr. Kellogg. And that $12,000,000 had been paid out of the earnings of the company, hadn't it ?

Mr. Harriman. Of course it had.

Mr. Kellogg. And while the company had paid 8 per cent dividends. That is true, isn't it ?

Mr. Harriman. Yes. Eight and 7, I think.

Mr. Kellogg. And was capitalized for $38,000,000 and carried its property on its books at $39,000,000 ? That is correct. I am speaking round numbers.

Now, what this testimony discloses is this : That a syndicate was formed, composed of these four men. These four men are bank directors, are the directing geniuses of some of the largest financial institutions of this country, institutions which in Wall street are rated high, institutions which have unlimited credit, which are supposed to be models of business honesty and integrity. These four men entered into a syndicate, to acquire control of the Chicago and Alton road. They agreed to have the stock deposited with Kuhn, Loeb & Co. They secured 97 per cent of the stock, the absolute control of the road; they issued the bonds of the road and sold them to themselves at 65. They manipulated the stock and the officers of the company so that they resold these bonds at from 83½ to 96. They sold the bonds to insurance companies.

Edward Harriman was a director of the Equitable Life Insurance Company, one of the purchasers of these bonds. Mortimer Schiff, member of the firm of Kuhn, Loeb & Co., which firm was the financial agent that sold the bonds to the Equitable Life Insurance Company. Mr. Stillman was a representative of the National City hank and its allied financial institutions.

After accumulating this stock, and becoming, as Mr. Harriman very aptly phrases it, "the Chicago and Alton Railroad," these men took the money which they paid to the Chicago and Alton Railroad—that is, to themselves—for these bonds and declared to themselves a 30 per cent dividend upon their stock. I desire to call attention to an exhibit which was submitted in the Harriman investigation and which will be found on page 134 of the printed testimony, and is as follows :

No. 65. Special common-stock dividend.
The National City Bank of New York. New York,
New York, N.Y., May 7, 1900.
Will pay to the order of Kuhn, Loeb & Co., syndicate managers, $5,562,900 (five million five hundred and sixty-two thousand nine hundred dollars).
Chicago and Alton Railroad Company,
By Fred V.S. Brosby,
Assistant Treasurer.
H.S. Bradt,
For the Secretary.

(Indorsed): Pay to the order of Kuhn, Loeb & Co. Kuhn, Loeb & Co. Pay to the order of the National City Bank. Kuhn, Loeb & Co.
" The other check, Exhibit 10, for the preferred-stock dividend is in the same words and form and is for $1,041,660. Both of them have like indorsements."

These indorsements are made to the order of the National City Bank—that is, these checks were made payable to that institution. James Stillman, a member of this syndicate, is the president of that bank, and if these checks and these exhibits show anything, they show that this national bank is engaged in this business for itself.

I have demonstrated that these men—such men as Harriman, Stillman, Schiff, Baker, and all of this crowd of high financiers that control the large banking houses in New York—control the national banks, that is, the large national banks of the system. They also control the principal railroads of the country. They should he concerned in conserving the property interests of the railroads for the benefit of the stockholders of these companies. That they have a greater concern in manipulating the stocks and securities of the companies that they may reap personal profits for themselves and their associates in the banking, trust, and security companies of which they are members, is evident from the manner in which the bull market was manipulated during 1904, 1905. and 1906. I wish to direct your attention to such testimony as is obtainable and which tends to show how this bull market was manipulated.

It is unfortunate that there was not conducted a general investigation and the testimony secured in regard to all of the railroad stocks which were dealt in and which were a part in this bull movement. But there is the testimony secured by the Interstate Commerce Commission in its investigation of the deals by E.H. Harriman and associates during this period. The evidence which I have quoted from the Armstrong report has relation largely to transactions of the old "blind pool" and to other transactions previous to the bull movement which started in 1904. The testimony which I now desire to quote shows that these men continued their operations up to and including 1906. The following is quoted from page 179 of the testimony taken before the Interstate Commerce Commission and shows how Harriman, Rogers, and Stillman and others began collecting in 1904 the stock of the Illinois Central, purchasing it in the market and concentrating it with the firm of Kuhn, Loeb & Co.:

Mr. Kellogg. Mr. Harriman, the company bought 281,231 shares of Illinois Central stock at that time, did it not ?

Mr. Harriman. If that is the amount. I suppose that is the amount.

Mr. Kellogg. Thirty thousand shares of stock from each of you, Mr. Rogers and Mr. Stillman ?

Mr. Harriman. Yes, sir.

Mr. KELLOGG. For 175 ?

Mr. Harriman. That is right.

Mr. Kellogg. Ex dividend ?

Mr. Harriman. That is right.

Mr. Kellogg. That sale was made on July 19, 1906, or about that time, was it not ? That stock is now worth less than 160, is it not ?

Mr. Harriman. The market value is apparently less than 160.

Mr. Kellogg. Was that a pool of stock, 30,000 each from you gentlemen ?

Mr. Harriman. I don't remember that.

Mr. Kellogg. How did you happen to own 30,000 shares each ?

Mr. Harriman. Well, we had bought it during a long time. We had acquired a certain amount of Illinois Central, bought it in the open market.

Mr. Kellogg. How long before that had you bought that ?

Mr. Milburn. That comes, I think, within the objection.

Mr. Kellogg. He volunteered the information that he sold this stock to the Union Pacific. I did not ask him.

Mr. Milburn. I do not think he volunteered it.

Mr. Lovett. The record shows you asked him the question.

The CHAIRMAN. He has stated, in giving his account of the transaction, that part of the stock of the Illinois Central that the Union Pacific acquired was his stock.

Mr. Milburn There is no doubt about that; but that is in the record, and is fully stated, and there is no dispute about it. When we acquired it is another question. That I think, is within the range of the objection I have made.

Mr. Kellogg. Let me ask a few questions in advance of that. Was that a pool ?

