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October 24, 1907.
Reports from the money
crowd early indicated that borrowers would have to pay whatever the lenders saw
fit to ask. There wouldn't be enough to go around. That day the money crowd
was much larger than usual. When delivery time came that afternoon there must
have been a hundred brokers around the Money Post, each hoping to borrow the
money that his firm urgently needed. Without money they must sell what stocks
they were carrying on margin-sell at any price they could get in a market
where buyers were as scarce as money and just then there was not a dollar in
sight.
My friend's partner was
as bearish as I was. The firm therefore did not have to borrow, but my
friend, the broker I told you about, fresh from seeing the haggard faces
around the Money Post, came to me. He knew I was heavily short of the entire
market.
He said, "My God,
Larry! I don't know what's going to happen. I never saw anything like it. It
can't go on. Something has got to give. It looks to me as if everybody is
busted right now. You can't sell stocks, and there is absolutely no money in
there."
"How do you
mean?" I asked.
But what he answered was,
"Did you ever hear of the classroom experiment of the mouse in a
glass-bell when they begin to pump the air out of the bell? You can see the
poor mouse breathe faster and faster, its sides heaving like overworked
bellows, trying to get enough oxygen out of the decreasing supply in the
bell. You watch it suffocate till its eyes almost pop out of their sockets,
gasping, dying. Well, that is what I think of when I see the crowd at the
Money Post! No money anywhere, and you can't liquidate stocks because there
is nobody to buy them.
The whole Street is broke
at this very moment, if f you ask me!" It made me think. I had seen a
smash coming, but not, I admit, the worst panic in our history. It might not be
profitable to anybody if it went much further. Finally it became plain that
there was no use in waiting at the Post for money. There wasn't going to be
any. Then hell broke loose.
The president of the
Stock Exchange, Mr. R. H. Thomas, so I heard later in the day, knowing that
every house in the Street was headed for disaster, went out in search of
succour. He called on James Stillman, president of the National City Bank,
the richest bank in the United
States. Its boast was that it never loaned
money at a higher rate than 6 per cent. Stillman heard what the president of
the New York Stock Exchange had to say. Then he said, "Mr. Thomas, we'll
have to go and see Mr. Morgan about this."
The two men, hoping to
stave off the most disastrous panic in our financial history, went together
to the office of J. P. Morgan & Co. and saw Mr. Morgan. Mr. Thomas laid
the case before him. The moment he got through speaking Mr. Morgan said,
"Go back to the Exchange and tell them that there will be money for them."
"Where?"
"At the banks!"
So strong was the faith
of all men in Mr. Morgan in those critical times that Thomas didn't wait for
further details but rushed back to the floor of the Exchange to announce the
reprieve to his death-sentenced fellow members. Then, before half past two in
the afternoon, J. P. Morgan sent John T. Atterbury, of Van Emburgh &
Atterbury, who was known to have close relations with J. P. Morgan & Co.,
into the money crowd. My friend said that the old broker walked quickly to
the Money Post. He raised his hand like an exhorter at a revival meeting. The
crowd, that at first had been calmed down somewhat by President Thomas'
announcement, was beginning to fear that the relief plans had miscarried and
the worst was still to come. But when they looked at Mr. Atterbury's face and
saw him raise his hand they promptly petrified themselves. In the dead
silence that followed, Mr. Atterbury said, "I am authorized to lend ten
million dollars. Take it easy ! There will be enough for everybody!" Then
he began. Instead of giving to each borrower the name of the lender he simply
jotted down the name of the borrower and the amount of the loan and told the
borrower, "You will be told where your money is." He meant the name
of the bank from which the borrower would get the money later. I heard a day
or two later that Mr. Morgan simply sent word to the frightened bankers of New York that they
must provide the money the Stock Exchange needed.
"But we haven't got
any. We're loaned up to the hilt," the banks protested.
"You've got your
reserves," snapped J. P.
"But we're already
below the legal limit," they howled "Use them! That's what reserves
are for!" And the banks obeyed and invaded the reserves to the extent of
about twenty million dollars. It saved the stock market.
The bank panic didn't
come until the following week. He was a man, J. P. Morgan was. They don't
come much bigger.
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