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The Commoner.
, VOLUME 3, NUMBER ,
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Topics y
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THERE WAS SOMETHING OF A SENSATION
in Wall street when Daniel L. Dresser,
president of the Trust Company of the Republic,
i N revealed under oath the methods employed by
Charles M. Schwab and J. Pierpont Morgan with
respect to the shipbuilding trust- The newspapers
of the vcountry have paid great attention to Dres
ser's testimony and some people pretend to be
surprised because of the revelations. Mr. Dresser
testified at a-hearlng before a special United States
examiner, Henry D. Oliphnnt, that the first mort
gage bondholders had obtained the appointment
of a temporary receiver for the shipbuilding com
pany and Dresser's testimony was introduced for
the purpose of showing that the company was
fraudulently imposed upon and rendered insolv
ent through the machinations of certain men.
DRESSE.R'3 REVELATIONS ARE RE
cited in an 'interesting story written by
Samuel G. Blythe, the special correspondent for
the New York World. Mr. Blythe sas that Dres
ser's testimony threw considerable light on "the
great game of O. P. M. other people's money."
Ho points out that "the era of prosperity that be
gan in the fall of 1896 and n e to high tide
threo years later was fostered by a gigantic bull'
market in the securities listed on the stock ex
change and sold elsewhere. The country went
money mad. liillions we' poured into Wall
street and millions were made. Nearly every
stock went up. It was as easy to inaka-money as
it was to breathe. All that was necessary was to
buy and take a profit. Waiters, cabmen, office
boys, laborers, clerks, merchants everybody
dipped into the golden stream flowing from the
church to the river on Wall street and brought
out handfuls of profit It was also the era of
combination. Industries were consolidated. Trusts
wore made of all sortB of factories and all sorts of
commodities. Clerks in the state offices in New
Jersey, where most of the combinations were in
corporated, grew weary of inscribing giant rows of
figures on the records. The prevailing idea was to
capitalize everything at any e. orbitan, number of
millions that fancy might dictate and sell the
stock to the people."
DURING THESE DAYS OF FRANTIC EX
ploitatloC the shipbuilding trust was
planned. Mr. Blythe says that the idea was to
combine the leading ship yards of the country and
control shipbuilding business. Daniel L. Dresser,
the president of the Trust Company of the Re
public, was one of the moving spirits. According
to Mr. Blythe, "the true exemplification of the
high finance" began when Charles M. Schwab
bought the Bethlehem Steel company, of Bethle
hem, Pa.,, a concern that made much of the gov
ernment's armor plate. This steel company was
' under option a year and a h: !f -ago to Kuhn, Loeb
& Co. and the Morton Trust company, of New
Yorki The plan was to sell it, to the Vickers' Sons
& Maxim company, of England. There -was an -option
which carried an agreement to sell the ,
stock to the Americans for $22.50 a share, they to
unload at a profit on the. Englishmen, of course.
It was thought on both sides that the. deal would
go through. Still, the owners of the Bethlehem
company are business men, and they cast about
for a better price. A letter, entirely non-committal,
but informing him that the company might
sell, was sent to Mr. Schwab, president of the steel
trust and competitor to the Bethlehem company.
Schwab saw a chance to turn an honest penny.
He, promptly bid $24 a share for the Bethlehem
company's stock, and his offer -was accepted. There
-were 299,910 shares of Bethlehem stock. Mr.
Schwab's increase, of $1.60 -a share made a tidy
sum, and the .directors of the Bethi-shem company
were well pleased. The Kuhn-Loeb-Morton Trust
company syndicate protested vigorously, but were
told it was 'business,' and finally decided to let
- the matter drop. ' Things were not going well with
.. the shipbuilding trust. Mr. Schwab, having turned
- promoter, had decided to sell his Bethlehem com
. pany to the shipbuilding promoters, but soon dis-(
covered that the 'time was not propitious. . This
left him in the position of owning a great steel
v company that was a competitor to the steel com
bination of which he was president. It also left
.-"him with a large' sum of money to pay for the
' stock he bad acquired."
