AN AMERICAN president lay mortally wounded for the third time in thirty-seven years. William McKinley was shot twice, once in the breastbone, once in the abdomen, on September 6, 1901. He was attending a reception in the Temple of Music at the Pan American Exposition in Buffalo. The shooter, Leon Czolgosz, an ex-metalworker and anarchist from Cleveland, was arrested on the spot, confessed to the assassination and claimed to be a follower of Emma Goldman’s, the country’s most notorious champion of the black flag.
McKinley lingered on for a week, rallying briefly before giving up the ghost on September 14. It was more than enough time for the molten emotions of the moment to cool into soberer reflection. At first people wanted Czolgosz lynched or burned at the stake. As a matter of fact he was electrocuted little more than a month later, unrepentant to the end. Emma Goldman was herself arrested although soon released because there was not the faintest trace of her involvement. Never easily intimidated, Goldman eulogized the immigrant assassin an idealist. Police authorities cracked down on socialist and anarchist clubs around the country. At his own request, J. P. Morgan was placed under police guard. Carrie Nation kept the pot boiling by celebrating the deed in a speech at Coney Island, praying the shot would prove fatal since the president was a buddy of the rum sellers and beer brewers. Memories of dismembered police corpses in Haymarket, of a river running red with blood in Homestead, of federal cavalry riding down Pullman workers, of inflammatory declamations against mankind’s crucifixion on a “cross of gold” were so fresh they weren’t even memories; they were haunting premonitions in a society living with a precarious sense of its own solidity.
True, McKinley’s victory over Bryan in 1896 and again even more resoundingly at the turn of the century proved populism’s epitaph, its last rites performed in front of the whole nation. Still, nobody believed America’s abraded class relations had miraculously healed. The president, a reticent campaigner, a man of studied caution and midwestern modesty, was nonetheless the standard-bearer of a party that had become the wholly owned subsidiary of a national corporate and financial elite. Led by Cleveland industrialist and Rockefeller ally Mark Hanna, it made no secret of its commitment to the social and ideological supremacy of the business classes. McKinley’s cabinet was a who’s who of financiers, corporate poobahs, and Wall Street lawyers. Not since the Jacksonian era had the electoral arena opened itself up to the rawest expressions of class fear and hatred. Under these circumstances, witch hunts and vigilante justice were predictable.
Despite the initial hysteria, however, hallucinatory visions of social insurrection soon petered out. A different set of anxieties disturbed the equanimity of the Republican regency. Administration insiders like ex–treasury secretary John G. Carlisle worried that this third presidential assassination in a single generation might bring on a prolonged depression. Most stockbrokers disagreed, convinced the country’s prosperity was so deeply rooted it was impervious to this sort of exogenous shock. J. P. Morgan was typically taciturn. Incredulous at the news, he offered no public comment except to declare it “sad,” and to assure everybody that the banking fraternity he headed would not permit the tragedy to “derange” the economy. It is reasonable to surmise, however, that his stoic reserve concealed real misgivings, not so much about the prospect of a depression but about the depressing prospect of who was waiting in the wings to assume command should the president die.
At a time like this, one expects official society to mount a united front of public reassurance, to convey a sense of unbroken political resolve and coherence. So it is noteworthy that hints to the contrary began to seep out almost right away. The chairman of the New York Republican State Committee said he was sure Vice President Roosevelt would make no mistakes, “no matter what people say.” After all, “Colonel Roosevelt” had consulted with Senator Orville Platt, the party’s New York State boss, and they found themselves, according to the chairman, in perfect accord. But it was common knowledge Platt despised Roosevelt as a reckless adventurer. He had connived to undercut the “colonel’s” presidential ambitions by detouring him away from the illuminated stage of the New York governorship into the Siberian gloom of the vice presidency. Platt could only have been chagrined at the undoing of his schemes by an obscure anarchist fanatic. If Platt wasn’t about to admit this in public, others were less circumspect. The chief counsel of Standard Oil lauded McKinley’s political predictability and integrity and prayed for his recovery because “Colonel Roosevelt,” he confided, would not be as safe as president and the Market would suffer accordingly.
The “Colonel” tried to do his own reassuring. As McKinley’s condition seemed to improve and tests reported no blood poisoning, Roosevelt likened the president’s medical predicament to comrades from the Cuban campaign who’d survived grievous wounds. Out camping, he rushed back at news of McKinley’s death, and at the swearing-in ceremony he promised to continue “absolutely unbroken” the policy of the fallen president. Mark Hanna, the Republican Party’s kingmaker and now Ohio senator, welcomed the new president with a great display of cordiality. But this was all for show. Hanna had even opposed T.R’s interment in the vice presidency, warning his fellow chieftains, “Don’t any of you realize there’s only one life between this madman and the Presidency?” Like Platt, Hanna didn’t trust Roosevelt, didn’t consider him a member of the club, and privately voiced his dismay that fate had catapulted “that damn cowboy” into the White House.1
LEON CZOLGOSZ’S bullet, some speculated, was poisoned. If so, the contagion it carried was not anarchy but a more insidious and slow-working virus that would disrupt the metabolism of “morganization,” shattering its immunity to public surveillance. True enough, that “damn cowboy” turned out to be less the uncontrollable ruffian than Hanna worried about. But just when Wall Street seemed to have decisively vanquished its oldest foes, Roosevelt’s accidental elevation opened up a long decade of challenge to its dominion by an altogether different cast of characters. They were men and women comfortable with the world of the cosmopolitan city and corporate bureaucracy, but incurably dubious that it was best administered by an imperious elite cloistered at 23 Wall Street.
The old-time religion didn’t vanish overnight. “Progressives,” whether acolytes of “the Colonel” or “the professor,” Woodrow Wilson, or muckraking independents or socialist intransigents, could all revert to a Christian vocabulary of moral denunciation when taking on the “morganizers.” They could sketch the lineaments of financial conspiracy as vividly as any prairie-fire Populist or dyspeptic Brahmin. They could be just as ardent in defense of Jeffersonian democracy as all those Jacksonian-bred Paul Reveres warning that the aristocrats had landed at Wall Street and were marching on the country. But the people who would disrupt the Morgan-Hanna entente were first of all in tune with the intellectual and cultural currents of modern times.
Facts were their favorite ammunition. They devoured the literature of the exposé. They were empiricists before they were moralists, pragmatic not apocalyptic. Their scripture consisted of the insights of the natural and social sciences. They were confirmed secularists. If Wall Street under the suzerainty of Morgan was indictable, it was not before the bar of biblical judgment, but because, fatally worse, it failed the test of rational social organization, standing in the way of economic progress. They were the nation’s first converts to planning and the ethos of nonpartisan expertise. They were preoccupied with trusts, and above all else the “money trust,” not because they worshipped at the altar of small is beautiful; quite to the contrary, they admired the technical and organizational innovations of modern industry and were convinced they were in danger of suffocating in the lockbox of white-shoe Wall Street.
If the Street’s overweening power caused a serious political problem, these middle-class rebels didn’t imagine solving it by some reversion to the town meeting and village democracy. They were among the first architects of the modern administrative regulatory state, an apparatus national in scope and with executive powers robust enough to match the encompassing grasp of the “money trust.” While they were dubious about the class struggle, they nonetheless believed in national solidarity, an imagined communal coming together around opportunity and abundance. This was new testament democracy, the democracy of strong government that would turn the language of classical liberalism inside out. Thanks to its confrontation with Wall Street’s “money trust,” democracy in America would never be quite the same again.
Muckraking, the biblical phrase dredged up by Roosevelt to disparage journalism he judged went too far in its assault on the powers that be, rather neatly captured the sensibility of this modernist milieu. They were debunkers by instinct, the writers and readers of realist and naturalist fiction, people who wanted to see things as they were and even more to see through things as they seemed. Deflating the grandiose illusions that had grown up around the heroes of finance and industry was an act of cultural revolution in which they delighted. When they mocked this Napoleonic romancing, they did so not because they thought these men were devils instead, but because they enjoyed undressing them as faux heroes, uncovering their naked pettiness. Iconoclastic and meritocratic, they detested and ridiculed the castelike exclusivity, hauteur, and presumptuous secrecy of Wall Street’s inner sanctum.
Two assassinations punctuated a long decade of withering criticism: McKinley’s at the beginning, and the Archduke Ferdinand’s in 1914, which brought this whole exercise in cultural delegitimation to an abrupt end well short of its objectives. One reason the movement petered out—aside from the chilling affect of the war itself on all serious forms of dissent—is that from the outset it spoke in many tongues. Roosevelt and his circle were to be sure suspicious of Wall Street and the moneyed classes and of their capacity for disinterested behavior in the public interest. But the “Colonel” had imperial, not democratic ambitions of his own, and he was prepared to find common ground with the country’s financial oligarchs that would leave their economic dominion intact. His declamations against “malefactors of great wealth” were inspirational, more than the president anticipated or could tolerate. When the air filled up with bellicose propositions to uproot the power of the “morganizers,” the “damn cowboy” holstered his weapons.
Others pushed harder and further. People like Louis Brandeis and Senator Robert La Follette, in league with a diverse array of middle-class reformers, hound-dog journalists, and injured businessmen wanted to use the powers of democratic government to pry open the financial oligarchy’s stranglehold over commercial life and its tenacious grip on the levers of political influence. Their motivations and intentions were various, overlapping, and sometimes at odds. Included in their ranks were substantial Wall Street interests who felt excluded from the Great Game alongside socialists who wanted the rules of the game rewritten from scratch. All of them, however, wrestled with the perplexing dilemma of the age; namely, bigness and complexity in modern economic affairs and what to do about it. And all agreed that the mother of all combines, the one that gave birth to and nurtured all the others, the one whose looming presence became a national obsession as the decade wore on, was the “money trust.” In a phrase that instantly entered common usage and has remained part of it ever since, the “money trust” was conceived to rest on a stupendous act of usurpation: It traded, so Louis Brandeis told the nation, in “other people’s money.”
“Other people’s money” was a damning aperçu. It lent an air of illegitimacy to all the deliberations and weighty decisions taken by the distinguished directors and trustees of the country’s most formidable financial institutions. It carried the implication of an offense more than strictly economic, like the theft of a birthright. Yet it also suggested something else: that those who found in the phrase the perfect expression of what was amiss in the way things were working wanted their money back. They were stakeholders—or sought to be—in a market economy that they claimed the “money trust” was ruining for everyone but itself. To bring Wall Street before the bar of public opinion and legislative supervision was not to attack the capitalist system but to restore it to good health, to open it up to vigorous participation by enterprising businessmen and middle-class investors, to assure consumers and citizens that the system could indeed work to maximize efficiency and satisfaction.
JOHN HAY was a young man of twenty when he served as President Lincoln’s personal secretary during the Civil War. He was still around at the turn of the century, functioning as a diplomat and éminence grise. Like Roosevelt he hailed from a background of genteel wealth, that is, from a world of a certain cultural fastidiousness and civic-mindedness that thought money ought to know its place and stay there. At the same time and just like Roosevelt, he operated under no illusions and was prepared to deal with the devil especially if that could be somehow justified as serving some higher, national purpose. As early as the 1880s, Hay delivered his own cold-eyed view of the state of the union: “This is a government of the people, by the people, and for the people no longer. It is a government of corporations, by corporations, and for corporations.”2
The new president would have subscribed to that view without demur. That was precisely why people like Mark Hanna and “Boss Platt” were worried. And they had reason to be. Roosevelt was determined to assert the prerogatives of the government over matters that the overlords of American finance capitalism had come to presume were theirs to decide. He was jealous of course of his own executive powers, sought to widen them, and would tolerate no challenge from private citizens, no matter how mighty. This was as much a matter of asserting his imperial will as it was a crusade on behalf of making government more responsive and responsible to the will of the governed.
