Monday, June 25, 2012

The Nation, 1905

February 23, 1905, page 146-147,
The one patent fact in the action taken by the Equitable Life directors on Thursday is, that the situation whereby control of the company and its assets is practicable through ownership of a bare majority of Its $100,000 stock, may be altered through transfer of this power to the policy-holders. Both factions in the recent contest recognize that the company's position will be strengthened and secured by conceding to policyholders a voice in electing the management. The right to such participation, in the case of joint-stock companies, is in some dispute, and apparently could not be won with the board of management hostile to the plan. The Equitable controversy will be particularly useful, then, if it impresses on the public and the legislative mind the necessity for such a safeguard in the case of all life-insurance enterprises. To prove this does not require proof of Incompetency on the part of any existing management Based on control of a small majority of stock, such management may be ideal; yet death, business emergency, or high bids from other capitalists, might shift the control into hands either incapable or untrustworthy. That such a possibility should exist in an enterprise where withdrawal by the people vitally concerned Is, to all intents, Impracticable, hardly conforms to modern ideas; but there is no way of averting it save by granting to bona-fide policy-holders -of such companies a potential veto on the acts of the management. This is the reason why the courts have tended of late towards recognition of rights on the part of patrons of lifeinsurance companies different from and superior to the rights of a bank depositor. Explicit admission of the same right by a company which has so long asserted the simple joint-stock principle in insurance, will have a very salutary effect.

It does not, of course, follow that this transfer of control will result in radical changes of personnel or policy. Even in the case of life companies operated from the first as mutual enterprises, such changes are very rare. With the enormous number and wide distribution of the policies embodying ultimate ownership of such companies, any management under whose auspices the enterprise has prospered is virtually assured of reelection. This is undoubtedly for the best. Nothing could be more injurious to the business of such a corporation than constant change of officials; and in case of actual and proved mismanagement, appeal to the policy-holders always remains as a possible corrective.

An arrangement to "mutualize" the Equitable Life became inevitable from the moment of a contest for control between two or more rival factions. It would have been no solution whatever for the majority holdings of the stock to have been sold at a fancy price to other capitalists. No greater calamity to the insurance business can be conceived than the Invasion of its field by the snatching and grasping methods which marked our railway and industrial company finance of 1901 and 1902. If the present situation, in which one Individual dominates through ownership of a bare stock majority, was no longer safe, and if the alternative of bids for his holdings by rival Interests, each with its eye on the company's huge assets, was inadmissible, the only possible recourse was that which the directors have adopted.

We do not doubt that the decision to Invest control in the Equitable policyholders will have good effect. At the same time, it seems to us that the matter cannot stop wholly with that Executive officers who were reelected last week have made certain distinct and positive statements, under their official signatures, as to a necessity for change in the composition of the board of management. The President of the company declared in terms that failure to make such change "would be most prejudicial to the welfare and progress of the society and the conservation of the trust funds held for the benefit of our policy-holders." We do not assume to pass judgment on the accuracy or inaccuracy of this formal official statement, but, after publication of such an utterance, the reelection, both of the officer who was responsible for it and of the officer at whom its criticisms were directed, composes nothing. If the statement signed by Mr. Alexander was exaggerated, In the heat of a canvass to force the board of management to the mutualizing expedient, then It ought to be modified or retracted. If it was strictly accurate, something more should be said, in common justice to the company's policy-holders, as to what steps the present management means to take with a view of ensuring proper correction of past evils after the mutual plan shall have been formally adopted.

We do not suppose that these considerations are absent from the minds of the gentlemen now representing the Equitable before the public. But It Is essential, In our judgment, that the nature of the situation and the nature of the remedy should be made absolutely clear. The question at issue is not a mere dispute over methods of management in a single institution; it affects the position of all other life companies and of their policy-holders. To stir up a controversy of this sort, only to drop it and leave matters precisely where they were before, would be a piece of fatuity and recklessness quite on a par with the exploits of Mr. Lawson; and it could have no other consequence than to create uneasiness and misgiving among holders of life-insurance policies throughout the country. This large and grave aspect of the matter obviously supersedes all considerations of "harmony" in the board of the Equitable or of any other company, and we believe that its importance is recognized by the principals In the pending dispute. It is fortunate that, with tie. plan for reversion of control to the policy-holders lairly under way, It will be entirely feasible to thresh out such questions without frightening Investors in the company, and leaving them in a feeling of helpless insecurity.

March 9, 1905, page 182,
Senator Marks's resolution for a legislative investigation of the manner in which the surplus funds of our life insurance companies are employed was to have been expected His statement in all reports made to the Commissioner the surplus is intermingled with the general assets of the company in such a way that no outsider can tell how it has been invested or deposited or used is but little exaggerated Certainly this information is generally Certainly this information is denied to the average policy holder who does not take the trouble to to Albany and inspect the detailed filed with the Commissioner Senator Marks is perfectly justified demanding a system of which will give the policy holder a Insight into the workings of his company We are of the opinion that suggestions of legislative action will stop here unless there are voluntary radical changes in the management some of our largest companies Equitable scandal has clouded the prospects of every insurance corporation this country More than two weeks passed since the so called Hyde victory and what has happened president and subordinate officers denounced the vice president and demanded his removal have not resigned and neither has Mr Hyde The conditions which Mr Alexander pictured intolerable have obviously become so if this were possible The vice president and chief shareholder of Mr Alexander said that it was to have him in charge of the during the president's absence is still in position to do harm in such an eventuality No one has denied or retracted a single allegation The public has no intimation whether Mr Hyde's is due to his youth his great wealth and his propensity for self advertisement or to some moral failing doubt is as cruel to Mr Hyde as are Mr Alexander some of the stories about him They can be ended only by a wholesale house cleaning.

March 19, 1905, page 223,
The settlement of the controversy the Equitable Assurance Society been hailed as a wise and generous compromise, the results of which will lasting and salutary. In short, the vocabulary of courtesy and even of enthusiasm is exhausted in honor of President James W Alexander, Vice-President James Hazen Hyde, and the committee which patched up the wretched truce between them. It is impossible, however, to see how, on any theory of sound finance or morals, Mr Alexander could accept Mr Hyde's plan of surrendering the policyholders the right to elect directors each year until they have chosen twenty eight of the fifty two. The struggle has been as to whether the Alexander or the Hyde faction should control the Equitable, with its vast funds upon which financiers of all grades looked with eager eyes. Mr. Hyde, who inherited a majority of the stock, has the whip hand, but Mr Alexander has publicly declared that the of the policyholders are not safe when entrusted to a man of Mr Hyde's intelligence and character. Mr. Hyde's friends have retorted that Mr Alexander has his own selfish aims in view in the effort to break the power of Mr Hyde. Whatever Mr Alexander's motive, the fact is indisputable that a company like the Equitable should be "mutualized," so that in an emergency, in default of honest and able management, the policyholders can rally and protect their rights.

April 6, 1905, page 262-263,
The report that James Hazen Hyde tried to shift upon the Equitable Life Assurance Society the cost of his expensive dinner to Ambassador Cambon, cannot be treated with contempt as an Idle rumor. The integrity and the judgment by which a great insurance company Is managed should be, like the chastity of a woman, above suspicion. This is a matter which Involves more than the Equitable. Before the specific charges were made against the vice-president of the Society—the most serious of them, perhaps, openly made by President Alexander himself—-the public mind had been inflamed by articles reflecting on the conduct of our great fiduciary institutions. Every fresh rumor and innuendo lends color to the old accusations of recklessness and unfaithfulness, and —If we may judge by press comment and private conversation—unsettle confidence in the insurance business generally. The time has come, then, for making a clean breast of it, for offering such detailed information as to this allegation and others of the kind that no fairminded man can doubt that the huge funds which represent savings for wife and children are handled with skill and honesty.

There is danger that the real Issue in the Equitable controversy be lost sight of In personal and factional squabbles. The latter bulk largest in the newspapers, but are not, we may be sure, the things which weigh most upon the minds of the millions of quiet people throughout the country who do not wish to see the security of their life-insurance policies in any way Impaired. They are ready to cry plague upon both Hyde and Alexander, but they want the cloud lifted from a great fiduciary institution and from life-insurance methods in general. Thus the main question far transcends the quarrels between individuals or between interests. It is time that the officials concerned, and their lawyers, lifted their eyes from the ignoble and sordid bickerings upon which they have been too closely fastened, and looked at the large principles involved.

They cannot too soon make up their minds that here is no case for the arts of the compromiser. The thing has gone too far for any form of smug adjustment, with half the truth kept back. It was really so from the beginning. The president of the Equitable had said that the vice-president was a reckless incompetent. The vice-president had replied that the president was a disloyal and selfish Intriguer. How could an honorable truce be possibly patched up between the two? Of what earthly avail could Senator Depew's rose-water be in such a situation? High finance rivals politics in making strange bedfellows, but it was utterly impossible that one pair of blankets could again cover Alexander and Hyde. Even if they had agreed to embrace and be friends, and to say that their severe accusations against each other were intended to be compliments, the matter could not have rested there. Nor could It if the cliques within the directorate had composed their differences and announced that all was for the best in the best possible of companies. A vaster interest was involved, and its Just demands had to be satisfied before there could be real peace.

What we mean, of course, is the interest of the 600,000 policy-holders of the Equitable, and of the ten times that number insured in other companies. Insurance officials are important, in their way, and their bitter disputes make good gossip, but, after all, it is the great body of plain folk, anxious to make provision for old age and death by insuring their lives, who are the chief parties in interest. Their confidence has been rudely shaken by the Equitable disclosures, recriminations, antagonisms, and dark hints of blacker mysteries all the while lying behind. Unless their doubts and fears can be dispelled, the effect upon the insurance business of all companies threatens to be disastrous. People will think twice before taking out policies, or even paying premiums on old ones. Why sink money in swelling a surplus which unscrupulous financiers are fighting over for speculative purposes? Such questions may be foolish; but they are in the minds, if not on the lips, of thousands, and to answer them is the instant duty of those who care for the stability and safe ongoing of the insurance business of the whole country more than for rows between scheming officers and struggling factions.

The first step should be full, free, and public investigation of the Equitable's affairs. It is of no importance whether Mr. Hyde "demands" this or not; the public good demands it. And the work must be thorough and above-board. Superintendent Hendricks ought to understand that he, too, has something at stake in this business. That the Equitable officials should have been allowed to go on as they have, is of itself a reflection upon his department and the thoroughness of its inspection. This time there must be no half-way probings, no blinds, no concealments. If there are, the Legislature should go over the Su« perintendent's head and throw open the doors with its own hand. To let in the light is the urgent thing. The accounts should be laid open and analyzed1, every suspicious entry run down to the last Item and voucher. No hidden scandal, If there be one, can be half so bad dragged to the day as left in the shadow. We want to know the exact truth, whether It be consoling or not. To attempt to cover up anything will only make the public believe that things are worse than they really may be. A clean breast of everything is now the only recourse.

