CHAPTER III

THE PANIC OF 1907

DURING no other portion of his Presidential service was Roosevelt more fiercely assailed with hostile criticism than he was in 1907. Early in that year signs were visible of serious financial disturbances, not only in the United States but in Europe. A formidable and concerted effort was made by the opponents of the President's policy in regard to railway and other corporations suspected of violations of law, to use those disturbances as an inducement for him to moderate that policy and to abandon temporarily legal proceedings that had been instituted under his direction. In his message to Congress in December, 1906, he had adhered steadfastly to his policy and had declared that while the powers conferred upon the Interstate Commerce Commission had been productive of excellent results, still there would ultimately be need of enlarging those powers along several different lines so as to give the Commission larger and more efficient control over the railroads. In November, 1906, the Government had brought suit against the Standard Oil Company as a combination in restraint of trade, and about the same time had begun an investigation of the Union Pacific or Harriman lines. Appeals for modification or temporary suspension or compromise poured in upon him from many sources, including persons who had hitherto upheld his course. Lifelong friends turned against him and joined the chorus of those who had been his most venomous assailants. The assaults upon him increased in ferocity when he refused to swerve a particle from his course. His letters at this time show that he was entirely unmoved by the appeals either of friends or of foes, because he was convinced absolutely of the justice and wis

dom of his policy. From a large number of these letters, among the most earnest and convincing that he ever wrote, I select a few which are typical of all, beginning with one written on January 24, 1907, to Paul Morton, a former member of his Cabinet, and at the time President of the Equitable Life Insurance Company of New York:

"I suppose that your letter was really based upon this Harriman investigation. It would in my judgment be most undesirable for the ultimate good of the railways to interfere in any way with a full and fair investigation. However, I am certain that we have got to make up our minds that the railroads must not in the future do things that cannot bear the light. If trouble comes from having the light turned on, remember it is not really due to the light but the misconduct which it exposed.

"I quite agree with you that there is danger in illdirected agitation, and especially in agitation in the States; but the only way to meet it is by having the fullest and most thorough investigation by the national government, and in conferring upon the national government full power to act. The federal authorities, including the President, must state as clearly as possible that railroads which do well are to be encouraged and when they make a good showing it is to be emphasized; and that the people who invest will be given a chance of profit which alone will make them willing to invest, and which alone will make big men willing to undertake the job.

"Do you ever see Judge Gary? He has assured us that the publicity given by the investigation of the national government to the steel corporation is welcome and will do good and not harm.”

An appeal from an attorney in the employ of Harriman, on January 31, 1907, called forth a reply which is an admirable specimen of Roosevelt's thorough and direct method of dealing with charges of misconduct against his associates in the Government:

"Last winter you came to me on several occasions, some

times with and sometimes without Mr. Harriman, assuring me that very grave errors and shortcomings existed in the work of the Interstate Commerce Commission, these being due primarily to the work of the statistician, Mr. Adams. The allegations made were so grave that I had both of you meet certain members of the Commission, on which occasion you stated that you would be able to get the Commission in possession of information, which would practically revolutionize much of the work they were doing, if you were given the chance to have access to their books. The Commission, at my request, gave you such access. You were engaged in the research last spring. When I returned to Washington last fall I heard from both Mr. Harriman and you on different occasions that you had found errors of the gravest and grossest character in the work of the statistician-errors which completely nullified and rendered valueless the work of the whole Commission.

"The charges you had made and were then making were of so grave a character that I did not feel justified in failing to give you every opportunity to substantiate them; for of course there was nothing more important than to find out whether or not the work of the Interstate Commerce Commission was accurate and trustworthy. I endeavored to have Mr. Harriman state to me definitely what the charges were. You admitted that your only knowledge of the matter was from him. I found it almost impossible to pin him down to any definite statement; and finally, in view of the repeated statements of both you and himself that only experts could go into the matter, I appointed Mr. O. P. Austin to look into the charges. He reported to me that after careful examination of the charges as presented in the paper of Mr. Harriman, and of the reply of Professor Adams, he believed the charges were without foundation.

"You and Mr. Harriman insisted that Mr. Austin had erred, and you yourself suggested that I should have Mr. Neill and one or more bank examiners examine your charges. I summoned Mr. Harriman to meet me with Mr.

Neill, Mr. Garfield and Mr. Adams. I spent an entire evening endeavoring to get Mr. Harriman to make specific charges, telling him that he had been many months at work and that it was out of the question for me any longer to accept general allegations or sweeping accusations without specific statements to back them up. It proved exceedingly difficult to pin him down to anything specific; but I finally did pin him down to three definite charges. I explained to him repeatedly that he must then and there make any charges he had to make; that it was impossible to take up the time of officers of the administration any longer with loose declarations and that I would consider nothing whatever save what charges he then and there presented; that I would have them tested by a commission consisting of Mr. Garfield, Mr. Neill, and a Mr. Starek, one of the best bank examiners in the Government service. The examination has been made and the charges of Mr. Harriman are found to be without any foundation whatever. Under the circumstances it would be simply folly for me to pay any further heed to any allegations whatever made in regard to the work of the Interstate Commerce Commission by either Mr. Harriman or you. The incident is closed and I shall forward a copy of this letter to the Chairman of the Interstate Commerce Commission."

A rather persistent appellant was Colonel Henry L. Higginson of Boston, to whom these two replies were sent: February 11, 1907.

"The present unsatisfactory condition in railroad affairs is due ninety-five per cent to the misconduct, the short-sightedness, and the folly of the railroad men themselves. Unquestionably there is loose demagogic attack upon them in some of the States, but not one particle of harm has come to them by Federal action; on the contrary, merely good. I wish very much that our laws could be strengthened, and I think that the worst thing that could be done for the railroads would be an announcement that for two or three years the Federal Government would keep

its hands off of them. It would result in a tidal wave of violent State action against them throughout three-fourths of this country. I am astonished at the curious shortsightedness of the railroad people-a short-sightedness which, thanks to their own action, extends to would-be investors. Legislation such as I have proposed, or whatever legislation in the future I shall propose, will be in the interest of honest investors and to protect the public and the investors against dishonest action.

"I may incidentally say that I think that no possible action on railroads would have as disturbing an effect upon business as action on the tariff at this time. I earnestly and cordially agree with you on the need of currency legislation, and have been doing all I can for it; but the big financial men of the country, instead of trying to get sound currency legislation, seem to pass their time in lamenting, as Wall Street laments, our action about the railroads."

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March 28, 1907.

. You say that the fear of investors in railway securities must be dispelled; and you say that the people now have the impression that the greatest business interests (those of railroads) are imperiled. I am inclined to think that this is the case. If so, the responsibility lies primarily and overwhelmingly upon the railway and corporation people—that is, the manipulators of railroad and other corporation stocks-who have been guilty of such scandalous irregularities during the last few years. Secondarily it lies, of course, with the agitators and visionaries to whom the misdeeds of the conscienceless speculators I have named gave the chance to impress the people as a whole. Not one word of mine; not one act, administrative or legislative, of the National Government, is responsible, directly or indirectly, in any degree whatsoever for the present situation. I trust I have stated this with sufficient emphasis, for it would be quite impossible to overemphasize it. Two years ago the railroads were all clamoring against the passage of the rate law-an act of folly on their part and on the part