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About Omaha daily bee. (Omaha [Neb.]) 187?-1922 | View Entire Issue (Nov. 22, 1903)
Hepburn on Financial Situation (Copyright 1903 by T. C. McClure.) T THE time that the speculative A frenzy of Wall street wti re sponding Instantly and freely to the many preposition of capital ists and other who were perfect ing Industrial combinations or trusts, as they are sometimes called, A. Barton Hep burn, vice president of one of the largest banks of New York, felt that the moment was opportune to sound a note of warning. Hli long experhnce as a banker, and es jrcla!Iy as the eompt; oiler of the currency whlc'i Is the administrative authority over the national banks of the United States), and the -accuracy with which many of Ills earlier predictions had been fulfilled, caused much attention to be raid to the few cau tlouss rareful and modnrate words which ho spoke. It seemed to him that the coun try was ndvarclnj too rapidly for the cap ital that It possessed. He thought that the o ginlnCon of Industrials and the expan Klon of new capital ought for a time to be checke 1. What he said, while It attracted much attention, t'ld. not seem to affect the faction of any one who was busily engaged In mnnufucturln car I tat stocks or In specu la lnft tho ma. ket or promoting the sale of new slocka. Yet, what Mr. Hepburn felt Juf.tl"ed In saying In a few words was echoed in a brief opinion expressed by Rufs-jU Sage. Whatever Mr. Bags says Is sure to 11 x, at least for the moment, the at. tent Ion of every one engaged In financial affairs. But there Is a natural wonder Whether u capitalist of such vast resource.!, and one epoclally whose chief vocation Is that of 1 iidlnj money upon call, might not be tempted sometimes to express an opin ion for tho puprpose of Influencing the mar ket.. No one can Ray Justly that Mr. Sage ever did that, and yet what he says , is UHtially accepted with some reservation. A few weeks after Mr.. Hepburn had venture! the cautious opinion, that there Should be a check to cipital expansion, one of his successors as vice president of the . largcut of American banks, as he was alsa a successor of Ms as an officer of high au- thority In the Treasury department, hav ing teen assistant secretary of the treas ury, In a more formal and cmphatlo man ner, nt a public banquet and In response to a toast, expressed ex-ictly the Idea which both Mr. Hepburn and Mr. Sage had thought it worth wl.l'-e to declare as their own. ' This banker, P. A. Vandrrllp, argued, with some detail, that the surplus capital of the country had been pratlcally ex hausted by the enormous drafts that had been made upon It In the last flvo or six years and that there could not be much more expansion without causing . shock, demoralization and, probably, disaster. What each of these three widely known financiers predicted, the great money cen ter of tho United States, and, rcuctively, tho other money centers, had been feeling throughout the entire summer. s . Durlr.g the period of the most severe depression and excitement In New ' York City, Mr. Hepburn was the guest of an association of bankers In New England and to them made an address In which he touched upon certain currency questions; and, after that address, in a more Informal manner, added to what he then said and what he had spoken a year earlier In the way of monition. He declared that In his vlow It was probable, if not Inevitable, that there would be In general commerce, busi ness and Industry, a reaction, just as thoro had been in the world of finance, stocks and speculation. It was known In New York that this was the opinion of many of the loading bankers, but not any of them cared to ex press It publicly. Mr. Hepburn was asked to explain In some detail the financial conditions both of business and of cor porations, as well as of the currency situ ation, which was In some features so acute during the summer of 1900 that Fresi- dent Roosevelt felt that he might be Justi fied In summoning congress Into extra ordinary session, partly for the purpose of coiiKidcring the currency question. , When Mr. Hepburn wus asked what was meant by his statement that the surplus capltul which had been so handsomely accummululed In the lust Ave or six years had been absorbed, he replied: "Soon after the country, In the great political , canvass of 18y6. decided In op position to the financial dogmas with which Mr. Bryan's name was identilled, there began to te a reliction from the period of distress and demoralization wl.(ch hud characterised the years from 1890 to 1S98. In, addition to that there were two or three years of most favoring crops and the repeal of the so-called 'Sherman sliver luw' i the summer of JMJ3 had caused coufidouce to some extent to lo restored; but it was not te be perfectly restored until the people of tho t'nlted States had decided, In a genera! i lection, whether there was to be free and unlimited coinage of silver at the ratio of 16 to 1. or whether the gold basis was to be established ' as the permanent basis of our currency. "It so happened that a year or two later there came the announcement of the dis covery of enormous deposits of gold In 1 ;,. A. P. HEPBURN the whole Alaska peninsula and almost colncidently .with that there was a great increase In gold-production In the .United States, Now all of these causes operated to restore confidence and, furthermore, to stimulate trade and commerce. We began' . to export our surplus products In enor mous quantities abroad.