Hellraisers Journal, Thursday November 7, 1907
From the International Socialist Review: “The Panic”
[By A. M. Simons]
By far the most important event of the month has been the financial disturbance. It is rather interesting that the ink was scarcely dry on the editorial in this magazine last month, questioning whether there would ever be another panic than we seemed to be launched full into the midst of one.
To be sure there is still some question of whether all the phenomena of an industrial crisis will follow, or whether, after a brief period of financial upheaval, there will be only a steady industrial depression, or possibly a revival. It is certain that never before has there been such a conscious control of affairs by great industry as has been shown during the past few weeks, but it still remains to be seen just how effective that control is in the deeper industrial phases of the subject.
It would seem that the industrial up-sweep had reached its greatest height, and that the income of the future had been mortgaged by the inflation of securities to such an extent as to produce, in the financial world at least, all the phenomena of over production.
Then came the battle between Heinze [F. Augustus Heinze] and the Standard Oil crowd, upon the one side and the conflict between some of the great trust magnates and the Roosevelt trust-busting crusade. These disturbances were enough to give the final touch that set the whole structure tumbling.
The first sign of any trouble was a decline in the price of certain stocks. This called for more margins, or increased collateral, from speculators and borrowers. The money needed for this purpose was not at hand, and the towering mass of credit that had been pyramided upon the small amount of actual currency began to totter. A money stringency occurred in New York. A frantic effort was made to quarantine the trouble in the city of its origin. If the New York banks could withstand the strain it was thought that the remaining financial institutions of the country would be safe. So money was poured into the metropolis from all directions. At almost the first call for help from the gamblers, the national government forgot its trust busting and rushed to the rescue. The United States treasury was swept clearer than it has been for years in the hope of stemming the tide. More than $100,000,000 was supplied by the national government, leaving a scant $17,000,000 in the national treasury,—a sum that would ordinarily be considered far below the safety point.
This vast sum of money was still all too little. It was secured by deposits of government bonds, and it was then proposed that ordinary securities be substituted for these, in order that the government bonds might be released to form a basis of national banknote issues. This is now being done and several million dollars more will be added to the currency in this way, and the national government will have loaned to the great capitalists of this country, without interest some two or three hundred millions of dollars at a time when money was worth from six to one hundred per cent in the market.
But all these efforts did not succeed in preventing the escape of the panic germ from New York. But when the disease spread to the remainder of the country it found the financial institutions of other cities already beggared for the assistance of the eastern banks. This process had been made all the easier by the fact that the law permits the banks in the small cities to keep the amount which they are required to hold in reserve against possible demands of their depositors, in certain great banks located in financial centers, and particularly in New York. So it was that by the time the panic had spread outside New York, the money had already been withdrawn from the banks outside that city.
There was no possible way by which the money of the depositors could be paid out if they demanded it,—and it soon became evident that they were going to demand it. The money was not there and the only thing the banks could do was to give an exhibition of a magnificent bluff. By a concerted agreement the banks of the United States quietly informed their depositors that they could not have their money. There is no question but that such action is illegal. We are not raising any question of its desirability. It is easily possible that in this crisis it was the best thing for all concerned, although we will by no means grant this without argument.
But it is absolutely certain that if this power is to be exercised, if all laws are to be swept aside at certain times, if the right of private property is to be abolished or suspended in certain things at certain periods, that some one ought to exercise this power besides a body of bankers who are mightily interested in the financial results of such action. It may be, on the other hand, that the precedent thus established will prove to be a handy thing at some future time. If a victorious laboring class should decide to take a few laws into its own hands without stopping to use the legislative machinery it can always point to the action of the bankers in 1907 as a precedent for such action.
Wherever necessary the state as well as the national government was placed at the service of the banking rulers. In Illinois it appears that the state treasury was swept a little cleaner than the national one had been in order to save the crumbling banks of the state. In several states the governors declared repeated holidays, and thus relieved the banks from all obligation of doing business.
In a number of cities the banks deliberately usurped the function of creating a legal tender and issued “scrip” in place of currency. When it was pointed out that this was illegal, and directly contrary to law, it was replied that there was no penalty provided for violation of the law and that therefore there was nothing to hinder the insurance of such “scrip”.
