In a chance encounter near Wall Street around the turn of the twentieth century, Edward Jones, a founding partner of Dow Jones & Co. and a well-known financial journalist in New York, bumped into William Rockefeller, the brother of the oil titan John D. Rockefeller and a high-ranking Standard Oil executive in his own right. The men, who were friendly, got to talking. According to Lloyd Wendt’s 1982 book The Wall Street Journal, a history of the paper, the exchange went something like this:
Rockefeller: “Edward, would it mean anything to you to get a little advance Standard Oil news?”
Beaming, Jones replied: “Kind sir, would you dare say that again?”
“Here’s something I jotted down for you, if you care to use it,” Rockefeller said, handing him a note. “Only, please, keep your authority confidential!”1
The news was that Standard was issuing new stock and increasing its dividend. Standard’s stock soared on the news. And Jones had another scoop.2
The image of one of the patriarchs of American financial journalism jumping at the chance for a scrap of news from a top Standard executive isn’t altogether a flattering one, particularly when compared with muckraker Ida Tarbell, who didn’t rely on favors from the company and received none. In the minds of some, this is the very image of the financial journalist—the flatterer, the scribe of the powerful. It’s a view expressed, for instance, in Stieg Larsson’s wildly popular novel The Girl with the Dragon Tattoo by the main character, Mikael Blomkvist, an investigative reporter for an alternative paper who holds a dim view of his colleagues in the mainstream financial press:
His contempt for his fellow financial journalists was based on something that in his opinion was as plain as morality. … The job of the financial journalist was to examine the sharks who created interest crises and speculated away the savings of small investors, to scrutinize company boards with the same merciless zeal with which political reporters pursue the tiniest steps out of line of ministers and members of parliament. He could not for the life of him understand why so many influential financial reporters treated mediocre financial whelps like rock stars.3
While irresistible, the image of the journalist flapping around a titan’s brother on a street corner, hoping for a scrap of news, is hardly a full representation of business reporting. Indeed, Wendt also chronicles a second incident in which Jones approaches the beef mogul, Philip Armour:
“Your friends are saying I misquoted you,” Jones begins angrily.
“What’s that?” a surprised Armour replies.
“Your friends say I misquoted you,” Jones icily repeats, “and that you repudiate me.”
“What’s a little fuss,” Armour says, attempting to defuse the situation.
“And just what do you say?” Jones insists.
“I say that Dow Jones is nobody’s goat,” Armour says.
Whatever that means, clearly Armour is backpedaling. The mogul tries to mollify the angry reporter, promising not to dispute any more quotes: “Shake. And if you shoot out another bulletin saying I say just what you said I said, say that I meant it … Jones, I like you—it’s great to meet a Man! [sic].”4
The scene presents a different image of Jones, certainly, and a no-less-accurate representation of a financial journalist than the fawning encounter with Rockefeller’s brother. In comparing the work of Tarbell and the journalism of the muckrakers to early financial reporters, it’s not my intent to disparage the latter or, for that matter, to glorify the former. There is no need to choose sides between muckraking and market reporting. For now, it’s enough to see the utility of both while differentiating between the two. But the differences are crucial in understanding why business news could cover something in granular detail and yet be scooped by others on the greatest story on its beat.
Both scenes show the roots of business journalism in access reporting. Whether the story is positive or negative, whether it curries favor with the source or the opposite, the reporting is “top-down,” entirely reliant on powerful players for the information on which the story is based. It is investor oriented, market serving, incremental, and self-referential. It is communication between and among elites, without reference to broader public interests.
The market for financial information is as old as markets themselves. Indeed, as the historian Wayne Parsons notes, business news, as the underpinning of the pricing system, is a precondition for capitalism itself.5 Until the seventeenth century, the flow of pricing and other financial information passed through private networks, like those controlled by the Medicis. The first business-news entrepreneur is believed to be Joseph Fugger, a German financier and a member of one the seventeenth century’s great commercial families, who sold market information to clients as a sideline. As capitalism grew, so did business news, propelled in the eighteenth century by public curiosity—or mania—about early public stock companies, including Britain’s notorious South Sea Company. Granted a monopoly to trade in South America, the company’s stock soared on the prospect and crashed on the reality that Britain didn’t control South America. Indeed, the economist Robert J. Shiller pointedly notes that the history of financial bubbles coincides with the advent of financial media, and it’s difficult to imagine the former without the latter.6
In Europe, the commercial press actually predated the political press, taking root in London, Amsterdam, Hamburg, and other centers of commerce and trade. Because its content was deemed uncontroversial, it was subject to less censorship than political news. The earliest business press in London circulated shipping news and pricing information. In 1734, Edward Lloyd began publishing Lloyd’s List, a source of shipping and pricing news for underwriters of shipping insurance who met at his Lloyd’s Coffee House, an important news hub in the City of London. The paper, which also provided stock and commodities prices, continues to this day. By the end of the eighteenth century, the market for commercial information was established and had spread to the American colonies.7 As Parsons and others have noted, the first newspapers in America were essentially commercial papers. They were aimed at merchant classes eager for news about commerce, shipping, and trade and eager to advertise their own products. One function of an early news cooperative, the New York Associated Press (not to be confused with the Associated Press, which survives), for instance, was to meet ships entering New York harbor and relay information about their freight via fast boats.
The value of the early commercial press wasn’t so much its specific stories. Rather, it functioned as the circulatory system of the market and provided the very language of capitalism—markets, trade, individualism, and profit. Its value was its role in creating and disseminating what Parsons calls “the capitalist culture.”8 The early financial press served as a voice for the rising merchant, commercial, and industrial class that read it. The Economist was founded in 1843 by the Scottish businessman and banker James Wilson to argue for the repeal of the Corn Laws, a system of import tariffs. Under Walter Bagehot, its iconic editor from 1861 to 1877, it advanced the cause of laissez-faire economics and enshrined market-based ideas as a widely shared form of public discourse about economic life. Along the way, The Economist helped establish a new professionalism and intellectualism in business and economic reporting and an ideology of sorts that underpins business news to this day.
