The Richest Woman in America (33 page)

I
n September 1905, Hetty arrived in Boston embroiled in lawsuits against her father’s estate. During her stay at the Parker House, she agreed to attend a lecture with a friend at a Protestant church. “I was bred a Quaker, but I go to every kind of church,” she confided to a reporter sitting nearby. What counted was not the denomination but that the followers kept the commandments. “I believe in simplicity. It’s that, you know, that makes me what folks call ‘mean.’ The fact is, I prefer not to be extravagant.” Extravagance was hardly an issue. Unlike the rest of the women in the pews that night in the early autumn frost, she wore no gloves on her hands and no furs over the shoulders of her plain dress.

She attended the daily courtroom proceedings and confessed on the way back from the church to her hotel that “all this litigation makes me very tired.” She sighed and spoke in a plaintive voice: “I am all fagged out tonight. Yet I must be in court by ten o’clock tomorrow morning.” After spending five years on the case she won a payment of $75,000 with a promise from her to drop all proceedings in court. “I usually get the better of all people who oppose me in lawsuits,” she said.

Back in New York, in November 1905 she marked her birthday with another loan to City Hall. Once again, New York needed money, and it turned to the most dependable banker it had. Over the course of two weeks, Hetty loaned the city $2.5 million at 5 percent interest. “She is now,” declared the
Los Angeles Herald
, “the largest money lender in New York.”

From her perch at the rear of the Chemical Bank, Hetty carried out her moneymaking obligations.
With the economy flourishing around the globe, from Europe to Asia to South America, demand was rising and prices escalating. U.S. railroads expanded their plans, increasing their need for new funds. Merchants and manufacturers widened the scope of their dreams, asking the banks for more money to build their businesses. As the boom continued, more and more Americans were eager to take part, borrowing money from the banks to buy stocks at prices that soared like out-of-control hot-air balloons.

At the same time,
the cost of land skyrocketed around the country, as people raced to buy up real estate in cities, towns, and rural communities. Inevitably, the cost of borrowing the money to buy the land rose precipitously. While others bought, Hetty sold. “I saw the handwriting on the wall,” she said later. “Every real estate deal which I could possibly close up was converted into cash.”

In 1905 the call for money surpassed anything that had come before. The heavy requests pushed interest rates up, causing many people to owe the banks far more than they had. At the start of 1906, the financier Jacob Schiff was so outraged over the currency situation that he told the Chamber of Commerce: “
If this condition of affairs is not changed, and changed soon, we will get a panic in this country compared with which the three which have preceded it would only be child’s play.” But businessmen and bankers continued to play.

Black clouds hung over the debtors; many had little choice but to divest their holdings. Hetty watched as rich men arrived at the Chemical; doffing their top hats, drawing out their expensive engraved cards, and handing them to the clerk at the door, they sought her out to sell off their possessions. As rates rose, more and more of “
the solidest men in Wall Street,” she said, from “financiers to legitimate businessmen,” came to call, begging to unload everything from palatial mansions to automobiles.

“They came to me in droves,” she recalled. “Some of them I lent money to, and some of them I didn’t. That was my privilege.” Stories spread that she was lending money at usurious rates. “Those to whom I loaned my money got it at six percent. I might just as easily have secured forty percent. But never in my life, no matter what has been said against me, have I practiced usury, and no one knows it better
than the wealthy men who have had business dealings with me.” Ironically, the woman who rarely shopped was besieged by retailers. “Nearly all the big department stores came to me and I loaned them money,” she said. She knew “a panic was inevitable.”

Opportunities emerged wherever she looked. Of all she was offered, she felt most comfortable with real estate and mortgages. “I would advise any young woman with $500 at her command to invest in real estate,” she said. “She should buy at auction on occasion when circumstances have forced the sale. If she will look out for such opportunities, they will surely come, and she will find that she can buy a parcel of land at one third its appraised value.” She followed her own advice and purchased land in upstate New York for $400,000, one-third the normal price. She donated the land to build a school for boys; Hetty was proud that the project gave work to many men at a time when jobs were scarce.

She owned real estate and mortgages all around New York: hotels, office buildings, brownstones, and townhouses such as 838 Fifth Avenue, 8 East Sixty-ninth Street, and 110 West Fifty-seventh Street; like most big real estate investors in the city, then and now, she bought them under various names to limit her liability. It was rumored that she was the real purchaser of Annie Leary’s new house; more likely, she held the mortgage.

Whether she owned it or not, Hetty spent much of her time in the lavish, five-story townhouse, where her daughter also lived.
There, in the marble house with its sixty-eight gilt-framed mirrors, the philanthropically minded Annie Leary, newly appointed a papal countess by the Church, entertained Catholic leaders. And there she hosted New York socialites and European aristocrats, praying that one of them would marry the tall and stocky Sylvie Green. A brief glimmer of hope arrived with the Prince del Drago, an Italian aristocrat working on Wall Street, who devoted time to the heiress. But the romance soon dried up. Three years later the twenty-seven-year-old prince married a wealthy widow nearly twice his age.

      
T
he news of the San Francisco earthquake on April 8, 1906, stunned the country and rocked its financial institutions. Within one
minute, the ground heaved and pressed, heaved and pressed, and with each groan, wooden structures disintegrated and tons of stone crashed from the steel frames of buildings. In that early-morning nightmare, families rushed from their beds to the streets: mothers clutched their babes; fathers stood agape watching their homes collapse. The rumbles brought the city to ruins.