For several years the banks have been asking for a law authorizing “asset currency”. They wished to be permitted to deposit industrial bonds and issue money upon them in the same way that national bonds are now used. Since even the national bond provision has long been a sore spot with Populistic orators and small capitalist critics of the banking system, there has been considerable hesitation in enacting such a law. But while no law to this effect has been enacted, yet much of the same result has been achieved by the executive ruling referred to above, by which industrial bonds have been permitted to be substituted for government bonds as collateral for money loaned by the national treasury. This permitted the withdrawal of the government bonds previously required as such security and their immediate redeposit as security for the issuance of banknotes. The consequence of all this is that the United States government has loaned some $100,000,000 upon the industrial security, whose inflation is claimed by bourgeois critics to have been one of the causes of the panic.
Another illuminating side of these recent events has been the sudden taming of President Roosevelt. As soon as the panic was well under way he was at once charged with having been its cause. He was told that his speeches attacking the trusts had undermined confidence and caused the fall of credit. That he really had anything to do with the matter is very doubtful, but one thing is certain, and that is that he has given every evidence of being one of the most thoroughly scared politicians occupying official position at the present time.
This fright has succeeded in accomplishing something that a few weeks ago would have been declared impossible. It has made him keep his mouth shut for nearly two weeks. The only exception was a, mildly congratulatory note addressed to the very men whom he has been supposed to be so violently fighting, praising them for their action during the panic.
It is announced that he has rewritten his message and cut all the “dynamite” out of it, and that he has abandoned his trust busting campaign entirely. He has also agreed to permit the passage of a bill through Congress legalizing the asset currency so long asked for.
All talk about collecting that famous $29,000,000 fine against Standard Oil has been carefully hushed up, and no more criminal proceedures are being heralded in the press. In short, Roosevelt has been made to eat dirt in a most humiliating manner, and is being thoroughly taught the very important lesson that while capitalism lasts capitalists must and will rule, and that the only result of meddling with their rule, while leaving them in power, is to bring the whole structure rattling about the heads of the meddlers.
Still another interesting feature of the matter is the sudden and complete conversion of Wall Street to the Populistic doctrine of cheap money. The “Wall Street Journal”, “Bankers’ Magazine”, “Journal of Finance”, not to mention the New York Sun and Chicago Tribune of to-day read very much like the Kansas country papers of the late 80’s and early 90’s. All of which does not prove that either one was right in their economic reasoning, but simply that both change their economic theories and political doctrines as they imagined that their material interests dictated.
One of the first results in the industrial world was a sudden acceleration of the consolidation movement. The United States Steel Company absorbed the Tennessee Coal, Iron and Railroad Co., its chief competitor. The Trust Company of America, one of the chief financial concerns outside the Standard Oil group, is now in process of being absorbed by the Morgan-Rockefeller interests.
Thus the outcome of the trust-busting campaign is simply more and bigger trusts. It is interesting to note that all talk of collecting the famous $29,000,000 fine against the Standard Oil Company has dissappeared from the columns of the daily press and the speeches of administration speakers.
Still another illuminating phase of the situation has been the magnificent discipline which has been enforced upon the entire capitalist press. With one accord they have shouted whatever the banks thought it well for them to shout. During all the time that the panic was spreading faster and further they were repeating each day that the panic was over, that confidence had been restored, that the banks were all safe, that there was no cause for uneasiness, and so on “ad infinitum.”
There has not been a break in their ranks. Not one of them dared to tell the truth. Here and there one would modify the general cry that all was well, and give the news of falling institutions, but always the burden of the song remained the same.
As usual Hearst outdid all the others. When he does get down and crawl he presses his belly so deep into the mud that he makes the other seem fairly upright in comparison. On this occasion he shrieked all over his front pages in signed statements, certifying to the strength and stability of the banks.
Throughout it all capitalism has shown a solidarity and daring that may well be copied by the working class. When Labor shall show the same uniformity of action, the days of panics will be over with forever.
The International Socialist Review Volume 8
Charles H. Kerr & Company
July 1907-June 1908
ISR Nov 1907
(Also source for images of text.)
“Editorial: The Panic”
For A. M. Simons as author of “The Panic”-
(This did sound like Simons to me, but glad
to have this confirmation.)
Panic on Wall Street, Wiki, Oct 1907
F. Augustus Heinze
Heinze’s role in The Panic of 1907
The Chief: The Life of William Randolph Hearst
-by David Nasaw
Houghton Mifflin Harcourt, Aug 12, 2013
(search: panic 1907)
Note: The Panic of 1907 led to wide-spread and long-term suffering for working-class families across the nation:
New-York Observer, Volume 88
Morse, Hallock & Company, 1910
(search: poverty panic 1907)
The New York Observer of April 21, 1910:
POOR BELOW “POVERTY LINE”
Recovering Slowly from Hard Times.