The true point of view is that of complete detachment from the wretched personal controversies involved. It is of no consequence whether Hydo be less black than he paints himself, or Alexander be more pure than he claims, compared with the question whether life insurance is to be able to recover from the enormous injury already done it. Perfect fearlessness in investigation and entire frankness in making the facts public are the remedies for which the situation cries out. We want to discover where we stand. Every insured man is eager to know what his true security is. And for any official of the Equitable, or of any other company, to put a single straw in the path of a complete Investigation, would be to heap folly upon scandal.

April 20, 1905, page 302,
The facts made public on Thursday regarding the heavy decline in the Equitable Life's new business since the company's internal dissensions have been known, probably surprised no one familiar with the insurance field. They point unmistakably, however, to one conclusion. The investigating committee must lose no time in weighing the evidence and in framing and publishing its report. Ordinarily, considering the mass of data which must be reviewed, very large allowance for delay would be made. But the Equitable situation admits of none but unavoidable delay. Confronted with another investigation, by the Insurance Department of this State, possibly with similar moves by the insurance authorities of other States, and with great demoralization among its agents, the interests of the Equitable itself demand the earliest possible answer to the vague accusations and insinuations which have already been too long left unanswered. The experience of the New York Life with its own internal troubles fourteen years ago ought to be conclusive as a precedent So long as its directors were passing "harmony resolutions" and deprecating hurtful publicity, the New York Life continued to lose business at a rate that was all but ruinous. Publication of a frank and unsparing report or. past abuses—even where those abuses were most scandalous—and public evidence that their recurrence had been made impossible, resulted in such a return of business to the company that the lost ground was almost instantly regained.

April 20, 1905, page 304,
The public has not had long to wait for the first tangible results of the searching questions addressed by the Frick investigating committee to the Equitable management. Scarcely a week had elapsed when confessions of the most damaging sort were already being made by implicated parties. We say confessions because, manifestly, Mr. Hyde's revelations, In his letter of the 15th to (he committee, would never have been made but for the Intensity with which the searchlight of public Inquiry has been turned upon the company's affairs. Mr. Hyde's deposit with the Equitable's treasurer of his profits in past "underwrltings" where securities were sold to the Equitable Company, was by his own statement not contemplated until "the outset of this controversy." This Is Mr. Hyde's review of the transaction:

"There has been a syndicate known as 'James H. Hyde and Associates,' including James W. Alexander, president of the society, whose participation was alwayB equal to my own, and this syndicate had been underwriters of a number of banking issues of securities, and the Equitable Society purchased, in some instances, in the ordinary course of business, securities which had been underwritten by this syndicate. At the outset of this controversy, Mr. Alexander and I were both advised by counsel that as to any such syndicate transactions in which any officers ot the Equitable Society had been interested, a full statement should be made up and laid before the board of directors, and whatever law and Justice required regarding them should be done by the officers concerned. Following the advice above referred to, I examined all these syndicate transactions and deposited my check for $61,446.92 with the treasurer ot the Society as trustee. This amount represented my entire profits from syndicate transactions ot the character above mentioned, with 6 per cent, intereat up to the date of such deposit period."

The statement concludes with the further assertion that Mr. Hyde admits no wrongdoing, and that the transactions referred to were "made with the sanction of universal precedent."

We have no other information as to the "underwritlngs" In which "James 11. Hyde and Associates" were engaged. It may be as well, however, to outline clearly what is the nature of these undertakings. On the basis of such knowledge, we think the reader can draw his own conclusions as to the propriety of a high officer in a life-insurance company participating in a syndicate of this sort and selling the "underwritten" securities to his company. The purpose of underwriting, in this sense, is to guarantee a market at a price for new securities. These securities may be good or bad, sound or rotten; they may be ar issue of United States Government bonds or the stock of the Shipbuilding combination. The syndicate, unless it can find a market for the underwritten securities elsewhere, must promptly pay the contracted price. Two necessary inferences follow: one, that the underwriter's profits depend altogether on the price at which he can sell the securities in question; the other, that the Inducement to "unload" in a friendly quarter becomes greater as the prospects of the "underwriting" grow less favorable. Thus it must be clear to the simplest intelligence that the possibilities are such a? to make the Hyde transaction with the Equitable Society indefensible In bcth law and morals.

Mr. Hyde very prudently refrains from any defence based on the smallness of his profits in the underwriting. Half t dozen years ago, such an argument might have been employed. To-day, with the incidents of 1901 and 1903 fresh In mind, the public has a pretty clear notion of what Wall Street underwriting may involve, and is not at all likely to pass lightly over any sign of the use of a life company's resources in such a connection. It will infer, very naturally, that Mr. Hyde's $61,000 Is not the final accounting in this direction. The sixth question put by the Frick committee asked for a statement of "all the socalled underwritings by the Society." If the Equitable management has clean hands to show in connection with the wild "promoting deals" of 1901 and 1902. It will have reason to thank the framer of that question.

As a matter of fact, during that time of madness nothing was more disquieting to cool-headed financiers than suspicion as to the employment of life-insurance surpluses. Whose money stood behind the amazing performances of the "second Steel syndicate," the Shipping Trust underwriting, and the United States Shipbuilding promotion, the banking connections of which have, to this day, been veiled In mystery? That there was life-insurance participation in some of these undertakings, has long been known. It will be no misfortune if we now learn exactly how much and how little this one great company had to do with them. Believing, as we do, that such participation was questionable in the highest degree, we think also that full public information on the facts is very desirable. It is time that the public learned whether or not these institutions have been or could be used to support the ambitious schemes of promoting or speculating financiers. Whatever the facts developed, we are convinced that good will come of their disclosure.

We have said little as to the legal irregularity of the transaction described by Mr. Hyde. It appears to us, however, to be abundantly covered, in both language and intent, by the severe prohibitory paragraph of the Insurance Act providing that "no director or officer of an insurance corporation doing business in this State shall receive any money or valuable thing for negotiating, procuring, or recommending any loan from any such corporation, or for selling or aiding in the sale of any stocks or securities to or by such corporation." Nor do we propose to enter into the controversy as to whether Mr. Alexander's alleged participation in this "underwriting" of "James H. Hyde and Associates" made the matter worse or better. We hold a brief for neither faction; but we are very sure that the investigation into the whole Equitable matter cannot now be stopped until the last stone is turned in the public view, and the record of the responsible officers made clear.

June 8, 1905, page 450, [Editorial]
A very grave situation was created by Friday's action of the Equitable Life directors. The case, as it appears to us, is simply this: A great corporation, with assets of $400,000,000 and with half a million policyholders on its list, had for two months been torn by dissensions in its management, in the course of which charges of mismanagement and illegal practices had been publicly made by several of its highest officers against each other. As was to be expected, under such circumstances, the company's business came to an absolute halt. Its cut-of-town agents thronged to New York, and in open convention asked for the resignation of one of these officers. As the recriminations increased, the public naturally rushed to the conclusion that still more serious scandals lay behind those which had been dragged to light in the quarrel between the president and the vice-president. Between these two officers lay direct and public Issues of fact. A feeling of panic had begun to seize on men and women who bad been paying their savings, year by year, to this company in return for a guarantee of provision for their families at their death. The crisis was urgent, and there was only one way to meet it. The directors chose a committee from their own membership, conferred on It full power to investigate the charges made and the whole management of the Society, and instructed it to report its findings frankly.

At the start, this committee was looked upon by the public with much suspicion—chiefly because of a prevalent belief that the ownership of the company bj one majority stockholder, the admitted existence of "dummy directors" or: the board, and certain financial entanglements would obstruct unbiassed judgment. Early in April, the committee's chairman published his heads of inquiry; they were so searching and comprehensive as apparently to preclude all possibility of "whitewashing" or evasion. Thereupon public confidence in the committee returned. Mr. Frick's formal requests for evidence, addressed to the heads of the Equitable, were as plain warning as any honest man could have wished that the report would be unsparing.

What is the result? The committee submits its report to the directors; the report is found to be what Its chairman's programme promised—an unflinching exposure of those grave evils regarding which the company's high executive officers have for months been exchanging accusations. There were open to the directors, in our judgment, three possible ways of dealing properly with that report. They might have approved it and published it. They might have published it, with approval of some findings and dissent from others. Finally, they might have rejected it in toto,denying the facts alleged—in which case their business was to produce the evidence refuting the charges—or rejecting the recommendations made and stating their reason for so doing. The directors chose none of these methods. They suppressed publication of the document, listened to the defence of some of the implicated parties, and then merely voted that the whole report be rejected. Except through unconfirmed rumor, colored by imagination and suspicion, the public knew nothing as to what these investigators of the company, chosen by the company itself, had desired to make known to its policyholders, or as to the grounds for the directors' action. The report, as subsequently given out, came from the committee itself, and without instructions from the board.

It appears to us that, from any point of view, the folly of this action is all but incredible. Resignations by directors whose work has been thus flouted, have followed as a matter of course. But in what a position is the company itself left by the board's extraordinary proceeding! It must be clear to any sane mind that the matter cannot stop where it is. The Frick report was made by order of the directors, but in the interest of the policyholders. Fortunately, these policyholders have obtained a knowledge of what the report contains by newspaper publication. Such publicity should have been conceded as a right, as a measure of self-preservation for the company. We ignore, and we shall continue to ignore until evidence is before us, the floating talk of "betrayal" of this accused officer or that by the committee, of secret offers by a committeeman, after submitting the report, to buy Mr. Hyde's stock control. Allegations of "betrayal" mean to us nothing, except that some implicated officer believed that he had a friend at court who would rule In his favor regardless of the evidence. But our judgment is, that neither incident, even if it were publicly proved, would in the least degree palliate the action of the board of directors. There are names signed to the report against which no intimation of blackmail could be raised for an instant; and, Indeed, if every committeeman had been guilty of indiscreet or objectionable conduct, it would remain no less true that the report Itself deals with facts, and that unless these can be disproved, It must be acted on, irrespective of the men who signed it.

As for the report itself, at present it suffices to say that the committee's findings of fact fully warrant the recent public demand for a thorough overhauling of the company's management, and, in our judgment, made inevitable a report of severe and unsparing character. We shall not undertake now to discuss Mr. Hyde's reported promise to "divest himself of his stock control"; that proposition cannot be intelligently considered until it is known who is to acquire the control which he lays down, what the terms of purchase are to be, and whether the Society itself has the right to pay the price. Beyond all these considerations lies the grave question, what steps the directors themselves are now to take to repair last week's blunder, and how they are to act on the formal charges which, even though the committee's report be officially rejected, are now more emphatically than ever before the public.

President Alexander and Vice-President Hyde have each published a reply to the report. The committee found President Alexander guilty of concealing from the directors his knowledge of illegal acts committed by his subordinates, and of being a member of the syndicate which, composed of officers of the Equitable, illegally and for the personal profit of its own members sold securities to that company. Mr. Alexander's reply is both feeble and evasive—qualities which, we are bound to say, have characterized every communication signed by him from the time this scandal started. He now declares the committee's charges to be "unqualifiedly false and not sustained by the evidence." Our own opinion is, that the evidence for them is absolutely convincing, and that the charges are established by Mr. Alexander's own communications to the committee. The alternative to acceptance of the committee's charges involves, Indeed, a supposition fully as damaging to the president's reputation as the charges themselves. Yet he alleges it in his own defence, declaring that the grossly irregular purchases of securities which had been going on as far back as January 1, 1904, came to his knowledge only a few weeks prior to the board meeting of last February. What sort of executive supervision that is which renders possible such unauthorized misuse of the company's funds for a year or more, and to the sum of millions, we leave to the reader's Judgment. At Mr. Alexander's door must also be laid, in accordance with all rational business practice, the first responsibility for the demoralization permeating the Society, and on these points the committee's evidence la quite irrefutable.