Mr. Milburn. I think that is a purely private arrangement. Here are these gentlemen who own these shares in this corporation. The corporation takes the matter up. The ownership is disclosed. The corporation decides to buy. A committee is appointed to fix the price, and the price is fixed. Now, I think it is an entirely irrelevant and immaterial matter, entirely in the domain of private business, as to when they acquired that stock or for what they acquired it, or whether they acquired it separately or cooperating together.

Commissioner Harlan. Mr. Milburn, the record shows, as I understand it, that the motion to acquire this stock was made by Mr. Harriman.

Mr. Milburn. It shows that there was a report made on this matter, not a motion.

Commissioner Harlan. Very well; a report by Mr. Harriman.

Mr. Milburn. They did not vote on it, and a committee was appointed to fix the price of the stock.

Commissioner Harlan. I understand all that; but the report was made by Mr. Harriman. He was then an officer of the company, and put himself in the position of recommending the company to purchase his stock. Now, do you say that it is not proper for the Commission to know all the details of that transaction ? That is, that he can act in one moment as an officer of the company and in another moment claim protection against full information as a private citizen ?

Mr. Milburn. I do not think, if the Commissioner will excuse me, that that question is raised here. Here is an officer of a corporation, a director. He is also an individual. Now, there is no concealment; the matter comes before the board of directors with respect to a purchase of Illinois Central stock. Here is a director who says, 'I own these shares of stock;' and the company decides it is a good thing to buy them. He says : 'Because I own them, I can not act on this proposition.'

Now, then, I wish to direct attention to another disclosure which is made by this evidence and which it all seems to me has bearing upon this bull movement—that is, to the increase in freight rates on the line over which Mr. Harriman and his associates have control :

Mr. Kellogg. Now, is it not a fact that within the last ten years nearly all products from the Atlantic seaboard to California have been increased 10 cents a hundred ?

Mr. Harriman. That may be. I had nothing to do with that.

Mr. Kellogg. Then the rates have not been reduced much, have they ?

Mr. Harriman. In what time is that ?

Mr. Kellogg. About 1904, just previous thereto. Do you know that from nearly all eastern points to all California points the rates of all classes of products, commodity rates, and other rates were increased substantially 10 cents a hundred ?

Mr. Harriman. You will have to go to the traffic men for that. What were they in 1904 as compared with 1902 and 1901 ?

Mr. Kellogg. They were higher in 1904 than in 1902 and 1901.

Mr. Harriman. They were, eh ?

Mr. Kellogg. Yes, sir. They were increased just prior to 1904. Now, here is the tariff with the increases. Do you wish to look at it ?

Mr. Harriman. I really don't know the reasons, but I presume that the prices of these very things that you spoke about have increased materially during that time.

Mr. Kellogg. The tariff I refer to is the westbound transcontinental freight bureau tariff.

Mr. Harriman. I had nothing to do with that.

Mr. Kellogg. Of January 18, 1904.

Mr. Harriman. The tariff on all railroads on all commodities was alike.

Mr. Kellogg. On all Pacific railroads; certainly.

Mr. Harriman. I mean on all railroads from the Atlantic coast line to the Pacific; it don't make any difference which way they went.

Mr. Kellogg. Oh, certainly not; that is all right.

Mr. Harriman. Did it make any difference whether they went to Union Pacific or Southern Pacific or Great Northern ?

Mr. Kellogg. They were increased on all of them.

Mr. Harriman. That does not bear on this question.

Mr. Kellogg. It bears on the reasonableness of your rates, and it bears upon the question of whether the rates have been decreased on the Pacific roads, as you say.

Mr. Harriman. There may have been reasons why they should have been increased. Is there any law against our increasing rates ?

The increased earnings which would come in a great measure from increased rates, the addition of 10 cents a hundred on all commodities between the Pacific and Atlantic would certainly increase the earning power of these roads.

Now, then, I wish to present the following evidence of another deal of Mr. Harriman and associates. On page 277 of the testimony will be found the following :

Mr. Kellogg. Of whom were the New York Central stocks purchased ?

Mr. Harriman. They were purchased in the market through brokers and bankers.

Mr. Kellogg. Were any of the directors of the Union Pacific interested directly or indirectly in the New York Central stocks at the time they were sold ?

Mr. Milburn. That is the same line.

Mr. Kellogg. I mean these particular New York Central stocks ?

Mr. Milburn. Same objection.

The Chairman. The same objections are made and they are overruled, and the witness declines to answer.

Mr. Kellogg. You decline to answer for the same reasons ?

Mr. Harriman. Yes.

Mr. Kellogg. I mean at the time the Union Pacific bought these shares of New York Central stock, were any of the directors interested in the sale of those particular shares ?

The Chairman. It will be understood that the question relates to that time.

Mr. Kellogg. And the same position is taken ?

Mr. Milburn. Yes; and the same answer.

Mr. Harriman declined to answer. It is clearly evident that Mr. Harriman and his associates, or at least that some of the Union Pacific directors, were interested in the sale of stock of the New York Central to the Union Pacific. Justice Hough has ordered that he should make answer to these questions.

Now, as illustrative of the speculative propensities of these men who are intrusted with the administration of the great properties of the railroad companies, and with the handling of the great funds of the insurance companies, and with the handling of the deposits of the people through their national and other banking connections, I desire to call attention to the testimony on pages 294 and 295:

Mr. Severance. Now, from the time of the reorganization of the Union Pacific down, I might say, to the present time your bank has been the fiscal agent of the Union Pacific, has it not ?

Mr. Kahn. Yes.

Mr. Severance. And still is ?

Mr. Kahn. Still is.

Mr. Severance. That is, when they wanted to sell securities they sell them through you, and when they want to buy securities they buy them through you, as a rule ?

Mr. Kahn. Provided that we offer as good or better terms than anybody else.

Mr. Severance. Well, we will come to that a little later. But, as a matter of fact, whatever may have been the inducements to do it, practically all the securities that have been purchased by—or a very large percentage of the securities purchased by the Union Pacific, and a very large percentage of securities sold by the Union Pacific, have passed through your hands, haven't they ?