Roosevelt was a democrat of the Napoleonic variety, speaking in the name of the people but trusting to his own genius to intuit its will. But he was also motivated by an even more telling insight: namely, that the Morgan elite was afflicted with a dangerous myopia. They imagined themselves as a disinterested ruling class, one with the wisdom to consistently transcend their own narrower self-interests, or rather to find that happy meeting ground where what was best for incorporated Wall Street was indistinguishable from what was best for the country. This was the constitutive delusion of the “morganizers,” and T.R. saw right through it.
Naturally enough, therefore, not long after McKinley’s body grew cold, Roosevelt shelved his pledge to continue in the footsteps of his fallen predecessor and began acting like a “damn cowboy.” In his very first message to Congress, mainly given over to sentiments of consolation and reassurance, he slipped in a more ominous word or two about the “baleful consequences” of overcapitalized trusts. Early on in his administration he encouraged the Justice Department to prosecute the Northern Securities Company under the Sherman Anti-Trust Act. Northern Securities was the corporate confection crafted by Morgan and Kuhn, Loeb to resolve the wild speculation and panic that followed in the wake of the railroad turf wars between Harriman and James Hill. The spectacle had nauseated everybody; even the redoubtable New York Times had its nose out of joint over this vulgar display of commercial megalomania, truculence, and indifference to the public interest. It was an inviting and vulnerable target.3
Roosevelt’s decision to press forward with the suit shocked the Street. But there was little it could do except bluster. The president’s action was “beyond comprehension.” It led to Morgan’s ill-considered expression of wounded hauteur: why hadn’t the president, a fellow chief executive and a gentleman, after all, assigned a second to settle the matter privately with some factotum of Morgan’s. “The community of interests,” the banker had long ago cynically concluded, was merely “the principle that certain numbers of men who own property can do what they like with it.” Morgan’s exquisitely hubristic utterance turned out to be a colossal faux pas and only stiffened Roosevelt’s resolve. His attorney general, Philander C. Knox, let it be known that in his judgment 30 percent of the company’s capital stock was pure water, an insult to investors and a burden to the railroad company’s customers. One paper gleefully applauded the government’s demarche: “Even Morgan no longer rules the earth and other men may still do business without asking his permission.” Henry Adams gloated, “Our stormy petrel of a President…hit Pierpont Morgan, the whole railway interest, and the whole Wall Street connection a tremendous shot square on the nose.”4
As the Northern Securities case made its way through the judicial system, the president fired off round after round of rhetorical artillery, some of it of pretty high caliber. He denounced “malefactors of great wealth” who shirked their public responsibilities and made no secret that in his own pantheon of the socially estimable, the money-besotted financial titan did not rank very high at all. He confided in his closest political friend, Massachusetts senator Henry Cabot Lodge, who shared Roosevelt’s disdain for these circles, that he loved the senator’s recently published remembrance of A Frontier Town, especially for its implied indictment of people like Harriman and Rockefeller for their callous and perilous indifference to the public welfare.5
According to Henry Adams, Roosevelt was “pure act,” and there were indeed actions that went along with the all the censorious language. Every presidential intervention into what had once been the protected preserve of the private marketplace alarmed Wall Street. Whether it was Roosevelt’s efforts to compel the coal barons to negotiate with their workers or to make the railroads show some restraint in their chronic demands for rate hikes from the Interstate Commerce Commission (ICC) or to punish the meatpackers and others for their egregious disregard for the public health, Wall Street was offended. This was after all the age of Morgan when the line between the world of big business generally and its financial overseers was virtually invisible, a distinction without a difference.
Tensions between the Street and the president eased a bit but never really went away for good. When, in the aftermath of the panic of 1907, he became the object of some rather uncharitable attacks by segments of the financial community (he had in mind particularly a nasty pamphlet entitled “The Roosevelt Panic,” which he was sure had been spliced together at the behest of the “Standard Oil and Harriman combinations”), Roosevelt plotted a counterassault on “predatory wealth.” He singled out “manipulating securities” and “stockjobbing” for punishment. Convinced that Harriman and William Rockefeller were conspiring to undermine the Republican Party and put Hearst (the publisher T.R. most loved to hate) in the White House, the president let it be known there was “no form of mendacity or bribery or corruption they will not resort to in an effort to take vengeance.” His megalomania flirted with paranoia: the panic itself, he suggested, had been deliberately fomented to intimidate the government, to scare Roosevelt away from investigating the railroads and other corporate redoubts of these wealthy malefactors. The president wasn’t about to let them get away with it. He railed against a conscienceless, kept press that fronted for these tycoons, providing cover, allowing them to hide out behind the mask of journalistic objectivity. He likened their behavior to that of gamblers, saloon keepers, and brothel owners. They had managed to make “the very name of ‘high finance’ a term of scandal.”6
In a way, Roosevelt couldn’t help himself. His conviction that financial plutocrats were the “most sordid of all aristocracies” was bred in the bone, part of an upbringing that dismissed materialistic strivings as unworthy, debilitating, and effeminate, encouraging behavior that in Roosevelt’s mordant assessment ranged “from rotten frivolity to rotten vice.” He worked at showing respect but confessed: “I am simply unable to make myself take the attitude of respect toward the very wealthy men which such an enormous multitude of people evidently feel. I am delighted to show any courtesy to Pierpont Morgan or Andrew Carnegie or James J. Hill, but as for regarding any of them as, for instance, I regard…Peary, the Artic explorer, or Rhodes, the historian—why, I could not force myself to do it even if I wanted to, which I don’t.” (Morgan matched the president’s low regard. He was alleged to have said once T.R. left office and was about to set sail for a safari in Africa: “I hope the first lion he meets does his duty.”)7
Rooseveltian verbal pyrotechnics were a force in their own right, and their impact should not be underestimated. No president since Lincoln had uttered a truly unkind word about doings on the Street. No president since Jackson had thought to single out the financial establishment as a political danger. So when Roosevelt ventilated, the country breathed in an ionized atmosphere sparking discharges all across the social landscape. It was the equivalent of a royal invitation to peer behind the facade of Wall Street’s intimidating omnipotence. Many a crusading journalist and audacious publisher raced to take up the invitation. For a brief while Roosevelt valued what they managed to uncover about the seamier inner workings of business and finance.
Hanna’s worst premonitions seemed prophetic. By 1903, the Republican Party high command was frantically searching for ways to deny the “cowboy” the party’s presidential nomination, and Roosevelt knew it. The “whole Wall Street crowd” was against him, he told Lodge, but he was ready for a knockdown, drag-out fight against both “the criminal rich” and “the fool rich.” Wisely, Lodge sought to rein in his friend’s temper. He agreed there were capitalists out to get the president, but they were in the main confined to “a group of Wall Street and Chicago people.” Moreover, even in Wall Street he had allies and in Boston’s State Street, too, firms like Lee, Higginson, for example, which actually approved of the president’s approach to the trust question. Lodge had his ear to the ground. Whatever Hanna might have hoped, by 1904 fantasies about getting rid of that “damn cowboy” were defunct. Not only was Roosevelt enormously popular, it was becoming increasingly clear to many that his bark was considerably worse than his bite. And as Lodge intimated, the “morganizers,” at least some of them, were in a mood to compromise.8
To claim that Roosevelt talked loudly and carried a small stick is not to accuse him of being disingenuous, or not any more so than most presidents have found it necessary to be at one time or another. First of all, there is no question that his low moral opinion of the Wall Street crowd was heartfelt. In this regard he acknowledged his membership in a fraternity of disdain that included the Adams brothers and others.
But on economic matters the approach of the president and his inner circle, including Lodge, Senator Albert Beveridge, Hay, Elihu Root, George Perkins of the House of Morgan, and others was something else again. It amounted to a kind of twentieth-century Hamiltonianism. The point was to enlist the country’s dominant economic classes, especially its financiers, in collaboration with the state in a quest for national glory. Hamilton of course was an eighteenth-century gentleman, less comfortable with democratic behavior, more at ease with the notion of a natural aristocracy, not so concerned, even after the William Duer scandal, with curbing the appetites and ambitions of liquid wealth. Still, however guilty of stock-watering and stock-manipulating shenanigans the trusts might be, they were in the eyes of the Roosevelt group institutions of proven economic viability. Their massiveness matched the power of an industrial order of daunting technical and organizational complexity that spanned the nation and even beyond. Trusts of the sort put together by the “morganizers” were the imperfect vessels of that high-velocity, high-volume system of production and distribution that carried with them a promise of abundance at home and mastery abroad. Correcting their imperfections made sense; shattering them did not. If their judgment was clouded by parochial self-interest, Roosevelt was prepared to call them to account. So, for example, when, following the panic of 1907, the Wall Street–dominated rail systems groaned under a burden of watered stock and gutted assets, Morgan’s people pressured the ICC to license a huge rate increase. This not only infuriated shippers everywhere, but jeopardized economic recovery more generally. Roosevelt told Morgan’s emissary, George Perkins, to back off.9
At the end of the day, however, Wall Street and the president searched for common ground. Despite his reputation as a “trust-buster,” the Northern Securities case (the company was ordered to dissolve by the Supreme Court in 1904) was actually the last significant antitrust case of the Roosevelt years. Instead administration functionaries arranged “gentlemen’s agreements” with their counterparts from the corporate-financial establishment to iron out rough spots that might cause the government and the great corporations to collide. So, too, near the end of his second term the president supported proposals offered by Senator Hepburn to amend the Sherman Act in ways that would permit the law to distinguish between “good” and “bad” trusts.10
“Gentlemen’s agreements” was an apt phrase in yet another sense, even though it is clear enough Roosevelt considered the Wall Street crowd to belong to a distinctly less-developed species of the gentlemanly caste. Trusts were command institutions, steeply hierarchical and superintendents of orderly business. Morgan, too, not unlike Roosevelt, practiced his own code of spartan discipline; his trusts after all were designed to rein in the riotous free-for-all of the free market. Roosevelt insisted only that they apply this same uplifting spirit of martial restraint to themselves. So long as the trusts kept within the sphere of their own legitimate authority and respected the government’s prerogatives to protect the commonweal, they actually shared a basic kinship, a real simpatico, with the way Roosevelt conceived the political universe.
The “Colonel” was not a democrat in any grassroots sense of the word. To the end of his days, he nurtured an abiding distrust of the “mob.” Almost anything was better than rule by the “popocrats” as he once sarcastically described Bryan and his allies. But he maintained a highly developed sense of social obligation and recognized that the cynicism and callousness of people like Jay Gould or George Baer were not only barbaric but an invitation to social chaos. Roosevelt’s conception of a new order incorporated a genuine concern for the social welfare of the many. He sought to protect the demos, but shivered at the thought of becoming its creature. On the contrary, Roosevelt not only considered himself a leader, but an architect of a leadership class, of a cadre of men trained to exercise power, not to chase after meaner forms of success or popular favor. That’s where a lot his brash self-assurance came from. Such a class of leaders was more likely to be recruited from the world of old money with its custodial traditions, its sense of noblesse. But so, too, might it be assembled in the mahogany-walled conference rooms of the patrician investment-banking houses, trustees charged with directing the flow of the nation’s capital resources. It could be, that is, if these institutions could be persuaded to give up living in an impromptu fashion, in day-to-day pursuit of their “interests.”