We have hitherto commented on the position in which Mr. Hyde was placed by his own admissions to the Frick committee. The committee finds him guilty of violating the insurance law by using the Equitable as a market for securities "underwritten" by his own syndicate, and we see no other possible conclusion. His counsel asserts that, "when the subject is fully understood," every rightminded man will agree that Hyde "was morally, as well as legally, entitled to these profits." Our opinion is, that the subject is fully understood already, and that right-minded men have reached and will Eustaln the opposite conclusion. Equally incontestable, in our view, is the committee's finding that Mr. Hyde has been guilty of other acts, "Irregular in the sense that they are not in accordance with the Society's law or with sound business practices, treating the Society and its affairs largely as If they were his own personal concern."

This finding is, indeed, a mild summary of the specifications which the committee fortifies with its evidence. The well-established facts that Mr. Hyde has used the Equitable's investment funds to gratify his own ambition and secure a place on other corporation directories; that, between 1901 and 1903, his own salary was marked up from $30,000 to $100,000; that he had added $27,000 more by salaries paid him for nominal services by companies owned by the Equitable, and that, by his own admission, he had attempted to use the company's money for social celebrations of his own—these simply show what a system of "graft" has pervaded the entire institution, and why it is wholly out of the question that the beneficiary of such practices should remain in his present office.

If anything more than the Frick report were needed to prove the state of complete demoralization into which the company has been brought, it may be found In Mr. Tarbell's statements to the directore—statements as yet uncontroverted. The |8,000,000 loss in business during May, and the warning that failure to deal promptly with the existing situation will involve the demoralization and desertion of the agency force, simply prove the folly of all talk of a "peaceful and permanent solution, satisfactory to all interests," being near at hand. Altogether too much has been said already of "satisfying all the interests" that are now known to have fattened on illicit plunder from the company. It is high time that the policyholders' Interest should take the place that belongs to it by right. For these policyholders, there can be no possibility of a permanent solution short of a thorough housecleaning which shall involve, first of all, removal of the officers whose mismanagement or guilt has brought the company to its present pass.

June 15, 1905, page 472,
The supremely important fact about the sudden turn in Equitable Life matters is that the company is saved from a situation the possible end of which was liquidation and disappearance of the Society from the financial field. This calamity—this "deep wound to our national prestige," as Mr. Cromwell had foreshadowed it—is averted. The management, whose continuance in office was incompatible with the company's continued efficiency, has resigned; reform of the grave abuses exposed by the Frlck report Is promised. So much is in sight towards the rehabilitation of the company.

For the complete restoration of the community's confidence in the Equitable, however, much more is necessary. This would be true even if so ideal a solution as repurchase of all its stock, by the Society Itself, has been judged practicable and had been effected. Even then the closest scrutiny would have been bestowed on the influences which appeared to affect the policyholders' selection of trustees. Necessarily, this somewhat critical vigilance must be far more complete when ownership of the company has admittedly passed to a syndicate, one at least of whose members Is engaged In large promoting enterprises and is a potent figure in the Wall Street market. The question universally asked, since Friday evening's announcement, is, What is to be the effect of Mr. Ryan's ownership on the future policy of the company?

We may conceive of a\$4,000,000 payment for stock whose Investment yield can never exceed some $3,000 per annum, being made from the highest motives of philanthropy, or, if a less lofty motive be inferred, from fear lest the state of things threatened by the Equitable's recent troubles might endanger other important enterprises dependent on public confidence. We shall certainly not insinuate that the gentlemen in the Ryan syndicate were actuated by any less worthy purpose. Their plan for trusteeing the stock, and for divesting the syndicate of voting power, is fair; and the promise that policyholders shall dictate a clear majority of the new directors is an Important concession.

But the new owners of the Equitable must fcnow that its future success de» pends, not on indefinite promises or pledges, but on raising the company's future methods and practices beyond the reach of any controversy whatever. This being true—and we think it will not be denied—it follows that the Ryan syndicate must place beyond question its permanent renunciation of control, direct or indirect, over any future action of the company. It is the perfectly well-known truth that transfer Of Mr. Hyde's stock to any person or group of persons identified with Wall Street was bound to inspire suspicion; such suspicion, just or unjust, cannot be allayed except by the utmost publicity regarding the whole transaction. We do not consider the trusteeship announcement sufficient. The contract of purchase with Mr. Hyde, whether written or verbal, ought to be published in all its terms. If there be a written contract defining the duties and powers of the trustees, that should equally see the light of day.

Still more necessary, we think, is a full and conclusive statement by the syndicate as to its plans with regard to the stock control. Trustees may resign or die; directors and officers will change in the course of years, as they are likely to change in consequence of this new development. But the ownership may, so far as the public knows, rest permanently in the hands of the present purchasers and their heirs. That is to say, recurrence of precisely the situation which has so nearly wrecked the company will always be possible so long as the basis of the Equitable's financial structure is stock ownership. We should like to see, first, the formal opinion of eminent lawyers as to whether or not buying in of the stock by the Society Itself is feasible under its present charter. If their opinion is adverse, we are strongly of the opinion that the question of such amendment to the charter by the Legislature as should make possible that purchase, ought to be taken up at once. All of these matters must, in fulfilment of his duty, be set forth in the Insurance Superintendent's report, which is expected to-day. Mr. Hendricks has the power to call for all contracts and documents to which we have referred, and to make them public. We think he will scarcely shirk this obvious duty.

We have thus far refrained from commenting on the selection of Mr. Paul Morton as the head of the reorganized Equitable. Our judgment of Mr. Morton's railway career has been too plainly expressed for our readers to expect our approval of his selection for this office. We have felt that its incumbent ought to be a man whose business record was beyond suspicion. That Mr. Morton is not such a man, is sufficiently proved by the fact that his career as railway manager is at this moment under investigation by the Government's lawyers.

We regret the necessity of thus criticising any one chosen in so grave a crisis for so important a task of financial reconstruction; but It has long been evident that nothing but plain and honest speaking would be of any avail in the Equitable's dilemma. These very doubts about the new chairman of the Equitable; the fact that, whomsoever the trustees may choose as a directors' board, Mr. Morton is the syndicate's appointee, and is apparently expected to retain his office, add greatly to the force of what we have already said regarding the further requirements of the situation.

June 22, 1905, page 492,
The agreement concluded between Mr. Ryan and the three voting trustees provides that Equitable Life director shall hereafter consist of twenty eight policyholders and twenty four "lawfully eligible persons," not necessarily policyholders. Every Equitable policyholder is invited to express to the trustees his suggestions for the first named class of directors. In their discretion the trustees may decide to confer on policyholders the right to a direct and conclusive vote for such twenty-eight members of the board. No precise method of obtaining this vote is prescribed. The trustees, after such "mutualization," shall continue to vote in their own discretion for the twenty-four remaining directors. In case of death or resignation of any of the three trustees, he is to be replaced by vote of the survivors. The trust agreement is to be renewed and continued "as long as the trustees shall deem advisable." A provision of some importance is, that "no vote shall bo cast upon said stock, for any purpose, except with the unanimous approval of the trustees." It will be seen that, on the face of the agreement, the plan of partial mutualization is for the present safeguarded. But it must also be observed that the agreement makes as yet no sure provision for the longer future

The defects of the plan, as of the "mutualization" scheme to which Mr. Hyde agreed last Feburary, are, first, that it makes no provision whereby the policyholders' wishes may be effectively ascertained; second, that it leaves a strong probability of the Society being really managed by the compact majority of twenty-four directors chosen in behalf of the stock, and, third, that confidence based on the personality of any or all of the present voting trustees is dependent on a life-time. In other words, it appears to us, as it has appeared from the start, that the crux of the whole matter is the stock ownership. The agreement with the trustees makes no reference to a purpose of transferring the stock eventually to-the company. Indeed, it describes the plan of electing twenty-eight directors through policyholders' vote as "the consummation of said plan for the mutualization of the Society." For ourselves, we cannot so regard it. Even Mr. Hyde's proposition of four months ago was that "if the board, upon such consideration, determines to retire the stock, I shall cheerfully cooperate in the change in any way which has due regard to the rights and equities of both stockholders and policyholders." Mr. Ryan can hardly do less than repeat this pledge. By his own formal statement, he, as the sole purchaser of Hyde's 502 shares of stock, occupies precisely Hyde's former position. It must not be forgotten that the situation involved by single ownership was the cause of the Equftable's troubles.

June 22, 1905, page 494,
THE PAUL MORTON CASE. It is now officially admitted that Judson Harmon and Frederick N. Judson, the two distinguished lawyers employej by the Government to investigate the giving of rebates by the Atchison, Topeka and Santa Fe Railway to the Colorado Fuel and Iron Company, have withdrawn from the case because of dissatisfaction with the attitude of the Attorney-General. Put in plain language, they have declined to continue their researches because they consider that the Government, by not giving them a free hand, has broken its faith with them. The bone of contention is Paul Morton, whose service as Secretary of the Navy terminates in another week. It is understood that Messrs. Judson and Harmon —the latter a warm friend of Mr. Morton's father, with whom Mr. Harmon sat in President Cleveland's second Cabinet—wish to prosecute Mr. Morton for giving secret rebates, and that the exponents of the "square deal" at Washington are not in favor of this procedure.

Since the Attorney-General, Mr. Moody, is now trying to come to an agreement with Messrs. Judson and Harmon upon some form of statement, we have no desire to prejudge either his action or that of Mr. Roosevelt. The hour has, however, come to present the facta in this case precisely as they are, and review without bias the actual charges against Mr. Morton. It Is hardly necessary to do more than point out that the incident is fraught with danger for a President who has justly acquired of late a very enviable renown for his readiness to prosecute not merely the "bad" Trusts, but all corporation offenders. His zeal in this direction has made him appear to thousands upon thousands of citizens a knightly defender of the rights of the people, ready to break Innumerable lances in their behalf upon the armor of the Trusts and corrupt public-service corporations. If it should appear, therefore, that he was unwilling to expose a member of his own official family to deserved punishment, the disappointment in him would be widespread and great. Not even his wellknown loyalty to his friends would excuse a failure to deliver Mr. Morton to the prosecuting authorities and the courts. It would, moreover, increase the doubts as to his earnestness in fighting for the rate-making power which are apparent in diverse quarters since the practical admission that there is to be no extra session of Congress for that purpose.