Mr. Kahn. Yes. That is the practice in the case of all large railroad companies, that they deal with one particular banker.

Mr. Severance. Yes; and you have been the particular banker of the Union Pacific ?

Mr. Kahn. Yes.

As evidence of the loyalty to trust which marks the dealings of these men, I desire to call attention to the testimony of Mr. Kuhn, member of the firm of Kuhn, Loeb & Co., pages 308, 309, and 310:

Mr. Kahn. No. The one 2½ per cent was for the risk taken in acquiring the stock of the Southern Pacific, for the responsibility involving that, and for ourselves as fiscal agents. The other one we got for guaranteeing and insuring the success of an issue of $40,000,000 of 4 per cent convertible bonds at par, which was an untried issue and a new departure in finance. It was very questionable, indeed, whether 4 per cent convertible bonds on a road that had just emerged from bankruptcy would be salable at par or anywhere near it if it had not been for our active efforts and the syndicate's active efforts. I think I may also say if it had not been for the moral responsibility which we incurred in coming before the public and practically guaranteeing the goodness and soundness of the security, and that we received an additional commission. The two transactions are entirely separate, and the risk and responsibility involved are distinctly separate.

Mr. Severance. And you got that commission of 2½ per cent, as I understand, for this moral responsibility, and the syndicate got 2½ per cent, practically a discount, of course, on the bonds for underwriting ?

Mr. Kahn. Yes.

Mr. Severance. And $25,000,000 of the $40,000,000 were not taken by the syndicate at all or by you, but by the stockholders of the Union Pacific. That is in substance the transaction, is it not ?

Mr. Kahn. That is in substance the transaction; yes.

Mr. Severance. So that the Union Pacific paid to you, with the exception of such amount as might have gone to the other members of your syndicate, these bonds and about 10 per cent commission, and the stockholders took about $25.000.000 of the bonds.

Mr. Kahn. No; the Union Pacific paid us 2½ per cent commission upon the entire $40,000,000, and we ran the risk on the entire $40,000,000 that we undertook to underwrite at par.

Mr. Severance. Yes; I understand the transaction. I was just getting at it.

Mr. Kahn. I think it is a most unfair way of putting it.

Mr. Severance. I do not mean to be unfair, Mr. Kahn.

Mr. Kahn. I think you distinctly are, if you state we made 10 per cent.

Mr. Severance. I do not mean to be unfair; I simply want to get in a nutshell the net figures, without reference to the explanation of why it is done.

Mr. Kahn. That is unfairness. You can not get the net figures without the explanation of how it is done and why it is done.

Mr. Severance. I think we agree on the figures, and your explanation will go with it. That is all right, Mr. Kahn. We will not have any trouble about that. Now, that money was paid over and the stock was acquired by the Union Pacific. A little later on, as I understand it, the Union Pacific bought some more of this stock. That was the next year, was it not ?

Now, this means that while Mr. Kahn said they got 2½ for one transaction and 2½ per cent for another transaction, it really means that Mr. Kahn's firm got 5 per cent on the sale price of the stock and that the syndicate composed of Mr. Harriman and his associates got 5 per cent on the sale price as a discount. That is, Mr. Harriman and associates were the Union Pacific Railroad, and they sold these securities to Mr. Harriman and associates, the syndicate, and they took 5 per cent of the sale price out of the treasury of the Union Pacific Railroad and paid it to themselves as the syndicate.

In the Harriman investigation it was also brought out that Kuhn, Loeb & Co. acted for the Union Pacific in the sale of large amounts of the securities of the Northern Pacific and Great Northern roads, and Mr. Kuhn, in his testimony on page 331, describing this transaction says : "We acted simply as the agents of the company in effecting the sales to the best of our ability, and I think I may say that we did pretty well and that we worked off a huge amount of stock, particularly without depressing the market, just as I may say we did pretty well in buying the Northern Pacific stock, because we paid about seventy millions of it before anybody had any idea we were doing it."

Now, what does this mean ? It is direct evidence, as direct as exists, that these men, Kuhn, Loeb & Co., the fiscal agents for the Union Pacific, the company that the Standard Oil-Harriman alliance deals with largely in the stock market, were engaged in the business of washing stocks. In other words, they were working the market. They were maintaining the prices by their washed transactions.

An additional proof of the manipulating methods used by these concerns I desire to quote from pages 232, 233, and 234 of the testimony :

Mr. Severance. Later on, I see by this report, that a large amount of the Great Northern and Northern Pacific was sold through Kuhn, Loeb & Co.?

Mr. Kahn. Yes.

Mr. Severance. Was that sold under a contract ?

Mr. Kahn. May I ask under what date ?

Mr. Severance. It begins on the 17th day of last July and runs down to the 1st of February, 1907—the 17th of last July. I mean 1906.

Mr. Kahn. There were direct purchases made from the company by us.

Mr. Severance. What I wanted to get at, Were these made pursuant to a single contract, or were they various blocks sold from time to time ?

Mr. Kahn. They were in various blocks.

Mr. Severance. And sold under the dates stated ?

Mr. Kahn. And sold under the dates slated.

Mr. Severance. According to this there is a block of $2,800,000 of the capital stock of the Northern Pacific sold the 1st of February for five million nine hundred and fifty-four thousand and odd dollars.

Mr. Kahn. What, a block of how much ?

Mr. Severance. That is what made me think that it must have been under some contract. That is a pretty high market price for Northern Pacific.

Mr. Kahn. A block of how much ? Two million eight hundred thousand dollars sold for $5,954,000 ? That is correct. We sold that at about 250. That would work out about right.

Mr. Severance. For the Northern Pacific ?

Mr. Kahn. Yes.

Mr. Severance. Are you not mixed up with the Great Northern ?

Mr. Kahn. No. We bought Great Northern from the company as high as 335.

Mr. Severance. This is Northern Pacific.

Mr. Kahn. And we bought Northern Pacific as high as 225.

Mr. Severance. I am speaking about the 1st of February, 1907; this was only the other day.