Roosevelt then was an elitist in the public interest. Social stability depended on a broadly shared sense of fairness as well as material well-being. Indeed, one of the reasons he was so alarmed at the selfish behavior of the financial plutocracy was that it aroused passionate resentment, caused people to doubt the fundamental equity of the social order, and inspired dangerous sentiments and schemes that might elude the control of the “Colonel.” Such rashness could upend the arrangements of private property and wealth on which Wall Street and the corporate order depended. That is to say, Wall Street, in the president’s eyes, threatened to become its own worst enemy. If at first the poohbahs of the Street failed to catch on, studiously cautious magazines like the Saturday Evening Post intuited the president’s drift right away and lambasted the financiers for their stupidity in abusing Roosevelt who, it told its readers, was seeking to save not dismantle the business system.
It was a delicate game: chastising the “morganizers” in public while pursuing detente in private; inciting popular animosities but not allowing them to detonate. The “community of interests” crafted by Roosevelt was capacious and disinterested in a way that Morgan’s more cynical formulation was not. It offered relief from the worst abuses of the old crony capitalism without unhorsing the white-shoe regency from its commanding position over the economy. This equilibrium between Wall Street and the White House was subject to chronic oscillations and adjustments. Whenever it saw the chance, the Street worked to restore the old fin de siècle order of things. And with the coming of the Great War there were chances aplenty. But until the Crash of 1929 this fragile equilibrium defined the chemistry of elite rule in America.11
MUCKRAKING WAS A pejorative phrase. It was coined by the president to put the genie back in the bottle, a genie released by his own incantations. Whether he saw it that way or not, his theatrical use of the “bully pulpit” of the presidency had helped ignite a wildfire of social criticism. No institution or center of power was spared, certainly not the ones whose shadow over the economic landscape had grown more enveloping and menacing during the course of a generation. Had Roosevelt never uttered an unkind word about Wall Street and the trusts, their day of inquisition was bound to come. But the president provided inspiration and a license. At first he seemed to welcome help in exposing to the light of day the backroom machinations of corporate financiers and business ne’er-do-wells. He read Upton Sinclair’s nauseating revelations about what went on in the country’s meat-packing plants, and it heightened his resolve to pursue a pure food and drug law. Ray Stannard Baker, one of the earliest “muckrakers” who’d done yeoman work exploring the dark interior of railroad financial affairs, was invited by Roosevelt to consult with him about ways to stiffen the regulatory reach of the ICC. Soon enough, however, the president grew leery of these associations and was hardly shy about saying so.12
Were the muckrakers and the spirit of middle-class rebellion they invoked more radical than Roosevelt? Yes and no. Their language was often more temperate than the president’s. He loved to indulge an antique vernacular of moral high dudgeon, a vocabulary so full of violent anathemas it might have been banned had it not also first been published in the Bible. The prose style of the era’s intrepid investigative journalist, on the other hand, was usually infinitely drier, bearing on its back freight-car loads of facts and numbers, the arithmetic not the pornography of financial debauch. So, too, proposals for legislative reform offered by progressive-minded critics were detailed, precise, heavily footnoted, and still dusty from the labors of archival research. Nor, for the most part, were these people driven by a sentimental anticapitalism. On the contrary, they were less interested in soaking the rich than in getting in on the deal. Progressives maintained a bedrock faith in the promise of economic opportunity for all under some closely monitored system of free enterprise. That scarcely qualifies as red or black flag radicalism.
Yet in tones that grew ever more sour, Roosevelt treated them as if they were Jacobin rabble-rousers, a radical menace to civilized order. He invented the “muckraker” metaphor as a term of opprobrium when David Graham Phillips published “The Treason of the Senate,” an indecorous undressing of the naked huckstering that usurped the public interest in the nation’s loftiest legislative chamber. After that, the president took to the low road with regularity, stigmatizing those who dared to go too far in their criticisms as a “lunatic fringe.” And in a certain sense he was right. The progressive agitators, the muckrakers and their millions of readers were not content to reach some accord with the “morganizers,” to place their trust in a “gentleman’s agreement.” They didn’t want to learn to live with the “money trust,” they wanted to level it. They sought to air out what had become a closely held system of financial superintendence. They were driven, in a word, to democratize the economic order, to open it up to the scrutiny and participation of outsiders. Democracy, even with these limited objectives, is always a risky business; one can’t with any confidence predict where things will end up once the invitation to participate is extended. Progressivism was radical in that sense, and it’s what made Roosevelt bristle. For a man of his breeding and disposition, it was hard to tell the difference between democracy and anticapitalism. In his over-wrought imagination, one bled naturally into the other once the appetites and resentments of the mob were unleashed. The social organism had evolved a species of leaders and commanding institutions it was in the end reckless to tamper with.13
Other Peoples’ Money was the exclamation point at the end of a decade of such democratic tampering. It was the quintessential muckraking assault on the world according to J. P. Morgan. First published in 1913 as a series of nine articles in Harper’s Weekly (gathered together and expanded a year later in book form), it was an instant journalistic sensation in an era that sometimes seemed defined by them. Roundly praised for its temerity and intelligence, its enemies treated it with caustic contempt; Frank A. Vanderlip, president of National City Bank, dismissed the whole notion of a “money trust” as pure “moonshine.” Both as a metaphor and a piece of empirical research, Other People’s Money would color public policy and popular opinion about Wall Street for the next half century.14
Louis Brandeis, the author of Other People’s Money, was an eminent jurist and trusted adviser of the newly elected president, Woodrow Wilson. He marshaled an armada of facts and figures to document the exposé’s principal argument: that a “money trust” did indeed exist; that it was headquartered in a handful of Wall Street investment banks; that it exercised a virtually unchallengeable control over the flow of credit and capital; that it deployed that power on behalf of a charmed circle of favored corporate clients in industry, transportation, and public utilities; that these gargantuan businesses were themselves directly under the influence of emissaries from the “money trust” who sat on their boards of directors; that conversely, the “trust” denied new, innovative, and competitive firms access to vital capital resources; that by virtue of its control over both the institutions in need of capital and those in a position to meet that need, this clique of investment bankers presided over and integrated the basic functions of the economy; that through deft manipulation of this web of interlocking interests the “money trust” feathered its own nest with unconscionable fees and insider stock transactions; that it was able to carry on this financial legerdemain thanks to its access to “other people’s money” innocently deposited in the “money trusts’” network of commercial and investment banks, insurance and trust companies and brokerages; and that, worst of all, the “money trust” had a sickening affect on the rest of the economy, leaving it in an advanced state of economic arteriosclerosis, its circulatory system clogged with inefficiencies, artificially high prices, watered stock, and technological blockages, subject to periodic failure.15
Brandeis’s journalistic tour de force was itself a distillation of an even more daunting fact-finding mission carried out under the auspices of the Pujo Committee, actually a subcommittee of the House Banking and Currency Committee, chaired by Louisiana congressman Arsene Pujo and charged with determining, first of all, whether there was a “money trust.” This was perhaps the first empirical investigation of a metaphor in American history. For a generation and more images of serpents, octopi, devil fish, and other monsters had captured a widespread popular conviction that a force of surpassing power but largely hidden from view exercised a malevolent power over the economic destiny of everybody else. The notion of a “money trust” itself in some ways belonged to that same metaphorical family. But what Brandeis and the Pujo Committee engaged in was an act of demystification. They wanted to track down the real-life “money trust,” detach it from the shadowy realm of myth, find out just where on earth it lived, and in painstaking detail describe how it went about its business. Their critique, their investigative zeal, their hopes for legislative remedy would live or die by the persuasive power of this mobilized army of irrefutable, obsidian fact. Such was the confidence that typified so many Progressive Era reformers. They were indefatigable researchers, practitioners of dispassionate analysis, pragmatists, free, so they believed, of ideological predispositions. They were determined to drag the nightmarish boogeymen of their nineteenth-century predecessors into the light of the day, or, more to point, subject Wall Street to the probing light of the social science microscope.
Under the remorseless drive of its chief counsel, Samuel Untermeyer, the Pujo Committee accomplished a work of herculean research. In an age when business records were largely immune to public inspection, the committee amassed what data it could about what today we might call the financial-services sector and its interactions with the “peak” corporations of industrial America. The Pujo staff probed and dissected and reconstructed what they had pulled apart. Untermeyer supplemented this mass of statistics, of interwoven boards of directors, of complex stock and bond underwritings, with a relentless public interrogation of the captains of finance. Appearances by Morgan and other luminaries naturally drew the media. Morgan’s appearance was practically a state occasion. He arrived accompanied by a platoon of lawyers and partners while a standing-room-only crowd looked on entranced.16
What Pujo first unraveled and then Brandeis displayed in bite-sized pieces for broader public consumption turned out to be a metaphor in its own right. Instead of a creature from some fantastical nightscape, they had discovered a web, constructed with architectural precision, each of its arms fluidly articulated with all the others, lending the whole structure impressive resiliency and elasticity. Included in the committee’s exhibits and in the pages of Brandeis’s book were illustrations resembling electrical grids or similar diagrammatic representations of lines of force. They were constructed to show all the interlocking connections, usually established through overlapping boards of directors, between the four or five top investment houses and their allied commercial banks at the apex and a whole network of underlying financial and industrial corporations, including the country’s leading insurance companies, trust companies, savings banks, brokerages, railroads, and top-rank industrial concerns like U.S. Steel, International Harvester, and AT&T. Every vector of the web was inscribed with an affiliation to some institution; each institution was arranged in a hierarchy of ascending and descending valences; together they formed a force field whose central generating station was located in the near vicinity of Morgan headquarters at 23 Wall Street. Nor was there only a single web; rather there were subsidiary webs deploying power in local domains, “provincial allies,” “auxiliaries,” and “satellites” like the Boston nexus and the Chicago group—all in the end wired back into the master grid.
Case studies documented how Morgan or Kuhn, Loeb functionaries in their dual roles as investment banker and corporate director determined strategic decisions about when and how and at what price securities were marketed. Brandeis cited Morgan partner George Perkins as a clinical example: As a vice president of New York Life, the country’s largest insurance company, he steered it into major purchases of securities underwritten by the House of Morgan, even though, as a mutual insurance firm, such decisions fell in theory within the province of the policyholders, a proviso Pujo called a “farce.” This same power might be and was used in reverse to close off sources of capital and deflate the value of rival securities. According to Brandeis, “no large enterprise can be undertaken successfully without their participation or approval.” Brandeis chose the Harriman railroad empire and its Kuhn, Loeb banking partners to illustrate how high finance in the transportation business was not directed at needed capital improvements. Those, he argued, might have been easily financed out of earnings. Instead, the Union Pacific and other lines went to market with large blocks of securities to finance paper transactions in the stocks and bonds of other roads and to acquire a slew of non-railroad-related speculative assets.17
The Pujo report and the Brandeis exposé also delighted in doing the arithmetic of power. According to the jurist, Morgan partners held seventy-two directorships in forty-seven of the country’s largest corporations. Pujo performed a grander summing up: All in all the House of Morgan and its allies (First National and National City banks) occupied 341 directorships in 112 corporations with an aggregate capitalization of more than $22 billion. When Morgan created that godfather of all industrial trusts, U.S. Steel, the whole country tilted to the East, according to Brandeis. The combination absorbed 228 separate companies in 127 cities in eighteen states, all once locally owned and financed. Wall Street trustifications of this magnitude warped the country’s financial geography, wiping out the financial independence of whole communities and regional banking centers.18
As it was pried apart and then resutured, the web emerged as a matchless metaphor particularly appealing to middle-class urbanites infatuated with the aura of science. Although steered by human hands, it resembled nothing so much as a highly reticulated machine: nothing but intersecting vertical, horizontal, and diagonal lines of motion primly labeled with an alphabet of institutional acronyms. Stark and abstract, the web, as a visual experience, was also an art work of modernist social science. That was the allure of its truth, a truth merely confirmed by flesh-and-blood men confessing that they were indeed “webmeisters.”