In his statement of Thursday Mr. Moody admits that there is a "point of difference" between his investigators and himself. But there can be no difference of opinion as to what Mr. Morton's offences were, because they were proved by his own testimony before the Interstate Commerce Commission. His statements and those of other officials who were concerned led to such an outburst of protests from the entire West that there was nothing for the Government to do except to proceed with a view to punishing the guilty. Testifying before the Commission in Washington on December 19,1901, in regard to a certain contract, Mr. Morton said, under oath: "Yes, sir, it was an illegal contract. It was illegal when we made it, and we knew it." A year previously this same witness had said to the Commission: "I think the corporation should be fined whenever it grants a rebate, and the shipper should be fined and forced to disgorge what he had received." A year later, in 1902, this same Paul Morton, then vice-president of the Santa F6, was in especial charge of freight traffic. His subordinate, W. P. Blddle, freight-traffic manager of the Santa Fe, admitted last January on the witness stand that he had given a rebate on coal shipped by a certain company. Mr. Morton openly defended his subordinate, saying-. "What Mr. Biddle did was exactly right in my judgment. Everybody did just as we did, and they had to, or go out of business." Commissioner Prouty characterized this action as "a barefaced violation of the law."

But these samples of Mr. Morton's unblushing activity as a law-breaker do not complete the indictment. In 1902, his brothers, Joy and Mark Morton, owned a salt mill in Hutchinson, Kansas, part 0/ the Trust known as the Hutchinson-Kansas Salt Company, which decided to freeze out its independent competitors by obtaining special freight rates. The Mortons were the men of the hour; they had previously built sidetracks and switches less than a mile in length, to connect their mill with the Atchison and the Rock Island Railroads. Joy and Mark Morton sold to themselves these sidings for $8,000, and formed the Hutchinson and Arkansas River Railroad Company. Without being possessed of a single car or a locomotive, they applied to Brother Paul for a traffic agreement—and got it. A few months later this fake railroad received $15,301.39 as its share of the freight rates, although the salt from the Morton mill was "billed in the same way, was taken out by the same engine, was transported in exactly the same manner, as it had been." Thanks to this clever scheme, the Morton mill had an obvious advantage over the independent mills.

Now, to allow such a plain violation of the law to escape punishment would be bad enough from the point of view of the Administration, but it would be even worse from that of the people. It would confirm a very widespread belief, particularly strong In the West, that a corporation rascal can escape every time where a small thief gets a long term in jail. Our Hydes and Alexanders go scot free after abusing their positions of trust; it is the Equitable clerk who steals $27,000 of the policyholders' money who finds himself in jail. As we have frequently pointed out, all the Trust prosecutions in the world will not reach the real evil if the men behind them, those who violate the laws, grant rebates, take unfair advantages or corrupt public ofcials, are to go free. When that eagerly desired day comes on which a corporation officer goes to jail for something less than cracking a safe, the common people will begin to feel that there is, after all, justice in America, and that the law is at last catching up with the new type of law-breaker whom District Attorney Jerome described so well last week. Mr. Jerome cannot make his correspondents believe that the acts of men in the management of the Equitable differ essentially from those of Larry Summerfield, confidence man. Mr. Moody will have to exert all his great ability to make such honest if out-of-date people appreciate his reason for differing with Messrs. Judson and Harmon as to his duty to prosecute the avowed law-breaker Morton, associate of Presidents and financiers.

June 29, 1905, page 512,
It was quite inevitable that the Insurance Department's highly incriminating report on the practices of the recent Equitable management should be followed by prosecutions. Investigation by the responsible State official finds that the law had been flagrantly and repeatedly violated, and for purposes of illegal personal gain; the necessary result is that the law department of the State should move to recover for the company these illegal profits, and to impose any civil penalties to which the guilty persons should be found subject. Attorney General Mayer remarks, in outlining his purposes of procedure, that "it might be to the interest of policyholders to learn the character of and occasion for some of the legal services paid for during the last few years." We sincerely trust Mr Mayer will pursue this line of investigation diligently. It will naturally lead him at once to the trail of Chauncey M. Depew, who, while not a lawyer in active practice, and while occupying a place on the Equitable's board of directors, has been receiving a salary of $20,000 per annum. The only service discovered by Mr Hendricks to have been rendered by Senator Depew in return for this modest honorarium was his achievement, two and a half years ago, of adding $25,000 each to the salaries of Mr Hyde and Mr Alexander---an increase not asked by the president. Whether Mr. Depew has rendered other services, such as warding off investigation, by public authorities, of the illegal practices of officers whose salary he had managed to get increased, might come to light in such an inquiry. The Senator's "impassioned plea for harmony," at the February meeting of the Equitable board, when the coming exposure of the crooked official practices was plainly in the air, suggests one way in which he may have deemed himself to be earning his $20,000.

June 29, 1905, page 514,
"A MISPLACED SWITCH." At the very moment on Wednesday week when the President was preaching to college students the value to the country of upright public service, he was destroying the worth of his words by publishing his apologia for Paul Morton. Never in his whole career did the President put his name to such a web of special pleadings, of casuistical and illogical arguments, as here appear, varied only by an irrelevant excursion into the affairs of the Equitable Life Assurance Society—as if to distract attention from the real defendant. The whole statement is a most disheartening endorsement of a man who is by his own sworn testimony a defiant law-breaker. On his part, Mr. Morton seeks to explain jocularly that it was against his express orders that the Santa F6 continued its illegal rebates in defiance of the courts, by an oversight—"by a sort of misplaced switch," as it were. We have to note a misplaced switch of a more serious kind. No hostile critic has dealt Mr. Roosevelt a harder blow than he has given himself by this extraordinary document. Coming as it does after his action in the case of Mr. Loomis, It ought to be apparent to every unbiassed person that the President's moral sense is not to be trusted whenever the conduct of a personal friend is concerned.

But the significance of the whitewashing is more than that. Mr. Roosevelt has given pledge after pledge to the country that lawbreakers of whatever degree shall be sternly dealt with at his hands, and In the case of the Post-Offlce grafters he showed how uncompromising he could be. Of late he has been filling the country with his denunciations of those lawless railroad officials who have, by means of favors in the matter of rates, built up Trusts and large corporations at the expense of the smaller shipper, precisely as he had demanded to be allowed to get at the "bad" Trusts. Well, an opportunity was given to him. By sworn testimony before the Interstate Commerce Commission, it was proved beyond a doubt that the Atchison, Topeka and Santa F6 Railroad had illegally conspired with the Colorado Fuel and Iron Company in the year 1902 to the end that, by a secret rebate, the railroad should retain the iron corporation's business. At once, with a great flourish of trumpets. Mr. Roosevelt announced that he would investigate this case, and, to prove his absolute freedom from partisan bias, he appointed as special investigators two Democratic lawyers of the highest standing. ex-Attorney-General Judson Harmon and Frederick N. Judson. These investigators quickly found that beyond doubt

"The laws have been violated by the traffic officers of the Atchison, Topeka and Santa F6 Railroad Company and those of the Colorado Fuel and Iron Company. The former have by the same acts violated the injunction in that case. The formal proof required to punish them for contempt ot court and also criminally, if it shall be thought best to do that, too, can be had only by judicial process. This is ready to our hands in the above-named case. The proof elicited before the master will also be available for criminal proceedings against the Colorado Fuel and Iron Company and its officers and agents."

They then appealed to the AttorneyGeneral for authority to prosecute those guilty officials. It is this permission which has been denied to them, with the result that they have resigned in disgust.

It has been withheld from them primarily because Paul Morton, whose father sat in Cleveland's Cabinet next to Mr. Harmon, was one of the accused men. The President and his Attorney-General seem to have decided, because of their friendship for and belief in the good intentions of this one man, that ail the other guilty officials of the two companies shall escape prosecution for their openly admitted offences. Thus, W. P. Biddle, freight traffic manager of the Santa F6, confessed, in 1902, to giving a rebate, and Mr. Morton, his superior, defended his action by saying: "What Mr. Biddle did was exactly right, in my judgment. Everybody did just as we did, and they had to, or go out of business." Mr. Biddle is allowed to go scot free by President Roosevelt, according to the latter's letter of approval to Attorney-General Moody, first because "no on« has suggested bringing action against several Western railroads that granted rebates to the International Harvester Company," and "there is, of course, no possible excuse for discriminating one case from the other." In other words, one set of offenders is to be exempt from prosecution in the courts because neither the press, the public, nor the Attorney-General has as yet urged the prosecution of a lot of similar offenders! This is extraordinary doctrine.

The President's other points are that he has never prosecuted individuals, but always corporations; that Mr. Morton denies all knowledge of any wrong-doing, and that no evidence to the contrary has been produced, thus overlooking the Judson and Harmon statement that "the formal proofcan be had only by judicial process." In other words, Mr. Roosevelt declares that corporations may be as wicked and as guilty as they please, but their officers are innocent parties, not to be prosecuted until the legal evidence against each individual is perfectly clear. Lest our readers think we exaggerate, we call attention to Mr. Roosevelt's own instructions to Mr. Moody to prosecute the accused pork packers individually only if the Chicago grand jury shows by indicting them that It has what it considers adequate proof. This attitude, it is scarcely necessary to say, will bring Into contempt the whole Administration campaign against Trusts and lawless railroads. In proceeding against the lawbreaking corporations the Government is reduced to the single deterrent of a nominal fine. If personal prosecutions are to lie only when the Attorney-General can be sure of the motive of the responsible corporation officer; if this motive is to be presumed as good, falling legal evidence to the contrary, then Congress might as well strike every antiTrust law from the statute-books and save future Presidents the burden of noisy agitation for an impossible reform.

So far as Mr. Morton is concerned, the President not only vouches for his moral blamelessness, but also proffers him Inexpert advice as to how to conduct his new life-insurance business. The Holy Father himself could give no more complete absolution with greater unction or more obvious certainty of representing the highest power on earth or In heaven: "I do not think that you need pay any further heed to the accusations that have been made against you." Mr. Roosevelt then reasserts his own full confidence In the man who testified under oath In 1901, in another case before the Interstate Commerce Commission: "Yes, sir; it was an illegal contract. It was illegal when we made it, and we knew it." Similarly, Mr. Roosevelt pays no attention whatever to the outrageous ease of the fake Hutchinson and Arkansas Railroad Company, owned by Paul Morton's brothers, Joy and Mark, with whom Paul Morton made a favorable traffic agreement as if it were a bona-fide railroad, although it possessed neither locomotive nor car. These cases were not, of course, under Investigation by Messrs. Judson and Harmon. That they were not considered or touched upon by Mr. Roosevelt in putting the seal of his high approval upon Mr. Morton, shows that there was indeed a "misplaced switch" somewhere.

June 29, 1905, page 515
MR. HENDRICKS'S REPORT. The supreme'y important part of Superintendent Hendricks's report on the Equitable Life scandal is his formal conclusion on the question of ownership and control. Summing up the situation as it has existed since the sale to Thomas F. Ryan of James H. Hyde's majority stock holding, and referring to the rew owner's asserted purpose of reform, Mr. Hendricks says:

"I do not question but this is the honest intention of those who have acquired the control of the stock of the Society. I do not think, however, that this will go far toward restoring the confidence of the present policyholders or aid In procuring new business for the Society. In my opinion the only thing that will restore that confidence and benefit the company will be the elimination of stock control, and, what I deem of equal Importance, the elimination of Wall Street control. No superficial measures will correct the existing evils of this society. A cancer cannot be cured by treating the symptoms. Complete mutuallzation, with the elimination of the stock, to be paid for at a price only commensurate with its dividends, is. In my opinion, the only sure measure of relief."