Mr. Kahn. The 1st of February, 1907 ?

Mr. Severance. Yes; the 1st of February, 1907.

Mr. Kahn. No.

Mr. Severance. You certainly could not have paid over 200 for Northern Pacific stock then, could you ?

Mr. Kahn. No—yes; that is right.

Mr. Severance. You paid 210 for it the 1st of February, did you, for Northern Pacific stock ?

Mr. Kahn. Yes.

Mr . Severance. And that was an independent transaction, and not pursuant to any contract ?

Mr. Kahn. Yes; an independent transaction.

Mr. Severance. Then, as I understand you, since last summer all of these sales that have been made to you were made in small or comparatively small blocks ?

Mr. Kahn. Yes.

Mr. Severance. From time to time ?

Mr. Kahn. Yes—sales to us or the sales which were made through us ?

Mr. Severance. What ?

Mr. Kahn. Did you say the sales to us or through us ?

Mr. Severance. To you.

Mr. Kahn. No; the sales to us were made in quite substantial blocks, and the sales through us were smaller blocks.

Mr. Severance. They are quite substantial blocks, but they are smaller than some of the other blocks ?

Mr. Kahn. Well, but in the aggregate—

Mr. Severance. They are in blocks of not less than 2,800 shares or more than a million ?

Mr. Kahn. Yes.

Mr. Severance. Some of the sales last summer went as high as seven millions in some of the other stocks ?

Mr. Kahn. Yes.

Here this merely means that Kuhn, Loeb & Co. went into the stock market, sold securities owned by this company in small blocks, and the company would deliver the stock to them as called for. In other words, the company was engaged in open speculation through its bankers. The speculative end of this transaction is clearly proven by the fact that if Kuhn, Loeb & Co. were buying these stocks for investment for themselves or as representatives of any large syndicate they would have taken the amount of stock at one time in its entirety or in large blocks according to contract, whereas as shown by Mr. Kuhn's testimony they took the stock in small blocks from the Union Pacific Railroad as Kuhn Loeb & Co.

As an illustration of the devious methods to which these men resort to cover up their dealings, I present the following from the Armstrong Report, volume 10, pages 72, 73, 74 and 75, and page 80:

" In 1902 the New York Life applied for a participation of $5,000,000 in the syndicate underwriting the securities of the International Mercantile Marine Company, known as the 'Navigation Syndicate,' of which J.P. Morgan & Co. were the syndicate managers, and received an allotment of $4,000,000. Upon this $3,200,000 was called in 1902, and this amount appeared in its annual statement for that year. In 1903 an additional amount of $800,000 was called, and in order that its interest in this syndicate, the prospects of which were not at the time particularly bright, should not appear at an increased figure in its statement for 1903, it was determined to make some disposition of the $800,000 Interest. Accordingly, on December 31, 1903, it was arranged that J.P. Morgan & Co. should pay the New York Life $800,000, which was deposited to the credit of the company. The $800,000 interest was entered in its books as sold and the report to the insurance department stated that the company's entire interest in the syndicate was $3,200,000 instead of $4,000,000, and the value was stated at par, the price at which the $800,000 interest had been apparently disposed of. On January 2, 1904, the New York Life gave its check to J.P. Morgan & Co. for $800,266.67, that is, $800,000 and two days' interest. The arrangement was made by Mr. Perkins, who acted both for the New York Life and his firm. It is plain that there was no bona fide sale and that the whole purpose of the transaction was to conceal the extent of the company's interest in the Navigation Syndicate. The interest of $800,000 was closed out in 1904 at a loss of $80,000 to the company.

" In March, 1904, on the increase of the stock of the New York Security and Trust Company, 1,000 shares of the increased stock was used for the acquisition of the stock of the Continental Trust Company, which was subsequently merged with the former company. In connection with the carrying out of this plan objection was made to the large interest of the New York Security and Trust Company in the syndicate relating to the securities of the New Orleans Railways Company. Influenced, as it is claimed, by the argument that the New York Life had made an advantageous sale of its stock some two years before, and apparently with no other object than to assist the New York Security and Trust Company and those interested in it, the New York Life took from the trust company a participation of $2,500,000 in the New Orleans Railways Company Syndicate, and $1,500,000 in par value of the bonds of that company at 85, paying therefor, with interest, the aggregate sum of $3,805,679.55. This was an investment wholly without justification. The syndicate interest was afterwards transferred to and settled through the temporary loan account. Two hundred and fifty thousand dollars of the bonds were sold at about 80 in November, 1904. On or about December 31, 1904, the remainder of the bonds, $1,250.000 in par value, were nominally sold for the apparent price of $937,500. In this way the bonds were closed out of the books of the New York Life and were not included in its annual statement as of December 31, 1904.

" The transaction was carried out as follows : One million dollars of the bonds, through an arrangement made by George W. Perkins, were sold pro forma to W.S. Fanshawe, a bond dealer with whom the New York Life had numerous transactions, for $750,000. The bonds were delivered to the New York Security and Trust Company, from which Mr. Perkins obtained the money without Fanshawe's intervention. The remaining $250,000 of the bonds were taken at the price of $187,500 by Mr. Perkins for the benefit of the 'Nylic' fund, a trust fund created for agency directors, of which Mr. Perkins was the managing trustee. On January 5. 1905, the subcommittee of the finance committee, composed of Messrs. Perkins, Langdon, and Randolph, reported, in connection with the 'New Orleans Railways interest referred to them with power,' 'that the proposed reorganization, although promising profitable results, involves the conversion of a portion of the bonds into stock, which could not therefore be entertained, and, in the judgment of the committee, made the sale desirable, to effect which involved a loss against which the committee provided in part by agreeing with the purchaser, in consideration of a division of the resulting profits upon the securities, to protect him against loss. The sale of $1,250,000 bonds at 75 was thereupon authorized on above basis.' On or about the same day Fanshawe took up the $1,000,000 bonds from the New York Security and Trust Company and the $250,000 bonds from 'Nylic,' paying the aggregate sum of $937,500, which at the same time was loaned him by the New York Life. He took them under an arrangement made with Mr. Perkins whereby the New York Life was to have 95 per cent of the net profits on their resale. In other words, Fanshawe merely agreed to take the bonds and sell them in his own name in consideration of 5 per cent of the net profits. The transaction was closed in June, 1905, when the securities were sold, and Fanshawe took up the loan and gave a check to the New York Life for 95 per cent of the excess over the price at which he had nominally taken them.

