They further informed me that, as a matter of fact, the policy of the company has been to decline to acquire more than sixty percent of the steel properties, and that this purpose has been persevered in for several years past, with the object of preventing these accusations, and, as a matter of fact, their proportion of steel properties has slightly decreased, so that it is below this sixty percent, and the acquisition of the property in question will not raise it above sixty percent. But they feel that it is immensely to their interest, as to the interest of every responsible businessman, to try to prevent a panic and general industrial smash-up at this time, and that they are willing to go into this transaction, which they would not otherwise go into, because it seems the opinion of those best fitted to express judgment in New York that it will be an important factor in preventing a break that might be ruinous; and that this has been urged upon them by the combination of the most responsible bankers in New York who are now thus engaged in endeavoring to save the situation. But they asserted that they did not wish to do this if I stated that it ought not to be done. I answered that, while of course I could not advise them to take the action proposed, I felt it no public duty of mine to interpose any objections.
Mr. Bonaparte received this note in about an hour, and that same morning he came over, acknowledged its receipt, and said that my answer was the only proper answer that could have been made, having regard both to the law and to the needs of the situation. He stated that the legal situation had been in no way changed, and that no sufficient ground existed for prosecution of the Steel Corporation. But I acted purely on my own initiative, and the responsibility for the act was solely mine.
I was intimately acquainted with the situation in New York. The word “panic” means fear, unreasoning fear; to stop a panic it is necessary to restore confidence; and at the moment the so-called Morgan interests were the only interests which retained a full hold on the confidence of the people of New York—not only the business people, but the immense mass of men and women who owned small investments or had small savings in the banks and trust companies. Mr. Morgan and his associates were of course fighting hard to prevent the loss of confidence and the panic distrust from increasing to such a degree as to bring any other big financial institutions down; for this would probably have been followed by a general, and very likely a worldwide, crash. The Knickerbocker Trust Company had already failed, and runs had begun on, or were threatened as regards, two other big trust companies. These companies were now on the fighting line, and it was to the interest of everybody to strengthen them, in order that the situation might be saved. It was a matter of general knowledge and belief that they, or the individuals prominent in them, held the securities of the Tennessee Coal and Iron Company, which securities had no market value, and were useless as a source of strength in the emergency. The Steel Corporation securities, on the contrary, were immediately marketable, their great value being known and admitted all over the world—as the event showed. The proposal of Messrs. Frick and Gary was that the Steel Corporation should at once acquire the Tennessee Coal and Iron Company, and thereby substitute, among the assets of the threatened institutions (which, by the way, they did not name to me), securities of great and immediate value for securities which at the moment were of no value. It was necessary for me to decide on the instant, before the Stock Exchange opened, for the situation in New York was such that any hour might be vital, and failure to act for even an hour might make all subsequent effort to act utterly useless. From the best information at my disposal, I believed (what was actually the fact) that the addition of the Tennessee Coal and Iron property would only increase the proportion of the Steel Company’s holdings by about four percent, making them about sixty-two percent instead of about fifty-eight percent of the total value in the country; an addition which, by itself, in my judgment (concurred in, not only by the Attorney-General but by every competent lawyer), worked no change in the legal status of the Steel corporation. The diminution in the percentage of holdings, and production, has gone on steadily, and the percentage is now about ten percent less than it was ten years ago.
The action was emphatically for the general good. It offered the only chance for arresting the panic, and it did arrest the panic. I answered Messrs. Frick and Gary, as set forth in the letter quoted above, to the effect that I did not deem it my duty to interfere, that is, to forbid the action which more than anything else in actual fact saved the situation. The result justified my judgment. The panic was stopped, public confidence in the solvency of the threatened institution being at once restored.
Business was vitally helped by what I did. The benefit was not only for the moment. It was permanent. Particularly was this the case in the South. Three