We think that In this conclusion the Insurance Superintendent expresses the belief and demand of the entire body of Equitable policyholders, and of the larger public on whose patronage the Society must hereafter depend to reconstruct its fortunes. If, indeed, such feeling had not already obtained so firm a hold as it has done on the public mind, the formal assertion of the head of the State Insurance Bureau—an officer noted for his extremely cautious view of Insurance matters—that "the only thing which will restore that confidence . . . Is the elimination of stock control," would suffice to create such a belief among the public.

Of Mr. Hendricks's report as a whole we shall say at once that it fulfils all reasonable expectations, and that it not only absolutely confirms the findings of the Frick committee, but uncovers an even more shameful record of official faithlessness and graft. We wish we could make our praise of the Superintendent's thoroughness unqualified, but the fact that these revelations, covering irregular practices indulged in as far back as 1876, are now for the first time brought to light, is Itself a confession of past negligence. The Department has at no time been without warning in these matters. Some of these very abuses were investigated by a committee of the Equitable board itself, In 1877. Its recommendations were notoriously unheeded, and there was every conceivable reason, long before the outburst of incriminating charges last February, to believe that corruption in matters of this sort had extended far beyond the scope of a generation ago. If the Insurance Superintendent had taken the matter courageously in hand before the crisis of the present year arose; if he had done so last February, instead of devoting himself to "harmonizing" the two incriminated officers and suppressing the scandal, we doubt if the present equivocal status in regard to ownership would ever have arisen. The best atonement that Mr. Hendricks can make for his negligence in this regard is to Inform himself, speedily and thoroughly, regarding the affairs of other life-insurance companies.

So far as the President and Vice-President of the Equitable are concerned, Mr. Hendricks's report agrees with the Frick committee's findings. As to Mr. Alexander, the Superintendent does indeed affirm that policyholders are under obligations to him for his demand, last February, for the Society's mutualization and for Mr. Hyde's retirement. But that Mr. Alexander had approved the company's questionable operations with its subsidiary concerns; that ho acquiesced in a policy of extravagance and waste; that he continued and reinforced leases of Equitable property whereby the Society was a heavy loser and companies owned by Equitable directors correspondingly the gainers, and that he personally participated in syndicates organized for the illegal sale of securities to the Equitable, the report declares to be absolutely true.

Of Mr. Hyde, it is found that he permitted the Equitable to lose heavily in business transactions with companies largely owned by himself; that he "exacted salaries out of all proportion to bis age. ability, or the value of his services"; that he "introduced and conducted the syndicate transactions and Involved others with himself"; that he "has been accustomed to draw large sums for expenses on his own unitemized vouchers"; that, In short, "he has not seemed to consider himself accountable to any one for the expenditure of the Society's funds." Both of these gentlemen should be compelled, Mr. Hendricks declares, to pay back to the Equitable, with interest, the profits on their syndicate sales of securities to the companies, and he further states that It Is an open question whether they, and the officers and directors who shared in these transactions, are not "disqualified, under Section 36 of the Insurance Law, from hereafter holding any office In a life-insurance company."

These conclusions regarding the two chief officers of the company make up but a small part of the Insurance Superintendent's incriminating findings. His review of the Equitable's relations with other corporations, during three decades, tells a story of official malfeasance and loot which amply justifies the reopening of those closed pages. Briefly, the practice of the Company's high officers appears during all this period to have been to organize outside companies in their own behalf—bringing in the Equitable at times as the least favored subscriber—and then so to conduct the Equitable's business dealings with such companies that the Equitable invariably lost and the other companies gathered in for their owners the resultant profit. That this official graft was deliberately Introduced by the Society's founder, and was zealously extended by the men who held office after him, until the acceptance of their resignations, ten days ago, Is the Insurance Department's unqualified conclusion.

There is more to say on these and some other phases of Mr. Hendricks's notable report, but the question to be met at once Is, What steps shall be taken to guarantee the Society against recurrence of such evils? Ownership by a private individual provides and can provide no such guarantee; if his own purposes are above question, he is still at liberty to sell or bequeath his shares. Transfer of voting power to trustees does not provide it; trustees may resign or die, and the trust itself must eventually expire. The one lesson of these exposures, first by the Frick committee and now by the Insurance Department, is that the evils in the Equitable's past have originated dierctly from the stock-ownership principle, and that its future can never be secured from recurrence of similar abuses until that principle is abandoned.

July 6, 1905, page 3,
The action, on June 28, of the three voting trustees of the Equitable Life in filling nine of the vacancies caused by resignation of former directors, was in line with their pledge to allow policyholders a voice, and to choose a portion of the new management from their ranks. The nine new names were not submitted according to a vote of the policyholders as a body, but in deference to the wishes of various policyholders' committees. Under the circumstances, this was the most practical course to follow. It would have been impossible, on this short notice, to obtain effective expression of majority preference on the part of the company's 600,000 policyholders. For such a vote to be of any value, a thorough canvass of the company's membership, and probably organization of proxy committees, would be necessary. We are not sure that expression of preference through policyholders in various sections or communities, acting through committees of their own, may not be a useful precedent. Exactly how far the various existing committees of this sort are fully representative, is doubtful; but It is possible for them to become so in the future. Assuming a voting power, direct or indirect, to be enjoyed by Equitable policyholders, their position would be akin to that of a large community on which popular suffrage is suddenly conferred. Without preliminary caucuses, without canvass of nominees, first by small groups and then by large groups of qualified voters, mere confusion would result, with the ultimate choice dictated, probably, by secret cooperation of a minority with interests of its own. This is precisely the situation of half a million policyholders suddenly asked to choose directors. It would equally be their position in case of absolute mutualizatlon. In our purely mutual companies, indeed, the society's vote is commonly procured through requests for proxies in favor of the existing management, whose candidates never are opposed.

On the question of the elder Hyde's culpability in the matter of leases made by the Equitable to smaller companies controlled by Equitable directors, his son's reply to Superintendent Hendricks's report takes issues with that document. Mr. Hyde makes perhaps as good a case for his father as was possible, so far as regards the original contracts with these companies. The weakness of his case, however, appears at once when he argues that, whatever the pecuniary results of these leases (Mr. Hendricks proved in at least two cases an absolute loss to the Equitable), "if does not follow that, because the rentals seem low at the present time, they were unfair when made." Possibly; but Mr. Hyde ignores the fact, very damaging to the recent management, that, as the earlier leases expired, at various dates during the past twenty years, they were "regularly renewed on the same terms, or on terms even more unfavorable to the Equitable." The salient point is the opportunity which undoubtedly existed, in this direction and in the investment of Equitable money in such companies, for underhand profit at the Society's expense. It was these considerations which moved Superintendent Hendricks to conclude that "there can be no question of the wisdom of prohibiting tha investment of the funds of life-insurance companies in subsidiary moneyed and busicess corporations controlled by lifeinsurance companies"; which led the Frlck committee to declare that, "judging these investments either on general principles or on their specific results, their wisdom is gravely questionable," and which called forth from the Morgan committee, as long ago as 1877, the very positive declaration that "it is not believed to be wise for institutions of the character of the Equitable Society, In order to obtain a suitable rent roll . . . or for any other purpose, to be in any way connected with any other corporation, however -valuable the stock of such corporation may be."

July 20, 1905, page 49,
But to go back to the question submited to Mr Hill, commercial morality may be low without being fatally debased. And it is our business to look the hard facts in the face, not saying piteously, as Carlyle said certain people do to unpleasant truth, "Thou art not that way but this way." For one thing, we are bound to admit that corrupt politics has too much had its root in private corruption. Grafting is not first learned in the public business. The opportunities there may be greater, and detection more difficult; but the spirit of getting rich quick at the expense of others and in defiance of the rules of morality, is not confined to the departments at Albany or Washington. In this sense, too, people have the kind of government they deserve. And it is unfortunately true that political reformers are to be deprived hereafter of one argument that they have used. They have urged that "business methods" be applied to politics. But imagine the sneer with which spoilsmen will now ask, "Do you mean Equitable methods?" This, however, simply makes the need of reform broader and deeper. We have got to make business men honest before politicians will be honest; to see to it that the fountain is cleansed before we expect the water to be sweet.

July 27, 1905, page 68,
New York State Legislature appoints committee to Investigate life insurance, page 68
The New York Legislature has decided, at Governor Higgins's instigation, to institute an immediate inquiry into the life insurance business in this State. The Equitable's one hope of future growth is to have itself officially declared disinfected and purified. As for the other companies, particularly the Mutual Life and the New York, they have suffered by the general distrust of insurance methods created by the Equitable revelations. People are everywhere scrutinizing insurance propositions and cross-questioning agents as never before. The shortcomings of Superintendent Hendricks, the conspicuous omissions from his report, the general belief that Important Republican politicians besides Mr. Depew are gravely involved, the wobbling of the Governor, have all made a very bad impression, especially beyond the borders of the State. This is only heightened by the dismissal of the Controller of the Equitable and the failure to trace the mysterious loan of $685,000 which, until recently, seems to have stood upon the books of the Mercantile Trust Company. The legislative investigation means that light will be thrown into every dark corner; that the publio will be acquainted with every step taken and every question put to the witnesses, who certainly should include every person in any way connected with the scandal.

August 3, 1905, page 90,
Not Letting It "Blow Over."
"After this disturbance blows over," said Senator Depew, on landing with a little less than his accustomed joviality on Saturday, "the Equitable will be the same as before." So will everything eise, he implied—characters and confidence will be restored, though they seemed lost forever, and it will be a merry world again. The Senator is a proved expert in the art of forgetting. It is essential to his peculiar brand of optimism. One who has before been known to retire into his cyclone cellar, to emerge tiiumphantly after all has blown over, may be excused for imagining that simply lying low a short time will make pf>ople forget even such a scandal as the Equitable's. But hot anger makes good memories; and we believe that any man concerned who thinks to set all right by a discreet hiding of his head in the sand, is pretty certain to have the vis a tcrgo of Carlyle's famous figure applied to him.

The very worst advice that could be given to Americans to-day is to shrug their shoulders and hasten to forget the revelations of rottenness In both their private and their public business, which have cut them to the quick. It may not be pleasant, but it is wholesome, to keep the eye fixed upon all this sorry affair— to see corruption steadily, and to see it whole. Memento in large letters should be written up at the bed-foot of every professional optimist who hopes to sleep away the whole thing and rise in the morning radiantly forgetful. It is one of the marks of a fool to refuse to consider his folly or to profit by his past mistakes; and if w« wish to be set down as a foolish nation, we shall make haste to push aside as ancient and irksome history the records of our disgrace. To be able to keep angry six months has been offered as a definition of good citizenship. It is certainly the sort that these times call for. We do well to be angry with those who both have taken our purse and robbed us of our good name; and every time that a smug Depew exhorts us to think of the good time coming when all this will have blown over, honest men should sternly point to the bad time present, with an indignant "Lest we forget!"

