As control of the American economy became increasingly centralized in trusts located on Wall Street after the Civil War, and the wealth of men like J.P. Morgan and John D. Rockefeller grew exponentially, there developed an increasing backlash against such concentrations of wealth. In the 1880s, through an investigation by a committee of the New York State Legislature, Americans became aware that Standard Oil secretly controlled a number of supposedly competing oil companies. By 1910 almost 90% of the world’s oil supply was controlled from the company’s headquarters at 26 Broadway in Manhattan.
Similarly, John Pierpont Morgan’s attempts to buy and amalgamate leading companies in other industries such as railroads, coal, and steel accelerated. The fundamental purpose of these combinations was generally to effect economies of scale, restrict prices by controlling supplies, and lower wages and costs of operation by consolidating their top management in Lower Manhattan. At times they did facilitate the development of efficiency generating technological improvements, but these consolidations created significant monopoly power in various industries controlled from Wall Street.
In 1890, the U.S. Congress passed the Sherman Antitrust Act, which was designed to provide the U.S. Department of Justice with legal authority to break up these trusts (it was particularly aimed at Rockefeller’s Standard Oil), but enforcement of this provision and its effectiveness was at first spotty. The was especially true after the U.S. Government United States v. E.C. Knight in 1895 in which the Supreme Court ruled against the attempt to break-up the sugar trust.
Generally unrestricted by antitrust laws until the Northern Securities Co. v. United States in 1904, Wall Street leaders like Morgan and Rockefeller dominated the American economy. They were strong supporters of “hard money” (i.e. keeping the U.S. Currency on the gold standard), particularly since this policy had been credited with keeping inflation low and prices stable. Low inflation worked to the benefit of creditor banks on Wall Street, and to the detriment of farmers and others throughout the country who tended to be debtors.
This issue came to a head in the 1896 Presidential Election. Since Jay Gould’s abortive attempt in 1869 to corner the nation’s gold supply, the Presidents Grover Cleveland (1884-1888; 1892-1896) and Benjamin Harrison (1888-1892) had been strong supporters of hard money policies. As opposition to the gold standard grew however, there were increasingly strident demands, particularly in the western and mid-western states, that the United States move to a policy of “bimetallism” permitting U.S. currency to be backed by both silver and gold. This would greatly increase the money supply and presumably create inflation.
In 1896 the Republican Convention in St. Louis nominated Ohio Governor William McKinley who was pledged to maintain the gold standard; the Democratic Convention in Chicago nominated William Jennings Bryan. Bryan was a 36-year-old former Nebraskan Congressman who had electrified the convention with a speech urging the abandonment of the gold standard in favor of bimetallism. His now famous “Cross of Gold Speech” is considered one of the most articulate attacks on the Wall Street hegemony in American history. In it, he said:
“…this [is] a struggle between the idle holders of idle capital and the struggling masses who produce the wealth and pay the taxes of the country…shall the Democratic party fight on the side of the idle holders of idle capital or upon the side of the struggling masses?
“There are two ideas of government There are those who believe if you just legislate to make the well-to-do prosperous that their prosperity will reach through to those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find it up and through every class that rests upon it.
“You.. tell us that the great cities are in favor of the gold standard. I tell you that the great cities rest upon these broad and fertile prairies. Burn down your cities and leave our farms and your cities will spring up again as if by magic. But destroy our farms and the grass will grow in every city in the country.
“Having behind us the producing masses of the nation and the world.. Having behind us the commercial interests and all the toiling masses we shall answer their demands of a gold standard by saying to them, you shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.”
To Morgan, Rockefeller, and other big businessmen and industrialists around the country Bryan’s candidacy and his call for the abandonment of the gold standard represented a direct threat to their privileged position. They banded together to raise millions of dollars and engaged in a massive public relations campaign, orchestrated by Ohio industrialist Mark Hanna (a close friend of McKinley and chair of the Republican National Committee), which was designed to convince American voters that Bryan’s election would cause them economic ruin. It’s said that some employers told workers not come to work after the election if Bryan won.
Certainly Bryan was playing on the fact that titans of industry like Rockefeller and Morgan were widely hated throughout the country. McKinley and the Republican Party however, although considered the pawn of the Wall Street titans, were not without resources in this contest. In fact they had some surprising allies.