Early business news was almost by definition a form of elite, as opposed to mass, communication, a press geared to a small band of market participants.9 The merchant class was the main audience for one of the most influential early business papers, the Journal of Commerce, founded in 1827 by Samuel Morse, the telegraph inventor, and a partner, Arthur Tappan, who later helped to form the Associated Press (also an important early purveyor of business news).
William Buck Dana modeled New York’s first business weekly, Commercial and Financial Chronicle, on The Economist and used it to advocate for laissez-faire economic policy, the gold standard, and labor-capital comity. The Chronicle (founded 1865) would become an authoritative source on the growing transportation and communication sectors, and later on banking, government, and railroad bonds and other securities. It was the most influential business publication of the late nineteenth and early twentieth centuries, much more so, for instance, than the fledging Wall Street Journal (founded 1889). It compiled so many business statistics that the U.S. government would rely heavily on it for its own statistical compendium, Historical Statistics of the United States.10 A Yale graduate and member of the Skull and Bones secret society, Dana was never confused about his target audience: the Chronicle’s circulation included the nation’s top industrialists and financiers and peaked at around 17,000.
The mid-nineteenth-century rise of financial markets in the United States—driven mostly by railroads—created a need for a new kind of business news: financial news. It also created a new set of problems for journalism, problems that have not been solved to this day. As Peter Thompson has pointed out, the financial world is almost entirely symbolic.11 The key “facts” of financial news—value, money, securities—are human constructs. That is, they “exist” only because of a general agreement that they do. A police reporter covering a fire can state with some confidence that the fire broke out at, say, 4:23 in the morning at the corner of Elm and Main, but a financial reporter walking down Wall Street has a much more difficult task in making the public understand the world he covers. The symbolic nature of financial news makes it vulnerable to manipulation in ways that other types of news—politics, government, arts, sports—are not. And, of course, as the history of panics has shown, manipulation of symbols can have catastrophic consequences on the lives of people who have no direct involvement in, or perhaps even awareness of, this symbolic world.
Among other things, the symbolic nature of finance heightens the need for journalistic specialization. The ability to read financial statements, for instance, is considered a must in business journalism (though such expertise is actually rarer than one might suspect). The symbolic nature of finance—along with its obvious importance to social stability—means business news requires more accountability reporting than other areas. As we’ve seen, even the multiple layers of official oversight—internal auditing departments, board audit committees, external auditing firms, rating agencies, regulators—have all proven inadequate individually and in combination. The last line of defense is journalism.
Yet the need for specialization also creates a dangerous insularity. Business journalists can, and usually do, spend their entire careers in the subculture, one with its own idioms, norms, and values. Sealed off by its expertise from the rest of journalism, business journalism operates in a bubble. Much as with the Washington press corps, intellectual capture becomes an occupational hazard. Unspoken assumptions about what is and isn’t a story narrow, as does the circle of acceptable sources.
Finally, the symbolic nature of finance makes for a kind of relativism not found in other journalism spheres since much of business journalism boils down to an argument about value: How much is something worth, in dollar terms, now and in the future. How much pay for a CEO is too much? Four times an average workers’ pay? Or 40? Or 400? How much is a mortgage-backed security worth? How much in points and fees should a subprime borrower pay? And given the rough-and-tumble nature of markets (and life), how much blame should be assigned—and to whom—when values collapse? Is it the seller’s fault for selling? Or the buyer’s for buying? Or should we just throw up our hands and say both? Or maybe no one is to blame: that’s just the way it goes. This last view is accepted as a matter of course in some business and financial circles, which see the “madness of crowds” as the driving phenomenon behind bubbles and panics.
In Railroaded, a history of the rise of transcontinental railroads, Richard White argues that it was not capital per se but credit that drove the wild railway boom that, in turn, dominated the American economic scene of the second half of the nineteenth century. The very word “corporation” was in the nineteenth century virtually synonymous with railroads, which dwarfed textile mills and other existing industries and required vast organizations and even vaster amounts of capital. This overwhelmingly took the form of debt—railroad bonds. After the American Civil War, the bond market expanded dramatically, with the total face value of railroad bonds spiking from $416 million in 1867 to $2.23 billion just seven years later.12
The railroad business was both the broadband and Internet of its day: a sector of seemingly limitless potential, able to attract huge amounts of capital from the sophisticated and unsophisticated for projects both worthy and dubious. It was a sector populated by as many scam artists and confidence men as visionaries and builders. As White notes, “The ultimate buyers of most railroad bonds lived at a distance from the railroad that they invested in, and they had no independent knowledge of the seller or the veracity of his claims. An investor encountered a virtual world of financial statements, prospectuses, newspaper accounts, and market values that at once stood in for and was inseparable from the actual railroads of a developing nation.” And while the need for trust has always been a constant in commerce, the new virtual world was, then as now, temptingly easy to manipulate. White says: “Numbers and words that were supposed to stand in for things could be changed and still maintain their influence; news could be altered or withheld; reports could claim assets that didn’t exist and deny trouble that did exist. Altering the numbers and changing the words of this virtual world could prompt actions in the parallel universe where people paid money for bonds.” And unlike other long-standing financial instruments, like promissory notes, bonds were replicated thousands of times with no other prior relationship between seller and buyer. The ascendance of the railroad bond—and finance capitalism—brought with it a parallel rise in the opportunities for fraud and manipulation.13
Enter journalism. A single newspaper article could have a huge impact on bond issues. Reporting—or not reporting—on an investor lawsuit, for instance, could make or ruin the value of securities. Understandably, railroad moguls obsessed over news coverage. As one furious railroad baron wrote to another in 1885: “I seriously wish that some legislative measure could be passed, which could make the shooting of reporters wholly justifiable on sight, punishable by a fine not exceeding $10 dollars.”14 The Associated Press held particular power since it aggregated and sent out over the Western Union stories gleaned from local newspapers, greatly amplifying their impact. It had particular discretion over smaller news items, such as events affecting railroad bonds.