" Brief allusion may also be made to the manner in which other transactions in securities have been dealt with in the company's accounts. In 1898 the company took an allotment in the Toronto, Hamilton and Buffalo Railway syndicate of $875,000, receiving bonds at par value and paying for them at 91, or $796,250. In July, 1899, the account was credited with $500,000 bonds as 'delivered to the New York Life at 99,' and these were transferred to another account then opened, which was debited with an equivalent amount, importing an investment in $500,000 of the bonds at 99. In fact, there had been no such investment. but the bonds were part of the lot acquired at 91. In December, 1899, the syndicate account was closed with an apparent profit of $44,908.96, which was carried to the credit of profit and loss, when in fact there had been no such profit. The transaction was simply that $500,000 of the bonds were marked up from 91 to 99, the company treating itself, on the one hand, as investing in them at the latter figure, and, on the other, as having made the profit by the resale.

* * * " It has been the boast of the company that it has made large profits in its dealings and securities. Its financial transactions, under the supervision of the finance committee, have been largely, including those already mentioned, in the immediate charge of George W. Perkins. On his becoming, in 1901, a member of the firm of J.P. Morgan & Co., his salary as an officer of the New York Life was reduced from $75,000 to $25,000, and he has testified that he has paid to the New York Life his share of the profits since made by his firm through his dealings with the company. The total amount paid by him to the company on account of such profits is $10,490.67, of which $10,412.57 was paid on December 30, 1903 ($9,730 through an offset of amounts claimed to have been disbursed by him for the company in the two prior years), and $78.10 on July 19, 1905. The explanation of the small amount paid by Mr. Perkins to the company on account of his share of the profits in these transactions is that they were high-grade securities yielding little profit to the firm, and that his interest in the firm was relatively small. The evidence is that while Mr. Perkins has been a member of the firm of J.P. Morgan & Co., the New York Life had purchased from it securities of the par value of $39,286,075 for the price of $38,804,918.51. Of these $3,657,000 in par have since been sold at a profit to the company of $35,131.25, and the market value of the remainder is stated to be $749,533.75 over cost.

" It has been the policy of the company not to limit itself strictly to investments. It has engaged largely in syndicate underwritings, and these, it claims, have been very profitable. Exclusive of its interests in the United States Steel Corporation syndicate, it states that its profits from syndicate participations have amounted during the past ten years to $2,399,695.22. It has been the practice, at least in recent years, to keep an account of profits from those sources in the ledger of the treasury department, against which have been entered sundry charges of syndicate losses and other items which it was convenient to charge against syndicate profits, such as $9,000 for furniture for the Hanover Bank office, and the balance has been carried to profit and loss in the general ledger."

To illustrate how lightly the obligations of a trusteeship rest upon these men, I desire to read from this same report, volume 10, pages 81 and 82:

" The company has also entered into numerous transactions on joint account, where the object was not to buy for investment, but for the purpose of early sale on a rising market. In other words, it has sought to take advantage of the financial connections and information of those charged with its financial operations by an approach, as close as possible, to the banking business. The course of business has been to make, with others, a joint purchase of securities, frequently furnishing all the money required in carrying the securities for the interest, and to divide the profits from the resale in agreed proportions.

" The company claims that its profits in cash and on bonds retired in connection with these ventures have amounted to $886,604.88. While it has made money for itself, it has given large shares of the profits to the bankers, who have used its money and attended to the business. Thus, in 1899, on a joint account with Goldman, Sachs & Co. and G.W. Bartholomew, the New York Life supplied upward of $2,000,000 for the purchase of $2,300,000 Missouri Pacific fives at 90; they were carried until September, 1900, when they were sold and the profits, after paving interest, were divided as follows: Eleven twenty-thirds, or $98,172.94, to Goldman, Sachs & Co.; one twenty-third, or $8,924.94, to G.W. Bartholomew, and eleven twenty-thirds, or $98,172.94, to the New York Life. In April, 1904, Chairman Perkins reported to the finance committee an 'offering by Kuhn, Loeb & Co. of about $3,000,000 Long Island Railroad Company refunding mortgage 4 per cent bonds, guaranteed by Pennsylvania Railroad at 98, accompanied by guaranty that our interest of $750,006 in syndicate through which said bonds are issued shall yield a profit equivalent to one-half per cent reduction in price of said $3,000,000 bonds. The chairman thereupon proposed to take the amount offered on those terms in joint account with William S. Fanshawe (he to surrender to us his own syndicate interest of $100,000)—$1,000,000 of bonds to be withdrawn as an investment for the company—which was approved.'

"Accordingly the New York Life supplied $2,334,590 for the purchase on joint account of $3,045,500 of these bonds at 99, less than 1 per cent, retired $1,000,000 at 971, and the remainder was sold in June, 1904. The New York Life received the proceeds and paid over to Mr. Fanshawe $22,500 for his share, retaining $8,182.50 for its share of the profits. In 1904 the New York Life furnished the moneys for the purpose of purchase and sale on joint account with W.S. Fanshawe, of Chicago, Burlington and Quincy joint fours up to $1,000,000. Purchases were made in September and October at from 97 to 97.7/8, and were sold from time to time in November, the account being closed with a profit of $4,656.20 to each party. There were numerous transactions of this general description, in some of which the other parties to the joint account carried their shares of the purchases, and the justification for the division of the profits is sought to be found in the command of expert services."

Is it reasonable to assume that George W. Perkins or George F. Baker or any other of these men will or are or can be any more faithful to their trusteeship as bankers than the evidence shows them to the trust which they assumed as officers of the insurance companies ?