AT THIS STAGE OF THE PROCEEDINGS,
Schwab called upon Morgan. Mr. Blytho
says that Schwab explained that ho was owner of
the Bethlehem company and president of the steel
trust. Why not let the steel trust take over tho
Bethlehem company, he asked Mr. Morgan, who
was manager of the syndicate of underwriters
that guaranteed the billion dollar steel trust bonds.
Tho Bethlehem property was added to the list of
the billion dollar Bteel company. No public men
tion was made of the fact The public did not
know that the steel trust owned the Bethlehem
company, but, as Mr. Blythe says, "presently ef
forts to organize end finance the shipbuilding trust
were renewed. Forays were made to England and
France to secure capital. Prospects brightened.
Then Mr. Schwab stepped out again as promoter.
-He took the Bethlehem Steel company out to sell,
just as a book agent 'takes a book out to sell, and .
he' did as the book agent does and went to tho,
people he thought wanted to buy."
v tr
AFTER CONSIDERABLE NEGOTIATION,
the Bethlehem company w;as sold. Messrs.
Nixon and Dresser stipulated that they were to
have 299,910 shares of the Bethlehem company
for approximately $7,200,000 in cash. Mr. Dres
ser said that he objected, urging that he did not
have the cash and that Mr. Schwab reassured him
and said that ae would provide the money. Mr.
Blythe explains: "The transaction was closed
at the office of Mr. Morgan August 11, 1902. A
young man named Wren came in and handed Mr.
Dresser and Mr. Nixon a check for $7,246,871.
Wren is Schwab's secretary. The check wag
made to the joint order of Dresser and Nixon.
They indorsed it and handed the check to Morgan
& Co. Then they handed the- stoc . to the lawyer
of the shipbuilding company, and the lawyer gave
Dresner and Nixon orders on the shipbuilding com
pany for the $20,000,000 worth of stock which was
to go to Schwab and Morgan $15,000,000 to
Schwab and $5,000,000 to Morgan. That closed
the deal, so far as Dresser and Nixon were con
cerned. It did not close the high finance. Mor
gan and Schwab had to get their profits."
DRESSER TESTIFIED THAr WHEN THE
the negotiations were on, Mr. Schwab told
him it would be necessary to market the $20,
000,000 block of stock owned by Schwab and Mor
gan before any of the $10,000,000 remaining stock
was to be sold. This was to reimburse Schwab
and Morgan for thc!r labors. It was agreed that
the stock should be put on the market at $65 a
share for the preferred and $25 a share for the
common. If, as Morgan and Schwab expected,
their stock had been sold at these figures, Morgan
would have received $2,250,000 for his $5,000,000
worth and Schwab would have received $6,750,000
for his $15,000,000 worth. 'iLis as to be the
cash bonus for selling the Bethlehem company to
the shipbuilding company. Then, if the public
appetite was unsatisfied the holders of the $10,
000,000 remaining out of the $30,000,000 worth of
stock might sell theirs.
if lf
TO CLINCH THIS ARRANGEMENT; AN
agreement was signed between the stock
brokers, Harris & Gates, Charles M. Schwab and
Dresser and Nixon which stipulated expressly that
the $5,000,000 worth of stock owned by Morgan
and the $15,000,000 worth o'ned by Schwab was
to be sold first at the price agreed upon $65 a
share for the preferred and $25 a share for the
common. Not a share of the other stock was to
be marketed until i organ and Schwab had cleaned
out their holdings to the public. This was rather
( rough on the other insiders, but Dresser and Nixon
- signed. The agreement was ready before they got
there. It is dated August 11, 19wi, which is the
day when the deal was closed and the stock trans
ferred to Morgan and Schwab. Those gentlemen
had their plans laid and they 'were ready to do
business at once. They took no cnances, but de
manded that tfie $10,000,000 worth of stock re
maining should be held in trust until the Morgan
and Schwab stock was sold. The scheme - was
beautiful In its simplicity. Morgan and Schwab
wanted their money, wanted it first, and they left
no loopholes. It was an arrangement within an
agreement. There were two kinds of insiders, real
and theoretical. Morgan and Schwab were the
real one3. The theoretical- ones were obliged to
wait untfl the public had been milked of the mil
lions demanded by Morgan and Suuwab. Then th
public was to be milked a .In with the remain.
lng $10,000,000 of stocK. Anything left after Sat
the public could have.
