Mr. Harriman’s “don’t-give-a-damnitiveness” has been worse since the insurance investigation began than ever before. He has delighted in offending public sentiment…. His arrogance toward the public is beyond belief and rather emphasizes my opinion that to be really effective in this world a man must have the elements of stupidity in his make-up no matter how strong he may be.
—American Magazine, April 1907
“The history of Harriman,” proclaimed one of an endless procession of Harriman watchers, “is a history of battle.” Given his combative nature, this was hardly a revelation. What is surprising is the number of fights that came to him rather than emanating from him. “If there was any fighting going on within ear-shot, however little it might concern him,” mused Otto Kahn, “he was tempted to take a hand in the fray, and the greater the odds against his side, the better.” Three bitter, highly publicized struggles did much to blacken Harrimans name between 1905 and 1907. All were forced on him by circumstances or the actions of others.1
A peculiar flavor of irony hangs over these episodes. Although Harriman never backed down from a fight once drawn into it, he would have given much to avoid these clashes. They consumed enormous amounts of time and energy he could no longer spare. In different ways all were “no-win” situations that hurt the victor as much as the loser, with repercussions that extended far beyond the immediate issues. Finally, and most painful, all three fights pitted Harriman against men who had once been friends: James Hazen Hyde of Equitable Life, Stuyvesant Fish, and President Theodore Roosevelt.
The Equitable fight was an accident waiting to happen, and it was Harriman’s misfortune to be in the right place at the wrong time. “Mr. Harriman had nothing whatever to do with the original trouble,” sighed Kahn. “There was no earthly reason why he should have been drawn into the fierce and bitter contest which followed, but in he jumped with both feet and laid about with such vigor that in the end he became almost the principal and probably the most attacked figure of the conflict, both the warring factions pausing in their fight against each other to pour their fire of abuse and innuendo upon him.”2
Insurance was another industry convulsed by growing pains at the turn of the century. Like railroads and banking, it had mushroomed from small companies into an industry dominated by giants. By 1903 Equitable had gross assets of nearly $380 million compared to $402 million for Mutual Life and $353 million for New York Life. This huge supply of capital served as the lifeblood for an age of industrial growth. The big three companies had more than 50 percent of their assets invested in securities, which prompted bankers like Morgan and Schiff to cultivate close ties with insurance companies. Morgan lured George W. Perkins of New York Life to his own firm, giving him a solid entry into that company, while Mutual had on its board George F. Baker and those denizens of Standard Oil, William Rockefeller and H. H. Rogers.3
Spectacular growth brought insurance companies the same dislocations that plagued large firms in other industries. The most common problem was a provincial form of management rooted in an earlier, simpler age. Every company owed its rise to the driving force of one individual who dominated its affairs during the early years. For Equitable this man was Henry B. Hyde, who founded the society on a shoestring in 1859 and built it into the largest firm in the world before his death in 1899. Despite this rapid growth, control of the Equitable still rested in its original $100,000 issue of stock. Most of this belonged to Hyde, giving him power over Equitable’s $400 million in assets but income limited to a 7 percent dividend on the stock. Although Hyde paid himself and his officers handsome salaries, the real money had to be made through creative use of Equitable’s huge capital pool.4
Hyde found one solution in financial subsidiaries. Equitable invested in several banks and trust companies and controlled two of them, Equitable Trust and Mercantile Trust. Hyde, his family members, and Equitable officers also bought shares in these institutions. Apart from drawing salaries for serving them, there were a dozen ways to reap rewards from this arrangement. The subsidiaries borrowed money from Equitable at low rates and loaned it out at higher rates. Hyde and his friends joined investment syndicates using funds borrowed at low rates from the company. They bought securities and sold them to Equitable at higher prices. Some of Equitable’s investment funds were kept as cash balances in subsidiary banks for these purposes.5
Milking a large company in this manner was an abuse made possible by autocratic rule. Not that Hyde ever thought of it as milking; the company was his creature to do with as he pleased. He and his associate, James W. Alexander, wielded absolute power. The company’s board of fifty-two prominent directors did nothing beyond read reports and approve them. Once when two new members were appointed to Equitable’s fiscal committee, Alexander reminded them bluntly that it was “not their province to go into the management of the Company, or to express opinions about methods.”6
