Theodore Roosevelt: an Autobiography — Ch 12-The Big Stick and the Square Deal, pt 2

There was another amusing incident in connection with the passage of the bill.

All the wise friends of the effort to secure Governmental control of corporations know that this Government control must be exercised through administrative and not judicial officers if it is to be effective.

Everything possible should be done to minimize the chance of appealing from the decisions of the administrative officer to the courts.

But it is not possible Constitutionally, and probably would not be desirable anyhow, completely to abolish the appeal.

Unwise zealots wished to make the effort totally to abolish the appeal in connection with the Hepburn Bill.

Representatives of the special interests wished to extend the appeal to include what it ought not to include.

Between stood a number of men whose votes would mean the passage of, or the failure to pass, the bill, and who were not inclined towards either side.

Three or four substantially identical amendments were proposed, and we then suddenly found ourselves face to face with an absurd situation.

The good men who were willing to go with us but had conservative misgivings about the ultra-radicals would not accept a good amendment if one of the latter proposed it; and the radicals would not accept their own amendment if one of the conservatives proposed it.

Each side got so wrought up as to be utterly unable to get matters into proper perspective; each prepared to stand on unimportant trifles; each announced with hysterical emphasis--the reformers just as hysterically as the reactionaries--that the decision as regards each unimportant trifle determined the worth or worthlessness of the measure.

Gradually we secured a measurable return to sane appreciation of the essentials.

Finally both sides reluctantly agreed to accept the so-called Allison amendment which did not, as a matter of fact, work any change in the bill at all.

The amendment was drawn by Attorney-General Moody after consultation with the Inter-State Commerce Commission, and was forwarded by me to Senator Dolliver; it was accepted, and the bill became law.

Thanks to this law and to the way in which the Inter-State Commerce Commission was backed by the Administration, the Commission, under men like Prouty, Lane, and Clark, became a most powerful force for good.

Some of the good that we had accomplished was undone after the close of my Administration by the unfortunate law creating a Commerce Court; but the major part of the immense advance we had made remained.

There was one point on which I insisted, and upon which it is necessary always to insist.

The Commission cannot do permanent good unless it does justice to the corporations precisely as it exacts justice from them.

The public, the shippers, the stock and bondholders, and the employees, all have their rights, and none should be allowed unfair privileges at the expense of the others.

Stock watering and swindling of any kind should of course not only be stopped but punished.

When, however, a road is managed fairly and honestly, and when it renders a real and needed service, then the Government must see that it is not so burdened as to make it impossible to run it at a profit.

There is much wise legislation necessary for the safety of the public, or--like workmen's compensation--necessary to the well-being of the employee, which nevertheless imposes such a burden on the road that the burden must be distributed between the general public and the corporation, or there will be no dividends.

In such a case it may be the highest duty of the commission to raise rates; and the commission, when satisfied that the necessity exists, in order to do justice to the owners of the road, should no more hesitate to raise rates, than under other circumstances to lower them.

So much for the "big stick" in dealing with the corporations when they went wrong.

Now for a sample of the square deal.

In the fall of 1907 there were severe business disturbances and financial stringency, culminating in a panic which arose in New York and spread over the country.

The damage actually done was great, and the damage threatened was incalculable.

Thanks largely to the action of the Government, the panic was stopped before, instead of being merely a serious business check, it became a frightful and Nation-wide calamity, a disaster fraught with untold misery and woe to all our people.

For several days the Nation trembled on the brink of such a calamity, of such a disaster.

During these days both the Secretary of the Treasury and I personally were in hourly communication with New York, following every change in the situation, and trying to anticipate every development.

It was the obvious duty of the Administration to take every step possible to prevent appalling disaster by checking the spread of the panic before it grew so that nothing could check it.

And events moved with such speed that it was necessary to decide and to act on the instant, as each successive crisis arose, if the decision and action were to accomplish anything.