A sharp jog to the memory was given by the Attorney-General on Monday in his announcement of suits against the whole board of Equitable directors. There appears much to commena m his statement of Intended procedure. He is cot to bring suit under the vexed clause 3C of the Insurance law, forbidding a director or officer of an insurance corporation to "receive any money or valuable thing for negotiating, procuring, or recommending any loan from such corporation." As Attorney - General Mayer says, this clause has never been construed by the courts, and "its meaning is, from a lawyer's standpoint, much In doubt." We have ourselves seen the clause interpreted very differently in different "opinions" that have been sought as to its intent and effect. This uncertainty is, no doubt, a strong reason why that section should be judicially interpreted at the earliest day possible, or why the Legislature should amend it so as to make its language more precise and unmistakable; but it also constitutes a valid argument for the Attorney-General's proceeding under some other law, if he finds one available and adequate.

He has, in fact, elected to bring suit under section 1781 of the Code of Civil Procedure. This provides for actions to compel directors to "account for their official conduct in the management and disposition of the funds and property committed to their charge"; also, to "pay to the corporation which they represent, or to its creditors, any money, and the value of any property, which they have acquired to themselves, or transferred to others, or lost, or wasted, by a violation of their duties." Under this broad grant of power, it seems clear that the Attorney-General may compel a searching judicial inquiry into the whole Equitable scandal. Individual and official responsibility can be rigidly inquired into and legally established, while personal liability to make restitution, or to be criminally prosecuted, may be fixed by the courts. The power both to investigate and to punish seems ample, if it be boldly employed.

One obvious advantage of the method of a sweeping inquiry, such as the Attorney-General proposes, Is that it will apportion blame. Though all the directors are to be sued, it is not contended that all are alike guilty. The action should clearly bring out the shades of guilt. If certain of the directors have profited personally by virtue of their trust relation to the Equitable, that will be made to appear, and separate suits, civil or criminal, may then be brought against them. If others have been simply negligent, and have allowed mismanagement, extravagance, and unlawful diversion of funds to go on without due diligence In preventing it, the courts will settle the extent of their liability. As the Attorney-General states, the suits which he is first to bring will include both those directors who have "done active wrong" and those who have "neglected their duty." The result cannot well be other than to get such a judicial determination of the responsibility, and the accompanying obligations, of a director of a great corporation as we greatly need. If the courts are able also to decide In what sense the surplus belongs to policyholders—whether for mere purposes of tax-dodging or for their actual benefit—so much the better.

The great thing is that legal machinery is at last to be set in motion. We are not to let all this blow over with our criminal American good nature. Somebody Is to be arraigned. Somebody, we hope, is to be made to smart. Unless our State and county prosecuting officers are able to bring some of these rioh swindlers to Justice, we shall have to transpose the nots in the definition of the law, so as to make It read: "The very least not feeling her care, and the greatest exempted from her power."

August 3, 1905, page 89,
Insurance Commissioner Cutting of Massachusetts, whose authority in the ranks of insurance experts is high, has taken up the Equitable scandal in his annual report. In so doing, he carries his inquiry into the causes of mischief beyond the mere question of negligence or corruption in this one great institution. His analysis of the true meaning of the moral downfall of the Hydes, the Alexanders, the Depews, and their numerous confederates, is striking. It repeats, indeed, the conclusion to which most thinking men have come, that the Equitable rottenness was not much more than an incident in the financial methods and practices of the day—exposure in that one case, as Commissioner Cutting himself points out, being a result more of accident and of an internal quarrel than of any effort by the public to learn the truth. The Commissioner's comments on the situation, from the life insurance point of view, are trenchant. He criticises unsparingly the entire system of "deferred dividend policies" out of which, in his judgment, the malign possibilities of the Equitable situation grew. He describes th's policy as a "demoralizing form of contract which is responsible for a large part of the evils of life insurance, and which ought to be prohibited in every State for a longer period, without an accounting, than five years, as has been done recently by the Legislature of Wisconsin. It is, he holds, a direct provocative to extravagance, waste, and corruption, and is favored by the great life companies, in his opinion, because the system "supplied such enormous accumulations, which can be used for expenses and the policyholders be none the wiser until their deferred-dividend periods have expired." Naturally, control of huge sums of life insurance capital for selfish purposes and schemes could not fail to be facilitated by this system. "That the ethical standard was lowered amid such conditions ... is an indictment not merely of the accused," but of long-current business practices.

August 24, 1905, page 158,
Flurries of Reform.
...the colossal knavery in the management of the Equitable, and the wide discussion of "tainted money" have set men to thinking that the Ten Commandments, though antiquated, may, after all, be a fairly safe guide in both polities and business; that in the long run dishonesty is not always the best policy. As Mr. Thurston naively puts it, "There is at present an epidemic of reform among the people of the United States, and their efforts appear directed toward men in the Government service." This, as Mr. Thurston generously admits, "is not to be condemned."

August 31, 1905, page 174,
The answer of the Equitable Life Assurance Society to the suit brought by Attorney-General Mayer is a virtual admission of all the serious charges against the management. The counsel of the Equitable frankly confesses the misconduct of the officials, and prays that they be compelled to restore the money which they have wasted, lost, or stolen. This statement removes the last vestige of doubt as to the scope of the legislative investigation. Members of the committee have been reported as saying that they were after "conditions, not men." True, the committee is not a grand jury; but in this instance it cannot even begin to uncover the conditions without uncovering the men who created them. People have a right to know how much of the looting is chargeable to the greed of Alexander, Hyde, Depew, and others high in office, and how much to political intrigue; to know, for example, who got that mysterious sum of $685,000. We cannot tell how and why the policyholders of the Equitable were robbed without telling who robbed them. Whether the trail leads to the Republican National Committee or to the State Republican machine and Edward H. Harriman and Benjamin B. Odell, Jr., it must be followed to the very end.

September 14, 1905, page 212,
The Insurance Investigation.
While the introductory testimony, at the hearing hy the Legislature's investigating committee on Wednesday week, proved that policyholders exercise no more direct control in mutual than in joint-stock companies, it proved nothing that was not known beforehand. The experience of the Mutual Life, at whose lest election only 199 out of half a million qualified policyholders appear to have voted, was fairly typical. To infer from this, however, that the policyholder's real interests are no better safeguarded in a mutual than in a joint stock company, would be inferring altogether too much. Absence, of personal interest in the election of their officers is no more common in the case of insurance policyholders than in that of shareholders for similar amounts in the great railway or industrial corporations The reasons for indifference are in both cases the same. Either the minority voter is content with the existing management and aware that it will be perpetuated without his assistance, or else he argues that his isolated vote in opposition will count for nothing. In most cases, neither the insurance policyholder nor the company shareholder even troubles himself to fill out his proxy.

Still, the fact remains that the policyholders have the power to unseat a management and rebuke its official actions, and in an emergency can do so, though only by thorough canvass and organization of the qualified voters. Moreover, it would be absolutely essential that the character and purposes of the proposed new management should be known beforehand. Under such conditions, however, the successful assertion of the policyholders' opinion is quite conceivable; it would be no more surprising than the removal of discredited railway managements, which has repeatedly been effected in exactly this way. Had the mutual system existed, three or four months ago, in the Equitable Life, we should have had no talk of "a situation without an outlet." The proposition at one time seriously considered, to wind up the company because a discredited officer refused to relinquish his position, would have been simply absurd. It was a serious possibility then, because the officer in question absolutely controlled the stock of the company. With a purely mutual system the policyholders, under conservative leadership, would have proceeded to settle the question of management for themselves.

The two questions on which the Insurance Investigating Committee took testimony on Thursday—the relation of trustees to underwriting syndicates, and also of the life companies to subsidiary institutions—may properly be said to occupy the foremost place in public interest. It was these questions to which the Frick report devoted most of its attention in the case of the Equitable, and it was its conclusions and criticisms on these points which drew forth the strongest endorsement from public opinion. The Equitable, it was shown, had in the first place been accustomed to buy securities in substantial amounts from underwriting syndicates in which its own officers and trustees were participants. It also appeared to have involved itself so deeply in the undertakings of trust companies under its own control that, in August, 1903, when the Equitable's books showed $37,945,958 on deposit with these companies to its credit, President Alexander wrote of the security market that "we should be buying a good many such things were it not that we are so strapped for money by engagements already made." These two disclosures, sustained by evidence, were accepted by the public as conclusive proof of unsound methods in American life insurance. The Armstrong committee was appointed chiefly in response to a public demand that the method of other life-insurance companies should be investigated, in order to determine how far the Equitable's practices were peculiar to itself, and how far they represented laxness throughout the insurance world.

The testimony of Mr. Frederic Cromwell, treasurer of the Mutual Life, bore particularly on the two questions to which we have referred. It appeared, from the facts frankly stated by the witness, that the Mutual trustees had not imitated the practices of the "James H. Hyde and Associates" syndicate, in organizing as intermediaries for the sale of securities to the company, but that trustees had been in the habit of participating in underwriting syndicates to which the Mutual Life had become a party. That is to say, they were not, in the same sense as the Hyde syndicate, receiving "any money or valuable thing for...selling or aiding in the sale of any stocks or securities to or by such corporation," and therefore were within the letter of the law, as the Equitable's officers were not. But whether, except in a technical way, the position was different from that of the Hyde syndicate, there appears to be a real question. Mr. Cromwell stated thus his own view of the matter:

"I will say frankly that there seems to me to be no impropriety in these men going into the syndicates. Others, of course, may differ from me. But it is a thing I have thought of seriously, because for some time I declined to go into some of the syndicates."

We imagine that the same serious question will occur to a good many readers of the evidence. The counsel for the investigating committee brought out the matter clearly in the following colloquy with the witness.

Q. "Of course you understand that the subscription of the Mutual Life, with the large amount of securities that the syndicate was bringing out. would greatly aid the success of the venture?" A. "Yes, sir."

Q. "And that any participators would be benefited by the success?" A. "But if you never allow anything to affect your judgment in the original investment."

Q. "You mean that you do not allow the fact that the Mutual Life Is going in to influence you?" A. "Yes, sir.'"

Morally, the distinction between this practice and that of an underwriting syndicate of trustees which sells bonds to their company and pockets the commission, seems to us somewhat fine drawn. The comment of the Frick committee on the Equitable underwritings was that trustees and officers of such companies, in their relation to the Society's funds, "are in the highest sense fiduciaries, and are governed by .the principles of the law of trusts, which are not less strict—in some instances stricter —than the moral code itself."

It was shown very plainly in the course of Thursday's testimony that the practice of investing heavily in the stock of trust companies, fostering such companies by leaving continuously with them large sums of money, and utilizing them in connection with large financial operations, was" not peculiar to the Equitable. The Mutual's treasurer, after describing such relations between his company and its various auxiliary concerns, made the point that its investment in such enterprises was extremely profitable. This is not the point of first importance, however. The Frick report made this pregnant comment on precisely this argument:

"The theory on which the purchase of these interests was justified is that the Society might thereby derive the larger profits which are possible from the class of investments which may be lawfully made by trust companies, but which may not be legally made by insurance companies.