An early court decision cast doubt on whether the federal government could regulate insurance companies, and state authorities had done little. But Hyde’s death set in motion a chain of events that transformed Equitable and with it the entire insurance industry. His shares in Equitable passed to his son, James Hazen Hyde, with a provision that they be held in trust until he reached the age of thirty in 1906. Alexander assumed the presidency with Hyde moving up to vice president even though he had just graduated from college the year before. Since Alexander was nearly sixty, this arrangement was viewed as a sort of regency.7
Young Hyde carried the same burden in life as George Gould. He was the pleasant, underachieving son of a hard-driving, overachieving father, the doting parent who had started life with nothing and was determined to give his son every advantage even though the effect was to make him unfit for the hard knocks of business life. Henry Hyde lavished love and affection as well as material things on his only son. “You have brought me up rather extravagantly,” James confessed in one of his many begging letters while at Harvard, where he lived an elegant lifestyle at his fathers expense. “I am a hot house flower, edition de luxe,” he sighed in another, “limited on fine paper, morocco binding, and I fear you never can make anything else out of me.”8
The elder Hyde died before he learned the painful truth of this observation. His death thrust James into the same trap that held George Gould prisoner. As vice-president he drew a salary that reached $100,000 by 1903 and was supplemented by smaller amounts from subsidiary companies. At twenty-six he had become the key figure in one of Americas top insurance companies, rubbing elbows with leading business and financial figures who treated him with a deference that led him to believe, as George Gould did, that his own talent and ability had earned him this exalted position.9
This was an illusion. As Henry Morgenthau observed sourly, fortune had given Hyde everything but character. Standing nearly six-four with handsome, aristocratic features, he dressed immaculately and spoke in a cultivated voice. The years at Harvard had given him a passion for things French. As a social denizen, Hyde made headlines not by his business coups but through lavish dinners and entertainments that drew the wrong kind of publicity to a man in charge of Equitable’s vast resources. While Morgenthau dismissed him as a “perfumed dandy and spoiled child of quickly gotten riches,” he was not a bad or dishonest man so much as a weak and shallow one.10
In society Hyde was a thoroughbred, sleek and fast; in business, however, he was a poodle among pit bulls. While Equitable’s own business slipped and its organization fell into disarray, Hyde and Alexander milked the financial subsidiaries with renewed vigor. They joined several underwriting syndicates for themselves, Equitable, and other officers. These ventures brought Hyde into close contact with leading bankers like Schiff and Stillman.11
Although Harriman handled some securities transactions for Equitable during his days as a broker, he had nothing to do with the company beyond occupying offices in its building until the spring of 1901. During the Northern Pacific fight he borrowed $2.7 million from Equitable at the prevailing rate of interest with no special considerations. The loan was renewed several times until Harriman paid it off in January 1904 because he got cheaper rates elsewhere. None of the aspersions later cast on this loan produced a shred of evidence showing it to be anything other than a routine business transaction.12
On the same day Harriman got the loan, however, he joined Equitable’s board. His duties were no more onerous than those of other directors, who merely rubber-stamped whatever was placed in front of them. In November 1902, when Harriman was putting together a syndicate to buy and hold $50 million worth of Union Pacific preferred as a defense against buyout threats, he offered Hyde a $2.5 million share. Hyde wanted the share put in Equitable’s name; Harriman insisted that it be in Hyde’s name because he did not want a corporation as a member of the syndicate. The result was a muddy transaction that later exposed both sides to undue criticism.13
Apart from the loan and the syndicate, Harriman had no dealings with Equitable other than attending board meetings. Given his habit of sticking his nose into everything around him, Equitable was probably the least he ever did in a corporation. This record might have continued unblemished had not a power struggle wracked the company. Since 1903 the insurance industry had been under attack for its high costs and arbitrary methods. The last thing prudent officers needed was publicity of the sort that would coalesce vague public discontent into hard demands for reform, yet that was exactly what Equitable produced in a fight for control that threw the company’s inner workings into harsh relief and in behavior by Hyde that cast him in the role of feckless socialite living the high life at the expense of the policyholders.14
The closer time drew for Alexander to surrender the reins to Hyde, the more reluctant he became to do it. Aware that the industry was becoming a target for muckraking journalists, Alexander came to the sound (and self-serving) conclusion that it was no longer feasible for control of so great a company to rest in the hands of one man. At a board meeting on February 8, 1905, he made his move by presenting one petition to mutualize Equitable—which would allow policyholders to vote for directors—and another protesting Hyde’s reelection as vice-president.15