IN THE WITNESS CHAIR, MR.'DRESSER DID
not explain why Morgan & Co. demanded the
enormous bonus of $5,000,000 worth of stock. Dres
Ber said the check which he paid, the Morgan com
pany was given him by Mr. Schwab. Mr. Blytne
says that the men whb are" familiar with Wall
street affairs ray that Mr. Schwab got the check
from Morgan and that, if it i3true, explains much.
It also shows that Mr. Morgan, if the conclusion
1p correct, demanded $2,500,000 for the short-tims
loan of $7,246,81; that he gave the check and
took it back at once, for Dresser and Nixon In
dorsed it to him immediately after they had re
ceived it, and that Mr. Morgan's firm simply
bought its own property vith its own money put
the check from one pocket to the other and ex
pected to get $2,250,000 for the accommodation.
Mr. Schwab nas never told where he got the
$7,246,871.
MR. BLYTHE CONCLUDES HIS INTEREST
ing comment upon the Dresser testimony in
this way: "This is the stdry of igh finance and
the shipbuilding trust. Two years or three years
ago it would have ended happily justvhere, for the
public would have bought the stock and Schwab
and Morgan would have made their money It
does not end happily for Morgan and Schwab. Tho
public refused to pay. They would not touch the
shipbuilding trust stock. Harris & Gates could
not sell it. It was of no value. The specifications
provided that the investing public should clamor
for the stock. They had clamored for stock just
as worthless in aays gone by. Great1 to the as
tonishment of all concerned, there was no clamor.
Various expedients were tried to start . boom. Tho
boom wouldn't start. Finally, Mr. Schwab gave
J. P. Morgan & Co. $75,000 for their $5,000,000
worth of stock, for which the public was ex
pected and asked to pay thirty tir-es as much.
Mr. Schwab may have that stock now, together
with his own $15,000,000 worth. The shipbuilding
trust is in a legal tangle. Nothing but high fi
nance has suffered, except the shipbuilding trust
stock, which' cannot be given away. High finance
has suffered and suffered greatly. The public com
prehension has been illuminated by Dresser's story
of how a pool was formed within a pool, how
it is-possible to be buyer and seller at the same
time, how there are agreements back of agree
ments, how there are cellars and sub-cellars un
der the ground floor, and how deliberate cam
paigns are made to fleece the unwary. There are
many denials and talk of prosecuting Mr. Dresr.
Meantime Dresser's reply has sunk deep into tho
public mind and the conclusion is rapidly forming
that there are but two sides to the promotion of
high finance. The high financiers take no chances
and the public has no chance."
THE FAMOUS CONTROVERSY BETWEEN
the United States and Great Britain con
cerning the Alaskan boundary has bee decided in
favor of tho former government, so far as con
cerns the opinion of the commission recently
agreed upon between the two governments, it
will be remembered that a joint tribunal was ar
ranged for and each government interested being
equally represehJ d in this tribunal it was neces
sary in order that a verdict should be reached
that at least one member concede the righteous
ness of the claims advanced by the power op
posed to his own government. Lord Alverstone,
chief justice of England, agreed to the contentions
of the United States government and therefore
cast a deciding vote. According to this verdict,
the title of the United States to all the land ana
water ways and' Inlets it has heretofore claim"
with the exception "Of the Portland canal, wnu-u
Canada secures as its only outlet to the sea,
confirmed. -What the United States gains by "
commission's finding, is set forth in brief by -in
Chicago Record-Herald as follows: "Recognmou
by Great Britain of its right to: The Janfitpsl
the Alaskan 'panhandle' for ten marine leafcJ;
or about 34 statute mijes from the coast ut
from the north aide of Portland canal, the pre
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