Mr. BEVERIDGE. Mr. President, I was impressed with what the Senator from Wisconsin said about five minutes ago concerning the necessity for investigation. One thing has suggested itself to everybody, and that is the possibility that this bill might in some way delay the beginning of a thoroughgoing and scientific currency reform, which all men of all parties conceive is necessary.

I have thought of asking the distinguished Senator from Rhode Island, who is the chairman of the Committee on Finance, what he thinks of the wisdom and expediency, in order that it may not be delayed, of a commission to investigate and to inquire into and give Congress the benefit of its deliberations upon this very grave subject.

Mr. ALDRICH. Mr. President, the bill before the Senate is a bill to provide an emergency currency for use whenever emergencies arise. It does not undertake to treat the general question of currency or of banking reform. I realize, and I have so stated to the Senate, the necessity of the immediate consideration and treatment of that subject, and I hope that before the present Congress adjourns legislation will be enacted which will provide for a commission, either a commission of Members of the House and Senate or a mixed commission, to consider this question, with a view of reporting at an early day in the future. It was not possible to do this at the present session. I think every Senator who listens to me realizes that fact.

Mr. President, it was my purpose to ask the Senate to take up the pending bill to-morrow and proceed with its consideration and reach a final vote some time during the day; but after a conference with Senators upon both sides of the Chamber, I will make the request now that the bill shall be taken up on Wednesday after the morning business and be considered on Wednesday and Thursday, and that a final vote shall be taken upon the bill and amendments before the adjournment on Thursday.

The Vice-President. The Senator from Rhode Island asks unanimous consent that the pending bill be taken up for consideration at the close of the routine morning business tomorrow; that the consideration of the bill be proceeded with the residue of to-morrow's session and on Thursday following and that a vote be taken upon the bill, amendments pending and to be offered, before adjournment on that day. Is there objection to the request ?

Mr. La Follette. Mr. President, I am constrained to interpose an objection to that request. I believe this to be a measure of such importance that it should be debated out fully. It may be that Thursday or Friday or Wednesday will see the termination of that debate, but I have witnessed in my limited time in the Senate the disposal of important legislative measures where debate was cut off by unanimous-consent agreements and where Senators were denied the opportunity to reply to arguments made and to which reply was, as it seemed to me, of vital importance.

I remember when the rate bill was pending in the Senate the debate was curtailed by a unanimous-consent agreement and that with respect to certain propositions which I desired to present and argue out to the Senate I was foreclosed. I then said that no unanimous-consent agreement of like character would be made in my presence in this body while I remained here upon any important piece of legislation.

Now, let me say that it is not my purpose to prolong the discussion upon this measure at all. But I do want that latitude which shall yield to me, representing in part one State in this Union, the right to be heard here on any proposition and on any phase of this legislation whenever any argument may be made with respect to it, or the right to advance at any time when the bill is still pending before the Senate any further argument which it may occur to me as important to present.

Mr. Aldrich. Mr. President, it is not my purpose, of course, to cut off any debate on amendments. I do not know of any Senator who desires to be heard upon this measure at length. I now give notice that to-morrow, after the routine morning business, I shall ask the Senate to proceed to the consideration of this bill, and I shall ask that they proceed to the consideration of it to the exclusion of all other business until it is disposed of.

Mr. La Follette. Mr. President, let me inquire of the Senator from Rhode Island whether that notice contemplates the limitation of debate ?

Mr. Beveridge. Mr. President, I think the predicament which we are in is very clear to all of us. Notice now served by the Senator from Rhode Island [Mr. Aldrich] merely means that to-morrow and from that time on this bill must be considered to the exclusion of everything else so long as anybody has anything to say regarding it, and when nobody has anything to say, a vote must be taken upon the bill. In view of that fact, I now suggest to the Senator from Wisconsin [Mr. La Follette], whether it is not the more practical thing to do, as well as the thing which would perhaps be most acceptable to all Senators on the floor, to fix the date for a vote by unanimous consent—if Thursday is not satisfactory, then perhaps Friday.

I think that all will agree that the Senator from Rhode Island, no matter how much we way all have disagreed with 1 him on this bill—and I have been one of those who have very earnestly disagreed on one feature of the bill, which has now gone out—must concede that he has not pressed the bill unduly, but has been very patient, indeed, in waiting until this time to ask for a unanimous-consent agreement.

The bill has been before the Senate—it is now practically the 1st of April—since the holiday recess, which is quite a long time. I should not interpose this suggestion, which is made, as I think the Senator from Wisconsin will perceive, with the utmost desire to produce some practical result, if there had been a disposition to press things here. I think, further, that everybody will concede that one of the objections which has been in the minds, not only of Senators, but of the country, that this legislation might put off a thorough-going reform of this whole great subject has been very largely obviated by the statement of the Senator from Rhode Island in favor of a commission to investigate and report upon this subject.

But the object in my rising at this juncture is to suggest whether it is not more expedient, instead of meeting to-morrow and going right on and voting upon this bill only when no Senator has anything further to say, to fix, as is the custom of the Senate, a day—no matter how far distant, and if Thursday is not agreeable, then Friday or Saturday—to vote upon it.

I offer the suggestion for what it may be worth. I do not know whether it is acceptable to the Senator from Rhode Island or to the other side.

Mr. CULBERSON. Mr. President, so far as the suggestion which the Senator from Indiana [Mr. Beveridge] makes about the commission, that can take care of itself, but I remind the Senator from Rhode Island [Mr. ALDRICH] of the fact that before Christmas a resolution was introduced and referred to his committee — the Committee on Finance—to make an inquiry into the causes of the panic and to report such legislation as, in the judgment of the committee, might prevent a recurrence of such conditions. That resolution is still in that committee.

With reference to the suggestion about a vote, it appears to me, on inquiry on this side of the Chamber, that no other Senator on this side desires to address the Senate at any considerable length. I was therefore of the opinion that taking to-morrow and the next day for the consideration of amendments and the bill itself, it would probably afford all the necessary time for the submission of remarks by Senators who desire to speak either on amendments or on the general bill.