Lower prices for agricultural products (prices to farmers had sunk significantly in the days of hard money from 1880 to 1895) meant cheaper food for people living in the cities, particularly on the eastern seaboard. This was also a period of significantly increased immigration. Many of these newer immigrants were fleeing extreme poverty. In some cases they were fleeing pogroms or other vicious physical attacks in their native countries. For many of them conditions in New York and other cities were so far superior than where they had come from, that they were not eager to criticize the status quo.
McKinley and the Republicans shrewdly sought to play on these feelings noting that the hegemonic Wall Street economy was providing them with a “full dinner pail.” McKinley told Catholic and Jewish immigrants that despite their not being Protestant, they would be welcomed as full citizens, provided they acted in accordance with American law. He thus sought to differentiate himself from the American far-right, which even then included many evangelical Christians.
On election day in November 1896 the Republicans made significant inroads in normally Democratic cities and McKinley carried the eastern industrial states, including New York, Massachusetts, Pennsylvania and Ohio, handily winning a majority of the electoral and popular vote. In a rematch of the same election in 1900, McKinley and his Vice President Theodore Roosevelt widened their margins over Bryan.
Although the resentment toward the vast disparities of wealth between Wall Street operators and the rest of the country continued, McKinley’s two election victories averted the most serious electoral challenges to their power.
The Trust Buster
Shortly after McKinley’s second election in 1900, an unexpected new challenge arose to the power of the Wall Street-based trusts. McKinley was assassinated, and his 43-year-old Vice President Theodore Roosevelt became President.
Roosevelt was a very wealthy resident of New York City whose family went back to the New Netherland period of Dutch control. His father was a wealthy glass manufacturer who was appointed by President Rutherford B. Hayes to replace Customs Collector Chester A. Arthur (later 23rd President of the United States) in 1876. Theodore Roosevelt Sr. was never able to take office however, because of opposition from the then powerful New York Republican Senator Roscoe Conkling.
Having watched his father’s tribulations, young Theodore abandoned his plans to become a botanist and decided to devote his life to governmental reform. After a year at Columbia Law school (from which he never graduated), he was elected to the New York State Assembly from the Upper East Side where he gained a reputation as an active gadfly reformer. At the age of 27, after the sudden death of his first wife and his mother on the same day, he decided to try his luck as a rancher in the badlands of North Dakota, where he hoped to form a cattleman’s association.
He soon returned to New York City however, and returned to political activities. In 1894 he was appointed by newly-elected Republican Mayor William Strong to serve as one of the four members of the New York City Police Board, where he sought to root out corruption in the New York Police Department.
From there Roosevelt received a position with the Civil Service Commission and was then appointed by President McKinley as Assistant Secretary of the Navy. He later resigned from this position to form a private regiment, the “Rough Riders”, which he led in the Spanish-American War in Cuba. Newspapers elevated his reputation as the purported hero of the Battle of San Juan Hill in which Americans overwhelmed the Spanish defenders.
Upon returning to New York, Republican Party bosses (particularly Thomas J. Platt), who considered themselves probably defeated in the next gubernatorial election, turned to the former reformer and newly-minted “war hero” in 1898. His Democratic opponent was Augustus Van Wyck, brother of the then mayor of the city of New York and the candidate of Tammany Hall “Boss” Richard Croker. Van Wyck was considered a shoe-in during what was expected to be a big Democratic year.
As Roosevelt later described it in his autobiography, he largely ignored his opponent Van Wyck, but personally attacked Croker as vain and arrogant (and by many accounts he was). Croker responded in kind. Roosevelt thus sought to fix the contest in the public mind as one between himself – the hero and reformer – and the crooked and corrupt Boss Croker, not Van Wyck, and “against all odds I won by approximately 18,000 votes out of two million cast.”
As governor Roosevelt frequently clashed with Republican leader Thomas Platt in his promotion of reform measures which the regular Republican Party opposed. It may have been Platt who led the effort to have him “kicked upstairs” to the Vice Presidency on the 1900 Republican ticket with McKinley on the apparent assumption that his reform eccentricities could do less damage there.