Not surprisingly, railroads actively sought, by one means or another, to bend coverage to their interests, and all too often they succeeded. The press of the day was neither necessarily disinterested in the events it reported on or particularly clean. Moguls bought some newspapers outright or cultivated publishers with free passes, printing contracts, and advertising, often at above going rates. Sometimes they recruited newspapermen as agents and lobbyists or lent them money. Press ethics of the day weren’t too different from business ethics generally. White quotes an 1881 memo in which a newspaperman, who also sidelined as a railroad lobbyist, carefully lays out various newspapers’ attitudes toward the mogul’s railroad, based on whether they had thrown in with bears or bulls: the New York Times was hostile, the memo said, but largely because bears were using it to drive down the stock; the Indicator and the Graphic were friendly but only because they were tools of bulls; The Stockholder was waiting until its owner, Jay Gould, decided where his interests lay; The Financial Chronicle was frankly open to be bribed by either side; The World was hostile but only because its owner, Joseph Pulitzer, was in a bitter feud with the owner of the Star, William Dorsheimer, who was friendly. And so it went.15
This Wild West of financial information created a need for a new kind of journalism that could sort through the complexities of this symbolic world and bring some sort of integrity to the role of distributing it among market participants. While much of the journalism on early finance capitalism was beholden to the interests that controlled the sector, some early business journalists stood apart. One was Henry Varnum Poor. Poor was born into a striving Maine farm family that would produce a number of success stories, including his brother, John, who became a minor railroad magnate in the state and owned a railroad trade journal. H. V. graduated from Bowdoin in 1835 and went to work for his brother. He went on to edit The American Railroad Journal and important compendia, including the History of Railroads and Canals of the United States, an annually updated guide to railroad finances and operations. Poor fashioned himself into a knowledgeable, sober, but nonetheless fierce advocate for railroad investors, one of the earliest business writers to assume such a role. He angered railway magnates and managers by warning against overinvestment and overcapacity and tried to use information as a tool to mitigate the industry’s debilitating boom and bust cycles, which, he argued, would drive away capital in the long term. In 1852, as the industry expanded wildly, he announced in an editorial that his Journal would adopt an “altered tone” and would become less an advocate for the railroad industry, more a analytic journal, an advocate for, if anyone, bondholders: “It is now our duty, as it is equally for the interests of railroads and the public, to point out the dangers to which we are exposed from an excessive investment in these works, to expose merely speculative schemes, which are encouraged by the ease with which money is had for anything like a railroad.”16
Poor pioneered the art of securities analysis and set a standard for integrity and care that future Wall Street analysts would not always be able to meet. His biographer, Alfred D. Chandler Jr. (a great-grandson of Poor and noted historian), described how Poor deftly critiqued a $1 million bond offering of a southern Illinois line seeking to expand. The company claimed it had already raised another $1.4 million for the project, but Poor pointed out that part of the sum was to be raised from municipal bonds that hadn’t yet been voted on and that the offering documents refused to say how much of their own money the project’s backers had put in. The offering statement included no engineering report, Poor noted, and the projected cost of the line, $17,000 a mile, was far too low. For these and other reasons, Poor wrote, “the proposed loan would not only be unsafe, but its negotiation would establish a precedent to the most injurious results.” Considering that he operated decades before the Securities and Exchange Commission, the value of his reporting becomes all the greater.17
Poor is not normally thought of as a journalism pioneer. His granular approach wasn’t intended for a broader audience and was ill equipped to deal with the broader questions posed by the rising power of the railroads and their tightening grip on the chokepoints of the American economy and, for that matter, the political system. But he represented a not-small step forward in cleaning up and professionalizing the world of financial information.
Poor died a respected editor in Brookline, Massachusetts, in 1905, and the firm he started with his son, H. V. and H. W. Poor Co., had the securities-ratings business to itself until the turn of the twentieth century, when rivals, including the Standard Statistics Bureau, would arrive. The two firms merged in 1941 to form the predecessor to Standard & Poor’s Ratings Services, which would, of course, became a pivotal actor in the financial crisis of the early twenty-first century, an “essential cog in the wheel of financial destruction,” in the words of the Financial Crisis Inquiry Commission of 2011.18 One reason for the firm’s failure to maintain its integrity can be found in a change in the company’s business model. To avoid the conflicts that plagued his newspaper competitors, Poor relied on subscriptions from investors for his income and never charged the bond issuers—precisely the fateful step taken by his successors.
Railroad bonds and the rise of finance capital inexorably pulled the attention of business news to New York City, which by the late nineteenth century was an important global financial center, driven by the New York Stock Exchange in Lower Manhattan. Around it sprang up a new sort of news organization created with the express purpose of ferrying information among the exchange, corporations, and their investors. Many newsrooms appeared; few survived. A special place in business-news history must be given to Dow Jones & Co., if only because, unlike so many rival financial news services, it survived. But why it did so and later thrived would have little to do with its founders or the type of journalism they produced.
It started behind a soda fountain. Charles Dow, a dour man, bearded like an Old Testament prophet, had grown up on a New England farm and went to work in his youth at newspapers, including the Providence Journal, eventually finding his way to New York and a job at a news agency called Kiernan, one of several clustered around the Exchange. An intense and ambitious man, he worked, a colleague would recall, “noiselessly.”19 In his late twenties, Dow pitched his boss on the idea of a daily newspaper, in addition to the short wire reports the service produced. Kiernan wasn’t interested but did allow Dow to hire an old friend from the Providence paper, Edward Jones. Sporting a flowing red mustache, well-cut suits, and handmade boots, Eddie Jones was as garrulous as Dow was taciturn. Jones brought with him a reputation as a heavy drinker and something of a quarreler. But he had incredible contacts among Kiernan’s customers—traders, bankers, and investors—having accumulated many of them in the swank bar of the Windsor Hotel on Fifth Avenue and Forty-Sixth Street, sometimes called “All-Night Wall Street.”