The worst quake in the country’s history destroyed two-thirds of San Francisco—everything from factories to office buildings to private houses to City Hall. A mass of rubble covered the streets; the water mains broke and cut off the water supply; fires broke out and for three days smoke belched from burning buildings; 2,500 people were killed; 250,000 people were displaced and destitute. As a result of the catastrophe, factories and businesses were forced to shut, and railroads suffered losses of hundreds of thousands of dollars. The calamity, which cost insurance companies $100 million, in due course drained hundreds of millions more from the banks. It took an immediate toll on Wall Street as fearful investors sold off stocks in its wake.

The increasing need for funds came at a high cost to municipalities and individuals. Banks raised their rates, forcing borrowers to pay more and more for their loans. Once again New York City came to Hetty; once again she loaned the money at favorable rates. “She is a grand little woman,” said the deputy chamberlain. “We can always rely on her.” Added one newspaper editorial: “With the aid of Mrs. Hetty Green, the richest woman in America, Controller Metz has been enabled to beat the financiers of Wall Street and save the city thousands upon thousands of dollars.”

Months before, Hetty had loaned the city $4.5 million at a rate well below those established in Wall Street; “she would have been ready to lend more if the city needed it,” noted the
New York World
. Indeed, with the death of Russell Sage, the city’s leading lender, in July 1906, it was confirmed: Hetty Green was number one. For all his reputation as a shrewd financier of ready wealth, a cool, immovable calculator, a person who could deal with heartless corporations in a corresponding manner, Hetty was his equal, said the paper. “The King is Dead; Long Live the Queen,” cried a Wall Street operator.

The balloon began to sink in the spring of 1907. A stock market crash in Egypt, which led to a run on the banks, was followed by
bank failures in Japan, Germany, and Chile. Throughout the world, a hoarding panic seized the markets. But the phenomenal increase in America’s economic strength, along with the establishment of the gold standard for its currency and the great resources of its banks, reassured everyone that the United States was safe from a similar fate.

With few regulations to restrain them, U.S. banks continued to loan more and more, lowering their reserves, at greater and greater risk of not having ready money if customers wished to redeem their deposits. But the bankers weren’t worried. “
It had been a cardinal doctrine, in American banking circles, that a panic like those of 1893 and 1873 would never again be witnessed in this country,” wrote Alexander Noyes, the financial editor of the
New York Times
.

But in June an iron manufacturer in New York went bankrupt, and shortly afterward a deficit in the city budget, combined with a lack of confidence in the local government, caused the failure of two municipal bond offerings. At the boardinghouse on Madison Avenue where Hetty was staying, a neighbor asked her advice. The young woman had money in the Knickerbocker Trust. What did Mrs. Green think about that? she asked. Hetty looked at her sharply: “If you have any money in that place, get it out the first thing tomorrow,” she said. “Why?” the young woman wanted to know. “The men in that bank are too good looking,” Hetty said in a serious tone. “You mark my words.” With that she marched off, a chunk of valuable papers, withdrawn from a shaky bank downtown, hidden in her bosom.

In the fall, the Metropolitan Street Railway, which ran the city’s streetcars, went under; other companies followed. For four months more, short-term interest rates soared upward from 25 percent to 125 percent as the stock market spiraled downward. In early October, Annie Leary honored Hetty at a lavish dinner for twenty-six guests at her home in Newport, but back in New York, everyone chewed over events:
J. P. Morgan took a sandwich and a glass of water at his desk; Hetty took comfort in a cup of custard and a glass of milk at a dairy restaurant on Broadway. Uptown, housewives shared their woes over chocolate sundaes at the new Schrafft’s on Herald Square, and socialites sobbed into their champagne at the new Plaza Hotel. All had a bad taste in their mouths.

Men’s brows darkened as the market declined. Not only were their shares in peril, a large number of banks had loaned money to speculators and taken stocks as collateral. Worse were the trust companies, institutions that invested money for the beneficiaries of estates and wills. They had also accepted demand deposits; with little regulation, and even less in cash reserves, they had traded in stocks, speculated in real estate, and loaned money for risky mortgages.

As Hetty predicted, the Knickerbocker Trust, one of the largest trust companies in New York, was in trouble. Rumors spread. Panic struck. The sidewalks of Wall Street overflowed as fearful depositors rushed to the banks to collect their funds. On the morning of Tuesday, October 22, 1907, dozens lined up on Broadway at the doors of the Knickerbocker’s downtown branch. Well-dressed women on the verge of tears, nervous priests, their faces as white as their collars, and a mass of clerks and messengers carrying empty satchels stood waiting. Over the next few hours the line grew, snaking around to form an S in front of the bank. Slowly, people were ushered in to claim their money, but by that afternoon, when $8 million had been handed over, the bank called a halt to the distributions; no more money was given out.

Depositors at all the Knickerbocker’s branches were left in despair. At the stately branch on Fifth Avenue at Thirty-fourth Street, where Roman columns and bronze doors ordinarily hailed its rich depositors, an anxious crowd clamored inside, their automobiles and carriages waiting for them on the street; at the Harlem branch, women wept and workingmen fought back their tears as they turned and walked back home. The Knickerbocker had shut its doors.