The Richest Woman in America (26 page)

Besieged by people wanting free passage on the railways, Ned turned again to his mother for help. She spoke to Chauncey Depew, head of the New York Central Railroad, who offered some biblical wisdom. Hetty suggested Ned hand out cards with these phrases:

In the months and years that followed, Ned became a popular figure around town. A generous host, he entertained on an elaborate scale and spent money lavishly to make friends with the local people; he bought uniforms for baseball teams in towns along the railroad line, supported theatrical groups, and started a brass band. “Eddie,” as he was known all over Texas, “is a capital fellow—hail-fellow-well-met with everyone,” said the
Dallas Morning News
a few years later. “
He is generous, though level-headed, very charitable, especially thoughtful of his men in times of trouble, and a father to the orphans of his men who are killed on duty.” The paper added, “Eddie Green is his mother’s boy. She has the utmost confidence and pride in him.”

Despite his showmanship and boisterous living, he had his mother’s ability to focus on his work. “He has the reputation of being one of the shrewdest railroad managers in the country, and his business keenness is phenomenal,” reported the
New York Times
. The Texas Midland, serving as the connecting line between the St. Louis–San Francisco and the Southern Pacific Railroads, carried more cotton per mile than any other railway in the country. Passengers could board one of its dark green Pullmans furnished in green, gold, and buff, ride for five hundred miles, from Terrell to St. Louis, and never change cars. “The lighting in the cars is so good,” said the
Dallas Morning News
, that “passengers may read as comfortably as at home and the conductor has no need to carry a lantern to read the tickets.” By 1895 the once-insolvent line was earning $28,000 a year from passenger traffic and $165,000 from freight. Over the course of several years Ned turned the Texas Midland into the most efficient railroad in the state.

Efficiency was a rare commodity among the railroads. The bankruptcies
of the two Texas roads that Hetty bought presaged the failure of many others. Excessive building of track, unwarranted buying of lines and equipment, and overextension of credit in the 1880s led the way to ruin. No longer able to fuel their expenses, in the 1890s they ran out of steam.

A
generation of Americans owed its way of life and its livelihood to the railroads, said Henry Adams. Furnace workers and financiers, shopkeepers and technicians, miners and manufacturers were all “
mortgaged to the railways.” And the railways were mortgaged to the world. But after the Baring Brothers disaster in 1890, the withdrawal of European funds dried up an oasis of available money. In addition, although the railroads had enjoyed good profits transporting American crops across the country and overseas, by 1893 the crops were failing and freight traffic dropped. The Pennsylvania and Reading, unable to pay the $125 million debt on its loans, declared itself insolvent; the announcement tossed the stock market into turmoil. Three other major lines, the Northern Pacific, the Union Pacific, and the Atchison, Topeka and Santa Fe, all declared they were broke when their loans were called by the banks.

Bankers were nervous, with good reason. They had risked huge sums loaning money to railroads and other enterprises with weak financial underpinnings. Adding to their concerns, American exports were down while imports were up markedly. As Thorstein Veblen pointed out a few years later, the rich needed to spend more money in order to improve their social position; the newer their money, the more they spent. They were spreading their dollars abroad, buying more clothes, more jewels, more furnishings, more food, and more
wines from Europe, creating a demand for more payments in gold from American banks.

Ships were sailing into the East River filled with fancy goods and leaving the New York harbor laden with gold. But because of the Sherman Silver Act, the ship of state at the Treasury was flooded with silver. Dollars may have been redeemable in both, but with much of the world on the gold standard, financiers everywhere requested their funds in bullion. They worried that American paper money was sinking in value.

With not enough gold in reserve to fill the demand, many financial institutions were forced to close their doors. The bankruptcies ruined railroads, injured investors, stranded farmers without enough funds to sustain themselves until harvest, and left small businesses without money to purchase goods or meet their payrolls.
The rich still imported expensive clothes, dined on Lobster Newberg at Delmonico’s, and drank to their health and wealth at the new Waldorf Hotel, but the rest of the country bit their nails and spat out fear. “
Everyone is in a blue fit of terror,” said Henry Adams, “and each individual thinks himself more ruined than his neighbor.”

Companies whose stocks had skyrocketed, whose dividends defied gravity, collapsed when their lack of capital was revealed. Money became so tight that short-term interest rates soared as high as 75 percent. The National Cordage Company, one of the most heavily traded stocks on the exchange, could not get credit and declared insolvency. The market plunged. Investors panicked. The Gilded Age, like other eras of avarice, opulence, and easy credit, burst from gluttony.

The New York Clearing House, a group of bankers led by George Williams of the Chemical Bank, put together an emergency fund to ease the flow of money. When Williams asked Hetty Green to help, she agreed. She would lend money to the fund, she said with an innocent air, if they would sell her Chicago railroad notes that were payable on demand. Williams consented, and Hetty provided millions of dollars to the fund. But as soon as she received the notes, she called them in for payment. When the railroad men complained they did not have the money to pay her back, she made them a counteroffer they couldn’t refuse.