Confessions before Congress’s committee were actually more equivocal than that anyway. Morgan was the only witness to openly condemn stock manipulations by the web. Others denied it existed or, conversely, rescued the practice from contumely by rechristening it as a way of “making a market.” George F. Baker of First National Bank proved himself a bottomless well of ignorance and memory loss, unable even to recall the companies he directed or just where exactly the New York, Susquehanna, and Western Railroad (one of his) began and ended. Frank Sturgis, president of the New York Stock Exchange, zigged and zagged as Untermeyer quizzed him about the web’s organized short-selling, maintaining simultaneously that it was a morally distasteful yet justifiable form of self-defense, even amid panics, even though, he agreed, such behavior aggravated those panics. Still others coyly insisted their Stock Market deportment was a private matter, while some, like the “Silver Fox,” James Keene, boldly supplied chapter and verse on just how the bloodless business was carried out. William Rockefeller, John’s remote and far less pietistic brother, avoided the problem altogether, developing an acute case of laryngitis when committee investigators came down to Georgia to ask him some questions at his Jekyll Island retreat.19
Silences like that echoed loudly, of course. As did the implausible terseness with which Morgan responded to the following line of questioning by the committee’s chief counsel about Morgan’s (and George Baker’s, head of First National Bank) control over the coal, steel, and rail industries:
UNTERMEYER: You do not have any power in any department of industry in this country, do you?
MORGAN: I do not.
UNTERMEYER: Not the slightest?
MORGAN: Not the slightest.
UNTERMEYER: And you are not looking for any?
MORGAN: I am not seeking it, either.
UNTERMEYER: This consolidation and amalgamation of systems and industries and banks does not look to any concentration, does it?
MORGAN: No, sir.
UNTERMEYER: It looks, I suppose, to a dispersal of interests rather than to a concentration?
MORGAN: Oh, no; it deals with things as they exist….20
But if Morgan’s self-possession and sangfroid could produce this sort of preposterous obtuseness, others came forward with a refreshing candor. Jacob Schiff admitted there existed a certain concentration of power but found in that fact no cause for worry; after all, the power was in “good hands,” which for the “morganizers” was the ne plus ultra of their right to rule. Schiff helped as well to clarify the true nature of competition within the web. While it’s two great branches—the Morgan/First National Bank/U.S.Steel cluster and the Rockefeller/National City Bank/Standard Oil cluster—might find themselves at odds, generally speaking it was not considered “good form to create unreasonable interference or competition.” George M. Reynolds of the Continental and Commercial National Bank of Chicago candidly acknowledged, even before the Pujo hearings convened, “I believe the money power now lies in the hands of a dozen men. I plead guilty to being one of the dozen.”21
By turns frank and duplicitous, forthcoming and evasive, the testimony did nothing to disconfirm what many already believed: that the web was real. One could admire its structural elegance while sensing the danger of the web’s depersonalized capacity for self-reproduction and perpetual motion. Thus, even as he pursued his relentless interrogations, Untermeyer insisted he did not necessarily consider these men dishonest or venial; on the contrary, he accepted that they often acted with self-restraint and with a regard for their own nice sense of justice. What bothered the implacable interlocutor was not the men but the system, the web that organized and set in motion this choreography of domination. So intricate in composition, it was hard to see how even the men who presumably designed it could completely control its workings.
Untermeyer feared that if left intact this system would end in “a moneyed oligarchy more despotic and more dangerous to industrial freedom than anything civilization has ever known.” Why more dangerous? Because, as Brandeis explained, it was unlike the great wealth of the Astors, for example. However socially objectionable and unjustly acquired, that was “static wealth” and strictly personal, unlike the “dynamic wealth” of the “morganizers.” Theirs was not only impersonal, it wasn’t even theirs. Instead it depended on their control over the capital assets of others. In turn, that allowed them sway over great industrial combines and vital financial institutions with only a fractional investment of their own money.
This pernicious system of interlocking directorates was an all-around disaster. It stifled the entrepreneurial spirit, intimidated business and professional people who feared to buck the powers that be, discouraged efficient management; destroyed sound business judgment; injured innocent stockholders, bank depositors, policyholders, and consumers; blocked new inventions and production processes in order to protect investments in antiquated technologies; kept prices artificially inflated; and was patently unfair and inherently at odds with itself since in the end “no man can serve two masters.” In Brandeis’s view there could be no temporizing. The whole web of interlocking relationships needed to be outlawed as offensive to laws both “human and divine. That was the royal road to the “New Freedom.”
Other People’s Money concluded on an adamantine high note: “We must break the Money Trust or the Money Trust will break us.” Armageddon-like language was hardly new to the antitrust persuasion. What was new, however, was the scientific espirt with which the challenge was offered. Brandeis’s book was full of references to despotism and industrial democracy, “money kings,” “banker barons,” and their crushing of the American spirit of free enterprise. On the one hand, this was more than mere rhetorical varnish. Brandeis’s locutions came from the heart. He meant them all, as did Woodrow Wilson and Robert La Follette and the magazine writers and the armies of anonymous middle-class insurgents ready to face-off against the “money trust.” But it was a case of old wine in new bottles. The final, summing-up chapter of Other People’s Money was entitled “The Inefficiencies of the Oligarchs.” In the end, Brandeis and his muckraking colleagues rested the case against the “morganizers” on their ill-fitness to rule.22
ARSENE PUJO was a Democrat. But his hearings were first called to life by Charles A. Lindbergh, Republican congressman from Minnesota, father of the future aviator hero. Suspicion about the “money trust” was a bipartisan phenomenon, proof that it was common currency among broad stretches of the middle classes. True, some conservative media, including the trade press of the finance industry, congratulated Morgan for his coolness under fire, although eyewitness accounts described the banker’s rising uneasiness as he became fidgety, chewed his lips, banged on the table, and looked for approval in the eyes of his lawyers and family members. Other publications pooh-poohed the Pujo investigation as a witch hunt. John Moody, a business publicist of deeply conservative instincts, praised the advent of economic giantism and took the existence of the web for granted. In his view, its peak institutions collaborated in a wise administration of the economy: “It is felt and recognized on every hand in Wall Street to-day, that they are harmonious in nearly all particulars.”23
However, even journals of impeccable respectability and restraint like the Nation had to admit Pujo had unearthed some unseemly truths about Wall Street, while turning up its nose at what it considered ridiculous notions of a “giant conspiracy.” The Baltimore American, known for its Republican sympathies, nonetheless went further, declaring the committee’s findings a “menace” and a “disgrace.” More liberal publications were less inhibited. In Collier’s the “Trust” was likened to Peer Gynt’s Boyg—shapeless, slippery, cold, and all over the place. Cartoons laughed off Morgan’s testimony: One pictured the banker sitting atop a pile of $25 billion holding in his pudgy hands all sorts of lucrative properties—ships, railroads, banks, buildings—and running underneath a verbatim rendering of his testimony denying any special power over the economy.24
Pujo’s hearings and Brandeis’s book were high visibility signals that popular skepticism about the web and the world according to J. P. Morgan had reached critical mass. The explosive ingredients had been accumulating for years, at least since that fatal shot in Buffalo. Magazines and newspapers all through the decade filled their pages with evidence, piecemeal and usually focused on some particular industry but always rich in detail, about the way the web conducted its affairs. Between 1903 and 1912, periodicals whose readership once numbered in the hundreds of thousands were now read by 25 million people. Financial coverage became a regular feature of this literature, including hot exposés and inside dope on the way the pros played the markets, especially about how promoters gulled the public selling sham securities that were “three-quarters wind.”25
There were Ray Stannard Baker’s careful reconstructions in McClure’s (“The Generals Up in Wall Street”) of the way financial titans exercised authority over the great rail systems, revelations Teddy Roosevelt found so persuasive. Striking a new note audible to an increasingly consumer-conscious middle class, Baker honed in on the way Wall Street used its captive rail systems like a tax farmer, levying usurious rates to drain away the income of its customers (both commercial and passenger) in order to recycle the revenue into the acquisition of other far-flung outposts of American industry. Baker told Roosevelt he thought the real solution was government ownership which the “damn cowboy” found too hot to handle.26
A similar excavation was performed on the underground operations of New York’s mass-transit financiers by Burton Jesse Hendrick in “Great American Fortunes and Their Making.” Raking up the muck left behind by the likes of Thomas Fortune Ryan and William Whitney (often in financial collaboration with the Morgan interests), Hendrick’s was a sordid but precisely itemized tale of stock watering, construction kickbacks, shoddy, unsafe work, bribed judges and legislators, and circumvented city regulations neatly arranged by Morgan attorney and now and again secretary of state, Elihu Root. It was typical of a whole subgenre of progressive periodical writing designed to explore the impact of the web on public services. Whether it was gas, water, electric, or even the ice trust, citizens and consumers of municipal services were the ultimate losers, at least according to the damning evidence unearthed by muckrakers like Hendrick and Charles Edward Russell.27
What is remarkable in its own right is that while much of this literature was brimming over with the driest sort of data, it nevertheless had an avid readership. Not so laden with the ideological baggage of the last century, it appealed to a cosmopolitan who fancied him-or herself a player in the high-velocity race of modern urban and industrial life and resented being taken advantage of. Indeed, the reputation and commercial success of whole magazines were made overnight and continued to rest on this taste for the methodical, “just the facts, ma’am,” demystification of big business in general and high finance in particular.
Frenzied Finance was arguably the most spectacular instance of this sort of journalistic wonder drug. Its serialized publication by Everyman’s magazine in 1904 virtually transformed an underread monthly into the country’s best-selling progressive magazine. Circulation quadrupled to 1 million while the series ran. Its special sizzle came from the fact that its author, Thomas Lawson, hailed from the belly of the beast; that is, he was a well-known Wall Street speculator on a first-name basis with all the masters of the web, a high flyer who’d seemingly gotten religion. He was prepared to tell all and take no prisoners.
Lawson’s defection was hardly unique. Rumblings of discontent were audible from opposite sides of the Street. There were distinguished investment firms, some of more recent vintage like Goldman, Sachs and Lehman Brothers, less than enamored with the Morgan regime. They made their way by bringing to market the initial offerings of companies in mass consumption and new technology sectors—retailers like F. W. Woolworth, mail-order firms like Sears Roebuck, auto companies like Studebaker, office-machinery manufacturers like Underwood typewriters and so on. Plenty prosperous enough, they nonetheless could feel like outsiders looking in. They were interested in breaking the Morgan chokehold. After all, even the Wall Street Journal worried now and then about how the “money trust” might imperil the capital stock of the country by shifting too much of it into speculation and by encouraging an unnatural piling up of resources in New York.
Critics often imagined the “community of interest” within the Wall Street confraternity to be more seamless than it really was. Fissures were inevitable, however, especially in an economy just then straining to make the transition from heavy-to mass-consumption industry. While Wall Street grew in size and power, the economy grew even more expansively. The Street was never able to exercise the degree of control it wished to. New regional centers of economic influence emerged independent of the Street’s dominant institutions. New competitors appeared who relied on internal financing or on local or regional banking resources in the Midwest and West. The great merger movement was essentially confined to eight basic industries, and even in those new competitors arose. Down below, the economy was far less concentrated and stable than either the “morganizers” or their enemies believed.