Dow and Jones began plotting a rival service that would deliver market news to subscribers via messenger boys, a crude but quick and inexpensive medium. The two news entrepreneurs took into their confidence one Charles M. Bergstresser, who contributed capital as well a special stylus he had invented that could make more than two dozen impressions at a time. This offered a huge competitive advantage in a business where minutes, even seconds, counted.20 In November 1882, Dow and Jones opened their new company in a two-story building at 15 Wall Street, behind Henry Danielson’s soda-water establishment. Bergstresser’s name, deemed too cumbersome, was left off. The operation was modest, a basement room with no paint on the walls or carpet on the floor and a single bare electric lightbulb. Dow had a space walled off by bare pine boards. Jones had a desk at the back of the room. Bergstresser, who walked Wall and Broad Streets looking for news, didn’t have a desk.
The New York business-news market, which Dow Jones was part of was highly competitive during this period. Adolph S. Ochs, who had bought the New York Times in 1896, quickly expanded the quality and scope of the paper’s business coverage as a means of reaching a new, affluent audience.21 He demanded consistent coverage of financial market reports and real-estate transactions, among other activities that publications previously had considered too boring to warrant an article. According to one of the histories of the paper, Ochs’s managing editor, Henry Loewenthal, “injected new life into his Wall Street reporters, goading them to greater output.”22 Carr Van Anda, who took over as managing editor in 1904, also spearheaded finance coverage during his tenure. “While general news reporters at the Times and other newspapers assumed that Ochs’ drive for business news would make the Times duller and less appealing, to their astonishment, Ochs was able to bring in thousands of ‘new, substantial readers and a brisk flow of advertising.’”23
Of course, business news was in no way limited to New York, and financial-news organs sprang up around the world to chronicle fast-growing stock and bond markets. Paul Julius Reuter, who had won some fame as a distributor of radical pamphlets in Berlin during the Revolution of 1848, developed a prototype news service in 1849 using electric telegraphy and carrier pigeons. In 1851, he installed his eponymous news service at the London Royal Exchange, serving banks, brokerage houses, and other businesses. The Financial Times, known first as the London Financial Guide, was launched in 1888, styling itself the “Friend to the Honest Financier and Respectable Broker.”24 It began to publish on salmon-pink paper a few years later to distinguish itself from a rival, which it later bought.
Then, as now, corporate news was the lifeblood of the financial-news business, and then, as now, a premium was placed on scoops about earnings, dividends, mergers, and other market-moving events. Competition for information was fierce. Reporters waited outside, or short-posted, corporate board meetings for hours and, if no phone was available, would run to a window to signal a colleague in the street through some prearranged system. One wave of a handkerchief would mean, “no extra dividend”; four might mean, “merger off.”25 Getting beaten by fifteen seconds was considered a sound defeat; a full minute was a firing offense.
Lloyd Wendt describes a scene at the fledgling Dow Jones in which a young man arrived at the modest offices for his first day as a copy boy. A relaxed and affable Jones is explaining the job until a messenger bursts in. “Earnings! Earnings!” he shouts. Jones’s feet hit the floor with a crash. Berating the cowering boy, who was slow, Jones believes, Jones snatches his notes and, splitting the work up with another writer, begins to scribble furiously using Bergstresser’s special stylus on a pad of twenty-four (later thirty-five) thin sheets. In a matter of minutes, a hundred copies are fired off and the messenger boys dispatched. Deadline passed, Jones put his feet back on the desk and continues to explain the ropes.26
Dow Jones’s early work hammered raw corporate information into short bursts of prose. For the general public, it might as well have been written in code. This series of items is from September 5, 1883:
12.05 P.M. “Hatch & Foote have announced their suspension.”
12.35 P.M. “The rumor that Peters, Wetmore & Schenck were in any trouble are [sic] absolutely false.”
1:05 P.M. “The House of Cook endangered by Northern Pacific.”
2:05 P.M. “Hatch & Foote have announced their reinstatement.”27
Dow Jones was the first Wall Street news service to acquire a printing press and the first to cover London via an arrangement with the Times of London to telegraph market summaries. Dow Jones also was the first to cover Boston via a similar arrangement with the Boston News Service, owned by Clarence W. Barron. In 1884 Dow created the first list of stocks and compiled their prices into an “average” that would become the iconic Dow Jones Industrial Average.
Bergstresser, the “third tenor,” as it were, of the early Dow Jones, convinced his partners to invest in the printing press and collect the bulletins they produced into a daily summary, to be called the Wall Street Journal. The first issue appeared on July 8, 1889. The press allowed the paper to be distributed by three-fifteen each afternoon, fifteen minutes after the close of the NYSE and about an hour before competitors. In 1897, Bergstresser, again, introduced a broad-tape ticker that allowed the transmission of text as well as numbers and symbols, an improvement over the prevailing version. By the 1899, the company was thriving. Customers were paying a hefty thirty dollars a month for the ticker; the newspaper’s circulation hit 11,000; and ads crowded the front page.28
The early Dow Jones produced valuable journalism, albeit within the narrow context of its self-perceived mission. In 1884, for instance, the wire helped to calm a market panic following the failure of a New York Stock Exchange member firm, Grant and Ward. The fact that the firm’s partners included Ulysses S. Grant, the former president, made big news of what was an otherwise inconsequential failure, but Dow Jones issued a series of reassuring remarks from major financial figures, including the railroad mogul Jay Gould, who said, “I think we have seen the worst of it [the panic].”29
On another panicky day, Dow Jones tried to calm markets by issuing a steady stream of reassuring statements from bank owners. At 11 a.m.: “The president of the Fourth National Bank says that the street talk about his bank is nonsense”; at 11:50 a.m. the Gallatin National Bank has $1,100,000 in cash in its vaults, the best answer to “any rumors”; at 1:45 p.m.:
Donnel, Lawson & Simpson failed. The Phoenix Bank has $135 for every $100 liabilities. The largest depositors know this and are not disturbing deposits.30
The value—and limitations—of the early Wall Street Journal style of reporting were on display during the famous Panic of 1901, involving J. P. Morgan and the Northern Securities Company. Dow Jones reporters smoked out the reason for a gyrating stock price, reported on backroom maneuvering and stock manipulations, and challenged official accounts of what had happened. Then, in columns and editorials, the Journal excused the manipulation, displaying the dependence of access reporting on its powerful sources and the intellectual capture that did, and still does, occur.