An indignant Hyde saw these moves for what they were: a bald attempt to wrest the stock and the presidency from him. Nor was the timing an accident. Nine days earlier Hyde had thrown the most lavish of a long line of entertainments: a coming-out party for his niece at Sherry’s in the form of an eighteenth- century costume ball meant to recall the glory of Versailles under Louis XVI and Marie-Antoinette. Nothing like it had been seen since the infamous Bradley Martin ball in 1897. Harriman had been there along with William Rockefeller, George Gould, Stuyvesant Fish, and the cream of society.16
Although the papers treated the affair with restraint at first, the image of Hyde as a social butterfly played into Alexanders scheme to curb his power in Equitable. The board created a Committee of Twelve to consider the petitions and put Harriman on it along with Schiff and Henry Clay Frick. Hyde regarded Harriman as a friend who would support him in the fight, partly because Schiff was an ally and Harriman was close to Schiff. A few months earlier Hyde had asked Harriman to intervene in a suit brought against Mercantile Trust by Harriman’s good friend Governor Benjamin B. Odell. Harriman obliged by bringing Odell and Hyde together in his office. After some negotiation, at which Harriman was not present, the two men agreed to a settlement.17
Later Hyde charged that Harriman had conspired with Odell to wring top dollar out of him by using threats of political influence against Mercantile Trust. At the time, however, he accepted Harriman’s help gratefully. Mutualization required an amendment of Equitable’s charter, which had to be approved by the legislature. Aware that anything was possible in Albany, Hyde dropped by Harriman’s office after the fateful board meeting of February 8 and found him in conference with Odell. In discussing tactics, Odell assured them that a mutualization bill could be blocked but warned that it was always better to kill such bills early.18
When the Committee of Twelve met the next day, Harriman defended the existing system for electing directors and officers. Alexander countered with a lengthy report blasting Hyde and his influence in Equitable. He renewed the attack at a second meeting on February 14 and urged a quick settlement. Already the fight had gone public. When Schiff asked how the newspapers had got wind of the affair, Alexander admitted that he had sent two notices to agency managers in the Equitable system. In the uproar that followed, Harriman declared hotly that he would never vote for mutualization. Using this remark as an opening, Hyde then offered to place his stock in trust for five years and let the board vote it. Alexander dismissed the idea as merely postponing the issue for five years.19
Harriman was even more furious than Hyde. While patience was always his short suit, something in this brawl got his temper up in a way wholly out of proportion to his stake in it. He saw in Alexander’s maneuvers a pattern of disloyalty that sickened him as it did Schiff. Angrily he asked whether Alexander had consulted counsel before acting, then snarled before Alexander could reply, “God damn you! I’ll chuck you where you belong. I’ve got you where I want you, and I have the power to do it. And furthermore, you can repeat what I say in any private, personal or public way that you see fit.” The startled Alexander replied that he had consulted no less than five lawyers, but Harriman was not appeased. The meeting broke up in hopeless disagreement over a report. As Harriman left the room he growled to Hyde, “Now, more than ever, Albany is yours.”20
Hyde came away with the mistaken belief that the best and strongest men stood firmly behind his cause. He failed to grasp a subtle distinction: Harriman, Schiff, and others supported Hyde because they were outraged by Alexander and his tactics. They had no illusions about Hyde’s shortcomings and had simply reserved judgment on what his role in Equitable was ultimately to be.
Two days later, the board met in an atmosphere charged with tension. Unable to get a consensus from the Committee of Twelve, it appointed two men to consider the conflicting claims. Schiff was to represent the Hyde interests, second vice-president Gage Tarbell the Alexander side. After an hour’s discussion they brought in two recommendations: the society should mutualize, and the presidency should be left vacant for the present. Schiff tried to cut off debate only to be gaveled down by Alexander, who dismissed the report as an insult and vowed never to be legislated out of office.21
Only an eloquent plea from Chauncey Depew quelled the storm that threatened to rip the meeting apart. The sullen directors then rejected Hyde’s offer, reelected all officers, approved mutualization, and created a committee to bring it about. The debate spilled over into the Metropolitan Club and Wall Street, where reporters hunted eagerly for juicy morsels. Schiff warned Hyde pointedly to regard the outcome as “not so much a victory for you personally, than a rebuke of the methods employed by Mr. Alexander.”22
Harriman walked away from the meeting in disgust. The Equitable mess was deteriorating rapidly and eating up his time, but he saw no easy way out. A group of policyholders organized a committee to push for mutualization and hired as counsel Frank H. Platt, son of New York State Republican boss Thomas C. Platt. As an influential figure in the party, Harriman’saw the potential for all sorts of conflicts brewing.