Newer Wall Street firms as well as investment houses with venerable pedigrees were naturally enough drawn to these emerging sectors. Still, these circles, particularly those who hailed from the studiously endogamous German-Jewish financial old guard, cultivated, like the “morganizers,” a sense of dynastic exclusively and a devotion to duty and work. Cloistered inside airtight cocoons of unimaginable wealth, they nonetheless prided themselves on their modesty, prudence, sensitivity to the arts, music especially, and an understated civic-mindedness.28
As if from another planet were the Street’s hoi polloi. They were Wall Street’s men on the make, flashy, full of wild financial enthusiasms and misguided speculations, carriers of the Street’s democratic promise that anybody could play the game and come out on top. And they, too, harbored a grudge against the “morganizers” whose grip over the Market was so viselike no one else could get a fingerhold. Where the Money Grows was one such cri de coeur. Garet Garrett was no innocent. A friend of Bernard Baruch’s, the Street’s most notorious speculator, he warned his readers about the innumerable mysteries and treacheries of a street he called the “Hall of Delusions.” But what he found irresistibly attractive was its egalitarianism. Everybody—everybody that is except the “Great Ones,” the Morgans, the Rockefellers, the Harrimans—dealt with one another in a spirit of good fellowship, like a fraternity of the hopeful and hapless. They shared their petty dreams and grand illusions, their stories of faded glory, their infallible schemes; altogether an odd-lot community of hangers-on and wannabes and once-wases. Ready to trust to fate and perhaps on occasion to the help of a “hoodoo man,” what spoiled this democracy of luck were “the invisibles,” the malevolent “theys” who used their hidden powers to bull and bear the Market behind the backs of the Street’s common folk.29
Thomas Lawson’s withering exposé seemed to emerge out of both these worlds. He was a rather dandified, glib, and remarkably charismatic one-time stockbroker from Boston. The son of a carpenter, he’d risen fast and far trading on his amiability, good looks, and rakish irreverence. A teenage speculator, he was a millionaire at thirty, decked out in black pearls, living it up in a castlelike estate on the Massachusetts coast. While some of the more pious from State and Wall Streets resented his Barnum-like jocosity and gambler’s insouciance, over the years he’d become a financial confidant and deal facilitator, especially in that domain of the web where the Rockefeller interests predominated. Standard Oil executive Henry Rogers, James Stillman, and William Rockefeller himself were the men with whom he dealt. However, while Lawson was trustworthy enough—at least for a world where the word trust was always accompanied by an asterisk—he was no mere gray functionary, but a man with his own outsized ambitions to master the Market, a lone wolf patrolling the borders of a financial no-man’s-land. The tale he told in Frenzied Finance was like a revenge fantasy come true by a speculator who felt he’d been used and abused by the web.
The Story of the Amalgamated, the first of Lawson’s grenades, was lobbed directly at the Rockefeller-directed machinations to set up a copper trust. Lawson had helped to make the market for the trust’s stock offerings among Yankee blue bloods and New England bankers. Making a market understated what happened. Lawson called it “dollar hydrophobia” as he sauntered through the Waldorf whipping up the avidity of the well heeled. But then he was betrayed. Lawson’s was a blow-by-blow account of the way the “top dogs” arranged it so that only they skimmed the cream from the initial underwriting. Everybody else, including not only speculators like himself but that presumably innocent mass of amateur middle-class investors, not to mention the great American consuming public, were victimized by plummeting share values, especially after McKinley’s assassination, and rocketing copper prices; all in all, he claimed, the trust fleeced the public of $100 million. Lawson sketched an empire of money run out of Standard Oil headquarters, its reach extending, like some enveloping web, to mines in the West, factories in the East, colleges in the South, churches in the North. He named names and reported sickbed confessions, flights from prosecution, and midnight intrigues. Full-page illustrations of Rogers and Rockefeller ran alongside the text. The forword to the series was reprinted in daily papers across the United States as well as Canada. A completely silly play, a cross between “Colonel Sellers” and the Keystone Cops, starring Douglas Fairbanks and entitled A Case of Frenzied Finance, lasted through eight performances on Broadway. Through all the hullabaloo, Standard Oil stayed mum. Lawson was darlingized, but also attacked unmercifully, branded a traitor, a fraud, and a hypester by his erstwhile colleagues on the Street.30
As if he still needed to scratch some festering sore, Lawson then announced in the December installment of Frenzied Finance: “I am now going to cause a life insurance blaze…so bright that every scoundrel with a mask, dark-lantern, and suspicious-looking bag will stand out so clear that he cannot escape the consequences of his past deeds, nor commit future ones.” With the able assistance of confederates in other muckraking journals and the Pulitzer media machine, he succeeded beyond his wildest imagining. Soon enough the New York State Department of Insurance ordered an investigation to determine whether the management of the Equitable Life Assurance Society was guilty of the misuse of funds. Had the company and others like it become violators of the people’s trust, mere “playthings of the Morgans, the Harrimans, the Ryans, and other speculative exploiters and gamblers of their ilk?”31
The Armstrong Commission, led by its chief counsel, Charles Evans Hughes, a man with an unimpeachable reputation for rectitude and propriety, conducted a dispassionate dissection of the life insurance business that nonetheless incited a hotly passionate response. It zeroed in on the industry’s three giants—Mutual of New York, Equitable, and New York Life—all major tributaries feeding the great commercial watersheds watched over by the Morgan and Rockefeller interests. Like Baker’s railroad revelations, the commission’s discoveries proved particularly alarming to an urban middle class increasingly self-conscious about protecting its rights as consumers and investors in the new economy. Hughes posed the bedrock question: How could the investment bankers who both directed the banks that sold and the insurance companies that bought these multimillion-dollar securities not find themselves in a conflict of interest? The traditional response of people like Schiff and Perkins was to point with reassuring pride to their professional probity. That answer was wearing thin.
Armstrong’s probe uncovered the way the web systematically milked the deposits of policyholders to support its own underwritings while premiums ballooned and dividends shriveled. Investigators tracked those hard-to-come-by premium dollars as they filtered into newsrooms, editorial offices, and legislative chambers (including the infamous “House of Mirth”) where they bought silence about or loud endorsement of the big three’s stratagems on behalf of the web. Ryan was cited, for example, for dipping into these idling pools of insurance company capital to float his far-flung promotions in traction, tobacco, mining, and even an escapade in the Congo. James Hazen Hyde, the notorious young sybarite running the Equitable, always the delicious target of magazine satirists and cartoonists (he rode to work in a flashily festooned hansom cab and staged an obscenely expensive “French Ball” for his friends, charging the whole shindig to the company), sold his holdings and decamped for Paris.
All of sudden a normally sleep-inducing subject not only provided some of the atmospherics for Edith Wharton’s best-selling novel, but became the raw material of one of the era’s most celebrated pieces of muckraking journalism. “The Story of Life Insurance” by Burton Jesse Hendrick ran in McClure’s where it laid bare not only the extravagant salaries awarded to top executives, but traced the evolution of a staid industry into a racy subregion of the Wall Street web. The “sharpies” had in effect colonized these insurance companies, treating their vast pools of capital like untapped oil reserves they freely funneled into railroads and utilities verging on bankruptcy. Cartoonists had a field day making fun of insurance company executives for their self-indulgence in food, dress, mansions, and lavish party giving. The urge to reform the industry, to bar it at least from participating in Wall Street underwritings, spread from New York to states all across the nation.32
Lawson, however, was incorrigible. He presented himself as a reformed sinner, a reformer who knew all too well what needed changing and had a basketful of remedies at hand—stock exchange regulations to control margin sales, interlocking directorates, undistributed profits, suspiciously large dividends, and so on. His readers became his followers, true believers. But even while he penned Frenzied Finance Lawson continued his career as a wild speculator; he couldn’t resist. His editor at Everybody’s, E. J. Ridgway, wrote him a public letter: “I shall never cease to believe that if you had kept out of Wall Street after you began the series with us you would be the biggest man in the country today.” Maybe so, but the love affair between Lawson and his loyalists ended badly. His credibility damaged, the progressive community abandoned him and he abandoned it, contemptuous of “the people” he believed were hopelessly mired in petty dreams of stock market riches. He should know.33
Lawson went through several more fortunes, ending a bankrupt. But Frenzied Finance, together with all the other richly detailed anatomies of the web—notably including Gustavus Myers’s mountainous 1907 tome, History of Great American Fortunes, whose encyclopedic inventory showed these “inert masses” of tomblike dynastic wealth originating in stupendous acts of grand larceny—worked a wondrous change in the cultural atmosphere. Wall Street’s grandees, lionized so recently as Übermensch, now seemed to wilt away under a remorseless scrutiny sometimes exercised by their former admirers.
LINCOLN STEFFENS went to work at Everybody’s magazine just after it exploded its bomb under the insurance business. Having taken a hiatus from Wall Street to write, among other things, his muckraking classic, Shame of the Cities, Steffens returned to the Street to find everything changed, including himself. He’d once been openly awestruck in the presence of Morgan and his ilk. But now he was put off by what he dubbed the “boss system,” by which he meant the web. For Steffens the drift toward dictatorship was unmistakable. Wall Street under Morgan had become “an organization of the privileged for the control of the sources of privilege, and of the thoughts and acts of the unprivileged….”34
Steffens’s epiphany was a not uncommon experience. Many, of course, continued to treat the captains of finance and industry as giants in the earth. To others, however, they began to seem more dwarf-like. As periodical literature, novels, and short stories picked away at their Napoleonic armoring, their cultural authority began to slip. Magazines which around the turn of the century could hardly fill up enough pages recounting the Herculean exploits of the paladins of business, shifted their attention to statesman, scientists, explorers, and others whose lives now seemed more exemplary. American Magazine announced that “the old gods are dying in the world of greedy finance…” and with them their Napoleonic mystique. New serialized biographies of Morgan, Gould, Rockefeller, and others took the view that these were really rather duplicitous men, callous and given to cheating. The motive driving this enterprise in debunking was not to turn heroes into ogres, but rather into ordinary men whose claims to reverential deference turned out, on close inspection, to be utterly groundless.35
Were the “money trusters” responsible for the nation’s industrial growth? Not at all. That was due to the initiative, endurance, and ingenuity of thousands of anonymous entrepreneurs. Did the “webmeisters” deserve credit for the country’s extraordinary technological progress that had transformed the material lives of so many? Far more deserving were the scientists and engineers whose theoretical and mechanical brilliance was admired round the world. Could the “morganizers” in good conscience congratulate themselves for the miracle of American mass production? Better to reward the production managers and highly skilled labor force who day by day grappled with the intractability of the inanimate world.
But at least there was always the Hamiltonian defense. Wasn’t it right and fair to assign the “money trust” the chief responsibility for mobilizing the capital resources of the country, a daunting burden to be sure, which it had assumed with spectacular results? Did not the investment houses assume the risk in “making the markets” in liquid capital that irrigated industrial growth? Were not their guaranteed underwritings of new corporate issues, even on occasion their willingness to buy up whole issues outright, enough to justify their power to dictate their price, and to whom, where, and how they would be sold? Alas, even here, on their home turf, the masters of high finance were found wanting. They performed their singular role with marked ineffectiveness. Their cartel-like gentleman’s understandings discouraged real competition and opened the way to unconscionable underwriting fees, grossly distorted security prices, illogical dividend payouts, and insider profit taking. It erected a Chinese wall of ignorance separating the Wall Street cognoscenti from the unwashed investing public. In a word, the system they presided over was passé.36
Passé or even worse! Those who championed the Wall Street elite saw it as a kind of vanguard, leading the rest of the country to the summit of a new manifest destiny, thanks to its mastery of the rational forces of industry, organization, and finance that gave the modern world its distinctive pecking order of power and preferment. Others took a long look at this vanguard and found it barbaric. When Morgan died, Walt Whitman’s close friend Horace Traubel called him a “brute.” He meant that not as a personal insult but to characterize “a certain civilization,” with which the Morgan name was practically synonymous, as “barbarous.” “What the power of wealth stood for: he was that. He was stocks, bonds, banks, railroads, trusts, financiering; chicanery, profit…. He was the shadow of his time…. We put his age away in the hole in the ground with him.”