In the spring of 1901, Morgan and a railroad partner, James J. Hill, began quietly buying control of the Chicago, Burlington, & Quincy, known as Burlington, through the parent of the Northern Pacific railroad. The goal was to control Burlington’s vital Chicago line and to create a coveted cross-country link. Meanwhile, though, rival moguls Jacob Schiff and E. H. Harriman, shut out of the deal, began secretly buying shares of Northern Pacific, hoping to out-flank Morgan and Hill and gain control of the Chicago line. Complicating matters for the Morgan-Hill alliance, Morgan was touring with a mistress in France and couldn’t be reached. The Journal sniffed out the reason behind a sudden jump in Northern Pacific shares and ran a story under the headline: “Combinations Make Combinations”: “Headway has been made in the project toward an alliance between Northern Pacific and Burlington. Should this alliance be consummated … there would be nominally a Hill-Morgan transcontinental route.”31
In a May 6 editorial, the Journal predicted (incorrectly) that the maneuvering for control would lead to a grand alliance. But it was generally right about the implications of various schemes. As it turned out, the battle turned into an all-out takeover fight that triggered a panic. When Morgan was finally reached in France, he ordered his brokers onto the floor of the New York Stock Exchange in a huge buying push that caused chaos in the market. Short sellers found they couldn’t buy enough shares to replace the ones they had borrowed, even at $1,000 each, wreaking havoc on their lenders. Wall Street firms called in other stock-market loans, and the market headed for a crash. For a while, a good part of Wall Street was technically insolvent. Thousands of small shareholders were wiped out. The two sides combined to form Northern Securities.
The Journal, which had explained the maneuvers in detail, had brought transparency to an otherwise bewildering market panic. Yet, ultimately, it went out of its way to excuse the participants. In a column on May 13, the Journal wrote: “The Northern Pacific corner was unintentional and was regretted by those who were the most influential in bringing it about.”32
The Journal’s formula, a pastiche of market-moving news, government and corporate information, and financial commentary, attracted a small but well-heeled readership. Financial success, though, sparked internal dissension. Jones, in charge of ad sales, was constantly at odds with Dow, who ran the editorial operation, over how much page-one space to devote to ads. Jones also clashed with Bergstresser, who wanted to invest in new equipment. Dow also disapproved of Jones’s gambling, drinking, and coziness with his millionaire sources. According to an account in Francis Dealy’s The Power and the Money, one of several histories of the Journal and its parent, Dow later complained that Jones “just wanted short term gains, and to hell with the reader.” Dow added: “Jones, who was volatile to begin with, became irrational when Bergstresser suggested we buy another printing press. And when I suggested we should stop coddling advertisers, Jones stormed out of the office.”33 Bergstresser eventually moved to Paris and became an absentee owner.
Ultimately, Jones sold his interests and took at job at a brokerage house (and, as it happens, helped Morgan during the Northern Securities buying push). In 1902, in failing health, Dow sold the company to Clarence Barron of Boston, who used money inherited by his wife, Jessie Waldron, a widow who ran a boarding house where Barron lived.34 Waldron’s descendants would remain principal owners of the company for the next 105 years. Dow died months after the sale, his death marked by a black-bordered tribute in the paper authored by his former partner, Jones.
Charles Dow was a journalist of integrity and a respected financial analyst. Edward Jones got plenty of scoops and helped put the fledgling news organization on the map. It is doubtful, though, that either they or their company would be remembered today but for decisions made long after their deaths, decisions that greatly expanded the idea of business news and its mission and would, ultimately, propel the financial news organization to greatness.
Dow Jones was only one of many competitors in financial news during the early 1900s, but it is representative of the genre. It was a form of elite communications, targeted to a narrow segment of society, the 1 percent, in today’s parlance. Its circulation hovered around 10,000. It had no aspirations for a mass audience and no particular ambivalence about its utilitarian function. It was less as an outsider than as intermediary among market participants. “Speed, accuracy, and efficiency were wanted, not imagination, literacy, or a grasp of economic subtleties,” says one of its historians.35 Its stock-in-trade was gaining access to insiders and then being first to tell the market what they were doing. The company was engaged in a constant balancing act between the interests of its readers and those of its powerful sources, who, it must be said, were often also its advertisers. Often in the early days, as we have seen, it tilted toward protecting and excusing the powerful.