For nearly a month the war raged in the papers. On March 21 the board met again and approved a plan for policyholders to elect twenty-eight of the fifty-two directors and stockholders the other twenty-four. After creating one committee to consult the state insurance superintendent about amending the charter, the board appointed another, headed by Henry Clay Frick, to investigate the company’s management. Harriman was among the five members of the Frick Committee, which became the storm center for the most explosive chapter in the Equitable fight.23
Afterward both sides cooed harmony to the press while privately feeding scurrilous accusations to reporters. Hyde remained confident that the Frick Committee would exonerate him, and he welcomed a second investigation by Francis Hendricks, the state superintendent of insurance. On March 19 Harri- man got a taste of just how ugly the fight had grown when the New York World informed the city that he had taken complete charge of Hyde’s campaign. By early April the Equitable was consuming most of his time and had drawn him into that open sewer known as New York state politics.24
Odell had gone to Europe in February, but his friends in Albany watched the legislature to prevent, in Harriman’s words, “a condition which would, if once started, end nobody knows where as far as the Life Insurance Companies were concerned.” But Harriman did not reckon with Hendricks. Both sides had approved the charter amendment and sent it to the commissioner for his blessing. Instead, he held it captive until Frank Platt and the policyholders’ committee could file affidavits charging irregularities by the board and the management. Harriman’spent two full days with Hendricks, who had first avoided him, trying to thrash out a solution.25
Gradually the game dawned on Harriman. He realized that Frank Platt and the policyholders’ committee were Alexander’s tools; that Alexander had secretly fed the committee the damaging material it released to the papers; and that he had captured Hendricks as well. “I must say,” Harriman fumed to Odell, “that this is the first time I have been so far below the strata into indecency in my life, and I have a feeling that it will take a long time to get rid of the filth.”
This long letter detailing his encounter with Hendricks reveals much about Harriman. As a private account to a close friend it may be assumed to contain no posturing or misleading statements. Harriman was furious over his rude treatment by Hendricks, but he also bellowed genuine shock and indignation at the political slime he found. “I can now understand,” he told Odell, “why you at times became somewhat disgusted in the political situation when you are brought so much in contact with the outfit represented at the Superintendent’s offices.”
This response betrayed Harriman’s curious naïveté about politics and his tendency to view complex matters in black-and-white terms shaped by the eternal verities that governed his life. Those verities imbued him with the strength and righteousness of the true believer who can do no wrong if his acts are in the service of the just. Like many businessmen, Harriman considered himself honest but did not hesitate to do the hard things his position required.
Lying was a classic example of this moral ambiguity. To men of delicate scruples, lying was wrong in any context. But even honest businessmen realized the practical necessity for lying in some situations. The real world was a clutter of clashing grays, not a stark skyline of black and white. While most men eventually came to terms with this contradiction, Harriman flew into a rage over any insinuation that he lied or hedged his principles. But he did lie. In April he told reporters flatly that he had never borrowed money from Equitable even though he had. Before the Armstrong Committee he denied ever having discussed the matter of a legislative investigation with Odell when in fact he had exchanged a flurry of cables with him during the spring of 1905.26