At the time (1901), James J. Hill and J.P. Morgan sought to consolidate two of the leading railroads in the Pacific Northwest into the Northern Securities Company. This would combine the two competing railroads into one, eliminating competition and giving the resulting line a monopoly on freight. This was a classic Morgan maneuver to stifle competition and raise prices on shippers and although it would seem this kind of anti-competitive combination was clearly intended to be prohibited by the Sherman Antitrust Act, the Supreme Court had already ruled on U.S. v. E.C. Knight, severely limiting its enforcement. In response to the merger, Roosevelt asked Attorney General Philander C. Knox whether it violated the Sherman Act, and when Knox said he thought it did, Roosevelt ordered him to file suit against the Northern Securities Company to prevent the merger.
J.P. Morgan, who had supported McKinley’s, and therefore Roosevelt’s, election was outraged. Morgan went to Washington to see Roosevelt and insist that the suit be withdrawn or that some accommodation be negotiated. Roosevelt, who felt there was a need for federal regulation of large companies on Wall Street, refused, saying in his autobiography that Morgan had treated the President of the United States as if he were a rival railroad operator.
In 1904 a five-to-four Supreme Court decision ruled in the favor of the Justice Department and held that the combination of the railroads in the Northwest violated the Sherman Act. It was as a result of this victory that Roosevelt earned the moniker “trust buster” and his Justice Department brought more than forty such suits over the next several years. One of its most significant legal victories came in 1911 in United States v. Standard Oil in which the Supreme Court ruled that Rockefeller’s Standard Oil trust violated the Sherman Act and had to be broken into its constituent parts.
By the first decade of the twentieth century Roosevelt’s efforts to break up the Wall Street trusts had made considerable headway. There were however, other elements of Roosevelt’s policies which significantly benefited the firms on Wall Street. Roosevelt was a proponent of the “big stick” in international affairs, pushed for a large army and navy, and supported interventions in support of American multi-national corporations around the world.
In an era when European powers were aggressively attempting to gain colonies, Roosevelt pushed a similar policy for America. (William Jennings Bryan by contrast was vigorously opposed to such blatant imperialism). Roosevelt actively promoted such projects as the Panama Canal, the annexation of Hawaii, and the continuation of the Moro Rebellion, which had followed the Philippine–American War’s de-facto American takeover of the Philippines.
Roosevelt’s vision (and much of his countryman’s) is probably most clearly reflected in the 1907 U.S. Custom House at Bowling Green in Lower Manhattan and its four sculptures, “Four Continents” by Daniel Chester French. The sculptures depict Africa as a sleeping naked woman (a sleeping giant to be exploited); the teeming masses cowering behind and beneath Asia on her throne set atop human skulls; a proud and regal Europe, with crown and armor dominating the globe; and America, torch of liberty in hand, a sheave of corn on her lap. Behind her is an indigenous man and beside her a working man toiling in a Phrygian (French revolutionary) cap.
In Roosevelt’s view, and that of many Americans, the 20th century was going to be the American Century, in which the United States would lead the world as its greatest democratic power.
With the coming of the First and Second World War, Wall Street’s importance as a world financial center would only grow.
This is a series of articles on the history of Wall Street in the city of New York. You can read the entire series here.
Illustrations, from above: The corner of Wall Street and Broad Street, ca 1900 (Library of Congress); A “Prairie Populist” in the style of William Jennings Bryan leads the rabble in a cartoon from Puck, 1920; a Republican political cartoon warning against silver, published in The Wasp, August 22, 1896; a period cartoon of Theodore Roosevelt watching from a window with glee as a jester “puts the screws” to the trusts; and “Another air-ship failure,” Puck magazine, April 20, 1904.
Janet K belsky says
terrific overview of a pivotal time in US history–with relevance to today’s uber concentration of wealth in the elite city dwelling 001%. I also like how you deftly showed the way Roosevelt straddled both camps painting himself both a man of the people; and purveor of the naked imperialism embodied in the phrase “make America great (the more things change….)..
And finally thanks so much for reprinting some of William Jennings Bryan’s amazing speech..Oh how I wish great oratory was still alive (thats a major way things HAVE dramatically changed!)
Amy Eckman says
Excellent article! There is renewed interest in this phase of history, embodied in the current HBO show The Gilded Age. Agreed about the amazing oratory of prior eras, sadly lacking in the 21st Century!