"Judging these investments either on general principles or on their specific results, their wisdom is gravely questionable. The very foundation of these extensive stock ownerships is an attempt to do by indirect, that which may not be done by direct, means; and this in itself is a departure from that dignity which should attach to every phase of life insurance.

"Having made the investment, the Society finds it necessary to protect and nurse it. The Society then finds itself involved with interests which, to quote the words of President Alexander, used in another connection, 'are not necessarily parallel with those of the policyholder.'"

The truth of this statement of the case is perfectly well known to every one at all conversant with Wall Street history in the past half-dozen years. It was the plain intimation, in the Equitable scandal, that the trust fund had been used in these indirect ways to foment the wild stock-jobbing mania of the period, which most of all arrested public attention, and fixed in the policyholder's mind the determination to see whether recurrence of such a mischief could not be prevented. We presume that, as the legislative investigation proceeds, we shall have more light on this highly important phase of the life-insurance situation.

Mr. Charles E. Hughes, the counsel of the committee, has shown himself keen and fearless. On Friday he drew damaging admissions from Edmund D. Randolph, treasurer of the New York Life. This company, through all the troubles of the Equitable, has been making professions of superior virtue. One of its circulars announces: "There is no insurance law, requirement, regulation, or provision in the world, with which this company is not now fully complying. No other insurance company in the world is in so impregnable a position as the New York Liife." Another reassuring declaration is: "The company does not invest in stocks of any kind." Both these pledges were, according to the confession of Mr. Randolph, deliberately evaded. A few years ago the Prussian Government insisted that the company, if it were to do business in Prussia, must not have any stocks in its schedule of assets. The mode in which the New York Life "fully"complied with this requirement was to make a fictitious sale of certain stocks. Two or three employees—one on an annual salary of $600—assisted by giving their notes in sums aggregating over two millions of dollars. Thus these stocks were, in the words of Mr. Randolph, "taken off the books." The details may be somewhat complicated for a layman; but the purpose of the transactions is so plain that every man can draw his own conclusion.

September 21, 1905, page 231
Subpoenas life companies membership in syndicates 231
On Wednesday week, Frederic Cromwell, treasurer of the Mutual Life, declared with much emphasis that in these days membership in syndicates is a necessity. Time was, twenty years ago, when the income of the Mutual was small and the company "could buy from bond-dealers and pay the broker's profits"; but now the company must go into syndicates in order to get satisfactory investments, "get them in sufficient size and at 'ground-floor' prices." "I go so far as to say," added Mr. Cromwell, "that unless we went Into the syndicates, we should not be able to invest our funds." The only difficulty with this lucid and plausible exposition is that a syndicate is formed, not for the purpose of buying bonds, but of marketing them. Capitalists unite to "float" an issue of Government, railway, or industrial securities, and they are expected to "stay in" till this end is accomplished. Indeed, Mr. Cromwell himself testified that when the Mutual backed Speyer & Co. to the extent of $5,000,000 in obtaining $35,000,000 of Cuban bonds at 89, it did not withdraw its share of the bonds and lock them up in its vaults. On the contrary, it went into a second syndicate which took over $20,000,000 of the bonds at 91. The Mutual understood when it entered the original syndicate that it was not to withdraw any of the bonds which It had underwritten. Then, too, the Mutual did not join the "Pennsylvania 3% convertible bond" syndicate for the purpose of securing "ground-floor" prices. The company, as a stockholder in the Pennsylvania Railroad, was entitled to $1,666,000 of the bonds at par, but did not care to avail itself of that chance. The Mutual put $1,500,000 into a syndicate which bought "Southern Pacific first refunding 4s" at 93%, but the Mutual itself bought $3,000,000 of the bonds at the public offering at 97, less the commission. Other syndicate operations were similar in character.

September 21, 1905, page 231
New York Llfe's juggling with its bookkeeping,
Policyholders of the New York Life now know that on December 31, 1903, the company sold $800,000 of International Mercantile Marine bonds to J. P. Morgan and Company, and on January 2, 1904, took them back again. The transaction was managed by George W. Perkins, a partner of the banking firm and also vice-president of the New York Life and chairman of its finance committee. The object of this feat of financial legerdemain was, as Edmund D. Randolph, treasurer of the insurance company, admitted, to show in the annual report only $3,200,000 of International Mercantile Marine—a bad investment—whereas the company actually had $4,000,000. The chief use of an annual report in a mutual company like the New York Life is to let the policyholders know exactly how their affairs are being managed. "Frankness" is, according to President John A. McCall, the admirable motto of his administration. "The New York Life," says a recent circular, "has for years believed in and advocated publicity." In the shift of $800,000 just mentioned there was neither frankness nor publicity. The policyholders, the agents in the field, and perhaps some of the officers In New York, were deliberately n.lsled as to the actual condition of the investment.

September 28, 1905, page 252
Corporation Absolutism.
President McCall of the New York Life Insurance Company gave last week the frankest expression we have yet had to an Idea which has evidently beeu getting a .firm hold upon many of his associates in the management of great corporations. This is, that they are o? necessity absolute monarchs in the kingdom of business. The motto of each of them is, Sic volo, sic jubeo. Mr. McCall freely shouldered all responsibility. Did he pay $50,000 to the Republican campaign fund on his own motion? He did. Without consulting the finance committee? Certainly. Did he order hundreds of thousands disbursed on his personal word? At any time. Was it at his direction that more than $200,000. was left in the hands of "Judge" Hamilton without an accounting, and under misleading entries in the books? It was. Did he think that such enormous and unregulated responsibilities ought to be put upon the president of a great lifeinsurance company? Yes, they are an inherent part of his executive function. If he is not free to do whatever he will with the funds of the company, he is not a real president.

This fair epitome of Mr. McCall's testimony touches on the really great question involved. Mere personalities and recriminations drop out of sight by comparison. It is the theory of the benevolent tyrant in the great finance with which we are squarely confronted. If a company is only big enough, has the adequate number of millions, and impinges upon the interests of the community in endless ways, then its president is entitled to do whatever seems right in his own eyes. In doubtful cases, his fiat creates propriety. If a method which he adopts seems irregular and it threatens loss, it is enough for him to say magnificently, "I ordered it done I accept the responsibility, I guarantee that the company will lose nothing by it." How excellent it is to have a financial giant's strength!

Unfortunately, this fallacy of bigness, this blunder of thinking that the reasons which apply to administering hundreds of dollars necessarily fail when it is a question of millions of dollars, overlooks two things. One is the law. The other is morals. For the law knows nothing of this absolutist management of large corporations. Lawful method, strict liability, the personal responsibility of directors and officials—these are the watchwords of our statutes and judicial decisions in the premises. We suppose it to be beyond doubt that, under existing law, President McCall could be compelled to pay back every dollar given by the New York Life to politicians. Nor is the Penal Code silent about some of the transactions which he and Mr. Perkins have admitted. Directors and officials of a life-insurance company are practically in the position of an executor of an estate. Suppose that the latter decided that the interests of the heirs would be imperilled by the success of one political party, and should contribute $1,000 to the other—would he not have a fine time getting his accounts passed by the courts? Even an autocratic life-insurance president seems to feel the bookkeeping difficulty, since he has not yet been able to discover under what "account" the political payments were entered.

But the moral maze into which we are led by the theory that the magnate can do no wrong, is more bewildering than the legal. Where shall one stop? If it is right to give $50,000 illegally to protect policyholders, it is right to give $1,000,000. If $50,000 was the assessment of the New York Life in 1896, it might easily have been asked to pay $100,000 in 1904. We are really astonished at the moderation of Treasurer Bliss in demanding only $50,000 when the assets ol the company (and, of course, the number of its insured in danger) had so greatly increased! Mr. Perkins testified that the assets may soon amount to $1,000,000,000. What will the proportionate share of the politicians be then? We may be sure that they will be prepared to submit affidavits that the other fellows will ruin the business of the company unless $200,0Q0 or so is paid to beat them. There is, in fact, simply no end to the absurdities and perplexities and moral perils into which you run, once you allow that fiduciary funds can be used in any way that seems good to their administrators.

We understand perfectly that the gentlemen who have felt themselves chartered to use corporation funds as they saw fit, indignantly disclaim bad motives. Indeed, they seem almost as much oppressed by the sense of their own rectitude as by their conscious wisdom, power, and success. But, granting their purity of intent and their unrivalled sagacity, they yet must be made to see, with the rest of us more fallible mortals, that business methods should be such as to endure the test even when weak and bad men are In control. We often see the same confusion of ideas in politics. Reformers are sometimes so convinced of their own goodness that they resort to devices which they would be the first to cry out against if employed by a Tammany politician. We have got to make our business methods correct even if some business men are supernatural in wisdom and angelic in character. When the law prohibits doing a certain thing, it is no defence to say that it was a good man who violated the statute, with the best intentions in the world.

It Is clear that the corrupt entanglement of corporations with politics must be taken sharply In hand by the American people. Mr. Perkins has lighted a fire of which the blaze is seen all over the country. It is not a case for bickerings between pot and kettle. The Democrats, as Judge Parker admitted from the first, have been as ready to sin as the Republicans; latterly, it has been the opportunity rather than the willingness that has failed them. They have had the appetite, but not the food. The whole miserable business, however, must be ended. By State or Federal statute, or both, it must be made unlawful for corporations to make, or for party agents to solicit from them, campaign subscriptions; so that the future corporation absolutist who uses company funds for party purposes may, if he chooses, thank God that he did it, but will have to utter his devout thanks in jail. Meanwhile, personally, things cannot go on as if nothing had happened. Young Mr. Hyde became an impossible burden to the Equitable; President Alexander had to resign—but is that to be the end? Are not other resignations and dismissals imperatively called for? Example is the only thing that really counts in business and public affairs, and this insurance investigation will not have wrought its perfect work until an example has been made of trustees not fit to be trusted; until directors who are both buyer and seller have to elect a single rdle; until presidents who are a law unto themselves are compelled to exercise their talents in some other capacity. As Mr. Cleveland puts it, with his refreshing, heavy-footed honesty, we must "compel in the direction and management of life-insurance companies . . . honesty and alertness in discharging fiduciary obligations."

September 28, 1905, page 253,
Should Life Insurance Be Cheaper?
In the course of the successive exposures of corrupt or unbuslness-like methods in American life insurance, since the Equitable scandal broke last spring, one question has failed to receive the attention which it merits. The train of evil consequences arising from the huge masses of capital accumulated in the form of surpluses has been clearly demonstrated. The formidable danger in the future, if these funds are to double and treble themselves as they have done in the past decade or two, has appealed to every one—not least of all to intelligent insurance managers themselves. Some of them have privately confessed their misgivings about the financial Minotaur which the existing system was letting loose on the community. Much has been said also of the mischievous influence of some special contrivances of insurance, such as the deferred-dividend policies, which made inevitable the excessively rapid heaping-up of money which must be invested. In all this, however, there has been surprisingly little discussion of the question whether the rates prevalent for the insuring of lives in this country are not too high. In any other sort of corporation, the admitted existence of an unwieldy and demoralizing surplus would lead to immediate adoption of one of two policies—increase of dividends or lowering of the charge for service. It is the second of these questions which ought to appeal most directly to policyholders.