It ought to be recalled that in the proposal of the Senator from Rhode Island the debate is not limited, as is often the case, to the five-minute rule, the ten-minute rule, or the fifteen-minute rule. Debate is to be general and unlimited on the amendments and on the bill; nor is an hour on Thursday proposed to be fixed for the final vote; in other words, so long as any Senator on Thursday desires to be heard upon this bill, be can be heard under the proposed unanimous-consent agreement, and must be heard, notwithstanding the length of the session on that day.

I suggest to the Senator from Wisconsin [Mr. La Follette] that, under all the circumstances, the proposal made for the final vote on Thursday, not at any particular hour, but before adjournment on that day—of course we can hold the session until midnight or even longer if any Senator desires to be heard—would in all likelihood meet any emergency that might probably arise.

Mr. Aldrich. Mr. President, I do not know of any Senator on this side of the Chamber who desires to take any part in this discussion at any length, and I thought the proposition which I made was exceedingly liberal. There is no disposition to cut off debate or to cut off amendments in any form. Therefore I hope that the Senator from Wisconsin will, upon consideration, withdraw his objection, as there is certainly no intention to cut that Senator or any other Senator off from any course of proceeding which he may see fit to adopt.

Mr. La Follette. Mr. President, it seems to me that with the chairman of the Finance Committee in control of the time when the Senate shall be required to consider this legislation he can hasten it to a conclusion, sitting at such hours as in his wisdom the Senate ought to be required to devote to it. I can see no reason why this legislation should not be considered by the Senate, amendments offered and debated as their importance may require, and voted up or voted down without having the stake set at some fixed time when there shall be no further discussion. Supposing it shall occur to someone to offer an amendment of vital importance at the last moment, debate being cut off on it by the limitation fixed by the unanimous-consent agreement, which can not be revoked.

This is very important legislation. I know of no reason why it should not run its course. As I have said to the Senator from Rhode Island, I have no disposition to prolong tile consideration of this bill beyond giving it careful, full, and complete consideration.

Mr. Hopkins. Mr. President, I see no trouble with the suggestion made by the Senator from Rhode Island [Mr. Aldrich], that we meet to-morrow to consider amendments, and when amendments are disposed of to take a vote on the merits of the bill.

As has been stated by the Senator from Texas [Mr. Culberson] and by the Senator from Rhode Island, no Senator on either side of the Chamber desires to speak at length upon the bill. Now, unless it is developed, on a consideration of these amendments. that some Senator wants to talk against time, I for one see no reason why we can not dispose of all the amendments to this bill to-morrow.

Mr. TELLER. Mr. President, there has grown up in this Senate quite a custom of fixing a time for a vote on pending legislation. I have never felt very much in sympathy with that custom, and I am rather glad to have the discussion on the pending bill go along in its regular way. I am confident we shall be able to vote on the bill as early as suggested by the chairman of the Committee on Finance [Mr. ALDRICH]. If he will keep the bill to the front, and it be understood. that he will object to the intervention of any other legislation—which I want to say now I am going to do, no matter how important it may be—if he will keep this bill before the Senate, I think we can finish it before adjournment on Friday night.

Mr. President, I expect there will be a great many amendments offered to the bill. Certainly, after listening to the Senator from Wisconsin, who has portrayed in vivid colors the enormities of this bill and described what it lacks, and who seems to think we ought to take up the entire financial system, although he has ignored the fact that some of the things of which he has complained are already provided in the statutes, such as penal sentences for certain banking derelictions, I shall expect that Senator to avail himself of the universal freedom of this Senate to give us his views on all these questions in the way of amendments. I presume somebody will want to talk about them for a few minutes, perhaps, or at least some Senator may ask for a yes-and-nay vote of the Senate, and it will take a little time to vote the amendments down, for I have no doubt that most of them will be voted down, because this bill does not provide for a reorganization of the banking system, and nobody supposed it would, although the Senator from Wisconsin seemed to think it ought.

I have said, and I think it is apparent to everybody, that the purpose of this bill is simply to meet emergencies that may arise, as they have existed heretofore and are likely to exist again. This is not a good time to attempt a reorganization of the banking system.

I do not believe myself in the advisability of the appointment of a commission to investigate this subject. I believe the Senate is as able to take up the financial question when we reach it and determine how we should change the present banking system, if we are going to change it at all, as any commission can be.

My experience with commissions, Mr. President, has not been such as to make me very strongly in favor of them. You may appoint a commission of six or eight men, and each man will have his own views, and when you come back here you will be at sea just as you are now. The Senate ought to be capable of taking up the financial question and considering it in a very conservative and careful way. That is what you have got to do, but you will not do it at this session, I am sure, and nobody expects you can. If you appoint a commission, you will not enact such legislation at the next session.

We are going to be faced, Mr. President, at the next session, with an asset currency bill. It may not get through the other body at this time; but it is like the poor, you will always have it with you. It will be here because the banking interests of this country have made up their minds that, if there is anything that is good for them, it is an asset currency. I do not wonder at that. I can understand how a bank having a lot of paper, some of it good and some of it bad, would like to issue bills and send them over the country. They want of course—it is a part of the programme—that the Government shall guarantee these bills. There will never be in this country a new banking system that shall depart from the present system if the Government is going to guarantee the paper so put out, and asset currency goes upon the theory that when a bank has exercised its judgment and issued all the paper it thinks it can issue the Government is to stand back of it.

Mr. President, I am quite content with this matter as it is. I believe we can get through and have a fair discussion, and, if we do not, we can extend it into Friday or even Saturday, I suppose.

The Vice-President. Does the Senator from Rhode Island yield to the Senator from Wisconsin ?