The Secretary of the Treasury took various actions, some on his own initiative, some by my direction.

Late one evening I was informed that two representatives of the Steel Corporation wished to see me early the following morning, the precise object not being named.

Next morning, while at breakfast, I was informed that Messrs. Frick and Gary were waiting at the office.

I at once went over, and, as the Attorney-General, Mr. Bonaparte, had not yet arrived from Baltimore, where he had been passing the night, I sent a message asking the Secretary of State, Mr. Root, who was also a lawyer, to join us, which he did.

Before the close of the interview and in the presence of the three gentlemen named, I dictated a note to Mr. Bonaparte, setting forth exactly what Messrs. Frick and Gary had proposed, and exactly what I had answered--so that there might be no possibility of misunderstanding.

This note was published in a Senate Document while I was still President.

It runs as follows: THE WHITE HOUSE, Washington, November 4, 1907. My dear Mr. Attorney-General: Judge E. H.

Gary and Mr. H.

C.

Frick, on behalf of the Steel Corporation, have just called upon me.

They state that there is a certain business firm (the name of which I have not been told, but which is of real importance in New York business circles), which will undoubtedly fail this week if help is not given.

Among its assets are a majority of the securities of the Tennessee Coal Company.

Application has been urgently made to the Steel Corporation to purchase this stock as the only means of avoiding a failure.

Judge Gary and Mr. Frick informed me that as a mere business transaction they do not care to purchase the stock; that under ordinary circumstances they would not consider purchasing the stock, because but little benefit will come to the Steel Corporation from the purchase; that they are aware that the purchase will be used as a handle for attack upon them on the ground that they are striving to secure a monopoly of the business and prevent competition--not that this would represent what could honestly be said, but what might recklessly and untruthfully be said.

They further informed me that, as a matter of fact, the policy of the company has been to decline to acquire more than sixty per cent 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 per cent, and the acquisition of the property in question will not raise it above sixty per cent.

But they feel that it is immensely to their interest, as to the interest of every responsible business man, 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.

Sincerely yours, (Signed) THEODORE ROOSEVELT.

HON.

CHARLES J.

BONAPARTE, Attorney-General.

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 per cent, making them about sixty-two per cent instead of about fifty-eight per cent 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 per cent 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 or four years afterwards I visited Birmingham.

Every man I met, without exception, who was competent to testify, informed me voluntarily that the results of the action taken had been of the utmost benefit to Birmingham, and therefore to Alabama, the industry having profited to an extraordinary degree, not only from the standpoint of the business, but from the standpoint of the community at large and of the wage-workers, by the change in ownership.

The results of the action I took were beneficial from every standpoint, and the action itself, at the time when it was taken, was vitally necessary to the welfare of the people of the United States.

I would have been derelict in my duty, I would have shown myself a timid and unworthy public servant, if in that extraordinary crisis I had not acted precisely as I did act.

In every such crisis the temptation to indecision, to non-action, is great, for excuses can always be found for non-action, and action means risk and the certainty of blame to the man who acts.

But if the man is worth his salt he will do his duty, he will give the people the benefit of the doubt, and act in any way which their interests demand and which is not affirmatively prohibited by law, unheeding the likelihood that he himself, when the crisis is over and the danger past, will be assailed for what he has done.

Every step I took in this matter was open as the day, and was known in detail at the moment to all people.

The press contained full accounts of the visit to me of Messrs. Frick and Gary, and heralded widely and with acclamation the results of that visit.

At the time the relief and rejoicing over what had been done were well-nigh universal.

The danger was too imminent and too appalling for me to be willing to condemn those who were successful in saving them from it.

But I fully understood and expected that when there was no longer danger, when the fear had been forgotten, attack would be made upon me; and as a matter of fact after a year had elapsed the attack was begun, and has continued at intervals ever since; my ordinary assailant being some politician of rather cheap type.

