The Richest Woman in America (34 page)

When a group of bankers, headed by J. P. Morgan, met to consider bailing out Knickerbocker with money from the U.S. Treasury, they studied the firm’s books and announced it was too far in debt to save. Within two weeks, six New York banks and two more trusts were forced to close. When both the Trust Company of America and the Lincoln Trust declared themselves in trouble, Morgan took the lead and called for emergency meetings.

Throughout the day of November 5, 1907, somber-looking men scurried around the city conferring over the crisis. Bankers, business executives, and government officials huddled over what to do.
The most important meetings took place on Thirty-sixth Street at the baronial library of J. P. Morgan. Starting at 11 a.m., a string of automobiles and carriages lined up along the block from Madison Avenue to Park Avenue as their owners emerged and approached the classical white marble building. A few had been there before but most had never been past the bronze Italian doors. The magnificent structure, a masterpiece of Charles McKim, was the “most jealously guarded treasure-house in the world,” wrote the
London Times
.

Clusters of four or five men, including the heads of banks such as Chase and First National, private bankers like August Belmont and Levi Morton, directors of trusts, and business leaders such as Henry Clay Frick of U.S. Steel passed through the gates into the high-ceilinged marble hall. From there they entered a lofty apartment, adorned with a carved wood fireplace, a splendid portrait of a Florentine girl, green tapestries, rich crimson furnishings, and two walls lined from floor to ceiling with the rarest volumes of fine books and manuscripts. From this space glowing with ancient leather bindings, the men strolled into a smaller but even more exquisite room, its Renaissance painted ceiling said to be brought from the Aldobrandini Palace; its fireplace carved in marble; its walls covered with crimson tapestries; its low bookcases filled with ancient relics and medieval treasures of marble, bronze, terra-cotta, faience, and enamel. In these hushed and sacred chambers, their voices murmured money.

Later, other groups came, and at 6 p.m. a mysterious woman veiled in black entered the building. Names were mentioned, gossip spread; later Morgan insisted it was the widow of Russell Sage, but rumors persisted it was Hetty Green. New groups arrived, each more important than the last; meetings continued into the night. When the clock struck twelve, a wagon appeared: six waiters from the Waldorf rolled in trays of edibles and urns of coffee. Finally, at 3 a.m., as the weary financiers emerged from behind the bronze doors, an announcement was made: they would give money to the two big institutions. The failing trusts would be saved.

The crisis was far from over. Around the country, banks with deposits in New York demanded their funds. Word of the New York closures caused a run on regional banks. Merchants in the Midwest wanted their money deposited in St. Louis; brewers in the West and
tobacco growers in the South demanded certified checks to pay their taxes. Farmers in Oklahoma, miners in California, and mill workers in Massachusetts withdrew their funds from local banks. Hiding their money under their mattresses, they hoarded nearly $300 million.

In Terrell, Texas, a long line formed in front of the bank that held the funds of the Texas Midland Railroad. Ned Green walked in and plunked a cardboard box on the counter. “This is the safest bank in the country,” he declared as he handed the clerk $30,000. The grim faces of the depositors melted into smiles as they realized their bank was safe. In New York, Morgan’s committee used government funds to support the banks with $25 million in loans.

The clamor for money caused a selling epidemic on the floor of the Stock Exchange. Shareholders who had borrowed money by using stocks as collateral saw their security washed away; forced to put up more collateral, they could not cover their loans. Orders to sell piled up on brokers’ desks, but few came forward to buy the shares. Stock prices plummeted to 50 percent less than their high the year before. The Exchange was on the verge of shutting its doors when the J. P. Morgan group stepped in again with $27 million to buy up shares and temporarily offset the losses. The
New York World
credited Hetty with providing some of that money.

The panic affected New York City. With expenses up and revenue down, worried financiers urged the mayor to lower the city’s costs. “The budget must be reduced to the bone,” Mayor McClellan announced: there would be no new policemen hired; no new city buildings constructed; no raises for the men who cleaned the streets. Jobs were cut, contracts were pushed aside, and contractors left unpaid. Once again, only when Morgan and a group of bankers agreed to buy $30 million of the city’s bonds was New York saved. Hetty helped out with over a million dollars in loans to New York.

The turmoil continued into the first few months of 1908. A major corporation, the Westinghouse Electric Company, went into receivership. And when the Oriental Bank in New York announced it would have to close its doors, Hetty ordered the Chemical Bank to advance it money; she promised to stand behind the loan. Later her son revealed that in addition to all the loans she made to banks and businessmen in New York, she lent $6 million in Texas.

But she accused President Theodore Roosevelt of worsening the problems: “
Mr. Roosevelt has not made good. What would you think if I were to declare every day for years that I was going to kill a muskrat—and then never did it?” she asked. “What has he accomplished aside from helping to create the financial situation? Has he punished those dreadful corporations, has he cured the evils of high finance, as he said he would? What has he actually done except wield the big stick?”

Despite her doubts, confidence-building measures brought the money markets back into shape. At the urging of Morgan and his small circle of colleagues, the U.S. Treasury secretary, George Cortelyou, supplied money for the financiers to use in several ways: as loan certificates to banks, easing the way for them to settle their balances while keeping their cash reserves; to secure loans overseas; and to support stocks in solid corporations.

The crisis was over, but it offered valuable lessons for the future: exaggerated expectations, wild speculation, and high leverage would lead to disaster.
The United States could continue to prosper, said the financial writer Noyes, if Americans kept a calm outlook on the use of the country’s resources and restrained themselves from venturous experiments with capital. With that in mind, he wrote: “In the future, as in the past, the trend of the country’s financial history will be fixed by the interplay of its natural resources, its capacity for production, [and] the industry, inventiveness and versatility of its people.”

