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.Their attitude was perhaps most forcefully expressed by corpo-rate lawyer and trust promoter John Dos Passos in his testimony before theU.S.Industrial Commission in December 1899.Dos Passos’s defense mayhave been a bit overheated, but it refl ected the common opinions of promot-ers and fi nanciers.The Commissioners sat politely for what must have beenhours, listening to Dos Passos hector them for passing the Interstate Com-*The careful reader will notice that $676 million and $727 million exceed $1.4 billion.For ease of reading here and throughout, I have rounded aggregate numbers but retained the component numbers as they appear in the different reports.• 69 •The Speculation Economymerce Act of 1887.He extolled the virtues of the free market like a revivalistpreacher.Dos Passos evidently was so pleased with his own rhetoric that hepublished his testimony as a book.22Dos Passos was a fi ercely antiregulatory Social Darwinist.After leavinghis tempestuous family in Philadelphia, he became an offi ce boy in a lawfi rm and began to read law, interrupted only by his service as a drummerin the Civil War.Upon his return from Antietam, where he had been putout of commission by dysentery, he apprenticed himself to a lawyer and at-tended night classes at the University of Pennsylvania’s law school, enteringthe bar in 1865.Two years later he moved to New York, where he quicklyestablished an important reputation by his successful defenses of two ac-cused murderers.He earned particular notoriety for his victory in the case ofsocialite Edward S.Stokes, who killed Jim Fisk in a fi ght over Fisk’s mistress.Forming a partnership with his brother in the Wall Street area, Dos Passosstarted to represent brokerage fi rms.He earned the bulk of his wealth as atrust lawyer, putting together Havemeyer’s Sugar Trust as well as several oth-ers.Among his projects was the fi rst tunnel connecting New York and NewJersey beneath the Hudson River.It was a project he abandoned to the youngWilliam Gibbs McAdoo, who later became Wilson’s treasury secretary andson-in-law.Dos Passos was a passionate man, and one of his passions was free-mar-ket capitalism.He had a “fl amboyant personality, fl air for the grand gesture,and inordinate powers of persuasion,” such that he could have “talked theblindfold off the goddess of justice herself with only half a tongue.” It was this last quality that must have led the Industrial Commissioners to tolerate hoursof his bullying testimony.23Dos Passos admitted that overcapitalization was an “undoubted” al-though curable “evil,” but claimed that it was necessary, at least in the forma-tion of the railroads and, by implication, the big industrial combinations.Recall that one of the ways railroads overcapitalized was by issuing bonusstock, the speculative stock that gave creditors a chance to share in the futureprofi ts of a corporate combination.Dos Passos explained that this potentialfor profi t was the key to persuading skittish Europeans to invest in railroadbonds: “Now, before you dissolve [the Commission], call before your com-mission those men who talk about overcapitalization and examine them; getat the facts;.I am not defending infl ation.I am speaking of the facts.I am giving you the facts, and showing you that there was no possibility of moneybeing raised except through the instrumentality of these large bonuses.” 24Sam Untermyer, who gave up watering stock to become a crusaderagainst Wall Street, agreed with Dos Passos as late as 1914 when the issue was• 70 •Transcendental Valuestill hot in some quarters.Minnesota’s Senator Knute Nelson, questioningUntermyer in a hearing on stock exchange regulation, suggested that theNew York Stock Exchange should be banned from listing companies withwatered stock.Untermyer’s response refl ected the standard business defenseof overcapitalization: “That would be a pretty drastic proposition, and I hopewe are not going so far as that.I, for one, am not prepared to urge such adrastic program as that, because you never would have had a railroad built ifthat had been the program.It would not allow anything for the goodwill ofany project, and goodwill is quite an essential element of value, as much so asphysical assets, and frequently more essential.” Necessity was the mother ofinvention [ Pobierz całość w formacie PDF ]