How Banker Use Other People's Money To Get Rich

By Harry Sebastian

Preface — Our financial oligarchy — How the combiners work together — Interconnected directorates — Only serve one master! — What advertising can achieve — Where the banker is unnecessary — Big men and small businesses — The curse of bigness The collapse of banker-management — The oligarchs' inefficiencies

• Language: English
• Publisher: Harry Sebastian
• Release date: Jul 18, 2022
• ISBN: 9798201244125

Harry Sebastian

AUTHOR: HARRY SEBASTIAN

Book preview

How Banker Use Other People's Money To Get Rich

Harry Sebastian

Published by Harry Sebastian, 2022.

Table of Contents

Title Page

How Banker Use Other People's Money To Get Rich

About the Author

CHAPTER I

OUR FINANCIAL OLIGARCHY

President Wilson, whilst Governor, declared in 1911:

The extremely good monopoly on this us of a is the cash monopoly. So lengthy as that exists, our antique range and freedom and person power of improvement are out of the query. A extremely good business country is managed with the aid of using its machine of credit score. Our machine of credit score is focused. The increase of the country, consequently, and all our sports are withinside the arms of some guys, who, although their moves be sincere and meant for the general public hobby, are always focused upon the extremely good undertakings wherein their personal cash is concerned and who, always, with the aid of using each motive in their personal obstacles, sit back and take a look at and ruin actual monetary freedom. This is the best query of all; and to this, statesmen2 have to cope with themselves with an earnest dedication to serve the lengthy destiny and the authentic liberties of guys.

The Pujo Committee—appointed in 1912—determined:

Far greater risky than all that has befell to us withinside the beyond withinside the manner of removal of opposition in enterprise is the manipulate of credit score thru the domination of those companies over our banks and industries....

Whether beneathneath a distinct foreign money machine the sources in our banks might be more or much less is relatively immaterial in the event that they stay managed with the aid of using a small organization....

"It is not possible that there have to be opposition with all of the centers for elevating cash or promoting massive problems of bonds withinside the arms of those few bankers and their companions and allies, who collectively dominate the monetary guidelines of maximum of the prevailing structures.... The acts of this internal organization, as right here defined, have despite the fact that been greater negative of opposition than whatever carried out with the aid of using the trusts, for they strike on the very vitals of ability opposition in each enterprise this is beneathneath their safety, a situation which if authorized to maintain, will3 render not possible all tries to repair everyday aggressive situations withinside the business global....

If the arteries of credit score now clogged properly-nigh to choking with the aid of using the obstructions created thru the manipulate of those companies are opened in order that they will be authorized freely to play their critical element withinside the monetary machine, opposition in massive businesses becomes feasible and commercial enterprise may be performed on its deserves rather than being issue to the tribute and the coolest will of this handful of self-constituted trustees of the countrywide prosperity.

The promise of New Freedom become joyously proclaimed in 1913.

The information which the Pujo Investigating Committee and its capin a position Counsel, Mr. Samuel Untermyer, have laid earlier than the us of a, display honestly the way with the aid of using which some guys manipulate the commercial enterprise of America. The file proposes measures which promise a few remedy. Additional treatments could be proposed. Congress will quickly be referred to as upon to behave.

How shall the emancipation be wrought? On what traces lets continue? The information, whilst absolutely understood, will train us.

four

THE DOMINANT ELEMENT

The dominant detail in our monetary oligarchy is the funding banker. Associated banks, agree with groups and existence coverage groups are his equipment. Controlled railroads, public carrier and business companies are his topics. Though nicely however middlemen, those bankers bestride as masters America’s commercial enterprise global, in order that almost no massive organization may be undertaken effectively with out their participation or approval. These bankers are, of direction, capin a position guys possessed of massive fortunes; however the maximum amazing component of their manipulate of commercial enterprise isn't always the ownership of brilliant cappotential or big wealth. The key to their electricity is Combination—attention extensive and complete—advancing on 3 wonderful traces:

First: There is the apparent consolidation of banks and agree with groups; the much less apparent affiliations—thru stockholdings, balloting trusts and interlocking directorates—of banking establishments which aren't legally related; and the joint transactions, gents’s agreements, and banking ethics which remove opposition a few of the funding bankers.