Traubel registered a sudden change in the cultural temperature. As one observer noted, “When the 19th century closed, America worshipped great wealth…. In five years time, America has learned to hate great wealth….” Already one can sense here an early intimation of the crisis that would eventually undo a ruling elite whose self-sufficiency and confidence depended on the indivisible linkages between its dynastic property and managerial authority. The house that Morgan built was a kind of monumental way station. It stood midway between an old world, where wealth and power were invariably vested in great magnates and their families, and the modern universe of the impersonal bureaucratic corporation, where the impress of even the mightiest individual was growing fainter. The confrontation between “morganization” and progressivism was a first reckoning with that historic crisis.37
All of that was still a Great Depression away. But no one could deny the growing skepticism that picked away at the “morganizers” vaunted rationality. What defenders of the web saw as its greatest virtue—that it stood above the fray, overseeing and integrating whole industrial sectors, imposing a healthy equilibrium—its opponents treated as its fatal flaw. Invested, like the Church or some feudal potentate, with this embracing sovereignty over the economy, the banker-barons had turned it into a system of tribute levied on everyone—railroad and shipper, investor and consumer, citizen and worker. To ward off threats to its existing investments, it discouraged new inventions and processes, using its control of patents to freeze in place the technological level of whole industries. Naysayers surfaced even from the innards of industry. The Engineering News observed that American manufacturing, iron and steel metallurgy particularly, trailed German technical development because “those who control our trusts do not want to bother developing anything new….” Instead of fast-forwarding economic progress, the web aborted it, leaving the national community in a state of arrested development.38
Around the turn of the century, a gathering chorus of academic criticism reinforced this conviction that “morganization,” far from representing the acme of economic modernism, was actually retrograde and dysfunctional. Distinguished economists like John Bates Clark, Richard Ely, and James Mead began to subject the new phenomenon of the publicly traded corporation to close inspection. At a time when the academy was not quite so segregated off from the general run of public debate, their voices further disturbed the equanimity of the “morganizers’” brave new world.
On the one hand, these men welcomed the emergence of large-scale industry for all of its efficiencies and economies of scale. They had no doubt that economic progress must follow this road. Moreover, the dispersion of shares of these giant combines into the hands of a broad middle class, and even into the hands of their blue-collar workers, struck these reform-minded scholars as a decidedly positive social development. If carried far enough it could serve as an antidote to class antagonisms and extend democracy into the authoritarian heart of American industry.
However, the superceding power of the web placed all of this in jeopardy. It opened up a fatal divide between the average anonymous shareholder seeking regular and reasonable returns on his investment, and the “webmeisters” who manipulated these securities for short-term gain. Clark, who served as the most daring member of a commission set up by New York governor Hughes to investigate the Stock Exchange, declared the investor the trust’s “most conspicuous victim.” Moreover, banker control opened up another fissure between the management of these corporations who served at the sufferance of web-dominated boards of directors, and the putative shareholding owners whose “ownership” had been so diluted as to no longer include any substantial say over the deployment of the corporation’s assets. So, too, managements obedient to these financial overlords, who lived insulated from the workaday world of most people, were not apt to harbor much sympathy for the plight of their employees.
The fraying connection between ownership and management was a newly observed dilemma at the turn of the century. It carried with it not only legal, organizational, and economic but profound cultural ramifications that would ripple on for decades. With some poetic license, it might be called the proletarianization of ownership. What was to become of the sense of personal and familial identity and social esteem once associated with control over productive property? This unanticipated estrangement of the income-bearing aspects of ownership from its organic ties to place, to personality, and to the physical sense of acting on the world was first rising to consciousness. As shareholding began to diffuse more widely, a dawning realization of this loss no doubt fed some of the middle-class dis-quietude about the web’s wrenching disruptions.
Still, these were the very earliest days when everything seemed reversible. What a tantalizing prospect these academic seers spied: A shareholder democracy that could turn the whole project of industrial giantism into a blessing for all. As Clark rhapsodized, “The old line of demarcation between the capitalist class and the laboring class will be blurred and at many points obliterated…. The socialist is not the only one who can have beatific visions.” Only the distortions introduced by a regressive Wall Street plutocracy stood in the way of this peculiarly urban middle-class arcadia, the first Wall Street utopia.39
Intellectuals further removed from the business world added more biting defections. Surveying the cultural landscape they’d inherited from nineteenth century, they reported back on the devastation left in the wake of Wall Street’s ascendancy. E. L. Godkin’s “chromo civilization” struck the great intellectual historian Vernon Parrington as a “great barbecue.” William James mordantly observed its culture of “pragmatic acquiescence.”
Progressivism lent its name to a school of history writing that registered the decisive impact of economic forces on the course of the nation’s development. Wall Street in particular cast its shadow backward to the nation’s founding. Charles Beard’s Economic Interpretation of the Constitution, published just at the time of the Pujo hearings, was perhaps the most provocative work of “progressive” historiography. His controversial discovery that the founding fathers had been motivated to junk the Articles of Confederation and substitute the Constitution’s federalism by their desire to protect their investments in government securities was shocking. Yet it also seemed to make perfectly good sense. After all, everywhere people looked titans of finance, the contemporary incarnations of those eighteenth-century bondholders, seemed to be calling the shots from behind the scenes, dictating the direction of economic as well as political life: this was “morganzation” read backward, history as orchestrated from the Street, a cruel mockery of democracy. Beard despised Morgan and was appalled at the vulgarity of this gilded civilization…and never tired of recording its more freakish excesses: a private carriage and valet for a pet monkey, a pair of opera glasses costing $75,000, beribboned dogs driven for afternoon rides in the backseats of luxury Victorias, a full symphony orchestra hired to serenade a newborn.
What made these men so wealthy and powerful, Charles Edward Russell argued in his scathing series in Everybody’s (bearing the insinuating title “Where Did You Get It, Gentlemen?”), turned out not to be any specific work connected to the nation’s productive enterprises. Rather their reputation as “excellent men” came from their control and manipulation of property titles. How unworthy of adulation this was Russell proceeded to document in a case-by-case deflowering of the romance of Napoleonic success. He took particular delight in rewriting the mythography of Thomas Fortune Ryan. His life was virtually the apotheosis of that romance. The nation’s secretary of state, Elihu Root, was his attorney; he maintained a brigade of loyal senators and congressmen in Washington; from Kentucky to the Congo, from London to San Francisco, “men are employed by him and are subject to his will; he says to them, Do this, and they do it.” How had he managed it? Was it a fairy tale of desperate beginnings, of unsquashable pluck, of ascetic avidity for business, of unimpeachable trustworthiness, of dedication to a stoical, patient rise from humble employments? Not exactly. It was, instead, Russell tried to show, the product of a marriage made in hell, a “union of rotten business with rotten politics.” Ryan, and his confederate William Whitney, were paragons of venality, overbearing bullies with a healthy contempt for other men. Scrape away the glamorous veneer and what you uncovered was something much cheaper, a tawdry spectacle of “debauched public officials” in league with the web to loot the public treasury, leaving the consumers of municipal services to pick up the bill.
Clearly muckrakers like Russell had their spells of righteous indignation. Even as he talked in practical terms about the material costs of this Wall Street syndrome—Russell noted that New York was one of the last great cities to electrify its transit system because so much capital had been swallowed up in stock manipulations—Russell couldn’t resist levying a moral indictment as well. It was directed not only at the captains of finance, but at his fellow citizens who’d become hypnotized by the ethos of success. By worshipping the very men who did them ill, the citizenry was complicit in its own fleecing. Of course, this was the great cultural dilemma with which in one form or another Wall Street had confronted the country for generations.40
Finley Peter Dunne’s send ups of the Street were precison-guided missiles aimed at puncturing just this cultural hallucination. When Dooley’s bartender friend, Mr. Hennessy, asked him what a “Titan of Finance” was, Dooley left him in no doubt: “A Ti-tan iv Finance…is a man that is got more money thin he can carry without bein’ disordherly….” Dooley described what happened when two such titans went at it hammer and tongs:
“…and im th’gr-eatest consolidator in th’ wurruld,” says Scaldy Harriman, “I’ve consolidate th’ U.P., th’ K.R. and L., th’ R.O. and T., th’B.U. and M., an th’ N. and G.,” says he. I’ve a line iv smoke reachin’ fr’ m wan ocean to th’other, he says. “I’m no ordin’ry person,” he says…“I’m a Titan an’ I’m lookin’ f’r throuble,” he says, “an here it comes,” he says. “You a consolidator?,” says Scrappy Morgan. “Why” he says, “ye cuddenit mix dhrinks f’r me,” he says. “I’m th’ on’y ruffyan consolidator in th’ gleamin’ West,” he says. “I’ve joined th’ mountains iv th’ moon railway with th’ canals iv Mars, an I’ll be haulin’ wind fr’m the caves of Saturn befure th’ first iv th’ year,” he says….
Dunne could be just as unsparing when it came to sizing up the popular infatuation with the Street. Dooley recounted the binge accompanying the Northern Pacific bubble of 1901:
…Niver befure in th’ history iv th’ world has so manny barbers an waiters been on th’ verge iv a private yacht…. Th’ barber on th’ third chair cut off part iv the nose iv th’ prisident iv Con and Foundher whin A.P. wint up fourteen pints. He compromised with his vicitim be takin’ a place on th’ board iv the comp’ny. But it’s all past now. Th’ waiter has returned to his mutton an th’ barber to his plowshare…. Th’ jag is over. Manny a man that looked like a powdher piegeon a month ago looks like a hinchback to-day.41
Novelists, too, took a second look at the warrior cult. Robert Herrick’s ingenuous hero in A Life for a Life at first buys into the notion that this seemingly gray world of credits and reorganizations and receiverships is really the modern analog of a battlefield, full of “powder, shot, and shell.” He’s saved from this illusion by an older, wiser man who shows the callow country boy that all this talk of crusaders and warriors and heroes is just so much after-dinner cant and hypocrisy mainly meant to titillate the archaic imaginations of the womenfolk.42
David Graham Phillips did something different in The Deluge. He fictionalized the life of Thomas Lawson: ripe, raw material indeed. The novel was a story of Wall Street heroism in reverse. Instead of standing in awe of the financial titan, the Wall Street insider, The Deluge made the Wall Street outsider its redeeming protagonist.