Mr. Aldrich. Mr. President, it has been the habit of the Senate for very many years, after discussion upon a measure was practically exhausted, to fix a time for taking a vote. This custom has grown out of a universal necessity, due to the pressure of public business in this body and the absence of a rule for the previous question. In making the suggestion which I did, I have followed the usual custom in such cases. I think no Senator can complain that there has been any attempt, on my part, to press this measure unduly. I shall, as I said before, ash the Senate to proceed to consideration of the bill, and I shall feel constrained to object to the consideration of any other business until this measure is disposed of.

Mr. Culberson. Mr. President, I understand the Senator from Rhode Island simply gives notice that at 2 o'clock to-morrow—

Mr. ALDRICH. My notice was that immediately after the routine morning business I should ask the Senate to consider this measure and proceed with the consideration of it until it is disposed of.

The Vice-President. Does the Senator from Wisconsin yield to the Senator from Idaho ?

Mr. La Follette. I shall occupy the floor only a moment, and then I will yield to the Senator from Idaho.

I merely wish to say, in reply to the observation of the Senator from Colorado [Mr. TELLER], that I have exercised what I conceive to be a right upon this floor to speak upon this bill and to speak my mind upon it. I do not think I have misconceived the bill or the purpose of it or the effect of it. I do not understand it to be, Mr. President, a revision of the currency and banking laws of the country. I understand that for many years the necessity of such revision has been recognized. I understand that you can not get a revision succeeding a panic, because there is a disturbed condition, and you can not get such a revision in a time of industrial prosperity and peace, because there is no necessity for it.

As to whether I shall offer any amendments to this bill, I will be governed in that, too, by what seems to me to be the right thing for me to do at the time, and I shall not be influenced at all by any consideration as to whether those amendments are voted up or voted down.

I have listened to all the suggestions that have been made here with respect to curtailing debate and fixing a time to vote upon the bill, and no suggestion has been made which leads me to withdraw my objection.

Mr. TELLER. Mr. President, I did not mean any reflection upon the Senator from Wisconsin. I have listened to every word the Senator has said, I believe, in his speeches, and it occurred to me that if he found so many errors in the bill be would exercise the right of every Senator on this floor to move amendments. Whether they prove popular or acceptable to the Senate will be another question, but nobody usually cares about that until at least a vote has been taken, although sometimes one may feel a little bit hurt if an amendment does not succeed.

I in nowise intended to reflect upon the Senator from Wisconsin, and if the defects in the bill are such as he declares, I hope he will take the sense of the Senate on them, because if there are such defects, then we ought to vote amendments in, and if we do not think they are defects we will vote the amendments down.

Mr. Aldrich. It is very evident that we can not now, reach a unanimous conclusion upon this subject, and I therefore move that the Senate adjourn.

Mr. Heyburn. I hope the Senator will withhold that motion for a moment. I have but a word to say.

The Vice-President. Does the Senator from Rhode Island yield to the Senator from Idaho ?

Mr. Heyburn. Mr. President, I think, in the interest of good government and wise legislation, that when a question has been thoroughly discussed in this body, or any other legislative body, it should come to a vote, and I am not at all inclined to do anything that would postpone that vote after a bill has been thoroughly considered. I think, however, if the request of the Senator from Rhode Island is to be considered at this time, that it ought to specify in some detail the time to be devoted to the consideration of amendments and the time that might be occupied by any Senator in discussing an amendment or in discussing the bill. I shall offer no objection to the fixing of a time for the final vote upon the amendments or upon the bill as amended. I believe that when the time comes the Senate should speak its sentiments and that there should be such a consent given as would enable this to be done.

I was rather startled at the suggestion of the Senator from Rhode Island in regard to the appointment of a commission. Under no circumstances and at no time am I in favor of delegating to any outside body of men or any man the duty of advising us as to legislation. The Committee on Finance of this body is quite capable of determining and presenting to the Senate whatever is important to be considered in this body for the country, and I should certainly not favor at any time the appointment of any commission to advise us. We have a most competent commission in the Finance Committee of this body and the appropriate committee of the other body of Congress.

Mr. President, I think that the request of the Senator from Rhode Island ought to divide the time for the consideration of this question and that an hour should be fixed. Otherwise, as has been suggested, at the last hour some motion or suggestion might be made that we would all deem it important to consider. I suggest that the request should be to fix an hour at which the vote should be taken upon amendments, the time that should be consumed in the debate, and the time when a vote should be taken upon the bill.

The Vice-President. Does the Senator from Idaho yield to the Senator from Illinois ?

Mr. Hopkins. Under the notice that has been given, the bill is to be taken up, as I understand, and the amendments to be considered, and there is no limitation, either in the consideration of the bill or in the consideration of the amendments, but every Senator will have as much time as he desires to speak upon the merits of the bill or any one of the amendments that is proposed. If, after everybody supposes that we are through with the consideration of the bill, another amendment is offered, that can be debated and voted on also.

Mr. Heyburn. But, Mr. President, unfortunately a legislative day has a legal termination, and that hour upon which a legislative day expires is one that we can not very well change, and it is so convenient to fix an hour that it seems to me it would obviate that question. We might be called upon to sit here until 12 o'clock on Friday—that is, sit all night Thursday—for the purpose of carrying into effect the agreement suggested by the Senator from Rhode Island.

Mr. ALDRICH. Personally I should have preferred very much to have a limit put upon the debate and upon amendments and to have had a time fixed for the final vote, but, knowing that that certainly would be objected to, I made the proposition which I did in the most liberal way in which it was possible to make it.

Mr. Heyburn. Mr. President, I would suggest to the Senator from Rhode Island that he probably will meet with no more opposition to a resolution or motion carrying the details than he would meet to a general resolution or motion, and it certainly would work out better in the end.

Mr. ALDRICH. I will try at some future time to carry out the suggestion of the Senator from Idaho.

Mr. ALDRICH. I understand that there is a desire for an executive session, and I therefore move that the Senate proceed to the consideration of executive business.

The motion was agreed to, and the Senate proceeded to the consideration of executive business. After five minutes spent in executive session the doors were reopened, and (at 4 o'clock and 10 minutes p.m.) the Senate adjourned until to-morrow, Wednesday, March 25, 1908, at 12 o'clock meridian.