Second: There is the consolidation of railroads into big structures, the massive mixtures of5 public carrier companies and the formation of business trusts, which, with the aid of using making companies so large that neighborhood, unbiased banking worries can not by myself deliver the essential finances, has created dependence upon the related New York bankers.

But aggregate, but extensive, alongside those traces best, couldn't have produced the Money Trust—every other and stronger component of aggregate become delivered.

Third: Investment bankers, like J. P. Morgan & Co., sellers in bonds, shares and notes, encroached upon the features of the 3 different training of companies with which their commercial enterprise delivered them into contact. They have become the directing electricity in railroads, public carrier and business groups thru which our extremely good commercial enterprise operations are performed—the makers of bonds and shares. They have become the directing electricity withinside the existence coverage groups, and different company reservoirs of the human beings’s financial savings—the customers of bonds and shares. They have become the directing electricity additionally in banks and agree with groups—the depositaries of the fast capital of the us of a—the existence blood of commercial enterprise, with which they and others carried on their operations. Thus 4 wonderful features, every important to commercial enterprise,6 and every exercised, originally, with the aid of using a wonderful set of guys, have become united withinside the funding banker. It is to this union of commercial enterprise features that the life of the Money Trust is specially due.*

* Obviously only some of the funding bankers exercising this extremely good electricity; however many others carry out critical features withinside the machine, as hereinafter defined.

* * * * *

The improvement of our monetary oligarchy accompanied, on this admire, traces with which the records of political despotism has familiarized us:—usurpation, intending with the aid of using sluggish encroachment in preference to with the aid of using violent acts; diffused and frequently lengthy-hid attention of wonderful features, which might be beneficent whilst one after the other administered, and perilous best whilst blended withinside the equal folks. It become with the aid of using tactics which includes those that Cæsar Augustus have become grasp of Rome. The makers of our personal Constitution had in thoughts like risks to our political liberty once they furnished so cautiously for the separation of governmental powers.

THE PROPER SPHERE OF THE INVESTMENT BANKER

The unique characteristic of the funding banker become that of supplier in bonds, shares and notes; shopping for specially at wholesale from companies,7 municipalities, states and governments which want cash, and promoting to the ones in search of investments. The banker plays, on this admire, the characteristic of a service provider; and the characteristic is a completely beneficial one. Large commercial enterprise businesses are performed normally with the aid of using companies. The everlasting capital of companies is represented with the aid of using bonds and shares. The bonds and shares of the greater critical companies are owned, in massive element, with the aid of using small buyers, who do now no longer take part withinside the control of the enterprise. Corporations require the resource of a banker-intermediary, for they lack normally the popularity and consumers important to promoting their personal bonds and shares direct to the investor. Investors in company securities, additionally, require the offerings of a banker-intermediary. The variety of securities upon the marketplace could be very massive. Only part of those securities is indexed at the New York Stock Exchange; however its listings by myself include approximately 16 hundred distinct problems aggregating approximately $26,500,000,000, and every 12 months new listings are made averaging approximately  hundred and thirty-3 to an quantity of $1,500,000,000. For a small investor to make an shrewd choice from those many company securities—certainly, to byskip an shrewd judgment upon a8 unmarried one—is mainly not possible. He lacks the cappotential, the centers, the education and the time important to a right research. Unless his buy is to be little higher than a gamble, he wishes the recommendation of an expert, who, combining unique understanding with judgment, has the centers and incentive to make an intensive research. This dependence, each of companies and of buyers, upon the banker has grown in current years, considering the fact that girls and others who do now no longer take part withinside the control, have grow to be the proprietors of so massive part of the shares and bonds of our extremely good companies. Over 1\/2 of the stockholders of the American Sugar Refining Company and almost 1\/2 of the stockholders of the Pennsylvania Railroad and of the New York, New Haven & Hartford Railroad are girls.