It should be said that the Wall Street Journal in its early years was not reflexively pro-capital or pro-mogul in its coverage or its editorials. When John Mitchell, president of the United Mine Workers, led 140,000 miners on strike against the anthracite industry in 1902, the Journal’s editorials showed understanding for the strikers’ position and called for arbitration. Indeed, the editorials, by Charles Dow, were so balanced that he was paid a visit one afternoon by three union officials who asked him to have the paper “undertake the preparation of statistics for the side of the miners.” Thomas Woodlock, an influential early editor who was there recalled. “Naturally, this could not be done.”36
Woodlock wrote an editorial strongly supporting Theodore Roosevelt, after the 1904 election, in his campaign against the trusts: “It was manly steadfastness of principle that yesterday won for Theodore Roosevelt such popular endorsement as was never before given by a free people. Against such a frank, fearless, honest personality, capital and combination [the railroad combination] beat as vainly as break the waves on the rock-ribbed shores.”37 The paper was by no means always hostile, for that matter, to Ida Tarbell’s series on Standard Oil. Indeed, it treated Tarbell’s revelations as news events in their own right and routinely ran lengthy excerpts in its own pages. On November 28, 1903, it ran part of Tarbell’s “Cutting to Kill” article from that summer under the headline: “System of Organized Espionage/Secrecy of the Standard Oil Company.” On March 4, 1904, it wrote a defense of Tarbell in a comment under the headline: “Will Not Let Him Alone”: “We have no sympathy with the indiscriminant denunciations of Mr. Rockefeller. But we do think there is good reason why the world refuses to let him alone. We believe absolutely in the principle of publicity to be applied to such corporations as the Standard Oil.”38
In fact, it can be hard to tell the difference between the views in some Journal editorials of these early days and the positions of leading Progressives. In an October 3, 1907, editorial, it inveighed against the growing power of trusts: “The trusts and combinations have grown so colossal as to overshadow the power of single states. Many of them became practically the masters of states, and the people found themselves virtually powerless in their hands. There was only one way possible to deal with this condition and that was by involving the power of the Federal Government.” And a few days later, the paper warned Wall Street to mend its ways: “The Wall Street man looks out upon the country and sees many suspicious, indignant and angry faces turned toward him. Each successive disclosure of financial wrongdoing increases the popular lack of confidence in Wall Street methods and Wall Street securities.”39
But editorial positions are one thing; reporting is another. And sometimes early business reporting failed woefully, even on its own terms, channeling the interests of moguls, papering over crises, and leaving investors and depositors in the dark. An unpublished paper by Bonnie Kavoussi makes a convincing case that Journal coverage of the catastrophic Panic of 1907, for instance, was timid and lackluster, certainly in comparison with the rival Times.40
The panic began after a failed attempt to buy up and control the shares of a giant company wiped out two prominent financiers. Word of the failed scheme triggered a run on the Knickerbocker Trust Company, whose president had been involved with the failed copper speculators. A consortium of banks, known as the New York Clearing House, attempted to contain the panic, forcing out the Knickerbocker’s president on October 21. But when one of the clearinghouse’s main members refused to clear the Knickerbocker’s checks later that day, the panic began in earnest. The Wall Street Journal, however, ran a story that failed to mention either the resignation or the clearing bank’s refusal to extend credit. The story said: “The New York Clearing House has the banking situation so well in hand that no doubt is entertained of its ability to all that is necessary.”41 The same day that a headline in the Journal declared, “Actions of the Bankers Clearing House Restores Confidence,” crowds of depositors, who clearly got their news elsewhere, flocked outside the Knickerbocker’s midtown headquarters. After doling out $8 million in deposits, the bank shut its doors two and a half hours before end of business hours. The panic was on.42
Meanwhile, Ochs’s New York Times, with a revived business desk, went deeper into the causes of the panic. The paper named names and attempted to cover the human angle of the crisis, including a sympathetic portrayal of Charles T. Barney, the Knickerbocker’s disgraced president, who, a month after panic, shot himself in the abdomen with a. 32-caliber revolver. By contrast, the Journal shied away from naming actors in the entirely man-made panic, which tipped the country into a recession and was deemed so calamitous that it led to the creation of the Federal Reserve System in 1913. “If one read only the Journal, it may appear as though the panic simply happened—entering the economy like a thunderstorm that no one could predict or control. By not assigning agency or describing personality, the Journal did not need to blame any particular bank or individuals for the downturn,” Kavoussi says.43
When push came to shove, the Journal abandoned its high-minded editorial positions and ran interference for Morgan. But even the superior business coverage of the Times didn’t explain the larger issues behind the panic: the concentration of capital and the means by which a few individuals had, over many years, come to hold such sway over the economy and, with it, the political system. Its coverage could only react to events, not explore their roots. So tethered to the cascading series of crises, “business news” didn’t perceive it in its mission to step back from the frenzy to understand their causes.
What’s more, early coverage was overwhelmingly reliant on information gleaned from institutions and other authorities. Gaining access to insiders, especially to J. P. Morgan, who was understood to be Wall Street’s lender of last report, was paramount. At the height of the 1907 crisis, a Times reporter stood outside Morgan’s apartment until two a.m. (the Journal wasn’t there) to report on the meeting where Morgan and other financiers decided the Knickerbocker’s fate and that of Barney, its chief. As it happens, the Times coverage was decidedly favorable to Morgan. Without attribution, it provided a rationale for his decision not to save the Knickerbocker (“Mr. Morgan did not care to assume the responsibilities of previous poor management”) and reminded readers that Morgan’s financial support during a previous panic, in 1893, “was perhaps the most potent factor in supplying the measure of confidence which averted widespread disaster.” In general, Kavoussi finds, the Times depicted Morgan, “as both a savvy businessman and a force for the common good.”44
Even if the Times had managed to maintain more critical distance (Ochs’s financial and social ties to Wall Street would have made that difficult), it was less the substance of the coverage than the journalistic gestalt—incremental, reactive, dependent on insiders, tethered to the pronouncements of institutions—that relegated the early business press to a passive role in the face of the momentous events sweeping the economy and financial system. The work of describing the roots of the systemic changes and, yes, identifying malefactors would, for a few more decades, be left to others, such as Ida Tarbell and the muckrakers.
Frenzied Finance, a (not particularly temperate) account of the formation of the Amalgamated Copper Company by the businessman and author Thomas W. Lawson (also a problematic figure), sought to explain the “System” that funneled wealth from common people to financiers. “Through its workings during the last twenty years there has grown up in this country a set of colossal corporations in which unmeasured success and continued immunity from punishment have bred an insolent disregard of law, of common morality, and of public and private right, together with a grim determination to hold on to, at all hazards, the great possessions they have gulped or captured.”45 But where muckraking was ambitious, business reporting during the same time was quotidian. Where muckraking set agendas, business reporting was reactive. Where muckraking explored the roots of systemic change, business reporting accepted such change as a given or sought to explain it after the fact. Where business writing provided information for investment decisions, muckraking informed public policy and political life. Where business writing was for elites, muckraking was for everyone.