The fight had become grist for the newspapers and was being ground in large daily doses. Both sides kept feeding material to reporters, who added imaginative touches of their own. The dirt got so bad that the board finally begged both sides to stop talking to the press. Critics called for a new president untainted by past struggles. A second shrill cry rose from New York’s two Democratic papers, the World and the Sun, and was picked up by others in the hinterland: Hyde was a pawn for Harriman, who was scheming to get hold of Equitable, merge it with the other insurance giants, and put Standard Oil astride “nearly all the available money in the country.” The Sun warned that public opinion would never “tolerate a Harriman in the control of such a public institution as the Equitable Life.” One cartoon showed Harriman and Morgan fighting over a huge pile of insurance money.27
Bad publicity seldom bothered Harriman personally. Not that he ignored it; he pored over the papers in search of every article and cartoon about himself with almost childlike curiosity. But the Frick investigation impaled him on a nasty dilemma: the evidence was as damaging to Hyde as it was to Alexander. Henry Morgenthau examined a satchel full of documents that convinced him the case against Hyde was solid. He showed them to Harriman, who sent him to Elihu Root, one of the most astute legal and political minds in New York. It was unheard-of, Root warned, to oust a man who owned a majority of a company’s stock. How would public opinion respond, replied Morgenthau tersely, to having the life funds of widows and orphans at the mercy of a feckless young man?28
This last argument impressed Harriman deeply, as did the belief that Equitable had been badly mismanaged since Henry Hyde’s death. During May the newspapers paraded one episode of financial abuse after another across their columns along with portraits of Hyde as a social dandy who used company funds for his personal entertainments. Reluctantly Harriman concluded with Schiff that Hyde had to surrender his stock. Despite the storm he knew it would create, Harriman helped draft a report that condemned Alexander and Hyde equally while calling for a reorganized management to curb the “loose and irregular methods” of the past.29
When the Frick Committee presented its thirty-eight-page report to the board on May 31, a furor erupted at once. Shocked and hurt by its findings, Hyde denounced the report as unfair and accused Harriman and Frick of betraying him. What Harriman really wanted, he charged bitterly, was to get control of Equitable for himself. Harriman, Frick, and Cornelius Bliss responded by storming out of the room. The most delicious irony in the situation was that Harriman had managed to bring Hyde and Alexander together—against himself. Threatened equally by the report, the two adversaries joined forces against the committee and filled reporters’ ears with tales of a conspiracy to hand Equitable over to Standard Oil.30
Two days later the board met again and indulged in what M. E. Ingalls called “a cat and dog fight.” Once adoption of the Frick report was moved, Alexander made a formal reply to its charges. Hyde then took up his defense, saying it was the crisis of his life, and consumed the rest of the morning rebutting the charges against him. At the afternoon session Tarbell took his whack at the Frick report. Schiff then tried to intervene as peacemaker by defending Tarbell and offering three resolutions for reform. While these were being debated, Hyde jumped up suddenly and accused Ingalls of giving the Frick report to the press. He also asked snidely whether Ingalls had received a $1,000 rebate on his own policy.31
“Young man,” roared a livid Ingalls, “whom the gods would destroy they first make mad.”
Before Ingalls could say more, Hyde turned his wrath on Harriman, Schiff, and Frick. They had posed as his friends and advisers, he snarled, and now were trying to snatch control from him. His attack grew so vituperative that Harriman jumped up several times to interrupt him but was so infuriated that he could only sputter, “Oh wow-wow-wow,” in a manner that reminded some directors of a dog baying.32
Invectives flew back and forth until Frick bellowed, “I will no longer sit in the same board as that young man.” Depew pleaded for harmony, but a flushed Harriman joined Frick in resigning on the spot and storming out. Cornelius Bliss soon followed; Hyde applauded their exit as purifying the board. “I have quarreled with Mr. Alexander and he with me,” he said grimly, “and there is still bitter feeling between us, but he never tried to put me out of my property for the benefit of his own pocket, as these gentlemen have done.”