* * * * *

Good-will—the ownership with the aid of using a supplier of severa and treasured everyday clients—is continually an critical detail in vending. But withinside the commercial enterprise of promoting bonds and shares, it's far of remarkable price, for the very motive that the small investor is predicated so in large part upon the banker’s judgment. This personal relation of the banker to clients—and the understanding of the clients’ personal affairs obtained by the way—is9 frequently a figuring out component withinside the advertising of securities. With the arrival of Big Business such accurate-will possessed with the aid of using the older banking homes, preëminently J. P. Morgan & Co. and their Philadelphia House referred to as Drexel & Co., with the aid of using Lee, Higginson & Co. and Kidder, Peabody, & Co. of Boston, and with the aid of using Kuhn, Loeb & Co. of New York, have become of more advantageous significance. The quantity of latest protection problems become substantially elevated with the aid of using big railroad consolidations, the improvement of the preserving groups, and specifically with the aid of using the formation of business trusts. The hastily amassing financial savings of our human beings sought funding. The subject of operations for the supplier in securities become as a result an awful lot enlarged. And, because the securities had been new and untried, the offerings of the funding banker had been in extremely good call for, and his powers and income elevated accordingly.

CONTROLLING THE SECURITY MAKERS

But this expansion in their valid subject of operations did now no longer fulfill funding bankers. They had been now no longer content material simply to deal in securities. They favored to fabricate them additionally. They have become promoters, or allied themselves with promoters. Thus it become that J. P. Morgan &10 Company fashioned the Steel Trust, the Harvester Trust and the Shipping Trust. And, including the responsibilities of undertaker to the ones of midwife, the funding bankers have become, in instances of company catastrophe, contributors of protection-holders’ Protective Committees; then they participated as Reorganization Managers withinside the reincarnation of the unsuccessful companies and in the end have become administrators. It become on this manner that the Morgan friends obtained their maintain upon the Southern Railway, the Northern Pacific, the Reading, the Erie, the Père Marquette, the Chicago and Great Western, and the Cincinnati, Hamilton & Dayton. Often they insured the continuance of such manipulate with the aid of using the tool of the balloting agree with; however even in which no balloting agree with become created, a stable maintain become obtained upon reorganization. It become on this manner additionally that Kuhn, Loeb & Co. have become amazing withinside the Union Pacific and withinside the Baltimore & Ohio.

But the banker’s participation withinside the control of companies become now no longer constrained to instances of advertising or reorganization. An pressing or considerable want of latest cash become taken into consideration a enough motive for the banker’s getting into a board of administrators. Often with out even such excuse the funding banker has secured a11 vicinity upon the Board of Directors, thru his effective impact or the manipulate of his clients’ proxies. Such appears to had been the deadly front of Mr. Morgan into the control of the then wealthy New York, New Haven & Hartford Railroad, in 1892. When as soon as a banker has entered the Board—something may also had been the event—his grip proves tenacious and his impact generally supreme; for he controls the deliver of latest cash.

* * * * *

The funding banker is clearly in search of accurate deals in bonds and shares. Like different traders, he wishes to shop for his products cheap. But whilst he will become director of a business enterprise, he occupies a function which prevents the transaction with the aid of using which he acquires its company securities from being nicely referred to as a bargain. Can there be actual bargaining in which the equal guy is on each aspects of a exchange? The funding banker, thru his controlling impact at the Board of Directors, makes a decision that the business enterprise shall difficulty and promote the securities, makes a decision the rate at which it shall promote them, and makes a decision that it shall promote the securities to himself. The reality that there are different administrators except the banker at the Board12 does now no longer, in exercise, save you this being the end result. The banker, who holds the purse-strings, will become generally the dominant spirit. Through balloting-trusteeships, distinct monetary corporations, club on government or finance