For many years, the Chicago men had supported Judge Collins in
his campaigns for the Illinois Supreme Court. But he was the judge who had let her down on the sale of her land in Cicero: now she could settle the score. She would forgive their payments, she told the railroad executives, if they would assist her with Collins. “You put him on the bench,” she declared, and now, she told them, “you can take him off.” “Or,” she said with a shrug of indifference, “you can pay your loans to me.” The men had little choice. They flattered Collins, suggested he was worthy of a higher position, and proposed that he run as Republican candidate for governor. Collins agreed and resigned from the judgeship. But the railroad men never gave him the financial support they promised and backed his opponent instead. Collins withdrew; Hetty won. “There’s been dirty work at the crossroads,” said his advisers.

The influx of funds from the Clearing House brought interest rates down, but financial institutions had risked their funds and caused “a loss of confidence in the solvency of the banks,” wrote the former Treasury comptroller Thomas Kane. Investors remained agnostic. Their doubts were “inspired by a general knowledge of the unsound conditions in private and public life and the speculative and venturesome character of the investments and loans.” As a result, fortunes were lost, thousands of depositors left destitute. But in their perpetual greed for profits, bankers would repeat those risks again and again. The Great Recession of 2008, brought about by hazardous speculation and high-risk loans, and followed by years of high unemployment, harkened back to those times.
Referring to 2008, the financial writer Andrew Ross Sorkin said, “The single most important factor was too much leverage.” Too much money borrowed, too much money loaned, and not enough assets behind it.

The crisis of 1893 forced the closure of companies around the country. Manufacturers and merchants slowly turned the key in their door for the last time as fifteen thousand businesses went under. Bankers slammed their heavy vaults shut; more than five hundred banks were in ruins. Firms of every kind suffered, even A. T. Stewart’s department store. The marble retail palace that opened on Chambers Street a few years before Hetty Robinson arrived in New York in 1854 had followed the fashionable uptown. For more than a quarter of a century, the store served as a mecca for upper-class women who used it as much as a social club as a place to shop.

When A. T. Stewart died in 1876, the business, with buildings and factories around the world, was
sold to a former adviser, Henry Hilton, who gave the firm to his two sons. But the Hiltons lacked Stewart’s marketing skills, and the business slid from $60 million to $8 million in annual sales. By the time of the financial crisis in 1893, the company had more than $1 million in accounts receivable that it could not collect.

The senior Hilton did everything he could to rescue his sons: hat in hand, he appealed to banks, insurance companies, and individual investors, but every man he went to turned him down. Only Hetty Green was willing to help. A shrewd bargainer, she sat across the table and demanded the original Stewart building as security. Offering him more than he wanted—$1,800,000 for five years—she insisted on discounting the loan and took 6 percent interest in advance, leaving Hilton with the amount he had asked for. They shook hands on the largest mortgage ever given on a single piece of property in New York. In the end, said the
Times
, both sides did well: “
Ex Judge Hilton saved his sons’ firm and Mrs. Green had the best mortgage in New York.”

Hetty prospered, but the country endured the most serious depression it had ever experienced: unemployment rose to 18 percent in 1894, went down slightly to 14 percent in 1896, and stayed at over 10 percent for two more years. In New York, seventy-five thousand people lost their jobs and twenty thousand were living in the streets. In Chicago, the Pullman Palace Car Company, which manufactured sleeping cars for the railroads, cut its wages, and three thousand union members went on strike. As anger spread, more workers joined and violence erupted; eventually 125,000 people around the country protested in sympathy. Railroad traffic in the Midwest came to a standstill, threatening the mails and menacing the economy. From Ohio, an army of five hundred unemployed men, led by Jacob Coxey, marched all the way to Washington, demanding that the government provide jobs through public works.

      
M
onetary issues divided the country. In the West, where mining spurred the economy, Democrats and Populists pushed for support of silver. In the East, where exports played a major role, Republican businessmen
feared that a bimetallic system, one that was based on both silver and gold, would make small change of the dollar.

The Wonderful Wizard of Oz
, by L. Frank Baum, told the tale of the times. Both a children’s fable and, many critics believe,
an adult allegory, it portrayed the political machinations, the social inequities, and the economic distress of the period. The author grew up in a wealthy family in the East but worked in the late 1880s as the editor of a newspaper in South Dakota. Living in Aberdeen with his wife and children, he wrote about the farmers and their families. Moving to Chicago in 1891, he saw the financial crisis of 1893 and the depression that followed devastate millions of people. He empathized with the Populist Party that arose and supported William Jennings Bryan, who campaigned against McKinley and spoke “against the encroachments of aggregated wealth.” In his Cross of Gold speech, the senator from Nebraska drew the nation’s attention to “the brave pioneer,” “the attorney in a country town,” “the merchant at the crossroads store,” “the farmer who goes forth in the morning and toils all day,” “the miners who go 1,000 feet into the earth”—the little man who struggled against the force of big businessmen and financiers.