In his wrath Hyde overlooked the fact that the whole fight had erupted because Alexander tried to do precisely that. The desperate embrace of Hyde and Alexander saved neither of them. The board rejected the Frick report but also asked Hyde to divest his stock. Conservative businessmen cringed at the headlines spawned by the fight, fearing that they might provoke a broader investigation of the industry. Ingalls and Schiff joined the parade of resigned directors, which reached a total of twelve.33
No one relished the fight more than Joseph Pulitzer. His New York World could not find columns enough to fill with the sensational revelations pouring out of the fight. Day after day his reporters hammered gleefully at inviting targets who happened also to be powers in the state Republican Party. A Harriman confidant was quoted as promising that his leader would revenge himself on Hyde. The Democratic World thought it knew how this would be done. So far Harrimans influence with Odell had protected Hyde from political interference; now Albany might take a keen interest in the young man.34
Damage control had become a giant problem. As one shrewd observer warned, the public might conclude from the Equitable mess “that there was a similar laxness in the management of other insurance companies and if such laxness existed in the insurance field, the public was likely to argue that it might also exist in the banking and railroad fields.” Schiff worried that the affair might trigger a panic unless some settlement was reached fast. For Harriman, however, the issue remained intensely personal. He had been drawn into the fray because he felt obliged to help put Equitable’s management right. His effort had been thwarted and heaped with abuse, but he never quit a fight under fire. Instead of getting out, he plunged deeper into the fray—thanks in part to a stunning, unexpected move by Hyde.35
The key to any resolution of the Equitable dilemma lay in prying Hyde’s stock loose from him. Hyde’s reluctance to sell had emotional as well as financial roots: the company was a monument to a father he adored, and he could not bear to let go of it. He offered to put the stock in trust or sell it to the society, but Equitable had no legal power to buy it. As the scandal lapped nearer his father’s name, Hyde came to the sorrowful realization that he must sell. But to whom?36
Harriman wanted the stock but knew Hyde would never sell it to him under the circumstances. He was adamant that it be put in safe, impartial hands to ensure that the reforms within Equitable would proceed without interference. The board asked Hyde to divest within three months; he took less than a week. On Thursday, June 8, the World's headline bawled, “$10,000,000 SCANDAL UNCOVERED BY STATE IN EQUITABLE SOCIETY.” The next morning, as Harriman was hurrying from the Erie Ferry to his office, he heard that Hyde had sold the stock to Thomas Fortune Ryan.37
The news staggered Harriman. He brushed aside Hyde’s slur that he would make a bonfire of his stock rather than let Harriman buy it, but he could not brush Ryan aside. Although not well known to the public, Ryan was a force on Wall Street. He had made his mark in railroads, tobacco, and banking and had a reputation as a brilliant organizer, tough bargainer, and stealthy operator. A towering six feet six inches tall with broad shoulders, cheerful eyes, and a slow Virginia drawl, Ryan was a commanding figure. “He was a mystery, always,” declared Frank Vanderlip; “no one ever knew exactly what he was doing.” The fact that Ryan was a Democrat did not stop Pulitzer from depicting him as a wolf grazing ravenously among the Equitable lambs.38
These qualities were precisely what worried Harriman about putting Equitable’s stock in Ryan’s hands. In that moment Harriman appointed himself guardian of Equitable’s destiny even though he was no longer connected with the company. He did not pause to consider the ramifications for himself. The whole affair had already bled more time and energy than he could spare (“I want you and this committee, and everybody else, to understand,” he later snapped at the Armstrong Committee, “that I have something else to do besides devoting my time to life insurance”), yet he could not leave it so up in the air.39
Once at his office, Harriman called Ryan and asked if the rumor was true. It was, Ryan said in his slow way, adding that he wanted Harriman’s cooperation. Harriman rushed over to Ryans office and was told Ryan had done it to make a name for himself in a civic sense. He had made plenty of money but never done anything conspicuous; this was his bid to do something prominent. Harriman told Ryan bluntly that he could not help but doubt his motives, but if they were really unselfish, he could count on Harriman’s assistance.40
Ryan asked him to help get Paul Morton elected chairman of Equitable’s board, which was meeting that same afternoon. Harriman respected Morton, who had been a capable officer for the Atchison before serving as secretary of the navy. He talked to August Belmont, who opposed Mortons appointment, then telephoned Ryan to let him know Belmont had relented. Ryan thanked Harriman and promised to do nothing further without consulting him. He asked where Harriman would be that evening. Harriman was about to leave for Arden but agreed to wait at the Metropolitan Club for Ryans call.41
He was still there at eleven that night, fidgeting impatiently when lawyer Paul Cravath rushed up to him full of apologies. He had been sent by Ryan to brief Harriman on what had been done that day. Ryan had asked three men headed by former president Grover Cleveland to serve as trustees for the stock until mutualization could be carried out. He had picked men “of such character as to command universal confidence and having no connection with Wall Street.” Naturally, Ryan was sorry he had not been able to notify Harriman first.42
Enraged by the news, Harriman hissed at Cravath that he was not in the habit of being trifled with and would not tolerate this sign of bad faith on Ryan’s part. Before Cravath could reply, Harriman’spun on his heel and left. Next morning he got Ryan on the telephone, but nothing he heard satisfied him that Ryan was playing straight. On Monday he bounded into Ryans office to settle matters. Cravath was there, as was Elihu Root. Without any amenities Harriman barked, “You want my co-operation?”43
“Yes,” said the surprised Ryan.