If I were on a sail-boat, I should not ordinarily meddle with any of the gear; but if a sudden squall struck us, and the main sheet jammed, so that the boat threatened to capsize, I would unhesitatingly cut the main sheet, even though I were sure that the owner, no matter how grateful to me at the moment for having saved his life, would a few weeks later, when he had forgotten his danger and his fear, decide to sue me for the value of the cut rope.

But I would feel a hearty contempt for the owner who so acted.

There were many other things that we did in connection with corporations.

One of the most important was the passage of the meat inspection law because of scandalous abuses shown to exist in the great packing-houses in Chicago and elsewhere.

There was a curious result of this law, similar to what occurred in connection with the law providing for effective railway regulation.

The big beef men bitterly opposed the law; just as the big railway men opposed the Hepburn Act.

Yet three or four years after these laws had been put on the statute books every honest man both in the beef business and the railway business came to the conclusion that they worked good and not harm to the decent business concerns.

They hurt only those who were not acting as they should have acted.

The law providing for the inspection of packing-houses, and the Pure Food and Drugs Act, were also extremely important; and the way in which they were administered was even more important.

It would be hard to overstate the value of the service rendered in all these cases by such cabinet officers as Moody and Bonaparte, and their outside assistants of the stamp of Frank Kellogg.

It would be useless to enumerate all the suits we brought.

Some of them I have already touched upon.

Others, such as the suits against the Harriman railway corporations, which were successful, and which had been rendered absolutely necessary by the grossly improper action of the corporations concerned, offered no special points of interest.

The Sugar Trust proceedings, however, may be mentioned as showing just the kind of thing that was done and the kind of obstacle encountered and overcome in prosecutions of this character.

It was on the advice of my secretary, William Loeb, Jr. , afterward head of the New York Custom-House, that the action was taken which started the uncovering of the frauds perpetrated by the Sugar Trust and other companies in connection with the importing of sugar.

Loeb had from time to time told me that he was sure that there was fraud in connection with the importations by the Sugar Trust through the New York Custom-House.

Finally, some time toward the end of 1904, he informed me that Richard Parr, a sampler at the New York Appraisers' Stores (whose duties took him almost continually on the docks in connection with the sampling of merchandise), had called on him, and had stated that in his belief the sugar companies were defrauding the Government in the matter of weights, and had stated that if he could be made an investigating officer of the Treasury Department, he was confident that he could show there was wrongdoing.

Parr had been a former school fellow of Loeb in Albany, and Loeb believed him to be loyal, honest, and efficient.

He thereupon laid the matter before me, and advised the appointment of Parr as a special employee of the Treasury Department, for the specific purpose of investigating the alleged sugar frauds.

I instructed the Treasury Department accordingly, and was informed that there was no vacancy in the force of special employees, but that Parr would be given the first place that opened up.

Early in the spring of 1905 Parr came to Loeb again, and said that he had received additional information about the sugar frauds, and was anxious to begin the investigation.

Loeb again discussed the matter with me; and I notified the Treasury Department to appoint Parr immediately.

On June 1, 1905, he received his appointment, and was assigned to the port of Boston for the purpose of gaining some experience as an investigating officer.

During the month he was transferred to the Maine District, with headquarters at Portland, where he remained until March, 1907. During his service in Maine he uncovered extensive wool smuggling frauds.

At the conclusion of the wool case, he appealed to Loeb to have him transferred to New York, so that he might undertake the investigation of the sugar underweighing frauds.

I now called the attention of Secretary Cortelyou personally to the matter, so that he would be able to keep a check over any subordinates who might try to interfere with Parr, for the conspiracy was evidently widespread, the wealth of the offenders great, and the corruption in the service far-reaching--while moreover as always happens with "respectable" offenders, there were many good men who sincerely disbelieved in the possibility of corruption on the part of men of such high financial standing.

Parr was assigned to New York early in March, 1907, and at once began an active investigation of the conditions existing on the sugar docks.