Phillips was already well known for his exposés of the medical and law professions, the church, press, and higher education. A year after publishing the novel, he would write “The Treason of the Senate,” which made Roosevelt apoplectic and inspired the president’s censure of “muckraking” for its stark assertion that the whole government was run by a claque of financiers—“the Seven”—through their “strong box.” In a sensational story in Cosmopolitan, he fingered “the chief exploiter of the American people” (by whom he meant Rockefeller) and his “chief schemer” (by whom he meant Rhode Island senator Nelson Aldrich, linked by marriage to Rockefeller and by a thousand handsomely rewarded political services to Morgan). Phillips would pay the heaviest price for his audacity. He was assassinated a few years later, shot six times, as he walked through Gramercy Park in New York, by Fitzhugh Coyle Goldsborough, the scion of a prominent Maryland family. While the motives for the killing remain obscure—Goldsborough took his own life immediately after the murder—the Phillips family speculated that Goldsborough sought to avenge Phillips’s scathing portrait of the lifestyle of the idle rich in one of his recent novels.
The Deluge was published into the afterglow of the Lawson revelations, which no doubt contributed to its considerable popularity. Matt Blacklock, the novel’s stand-in for Lawson, is a character in the American grain, a folk hero of Wall Street’s new frontier. He’s self-made, democratic in spirit, and rather picturesque; like Lawson he’s a bon vivant, a freelance, and not afraid of a fight. He’s a genuine enthusiast, a promoter who works with but is never allowed inside the inner spirals of the web. He revels in his insouciance and bumptious egoism. Blacklock is the vox populi of the civilian investor facing down the old guard. It’s not that he doesn’t want in, but he can’t stifle his caustic assessment of their flimsy pretensions and supercilious rectitude. Blacklock doesn’t fear the great titans; on the contrary, he’s figured out they are really weak and passive characters with no claim to join him in the aristocracy of doers.
One, however, is a more fearsome opponent than that. Roebuck is a villainous caricature of Morgan, full of pious delusions of grandeur and convinced his reorganization of the economy is God’s work, that he’s saving the poor, the unemployed, widows, and orphans from the chaos of deadly competition. Roebuck exercises his dominion over both political parties, the press, and the courts, his power nearly beyond challenge. He is a consummate hypocrite, delights in the humiliation of his rivals, but is at the same time a figure of practically irresistible hypnotic force.
Blacklock’s truest insight is, “Financiers do not gamble. Their only vice is grand larceny.” With this bon mot, gambling, or, more exactly, speculation, wins a reprieve from the moral gulag it had been consigned to for more than a century.
Blacklock/Lawson trusts to luck, fate, and his wits to see him through. His is the esprit of the sportsman, honorable, courageous even. The “webmeisters,” on the other hand, leave nothing to chance. The fix is in before they ever sit down to play the game.43
Nowhere was the ethic of good sportsmanship, of playing by the rules, more hallowed than in the weekly escapades of Frank Merriwell, a series of enormously popular adventures aimed at teenage boys. Just after the panic of 1907, Frank finds himself up against the “the wolves of Wall Street.” Frank is himself heavily invested, but he’s a straight arrow, a man’s man of the sort T.R. would have loved. While there are others on the Street just as honest as he, and some hopelessly crooked, the far darker force Frank must deal with is the mysterious “System.” Its rigging of the Market fouls the nest it grew up in. Once a place where legitimate companies could turn to raise money and pay dividends to their investors, the “System” threatens to make the Street over into a sinkhole of trickery, of very bad sportsmanship. “Putting the Wolves to Rout” becomes a kind of middle-class revenge fantasy. To tame the great magnates, you need someone with Frank’s extraordinary capacities for mental agility, dogged determination, unflappable rectitude, and manly courage—someone in fact suspiciously like Teddy Roosevelt.44
FRANK MERRIWELL slew his Wall Street dragon in the aftermath of the truly terrifying panic of 1907. The irony here is noteworthy. The tides of cultural opinion seemed to shift just then and to begin running decisively against the “morganizers.” Yet this was, after all, Morgan’s supreme moment. When everyone else seemed frozen in place, while the government looked on helplessly, he’d rescued the economy and the nation from what seemed certain disaster. For just that reason, however, some began to wonder out loud whether any one man, however “safe and sane,” ought to be entrusted with such fateful authority, free of any public scrutiny. Others went much further and had the audacity to suggest that Morgan had deliberately fostered the panic in order to feather his own nest.
Upton Sinclair’s roman à clef, The Moneychangers, published in 1908, suggested as much. It’s a clumsy novel full of cliché and caricature: oversized furniture inside oversized, overripe buildings all bronzed and marbled, tapped phones, snoops reading other people’s mail in a suffocating climate of conspiracy lorded over by a Morgan figure (Don Waterman) so brutalized and despotic he can risk committing rape without fear of punishment. But the real point of the story is an accusation that the Senate Judiciary Committee later investigated and that even sober-minded insiders like John Moody took seriously. Morgan, so the story went, wanted to acquire the Tennessee Coal and Iron Company (TC&I), to extend his U.S. steel empire into the South and to block the emergence of a dangerous competitive rival. The panic allowed him to do so (with T.R’s acquiescence) at a rock-bottom price. Although the Senate investigation concluded that Morgan had indeed forced the “surrender” of TC&I and might be in violation of the Sherman Act, George Perkins called the charge an “infamous lie.” Morgan’s most recent biographer agrees with Perkins. Teddy Roosevelt denounced the charges as calumnies. Sinclair, despite his notoriety, could find no magazine willing to serialize the tale and only an obscure publisher willing to put it between hard covers. Nonetheless, that such accusations could reach the level of urban legend already indicates how damaged the prestige of the Wall Street elite had become.45
Everything went downhill from there. Arguably, business never fully recovered from the trauma of 1907, not until the outbreak of war. It sputtered along, and wide segments of the business community blamed the Street for the general sluggishness. Inertia seemed to take the place of that heady sense of forward march that inspired enthusiasm at the turn of the century. There were no new railroads being built, no new cities rising up out of nothing, no vast manufacturing facilities undergoing expansion. The panic seemed to confirm that the “morganizers” were superintendents, or worse, undertakers of the old, not master engineers of some exciting new explosion of industrial energy. James Hill himself granted that most trusts were created “not for the purpose of manufacturing any particular commodity…but for the purpose of selling sheaves of printed securities which represent nothing more than good will and prospective profits to promoters.”46
Right after the panic, Roosevelt called for legislation to regulate speculating and trading on margin. He lashed out at financiers he believed were trying to use the hysteria to embarrass the government. Anxiety that the nation’s system of credit was antiquated and incoherent infected even the soberest banking circles. A cautionary cartoon appeared in the Denver Daily News showing a smarmy fortune-teller reading a Republican elephant’s palm where he spied the end of the pachyderm life’s at the end of a serpent’s forked tongue, a “finance capitalism” snake whose sinewy form could be seen coiling in the background. “The Bear Dance…or Wall Street Jubilee” made its debut as song and musical theater featuring a ghoulish group of ravenous grizzlies whopping it up in the forest at a midnight witches’ coven. In another Broadway musical a chorus of demons fanned the flames of a glowing griddle in Hades, chanting delightedly, “This seat’s reserved for Morgan/That great financial Gorgon.” Movies, the infant medium of mass entertainment, discovered the inherent melodrama of high finance. An attempt to film Sinclair’s The Moneychangers came to nothing when his screenplay was rejected. But in 1909, D. W. Griffith’s first feature-length film, A Corner in Wheat, shocked audiences with its vertiginous scenes of manic speculation in the pit. In a truly terrifying denouement the “Wheat King” stumbles into one of his own gargantuan wheat bins and is literally buried alive by his ill-gotten gains. A card game called “Commerce” became the enormously popular still-life equivalent of Griffith’s early masterpiece. Its brilliantly lit chromolithographs depicted a whirlpool of concentric circles sucking the “farmer,” “merchant,” “scientist,” and “mechanic” into its vortex of “bankruptcy,” “dishonor,” “failure,” and “ruin.”47
CULTURAL SUBVERSION of white-shoe Wall Street’s honorific status naturally spilled over into the political arena. After 1907, reform energies tended to build up force around the web. Morgan’s midnight rescue actually served to fix public attention. Lingering doubt about the existence of a “money trust” was hard to sustain in the teeth of such salvationist heroics.48
Questions about what its presence meant for the future of middle-class democracy and middle-class capitalism became irrepressible. They washed through the ranks of both parties, spilling over into presidential campaign rhetoric, forcing their way into congressional investigations, cresting in Pujo, demanding some legislative resolution. Antitrust sentiment is sometimes too loosely thought of as a plaint of the resentful, as an assault on property by the dispossessed. But what lent the movement so much political heft and cultural salience was its anchorage not alone among the unwashed but in diverse niches of the commercial and professional middle classes. It was an unlikely and yet characteristically American liberationist rising.
Historians have argued for generations about the difference between Teddy Roosevelt’s “new nationalism” and Woodrow Wilson’s “new freedom”…or about whether in any substantial way they were different at all. Roosevelt suggested a kind of national trusteeship administered by a disinterested political elite prepared to collaborate with or police the country’s economic overlords. However much Roosevelt concerned himself with matters of social justice—he vigorously endorsed child labor, minimum wage, and workmen’s compensation legislation—in the end there was a kind of American-style Tory socialism that flavored the “new nationalism.” Woodrow Wilson’s “new freedom” relied more on the democratic energies of the middling classes. Roosevelt’s campaign barbs aimed at Wilson to the contrary, the “new freedom” indulged no nostalgia for some earlier species of small-scale capitalism. “We shall never return to the older order of individual competition,” Wilson proclaimed, observing that the “organization of business upon a great scale of cooperation is, up to a certain point, normal and inevitable.” Instead what excited urban as well as small-town progressives was Wilson’s conviction that “the men who understand the life of the country are the men who are on the make and not the men who are already made.” And nowhere was one more likely to run into made men than at the “money trust.”49
Woodrow Wilson already nurtured serious presidential ambitions when, still president of Princeton University, he delivered speeches to the Commercial Club of Chicago and to the American Bankers Association in 1908. He issued a warning. Citizens had good reason to fear that their God-given and democratic right to achieve economic self-sufficiency and to help determine their nation’s fate was in danger of being usurped. This was no Old World plot by conspiring aristocrats, however. Nor did Americans need fear, as their ancestors once had, the baleful influence of the sinful city, the despoiling of the virgin land by an alien industry, the weakening aftereffects of self-indulgence, or even that most formidable of ancient enemies, the government. Now it was the life and death grip over capital exercised by a remote group of imperial bankers who, in league with the captains of industry, frustrated all attempts at restraint. There were men, Wilson insisted, who “stood outside the formal organizations of the greater enterprises and manipulated their securities….” Every one else suffered. “The truth is,” Wilson confided, empathizing with a widely felt middle-class unease, “we are all caught in a great economic system which is heartless.”50
Once his presidential campaign got under way, the New Jersey governor made an inquiry into the “money trust” a live issue and consulted regularly with Brandeis about how best to tackle it. His acceptance speech at the Democratic Party convention elevated the “money trust” into a position of first among equals in the rogues’ gallery of the nation’s enemies. Walter Lippman might consider this catering to paranoia—“men like Morgan and Rockefeller take on attributes of omnipotence that ten minutes of cold sanity would reduce to barbarous myth,” he remarked with disdain. Upton Sinclair might be blacklisted for inventing bogeymen. But the man who would soon become president spoke plainly about something he considered all too real: “There are not merely great trusts and combinations…there is something bigger still…more subtle, more evasive, more difficult to deal with. There are vast confederacies of banks, railways, express companies, insurance companies, manufacturing corporations, mining corporations, power and development companies…bound together by the fact that the ownership of their stock and members of their boards of directors are controlled and determined by comparatively small and closely interrelated groups of persons who…may control, if they please and when they will, both credit and enterprise….” This “combination of combinations” must be firmly if delicately pried apart by a vigilant government.51
Unquestionably, the censorious moralizing of genteel Protestantism continued to fire up progressive politics. This was emphatically true of Roosevelt as it was of Wilson. The “Bull Moose” candidate evangelized his followers: “We stand at Armageddon, and we battle for the Lord.” The Democratic president-elect, a minister’s son, devout and didactic, had this to say about anyone foolhardy enough to deliberately sow the seeds of financial panic: “I will build the gibbet for him as high as Haman’s.”52
Progressivism was, in part, a revival meeting of superannuated elites. Second-and third-generation New England Federalists, their New York Knickerbocker cousins, urban mugwumps of the Gilded Age, expatriate southern reformers like Walter Hines Page, William Gibbs McAdoo, and Wilson himself, all of whom had long since taken leave of the seats of their regional and national dominion, rejoined the battle for supremacy. Still fluent in the oratory of Jeffersonian and protestant righteousness, they learned to apply it to the circumstances of modern finance capitalism. In one way or another they were determined to rein in the plutocracy, sensible of the fact that it had become so inured to its own willfulness that it had become a chronic incitement to political and social turmoil.