“Well, I will tell you what I will do. I will take half your stock. I don’t know what it cost and do not care—provided you agree to the appointment of two additional trustees who will be absolutely independent.”
Ryan thought for a moment, then said, “I won’t do it. That is not what you agreed to.”
“What do you mean I agreed to?” snapped Harriman.
“You agreed that if you were satisfied that I was acting from an unselfish motive in the interest of the general situation and the society, that you would help me.”
“Yes, I did,” retorted Harriman, “and this is my way of satisfying myself.”
Later Ryan testified that Harriman threatened to use “his whole influence” against him if the stock was not shared. Harriman could not remember whether he said any such thing, which was plausible given his temper, but insisted that his only interest was to see Equitable “protected and properly safeguarded.” Ryan professed to want the same thing, but Harriman did not trust him, especially after Ryan had decoyed him. “It seemed to me,” Harriman’said, “that in denying the participation to myself or anybody else that… his motive was to center the control of the Equitable in himself.” He was not alone in wondering why a man would pay $2.5 million for stock that could earn only $3,514 in dividends. Wall Street and the press alike tantalized over Ryans real object, never believing for a moment that it might simply be what he said it was.44
Nor is civic duty alone a sufficient explanation for why Harriman got so wrought up over a fight in which he had so small an interest or why he was so blind to its repercussions. Paul Morton, who had just walked into the mess, offered a different slant. “We are likely to have a great row before we get through,” he wrote his wife, “because Harriman is so mad—he got terribly left in the shuffle and is horribly broken up about it. He shook the tree for months and months and Ryan walked off with the plums and now Harriman is hostile.”45
As Morton suggested, Harrimans cry of protest also came straight from his wounded ego. He never liked being thwarted, and nothing made him more furious than being used as a pawn in someone else’s game. “I was brought forward … in the insurance matter by Hyde and Ryan, and by their request for my help,” he later complained, “and in the case of Ryan I would probably have dropped the matter had it not been for my desire to save Belmont from taking a position for which he could have been criticized by the public press.”46
In his wrath Harriman failed utterly to see how suspect his own motives looked to other eyes. As it did with Hyde, public attention clamped more onto the image of Harriman wielding threats like a club than onto the issues involved. Ryan was an outsider who had come into the fray as a neutral; Harriman had been slugging it out for months. The fight with Ryan only reinforced the suspicion that Harriman was serving as point man for the Standard Oil crowd’s desire to get its hands on Equitable’s assets. Rumors were already afloat that he and Schiff were secret partners with Ryan. Rival bankers like James Speyer insinuated with malicious glee that Harriman and Schiff, “having walked out the front door [of Equitable], are now walking in at the rear.”47
These factors made it hard for anyone to view Harriman as fighting the good fight purely out of a sense of duty. The public could no more think that Harriman wanted nothing for himself than Harriman could believe it of Ryan. He looked like a man insatiable for power and ruthless in his drive to obtain it. Reporters had often portrayed Harriman as rude and ambitious but not as greedy or grasping. Now his image took on a new coloring that grew steadily more vivid as one improbable episode after another fed it.
Yet in the end Harriman got his way. Morton lost no time cleaning house, and Ryan kept his distance after handing the stock over to the trustees. Later, when public attention had moved past the insurance industry, Ryan quietly sold half of his Equitable stock to Harriman. Having reaped his dividend of glory, he was content to let Harriman’share the load. The transaction was kept so secret that when Morgan later went to buy the Equitable stock from Ryan, he was unaware that Harriman owned half of it. Eventually Morgan acquired these shares not from Harriman but from his widow.48
In getting what he wanted, Harriman paid a steep price. The Equitable scandal set in motion a chain of events that put him on the defensive for two years. While Morton put the Equitable house in order, Superintendent Hendricks released his report condemning the company in terms that went beyond the Frick report. As the quagmire deepened, Frank Vanderlip moaned that it had “done more to lose to Wall Street and Wall Street men the respect of ordinary people than anything that has happened in my knowledge of affairs.”49
The Democratic papers harped on the fact that Hendricks had not called Harriman to testify and asked whether it was because of the financier’s influence in Albany. Harriman did not feel obliged to appear because he was no longer on Equitable’s board. The World dissented in a lengthy feature entitled “HARRIMAN, THE HIDDEN FIGURE IN THE EQUITABLE SCANDAL,” and even friendly papers agreed with the Wall Street Journal that “to stand upon technicalities in this affair at this time, is practically to confess wrong-doing.” Governor Frank Higgins underscored this point by ordering what all sides feared most: a general investigation of the industry.50
The news caught Harriman as he was preparing to leave for Japan. He received a visit from the district attorney, who asked to see the Union Pacific syndicate agreement. Harriman’showed him the document and said that all his other papers were in Judge Lovett’s hands and available for inspection at any time. As Harriman left his office, he spied a reporter coming toward him. “Don’t ask me anything about Equitable matters,” he barked. The reporter inquired about his trip and received a curt answer. Then Harriman relented. “You fellows have a hard time, don’t you?” he asked.51
“We have our troubles,” the reporter admitted.