Hetty believed the problems could be traced to another source: “
There’s one reason why we have hard times: money easy coming and easy going! American children are not taught how to save money but how to spend it. Everything they want—give it to them so long as you know the price of the credit. That’s the policy of the modern mother and she is raising a nation of spendthrifts whose one thought is to get what they want when they want it.”

A few years later
Harper’s Magazine
noted that the trouble was not unique to the nation or the times. “ ‘Easy come easy go’ is the maxim of all get-rich-quick civilizations,” the editors wrote. More than a century later, the notion still applies. Referring to the stock market crash in 2008, Paul Volcker, the former chairman of the Federal Reserve,
noted, “
We had a big financial crisis. We’d overspent. We’d overborrowed. We’d overleveraged. It’s tough to have a recovery.”

As often happens, the 1907 financial crisis provided a catharsis: it cleansed the system of weaker banks; weeded out the speculators; strengthened sturdier institutions; and reenergized the markets. Once again, the country was on the go.

A
nything, everything is possible,” announced Thomas Alva Edison in 1908.
Newspapers reported talk of war in Europe, Germany’s increasing strength, a bomb in India, a coup in Persia, problems in Afghanistan, and the effects of the financial crisis at home. And yet, the United States oozed with optimism. The exceptional American people were producing incomparable ideas and innovations. The Wright brothers’ flying machine whipped through the skies at Kitty Hawk; Henry Ford’s Model T, “stronger than a horse and easier to maintain,” zoomed through the streets; Frederick Cook’s dogsleds plowed through the Arctic ice to reach the North Pole; Howard Hughes’s drilling bit bore deep into rocks to release petroleum; and every day people snapped one another’s pictures with Eastman Kodak’s Brownie, danced at home to music on Edison’s phonograph, and vacuumed their rugs with a Hoover.

If the United States was flying high, New York was soaring in superlatives. The twenty-five-story New York Times Tower reigned over triangular Times Square; downtown the forty-five-story Singer Building scraped the sky; and in Madison Square, the Metropolitan Life building ascended higher than any other edifice in the world. At night the lights in the granite buildings glittered like Christmas trees in the dark. In the daytime uniformed men in their lobbies stood ready to swoop the workers up in elevators and discharge them onto their floors. And the workforce rode the longest subway system in the world,
rumbling underground or hurtling along on elevated tracks. Not only the subway linked Manhattan to the surrounding parts: beneath the East River, the Battery Tunnel opened the way to Brooklyn; the Williamsburg and Manhattan bridges spanned above; the Queensboro Bridge stretched to its namesake; and a brand-new tunnel connected New York to New Jersey.

Manhattan bubbled over with wealth and possessions. Imposing mansions filled with fine furnishings lined Fifth Avenue. Elegant ladies wrapped in furs stepped into brightly colored Buicks that raced like thoroughbreds through Central Park. Flags flew from the buildings, flanks of pedestrians charged through the streets, and fashionable homes proudly showed off the scenes painted by Childe Hassam.
Henry James was entranced by “the extent, the ease, the energy.”
H. G. Wells extolled the “lively air, gigantic buildings, incessant movement, sporadic elegance.”
Another English author thrilled to the city’s feel: “I have driven rapidly in a fast car clinging to my hat and my hair against the New York wind from one end of Fifth Avenue to the other, and what with the sunshine, and the flags wildly waving in the sunshine, and the blue sky and the cornices cutting into it, and the roofs scraping it, and the large whiteness of the stores, and the invitation of the signs, and the display of the windows, and the swift sinuousness of the other cars and the proud opposing processions of American subjects,” said Arnold Bennett, “I have been positively intoxicated!”

The United States boasted the
highest per capita income in the world. Two percent of the people owned 60 percent of the wealth—highly skewed toward the top but not nearly as bad as a century later, when 1 percent of the people would own 90 percent of the wealth. In New York, where people of lesser means still suffered the loss of jobs, the princes of privilege recovered swiftly from the financial crisis, and prosperous men clutched wads of money as fondly as they clasped their mistresses’ breasts. At Delmonico’s and Sherry’s, at the Waldorf-Astoria, the Hotel Astor, the Hotel Knickerbocker, and the brand-new Plaza Hotel, society feasted its way through the season. With more than 150 functions in the Waldorf’s grand ballroom alone, and thousands more in the other hotels, the maître d’s of the city’s top dining spots declared it a record year: their patrons spent $1 million on dinner parties in 1908. From a dinner at the Knickerbocker that
featured a duck pond with live ducks to the dinner for the Duchess of Marlborough complete with a rose garden, and rosebushes running the length of the tables, hosts and hostesses outdid one another with extravagant decorations, expensive entertainment, exotic food, and rare wines.

As for the former Consuelo Vanderbilt, now a duchess, or her cousin Gladys Vanderbilt, soon to be married to a Hungarian count, their titles meant little to Hetty. She dismissed them like cheap perfume: “
I am glad Miss Gladys Vanderbilt is not my daughter. Girls who go to Europe to get their husbands deserve what they get and more. If my son married a foreign woman because the union would bring him a title, I would disown him,” she declared. “The mother who will pay a million pounds for a title for her daughter should not expect to get a son-in-law of any account. Further, the woman who pays a million pounds for a son-in-law should have a guardian appointed to care for her.”