-. The apparent trade balance in our favor each year for several years was In the neighborhood of (500,000,000. Domestic Industry and trado -' were ' very greatly quickened. The Iron -and steel Industry responded most Im pressively to this new Impulse. 'Through ti.l creat productivity of crops, of precious metals and of Industrial agen cies, the country began to discover that it was accummulating capital. It was able, by means of Its surplus foreign trade, to absorb a large amount of American se curities held in Europe for many years. It was able to pay off some of our Indebted- ' ness abroad; and It was discovered that we were establishing 'what are called 'bankers' credits' over-there. Relatively, I have often thought that the increase of r.urplus capital In the west was even greater than elsewhere In the United States. Farm ers, who had been In debt for many years, . were able to pay off their mortgages, to buy Improved machinery and to add to their lands, and the records furnished by the banking departments of the-various states showed that they wero accummu lating money, . . . . .' "Wo, therefore, had a greater amount of surplus capital certainly greater in figures, probably. - greater relatively than In any other time In our history. . The Inevitable result of thut followed. When blind capital, as It is sometimes called, or surplus cap ital, becomes very large, It seeks utilisa tion. Teople want to muke as much money as possible. That Is the time when capital Is in plenty. It Is used up In these ways, and then there follow demoralisation and panic." , Mr. Hepburn wrs asked to detail moro specifically some of the uses of this surplus cnpltul. "There were, for one thing, large Invest ' mcnts in foreign loans. Home of the richer corporations cf New York bought great blocks of European loans. American capital "wr.a interested in the financing of some of the English war loans. There began even to be purchase's of English consols. In ad dition to that there came at that time the great impulse to consolidate various In dustrial properties and to bring together various railway systems; the conspicuous example of that being, so far as Industry Is concerned, tho organization of the United KtHte Rte-l corr-rs t!cn; cr.d, to f-r its r?n rouda are concerned, the movements which led to the unification of some of the Pacific railroad systems. These and many minor undertakings come minor only In the sense thut they were not as large as the United States Steel corporation, but were yet very large were promoted, and for a time found apparently easy absorption. . ... "lint there came a time when It was ap parent that the power of absorption was gone. Commercial and financial expansion 4h. I t had reached Its limit. The surplus capital had been used up, so to speak. . Credit Itself was being strained. And when, a year ago, there came heavy demands for money for crop movements In the west, It was evident to skilled observers that the strain was really upon us. There began to be hesita tion, then stronger evidence of the inability or refusal of those who in the past had sur plus capital, to purchase securities; and, little by little, the reaction made itself felt, until it culminated In the excitements and vivid object lesson of the summer of 1903." Mr. Hepburn was then asked to explain what he meant by his intimation that the wise man of business,. In view of all that, has happened within tho first half of the year .1903, would check his own business expansion and curtail and fortify himself agnlnst any- period of depression or dis tress. "The meaning ought to be self-evident. There cannot be any such liquidation as has been in progress for nearly a year .without there resulting frpm it, not only a check to' new Investments, to new prop - osltlons, but also a limitation of demand, which causes a market more or less dull. according to the extent to which the lim itation of the demand goes. There is an Im pression that Wall street is something apart from the rest of the nation. It la some thing llko the view sometimes held by public men that the New York postofflce Is a purely local Institution; and yet. the .New York postofflce is of quite as great Importance to merchants and manufactur ers elswhere In' the country ' as It la to those of New. York City. It was once said by a former postmaster general that the pulsations it Its mighty heart, are felt all over the country and the world. So, too,' the pulsations of the financial heart of the country, which is New York, are even moro speedily and perceptibly felt than are those of the great center of the postal system' of this country; so that Wall street cannot experience reverses without ulti mately the effect of them being also felt throughout the country. Wall street Is not a cause, but It is a reflection of all the mighty agencies that make industrial, com mercial and agricultural prosperity, as it is an Important reflection of all the agen cies which make depression and distress. Wall street does not cause ell panics, al though panics are usually first developed there." Mr. Hepburn was asked if, In his view, the currency system of the United States was In any way responsible. He replied that, while there were certain features of our currency system, certain defects that should be remedied, yet, on