“There’s altogether too blame many of you,” Harriman observed. “Some of the papers have five or six men following me. That’s too blamed many.”
The next day Harriman released a statement categorically denying anything improper in his relations with Equitable, his loan, or the preferred stock syndicate. The real issue was mismanagement of the company rather than the transactions on which the papers had spilled so much ink. “There has been too much mystery surrounding the Equitable affairs,” he concluded. “I have always been ready and willing to answer any questions asked by any one entitled to make inquiry and have never tried in any way to avoid it.”52
With that explanation he departed for Japan, leaving in his wake a chorus of grumbling over who exactly qualified as “one entitled to make inquiry.” During his absence the Armstrong Committee of the state legislature opened its investigation of the insurance industry. It proved a long-running show, lasting deep into December as it gathered testimony from all the major players. From it flowed a steady stream of revelations and controversies that splashed into business circles outside the insurance industry as well.53
Equitable emerged from this ordeal looking no worse than the other major insurance companies, but it provided the most fireworks. The gaudiest display came in mid-November, when Hyde, Harriman, and Odell took the stand on successive days and unleashed a torrent of sensations. Hyde led off with his sad tale of betrayal by men posing as his friends. He accused Harriman and Frick of treachery and charged Odell with using Harriman to gain a favorable settlement through what amounted to blackmail in his suit to recover losses in United States Shipbuilding bonds.54
The next day Hyde watched with a sardonic smile as Harriman flatly contradicted his version of events. He recited his answers in a dry voice without gestures, as if holding his emotions in rigid check. The hotter the questions, the colder grew his responses with their strange lack of inflection. His expressionless features contrasted oddly with the fire in eyes that stared intently at Charles Evans Hughes. Only once did his control slip, when Hughes turned to address a lawyer and Harriman’snapped, “Mr. Hughes, I should like to have your attention.”55
Odell then took the stand and issued the same sweeping rebuttal. The contradictions were so complete that no one knew what to believe. Since the committee did not allow cross-examination, the discrepancy could not be resolved. This left its members confused and the papers free to draw their own conclusions. Most of them roasted all three men. The World skewered Hyde in a devastating cartoon showing him as a peacock plucked of all his feathers, which were being bundled off by Harriman, Odell, and Ryan. Editors were no less charitable to Harriman and Odell, about whom there hovered an odor of ham-handed political influence.56
Ryan refused at first to discuss his meetings with Harriman, then let it be coaxed out of him that Harriman had threatened to use all his influence (which Ryan assumed meant political influence) against him if he did not sell half the stock. Recalled to the stand, Harriman gave events a different slant, but he could not deny the threats. They had burst out of him, as similar ones had so many times before. This remarkable performance gave the committee and reporters a tantalizing choice. Was Harriman’s temper so explosive that he routinely fired off threats without even remembering them? Or, if he was lying about recalling the threats, why didn’t he simply deny that any of it took place? The one constant in any interpretation was the image of a ruthless, overbearing bully who let nothing stand in the way of what he wanted.57
As the tide of criticism mounted, Otto Kahn tried to warn Harriman that it was becoming dangerous and required some response from him. But Harriman ignored him. “Let them kick,” he shrugged. “They have the advantage because they will tell lies about me, and I won’t about them. And as for the effect in the long run, why, the people always find out what’s what in the end, and I can wait. Let those fellows continue to shout and to kick against air. I need my time and energy to do things.”58
These were noble sentiments, but Harriman did not yet know just how loud his detractors would shout or how hard they would kick. Here as with so many other things, he had to find out the hard way.