This terminated in the discovery of a steel spring in one of the scales of the Havemeyer & Elder docks in Brooklyn, November 20, 1907, which enabled us to uncover what were probably the most colossal frauds ever perpetrated in the Customs Service.

From the beginning of his active work in the investigation of the sugar frauds in March, 1907, to March 4, 1909, Parr, from time to time, personally reported to Loeb, at the White House, the progress of his investigations, and Loeb in his turn kept me personally advised.

On one occasion there was an attempt made to shunt Parr off the investigation and substitute another agent of the Treasury, who was suspected of having some relations with the sugar companies under investigation; but Parr reported the facts to Loeb, I sent for Secretary Cortelyou, and Secretary Cortelyou promptly took charge of the matter himself, putting Parr back on the investigation.

During the investigation Parr was subjected to all sorts of harassments, including an attempt to bribe him by Spitzer, the dock superintendent of the Havemeyer & Elder Refinery, for which Spitzer was convicted and served a term in prison.

Brzezinski, a special agent, who was assisting Parr, was convicted of perjury and also served a term in prison, he having changed his testimony, in the trial of Spitzer for the attempted bribery of Parr, from that which he gave before the Grand Jury.

For his extraordinary services in connection with this investigation Parr was granted an award of ,000 by the Treasury Department.

District-Attorney Stimson, of New York, assisted by Denison, Frankfurter, Wise, and other employees of the Department of Justice, took charge of the case, and carried on both civil and criminal proceedings.

The trial in the action against the Sugar Trust, for the recovery of duties on the cargo of sugar, which was being sent over the scales at the time of the discovery of the steel spring by Parr, was begun in 1908; judgment was rendered against the defendants on March 5, 1909, the day after I left office.

Over four million dollars were recovered and paid back into the United States Treasury by the sugar companies which had perpetrated the various forms of fraud.

These frauds were unearthed by Parr, Loeb, Stimson, Frankfurter, and the other men mentioned and their associates, and it was to them that the people owed the refunding of the huge sum of money mentioned.

We had already secured heavy fines from the Sugar Trust, and from various big railways, and private individuals, such as Edwin Earle, for unlawful rebates.

In the case of the chief offender, the American Sugar Refining Company (the Sugar Trust), criminal prosecutions were carried on against every living man whose position was such that he would naturally know about the fraud.

All of them were indicted, and the biggest and most responsible ones were convicted.

The evidence showed that the president of the company, Henry O. Havemeyer, virtually ran the entire company, and was responsible for all the details of the management.

He died two weeks after the fraud was discovered, just as proceedings were being begun.

Next to him in importance was the secretary and treasurer, Charles R. Heike, who was convicted.

Various other officials and employees of the Trust, and various Government employees, were indicted, and most of them convicted.

Ernest W. Gerbracht, the superintendent of one of the refineries, was convicted, but his sentence was commuted to a short jail imprisonment, because he became a Government witness and greatly assisted the Government in the suits.

Heike's sentence was commuted so as to excuse him from going to the penitentiary; just as the penitentiary sentence of Morse, the big New York banker, who was convicted of gross fraud and misapplication of funds, was commuted.

Both commutations were granted long after I left office.

In each case the commutation was granted because, as was stated, of the prisoner's age and state of health.

In Morse's case the President originally refused the request, saying that Morse had exhibited "fraudulent and criminal disregard of the trust imposed upon him," that "he was entirely unscrupulous as to the methods he adopted," and "that he seemed at times to be absolutely heartless with regard to the consequences to others, and he showed great shrewdness in obtaining large sums of money from the bank without adequate security and without making himself personally liable therefor."

The two cases may be considered in connection with the announcement in the public press that on May 17, 1913, the President commuted the sentence of Lewis A. Banks, who was serving a very long term penitentiary sentence for an attack on a girl in the Indian Territory; "the reason for the commutation which is set forth in the press being that 'Banks is in poor health.'

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