Clarence Barron has been called the father of modern financial journalism. If so, he is a problematic foundational figure. While Barron raised the intellectual caliber of financial journalism, his greatest journalistic scoops came from jotting down the words of the rich and powerful rather than examining how they had gotten so powerful in the first place. The son of a Boston teamster and his wife, Barron was educated at the city’s elite primary schools. He worked at a Boston paper, the Evening Transcript, established himself as an expert on the city’s finances, and started the paper’s financial section. He started the Boston News Bureau in 1887, based on the idea that business people needed news updated several times a day.46 Like Dow Jones, launched five years earlier, the bureau delivered news via handbills carried by messenger boys. He organized a cooperation agreement with Dow Jones in New York then, as noted, bought out Charles Dow and his partners in 1902 after marrying a wealthy widow, Jessie Waldron, who ran the rooming house where he lived.
Barron is certainly one of the more flamboyant figures in business-news history. A big, round man, he weighed well over 300 pounds, sported a full white beard, and favored commodore outfits complete with brass buttons and sailor cap—“jolly Kris Kringle in the flesh,” as an admiring biographical sketch put it.47 Despite his bulk, he was constantly on the move, traveling to interview and visit with dignitaries, barking out commands, dreaming up story assignments. He dashed off as many as a hundred memos a day to the two or three male secretaries who trailed his every step, even following him to the toilet and the bathtub (which he required to be drawn at precisely 104 degrees). He dictated notes while bobbing in the ocean, his secretaries trailing him in small boats. On train trips, one of the secretaries was designated to carry a hatbox containing a bedpan that had been specially made to accommodate Barron’s tremendous girth. Once, in Europe, he urgently called, “Bring the hatbox. Bring the hatbox!” When a flustered secretary presented a box, it contained a silk top hat. “Wrong hatbox! Wrong hatbox!” Barron shouted.48
Barron was, it is fair to say, a tyrannical boss who kept his mostly young staff of reporters on a short leash. One didn’t work “with” Barron, an employee would write, only “for” him. Barron’s admiring biographers put it this way: “It was part of his policy, as a boss, to ‘ride’ his men until they were broken to suit him.”49 During the first ten years after the sale, the Wall Street Journal was effectively run by a series of editors appointed by his wife. But when Barron took full control of the paper upon being named president in 1912, he made his presence felt by barging into the newsroom in New York and launching into a tirade, recounted by a contemporary biographer: “He strode into the room, kicking over wastebaskets and whacking his cane on a desk to attract attention. He berated them all for their sins and mistakes and told them he intended to straighten them out, at once. They would obey him or they could get out.”50
Such scenes would be repeated often. The top-down editorial style of the early Dow Jones was a stark contrast with the collaborative if quirky style of McClure’s. McClure assembled a staff of professional stars and let them run the magazine while he took his cures in Europe; Barron’s avowed style was to “break a colt so that he could be trained.” A young, inexperienced staff can be controlled and is less of a threat to elites than journalists who are powerful in their own right, as Barron and generations of news managers after him, up to and including Rupert Murdoch, have recognized.
Barron, who ran Dow Jones from 1912 to his death in 1928, was, it must be said, a tireless reporter and gifted writer in his own right. The paper had one star, and he was it. He had a knack for laying out complex subjects in simple language and emphasized those qualities to his staff. In a memo, he put forth “seven points to better reporting and writing,” containing strictures that most news organizations follow to this day: “Be intrepid,” “no ego,” “keep it simple,” “be lucid,” “Get it right,” “tell a story,” and “the lead is everything” are among them.51 Despite his high social and professional standing, he never stopped referring to himself as a reporter. Barron is credited with raising the intellectual level of financial journalism, writing some of the early Journal’s most highly regarded stories. When the Federal Reserve Act was passed in 1913, he wrote a lucid and fair-minded series on the reasons for its passage and how it would work. A series on the Mexican oil business was a far-sighted look at the importance of stable oil supplies for the American economy. In 1918, he wrote series on “War Finance” and “Peace Finance” that laid out American prospects for the postwar economy.52 He wrote frequent columns on Wall Street and inveighed against the dangers of inflation. In 1921, he started Barron’s, the investment guide published to this day. Unusual among business news editors, Barron pushed his staff to scrutinize financial records, now routine in financial journalism (less today perhaps than it should be). He gave testimony to Massachusetts regulators about a slush fund operated by the New Haven Railroad he investigated. Barron is also credited with exposing Charles Ponzi, the notorious swindler, after the Boston Post sought his expertise in 1920.53
But it’s a mistake to idealize Barron or his legacy. Barron saw his paper not as a reporter about capitalism but as a defender of both the capitalist system and individual capitalists and financiers. As the public grew warier of an unbridled financial system after the 1907 Panic, Barron in columns and editorials would steer the paper toward more conventionally conservative views than those of the editors who had immediately succeeded Dow and argue against increased financial regulation (“Rather than continue the system exactly as is, there are those who would have the government intervene and control Wall Street, as if it were more illegal gamble than legitimate risk,” he would write).54
Barron’s trademark, his métier, was access reporting. He used personal connections and flattering prose to win the trust of the powerful. The stenographic skills that he had learned as a child came in handy to accurately jot down their words. Presidents Roosevelt, Taft, and Wilson all counted him among their trusted advisers.55 His notes would fill two volumes, They Told Barron and More They Told Barron, posthumous collections of interviews with the likes of Kaiser Wilhelm and Nicholas II.