the whole. It is now In a tieaitnrui ana connuence givlng condition. "There Is no reason," he continued, "why there should be any distinction between the revenues received for customs and those received from Internal taxes, so far as the utilisation In the discretion of the secre tary of the treasury and In the form of deposits In the banks is concerned... If the funds which are now required by law because collected from customs dues to te kept In th etreasury until paid ro for government expenses were available for the' public US3S, as the funds collected from Interne 1 revenue are, that would be a meas ure affording considerable relief, especially In times of stringency. As to what la called asset banking, I am not of the opin ion that the country is ready for It, what ever may. be said of Its merit as an ab stract proposition. The pople have be come familiar with a bank currency, which they know is as good as gold, because the entire faith of the nation, as expressed In Its bond, is behind this currency. "A bank note Issued by a bank at East port, ' Me., passes as readily In circula tion in Tan Francisco as docs a greenback or silver certificate, end there is no ex change '. upon it. This pen3C of absolute safety wl.l, I fo3l, prevent uny congrc-s at pr;sent from approving any rr.c hod of se curing national tank notes that differ from the present one. The government bond which stands behind the note Is as sure a prot.c Ion' as' lAil ion itself wouli be. , "It: has, seemed to me, however, that It might be worth while for congress to pass such .a. law ns would permit the secretary of the treasury-. In his discretion, to grant .to. any national bank; in time of emergency, tho . right .to increase its cir culation up to a certain ratio of its capital. But, of course,-a currency of that kind: should bo .made . automatic, so that K would.be immediately retired when the emergency was . passed . and - that can be dene by taxing it- at- cuch a' figure as to compel. Its retirement when the rates for money . reached a . normal figure. That Is exactly what happens when the New York clearing house issues its certificates, some thing that is done , only In times of great emergency. The tax upon these certificates Is sufficient to compel their instant can cellation when rates for money become nor mal. Nothing should be done which would make It possible' to inflate the paper money of the United States. "The natural Increase of national banks and the new circulation thereby provided and the certainty that for many years, probably, the gold mined each year In the United States and in Alaska will in crease the circulating medium by (75,000,000 or more, ought of itself to provide what ever additional currency the normal and healthful growth of business and produc tion in the United States makes necessary. I am certain that the great development of the west, Its capacity to produce noble harvests on the whole for climatic In fluences in one part of our country do not affect all vparts unfavorably the ' opening: up of much of the yet undeveloped west, will, of themselves, speedily provide . surplus capital, which, when It is secured, may make possible renewed Investments, renewed enterprises and thereby a re newed season of prosperity." It is now reasonably certain that by rearon of the warnings given by Mr. Hep burn and others, and, In addition, the pre cautionary measures adopted by the Treas ury department and the leading bankers, the financial condition and business con dition of the country is to be In the clos ing weeks of the year satisfactory. It Is expected that after the new year there will be a hea.'thful revival of Investment which will follow an increase of surplus capital.' DANIEL STRONG. Watered Stock As a contribution to the food reform movement, scientists In the United States have been conducting Interesting and Im portant Investigations regarding fruit and nuts. In these tests they have demdnstrated that the finest varieties of fruits are those that contain the greatest amount of water. A heaped bushel of exquisite peaches, num bering one hundred, contained 93 per cent of water, while small and Inferior peaches of the same variety showed only 84 per cent of water. Thus, although there was only 8 per cent of solids In the first bushel, the fruit was vastly superior to that which had just doubled the amount. Other foods arc valued on the basts of the dry matter contained, but fruit Is th ur.iquo exception; the greater the propor tion of water the more desirable It Is as an article of diet. With this big volume of water it Is tho delicate blending In just th right proportion of a smull quantity of acid and sugar that Imparts distinctive flavors. In recent experiments much attention has been paid tj the waste material in fruit and nuts. The average per cent of waste la apples is found to be 23.8, and in grapes be tween 25 and 30 per ceut As a rule, th smaller the apple the greater the propor tion of waste. Saturday Evening Post Glimpse Into Mythology AJax was defying the light'r.;. "You are passing brave," observed an ad miring bystander. "Why so?" demanded AJax, disdainfully. "Because you are likely to get It in th neck any moment!" Whereupon . AJax laughed scornfully. "Poor fool," said he, "know you not that X have a rubber neck?" 'For which display of wit and bravery bo . was offered. 8500 a week by a vaudeville manager. Milwaukee Sentinel,