For years editorial opinion warned that if a tiny group of financiers was allowed to dictate the “capitalistic end of industry, the perils of socialism…may be looked upon by even intelligent people as possibly the lesser of two evils.” Partisans of Wilson’s New Freedom harbored a fear that the reign of the “money trust” might end up proletarianizing American society. There was a striking family resemblance here to the old Jeffersonian phobia about a “moneyed aristocracy” breeding European-style sinkholes of urban dependency in the New World. Brandeis went so far as to call the conflict “irreconcilable,” cautioning in resonant language that “our democracy cannot endure half free and half slave.” He worried not merely about the crushing of economic liberty but of “manhood itself which the overweening financial power entails.” Progressivism, inside and outside the Democratic Party, was in some sense a cultural purgative. It meant to revivify a spirit of egalitarianism and self-restraint that the rule of the plutocracy, and especially the “money trust,” which epitomized its hubris, seemed bound to destroy.53
Wilson’s nomination itself came only after a fierce fight within the Democratic Party, the denouement of a nasty internal feud with Wall Street running all the way back to Bryan’s capture of the party in 1896. At the 1912 Baltimore convention, the old Belmont faction lobbied for New York’s Alton B. Parker, who William Jennings Bryan openly accused of being Wall Street’s creature. An ocean of telegrams from the hinterlands echoed that belief. Bryan felt emboldened and introduced a resolution declaring the party unalterably opposed to any nominee “who is the representative of or under obligation to J. Pierpont Morgan, Thomas Fortune Ryan, August Belmont, or any other member of the privilege-hunting, favor-seeking class….” There were cheers along with cries to “lynch him,” “beat him up.” Bedlam ensued. The resolution passed (only after Bryan agreed to remove a clause calling for the expulsion of delegates representing those nefarious circles; indeed Ryan and Belmont were both delegates), and Parker’s candidacy was dead.54
Wilson’s nomination thus marked the convergence of two oppositional cultures enflamed by hostility to Wall Street. Bryan championed a venerable rural and ethnic suspicion of the eastern big-city “devil fish”; Wilson a self-confident iconoclasm of the economically more secure and respectable urban middle class. It was a marriage of convenience that would end in mutual recrimination in the 1920s. For the moment, however, it was a striking measure of Wall Street’s demonic stature in the nation’s political iconography.
Across the aisle, chastened by the panic of 1907, the Republican old guard grew ever more wary of movement. Nonetheless, sentiments similar to Wilson’s were alive and well in the Grand Old Party, especially among those circles faithful to that father of progressive reform, Wisconsin senator Robert La Follette. He was a crusader of the old school. Indeed, his rhetoric was less temperate, his demands for legislative remedies more strident than Wilson’s. Like Upton Sinclair, La Follette was willing to ask the unaskable: Had the panic been deliberately provoked to suit Morgan’s darker purposes? On the Senate floor he trotted out documents to prove the control of American industry and transportation by a closed clique of fewer than a hundred men. When the ICC laid bare what a mess Morgan had made of his New Haven Railroad system, the senator wasn’t shy about fingering the country’s Napoleonic banker: “These men…are but hired megaphones through which a beefy, red-faced, thick-necked financial bully, drunk with wealth and power, bawls his orders to stock markets, Directors, courts, Governments, and Nations. We have been listening to Mr. Morgan.”
La Follette led the insurgency within the Republican Party and gave serious thought to instigating a third-party rebellion. Democracy was what he talked about ceaselessly. This was not social democracy. No collectivization of the means of production and distribution was contemplated. But it was economic and industrial as well as political democracy of a distinctly middle-class sort that the senator warned was being strangled in the grip of the web. In a signature speech delivered in Philadelphia in 1912 and then circulated nationally as a pamphlet, La Follette described the trustification of the economy as an attempt to “Mexicanize it.” Standing at its headwaters was the “money trust” roped together by directorships from the command centers of the Morgan and Standard Oil dynasties. Worse even than its baleful influence on the economy was the way it crushed the democratic impulse, reducing the country to a condition of “complete industrial and commercial servitude.” A captive media, muzzled by the cross-fertilization of publishers, bankers, advertisers, and special interests” insulated the web from public criticism. The “end of democracy” was in sight.55
When the bolt from the Republican Party actually happened in 1912, it was Teddy Roosevelt who became the standard-bearer of the new Progressive or “Bull Moose” Party. La Follette was bitter, noting that George Perkins along with other leading Wall Street bankers financed the ex-president’s candidacy. The platform of the Progressive Party did indeed acknowledge that economic concentration was inevitable and not necessarily a bad thing. At Roosevelt’s insistence, it scrapped a call to strengthen the antitrust law that the ex-president considered pandering to reactionary sentiment. But the new party also raised the specter of an “invisible government.” Albert Beveridge, ex-senator from Indiana, Roosevelt ally, and temporary chairman of the party convention, declaimed against overcapitalization and manipulated prices. While he judged the Sherman Act antiquated, he called for the criminal prosecution of “the robber interest.” Only put these men behind bars, and Beveridge was confident of the republic’s grand future, a time soon to come when around the world it would be said of the American businessman, “as it is said of the hand that shaped Peter’s Dome, ‘he builded better than he knew.’”56
Beveridge’s sunniness typified the prim, sanguinary fervor of the Progressive Party’s cadre. College-educated, self-employed professionals, public intellectuals, journalists, and social workers, they fancied themselves the embryo of a public-service mandarinate. Indeed, some would go on to play just that role. Dean Acheson, Walter Lippman, Felix Frankfurter, and Henry Wallace, among others, served their apprenticeship as Bull Moose partisans.
What came of all this political sound and fury was both a lot and not so much. On the one hand, in the election of 1912, the country’s center of political gravity shifted. What to do about the trusts lent the campaign its dramatic tension. Whether people voted for Teddy Roosevelt, Woodrow Wilson, or in sizable numbers for Socialist Party candidate Eugene Victor Debs, a large majority of the electorate registered a desire to break the power of Wall Street’s “money trust.” Wilson’s New Freedom promised an end to “Hannaism,” a system in which the country was given over to Wall Street to be “exploited like a conquered province.” Nurtured over the course of a decade, the nation now entertained a once heterodox sentiment: that a reconstruction of the economic order of things might be called for and that the government had some leading role to play in that reconfiguration. Was the state to function as a command institution, compelling the country’s peak financial and corporate institutions to behave in the public interest? Was it instead to work as a lubricant, a kind of anticoagulant, opening up the arteries of financial and industrial to life-supporting regulated competition and innovation? These were undecided matters, but they were, for the first time, matters up for decision.57
Yet Wilson himself, however given to denunciations of the “money trust,” maintained, just like Roosevelt, close ties to the financial elite, including people like Paul Warburg of Kuhn, Loeb, who helped draft the Federal Reserve legislation (and whom Wilson immediately appointed to serve on the new Federal Reserve Board). Bernard Baruch was a Wilson intimate. Members of the German-Jewish “our crowd,” including Jacob Schiff, Henry Morgenthau Sr., Nathan Straus, and Hy Goldman became Wilson loyalists. Consequently, circles of left-leaning Democrats as well as La Follette denounced the 1913 Federal Reserve Act as a banker’s bill. Wilson had always kept his distance from the more ideologically driven wing of the antitrust movement. He considered himself a “practical idealist,” not a leveler: “I am for big business and I am against the trusts,” he explained. Like Roosevelt, Wilson worried about the forces of “envy” that battened on Wall Street, making it the target of choice for class animosities that progressivism of whatever persuasion tried to stay clear of.
Legislative and executive action was indeed muted. The Federal Reserve Act, while establishing some measure of government oversight and some power, at least in theory, to rein in speculative trading, hardly did away with the “money trust.” The bank bill made no attempt to break apart the system of interlocking directorates that had revved up “money trust” accusations for years. The disproportionate power of the New York banking establishment was left nearly intact. Indeed, Carter Glass, a Virginia Democrat and chief architect of the bill in the Senate, subsequently boasted that it was always intended, notwithstanding its decentralizing language, to confirm New York’s preeminence and “even hoped to assist powerfully in wrestling the sceptre from London…” and eventually to make “New York the financial center of the world….”
None of this stopped elements of the business community from labeling the bill “socialistic” and the “preposterous off-spring of ignorance and unreason.” But it was a long way from the system of nationalized control over the country’s system of credit, which the “progressive” assault on the web had for years envisioned. William Gibbs McAdoo, Wilson’s son-in-law and secretary of the treasury, irritated the business establishment, and he jealously gathered in as much power over the monetary system as he could manage. But he was an experienced railroad executive with many ties to the Street. No ideologue, McAdoo was perfectly prepared to work out informal arrangements with the leading commercial and investment banks that left most of their prerogatives undamaged.58
The new system first of all devoted itself to ensuring stability in the capital markets, a cause in which even the “webmeisters” believed, having gotten religion in 1907. Various mechanisms at the disposal of the board facilitated this general purpose, while insulating the board itself and its regional banks from the storms of partisan politics and the public discipline of executive fiat. Credits were made available to a wider range of newer, smaller enterprises. In this way the system responded to that chronic middle-class complaint that the web had shut down the republic of opportunity. This was tacit recognition of an underlying dilemma: that the modern economy somehow had to be put together to both accommodate the need for centralized direction and good order while not killing off the goose that laid the golden egg, that is, that ever-renewable desire for private capital accumulation.
So, too, Wilson’s special message to Congress early in 1914, in part aimed at making up for the deficiencies of the Federal Reserve Act, featured tough talk about outlawing interlocking directorates, beefing up the powers of the ICC to regulate railroad financing, and stiff penalties for other business malpractices. Noises were heard around the Capitol about forcing railroads to sell securities at competitive auctions, about prohibiting corporations from designating a bank as its sole fiscal agent to sell its stock, about special taxes to penalize short sales. The Clayton Act, however, turned out to be a disappointment. It did make it illegal to hold directorships in two or more corporations if these corporations were direct competitors. Still, even though Pujo had called for government regulation of the stock exchanges, federal supervision of new securities issues, and for various measures to outlaw stock manipulation and to control trading on margin, none of that made it onto the law books.
Gathering signs of a depression may have scared the president into mending fences with the financial elite. Morgan was invited to the White House. Soon enough the outbreak of war in Europe would simultaneously dampen the reform enthusiasm and go a long way to rehabilitate the Morgan elite. The war would change many things. Ironically, by compelling Wilson to make peace with Wall Street, it would prepare the way for the Street’s own Armageddon.59