Barron enjoyed ready access to the likes of Charles Mitchell, the head of National City, Citigroup’s predecessor, later notorious for his role in the Great Crash, and other banking titans. “Breakfast at 8 a.m. with Albert H. Wiggin, president of Chase Bank, in my hotel parlor,” is how one of his typical notes starts, or, “Motored to the Gulf Stream Golf Club and spent an hour with [another prominent banker].” “Dropped in for a twenty-minute chat with [John P.] Morgan [son of the iconic financier], who said: ‘Politicians don’t want to help business in this country, and the people don’t want them to help business. … Who did more than Theodore Roosevelt to smash business?’” is a not untypical item, dated December 6, 1917, that goes on in a similar vein for several paragraphs. As Barron’s biographers observed, “Nobody understood more clearly than Mr. Barron the vital service which banks and bankers render to modern civilization. He praised them whenever he could do so.”56
Barron’s wide circle of powerful friends eventually led him to become entangled in the Teapot Dome Scandal, the Watergate of its day. Barron led what amounted to a crusade in the pages of the Journal on behalf of the oilman Edward Doheny, who in 1924 was revealed to have lent $100,000 (about $1 million in 2011 dollars) to Interior Secretary Albert B. Fall while negotiating for rights to U.S. oil leases. Both men were subsequently indicted on bribery charges. Barron, according to Wendt, conducted some twenty-two interviews with Doheny and published several stories attempting to prove him innocent. Until his death, Barron insisted that Doheny was a public benefactor for bidding on leases no one else wanted. In a 1929 criminal trial, Doheny was in fact acquitted of giving a bribe to Fall. In a separate trial the same year, however, Fall was convicted of taking one from Doheny.57
Barron’s easy tolerance of corruption among his friends extended to his own newsroom. While he formally forbade reporters from writing about stocks they owned, his famously obedient reporters honored the rule mostly in the breech. Barron himself was notorious for promoting companies of stocks he owned. While salaries were low—a copy clerk would earn fifty dollars a week—and the work unglamorous, reporters’ jobs were nonetheless highly sought, for all the wrong reasons:
What drew most young men to the Journal was an open secret having nothing whatever to do with the fabled fun of the news business or the romance of the rolling presses. Newspapermen and radio newscasters were privy to inside information that could practically guarantee profits in the stock market. In addition, they were paid—sometimes handsomely—to work in conjunction with speculative rings and stock syndicates. Easy money was all around.58
The consequences of this casual journalistic culture would spill into public view a few years later during special Senate Banking Committee hearings into the cause of the Great Crash. While the Pecora Commission, called so after its chief counsel, was looking chiefly into conduct of New York Stock Exchange member firms, Dow Jones came into the spotlight during a surprise appearance by Fiorello H. LaGuardia, then a congressman from New York. LaGuardia hauled a trunk of documents into the hearing room that showed that financial journalists had received under-the-table payoffs from stock promoters for pushing rigged stocks. LaGuardia produced $284,000 in checks made out to “cash” drawn on the account of a stock promoter with ties to many financial reporters. One Dow Jones reporter, a certain Gomber, had cashed $600 in checks made out to him from the promoter. The Journal reported on LaGuardia’s testimony in the next day’s paper with a single story on page eleven. Gomber quietly resigned.59
It should not be surprising to learn that Barron’s Journal did not distinguish itself with its Wall Street reporting during a period rife with hype, stock-manipulation schemes, and, investigators would later learn, systematic fraud. While the Journal did issue periodic warnings against excessive speculation and expressed concern over high stock valuations, editorially, the paper for the most part defended Wall Street against attempts to rein it in. An area of particular concern in Congress and at the Fed was the margin loans that brokerage houses made to retail stock buyers, which by 1928 were running around an extremely high 12 percent. These loans were then packaged and sold to investment trusts, similar to today’s mutual funds. The market looked, as one historian would put it, like “nothing so much as a dog chasing its own tail.”60 The Journal repeatedly pooh-poohed congressional attempts to restrict brokerage loans, as in this March 1928 editorial:
People who know nothing about credit, surplus bank funds, collateral, call loans or anything else germane to the question profess to be terrified when the Stock Exchange Loans attain of $4 billion or more. They talk of a “pyramid” of speculation, forgetting that the pyramid is the most stable form of all building with the broadest possible base. … Nothing can be so easily manipulated in this country as the speculative position in stocks.61
While the Journal editorialists’ grasp of geometry was sound, their understanding of the financial landscape was far less so, and the paper would publish similar howlers right up to the Great Crash. When it finally came, Journal reporters—some fully invested—would be caught as flatfooted as their paper, not to mention the rest of the country. One reporter, who had somehow acquired a horse farm in Connecticut while working at the Journal, wandered the offices moaning that he no longer had even lunch money. “For God’s sake,” someone finally snapped, “from now on you’ll have to learn to live off your salary like the rest of us.” “Salary!?” the reporter is said to have replied. “Oh my God, I forgot about that!” and he bounded off to payroll for checks he hadn’t bothered to collect.62
But in the end, Barron’s Wall Street Journal was mostly constrained by its own conception of its mission. It was, in Scharff’s words, “a stock and bond sheet.” At best, it was a utilitarian tool that functioned an intermediary among market participants, an information broker. The paper explicitly framed its role as serving investors or, at best, as Barron put it in a 1923 memo, “savers”:
In the Wall Street Journal, I have sought to create a service. I have striven for a creation so founded in principles that it can live as a service—live so long as it abides in the laws of that service.
I believe there is no higher service from government, from society, from journalism than the protection and upbuilding of the savings of the people. … The Wall Street Journal must stand for the best that is in Wall Street and reflect that which is best in United States finance.
The paper’s motto at the time was a not particularly ringing “The truth in its proper use.”63
This narrowly defined role for financial media would restrict its popular appeal. Even at its peak during the Roaring Twenties, the paper’s circulation hovered around 50,000, a tenth that of McClure’s at its peak. More than that, its self-definition restricted its journalistic vision: the paper that was about the market, for the market, and, indeed, of the market did not have the inclination or the ambition to step back from the daily news crush, look at problems systemically, and, if need be, expose powerful malefactors while they were still powerful. The irony of the early financial press is that the journalism closest to and with the most knowledge of growing problems in the financial system was unable or unwilling to bring its skill and credibility to bear on looming dangers. As the financial system hurtled toward its greatest panic, in 1929, the Journal and the rest of the financial press would be as surprised as the rest of the country.
As it happens, history records a single meeting between Barron, the leading financial journalist of his day, and Ida Tarbell, the great muckraker, long after the publication of her Standard Oil series. What they discussed at this lunch of journalism titans is not known, but Tarbell, in this account from Wendt, was evidently not impressed. Afterward, she is said to have remarked to friends: “That man is a glutton—for food and money!”64