Are our life-insurance premium rates too high? English critics, basing their judgment on their own system, answer. Yes. But the question is one of facts and figures rather than of general principles, and it is the examination of the subject from this point of view which gives timeliness to an article by Mr. Allan H. Willett, of the Department of Economics of Brown University, in the September Political Science Quarterly. He examines in great detail the statements of twenty-four American life-insurance companies, comprising all the most powerful concerns, and reaches this conclusion:

"The average experience of twenty-Tour companies shows a saving on mortality of over 20 per cent., and an excess" of interest earnings of nearly or quite one per cent., and a generous profit from lapsed and surrendered policies, while the loading is just sufficient to cover the cost of carrying on the business. The galn-and-loss exhibit indicates that, but for the depreciation of securities during the year 1!)03, the Insurance operations of that year would have brought into the companies a profit of more than $40,000,000, to be returned to the policyholders 'or added to the surplus. With no Improvement in the methods and practices of Insurance companies, a reduction of 20 per cent, or 25 per cent, in premium rates is possible for a company managed with average care and efficiency, and is in every way desirable.

"But to bring insurance rates down to the present cost-level is only half enough. The cost itself ought to be lowered. It Is demonstrable that some of the practices of insurance companies tend to Increase their mortality loss, that a higher net rate of interest could be secured on their investments, and that the cost of administration is often extravagantly high. Improvements in any of those particulars would materially lower the cost of insurance, and make possible a further reduction In premium rates, resulting in a wider utilization of the benefits of insurance by people of small or moderate Income."

The first point on which this conclusion is based is the variation of actual mortality from the assumed average mortality of the tables in use by the companies. The reports of the twentyfour companies for 1903 show the total indemnities which the companies, in accordance with theif mortality tables, were theoretically prepared to pay in the period for death losses. They also show what was actually paid, and the sum thus disbursed is less by $20,315,698 than the amount marked out by the official tables. The premium income for the period having been $318,328,592, a profit of 6% per cent, on the entire receipts from that source appears to have resulted from the difference. But this is not all, for the average of mortality loss is abnormally raised by the results of a very few companies. Nineteen out of the twenty-four companies show actual mortality bearing a ratio of 80 per cent, or less to the assumption of the tables; ten of them work out below 70 per cent. Mr. Willett argues from this that the average of the tables is excessive, under proper admission of risks, to the extent of 20 to 30 per cent.

The reserves of the companies are calculated, in their reports, on the basis of interest earnings of 3 to 3% per cent. But the average of actual interest earnings of the twenty-four companies in 1903 was 4.3 per cent.; therefore a profit of 1 per cent, over the assumed requirement is shown to exist in this direction. Again, the important question of lapsed policies arises for investigation. The full reserve required against the policies lapsed in 1903, by all these companies, was $40,446,983; the "surrender values" paid were $31,903,657; difference, carried to surplus, $8,543,326, or 2% per cent, of the total premium income.

In taking up the question of expense of administration and procuring business, a difficult field is entered, because the estimates of the necessary ratio of such outlay to gross income is an arbitrary matter. Yet even so, and with the very liberal allowance made by the larger companies for their agents' expenses, nine out of the twenty-four companies report a ratio of expense in acquiring business to the year's income from such business smaller t han-was deemed necessary. Obviously, the discussion touches here on the larger question as to needless extravagance In soliciting business —a question of great significance when the double conclusion is adopted that accumulation of excessive surpluses is an evil, and that the offer of insurance is made, not for the satisfying of a company's ambition, but for the benefit of the insured.

It will be no unfair conclusion from these figures that the cost of Insurance to the American policyholder Is too high.

It is far from the purpose of conservative reformers in this matter to Insist on any such sweeping cut as should In any degree imperil the soundness of life insurance, prudently and properly conducted. But when it is capable of proof that the cost of Insurance is far higher than the needs of such administration, and that the consequence of this overcharge Is the very surplus whose pilingup is the cause of the recent insurance company scandals, the hour surely ought to have arrived for reconsideration at the whole matter.

October 5, 1905, page 271,
Mutual Life's Republican campaign contribution In 1904, page 271
Jacob H Schiff describes dummy directors, page 271
No one, except perhaps President John A. McCall of the New York Life, will be surprised to learn that "Judge" Andrew Hamilton is employed as legislative agent by all three of the big insurance companies. Mr. Hamilton, as the investigators discovered, now has $235,000 of the money of the New York Life. For this he has rendered no accounting, but President McCall is sure the fund has been or will be properly expended—say, in purchases of real estate for the company or in "legal expenses." On Friday the committee of the Legislature found out that the Equitable and the Mutual have such implicit confidence in Mr. Hamilton's integrity and discretion as a persuader of lawmakers that they, too, have entrusted him with large sums for disbursement without accounting. Whenever a legislature takes up the insurance laws, Hamilton is on hand to guide the members in the right path. As Alfred W. Mayne, associate auditor of the Equitable, euphemistically put it, the business of a legislative agent is to look out that "nothing inimical to the policyholders' interest Is passed." Mr. Mayne, like President McCall, was indignant at the intimation that such an agent might exert improper influence. The legislative agent of an insurance company, as we gather from the testimony, always wins his laurels by moral suasion. We would, however, point out to the guileless managers of big insurance companies that the existence of their alert and well-provisioned lobby might be a temptation to venal legislators. A few of the representatives who meet at Albany, Trenton, or Harrisburg might imagine that if they introduced "strike" bills often enough and refused to be convinced by pure logic, the arguments would become more tangible. This we suggest as a mere possibility. Hamilton, vouched for by all three companies, would firmly resist every demand for a bribe; but paragons of virtue like Hamilton cannot live forever.

On December 28, 1896, Gov. Charles A. Culberson, now United States Senator from Texas, wrote to Mr. McCall for a sworn statement, telling, among other things, "the amount, if any, paid by or on behalf of the company for political purposes during the last campaign." Mr. McCall did not commit perjury. The unpleasant questions were turned over to subordinates. One of the- affidavits returned to Gov. Culberson reads as follows:

"Theo. M. Banta, cashier of the New York Life Insurance Company, being duly sworn, deposes and says, that all payments, except such as are made at the branch offices, pass through his department, and that to the best of his information, knowledge, and belief no moneys were, directly or indfrectly, paid by the company to the Republican campaign fund during the Presidential election [1896]."

Hugh S. Thompson, comptroller of the company, and John C. Whitney, auditor, made similar depositions. Mr. McCall had not, in 1896, experienced a change of view on the subject of campaign contributions, for he gave away policyholders' money in 1900 and 1904. His want of boldness and frankness is therefore amazing, not to say painful. Instead of shuffling and allowing his cashier, comptroller, and auditor to deceive the Governor of Texas, he should have admitted proudly that he gave $50,000 to defeat Bryan.

President McCall now notifies his agents by circular that never again will the company contribute "to any political organization for any purpose whatever"; and, in order to avoid mistakes, he will ask the trustees to pass a resolution. Policyholders will find it a little hard to reconcile this announcement with President McCall's hearty defence of his gifts to the Republican National Committee; a few days ago he was fully convinced of the wisdom of his course. To be sure, he explains his present attitude by saying that "the gold standard has been irrevocably adopted. Therefore the question of similar contributions cannot arise again during this or any subsequent administration of the New York Life." But it may easily happen in the exigencies of politics that issues as vital to the policyholders as the gold standard itself may come to the arbitrament of the ballot-box. In that case Mr. McCall (or his successor) would, according to his avowed theory of trusteeship, be compelled to wring his hands helplessly while the country was being ruined. We are inclined, therefore, to believe that in his heart of hearts Mr. McCall now regards his unostentatious and vicarious generosity to the Republicans as a mistake.

Mr. Jacob H. Schift, in his testimony before the legislative committee of inquiry, admitted that directors are often, in a very real sense, dummies. A director, he said, is practically powerless, of little use except to comply with the law's requirements. The executive officers attend to the business of the corporation and occasionally appeal to the directors for advice. In fine, directors do not direct. In this statement he pointed out one of the great weaknesses in the management, not only of insurance companies, but of other vast corporations. The law provides for directors on the theory that they will act as a check upon executive officers and safeguard the property. The agents who are soliciting insurance or asking you to invest in the stock of some railway or Industrial organization, point to the list of directors: "Look at these men, of the highest skill in finance and solidity of character. You cannot possibly make a mistake in casting in your lot with them." But, according to recent revelations, this roll of respectabilities who give standing to a company and inspire faith in it throughout the country, is a mere catalogue of names. That such a system is wrong, no one will now dispute. Mr. Schiff spoke of his own bitter experience in this whole matter; but he and his fellow-directors are not the chief sufferers.

October 12, 1905 page 290,
Under happier auspices, Mr. Hughes might have been a fitting and formidable candidate for the mayoralty. He had demonstrated his marked ability, and shown himself a fearless and unsparing investigator of public abuses. Hence if his first duty did not lie elsewhere, and if a free conference of all who oppose Tammany maladministration had pitched upon him as the man to lead the fight, there might easily have been an enthusiastic rallying to his standard. But what is the actual situation? The Republicans turned to him in desperation. They make no pretense of thinking that they could win with him, or anybody. The tactful Woodruff laid their motives bare when be compared the present party emergency to that when Mr. Roosevelt ran as Republican candidate for Mayor merely, as was afterwards confessed by Roosevelt himself, "to keep the organization together." Precisely for that Mr. Hughes's name has now been invoked. Odell is looking simply for a figurehead behind which to hide—unless, and here is the most serious aspect of the whole matter, he hoped to call Mr. Hughes off the insurance Investigation. In this connection, it must be remembered that the Sun has made the specific and detailed charge that Odell himself had $75,000 out of the Equitable "yellow dog" fund. He might well shrink from facing Mr. Hughes on that point. The latter has done what every one who believed in his clear head and public spirit expected him to do—declined to become a party to Odell trickery, this he sufficiently characterized, by implication, when he said that it was his duty not to give "the slightest occasion for questioning the sincerity and single-mindedness" of the insurance investigation. In electing to prosecute that to the end, unembarrassed by political entanglements, he has chosen, we are convinced, to perform the greatest public service now open to him. His refusal, according to Chairman Barnes of Albany, leaves the Republican party in a "deplorable" condition.

One good service which Mr. Hughes did in his plain-spoken address to the committee, lay in his blunt repudiation of a party conscience superior to the individual. It was the supreme obligation of party which was held up to him as the norm of public duty. The committee supposed that, if they rubbed that Aladdin's ring, the instant response would be: "Here am I." But listen to the surprising Mr. Hughes: "I may be pardoned for saying that I am a better judge." It was enough to throw all the party hacks standing by into convulsions. Their binding creed is absolute submission to the behests of their political organization. If ordered by that arbiter of life and death to go through fire and water, they would rise to the sublime act of faith and go, nothing doubting. "I am a Democrat. I am a Republican. Therefore, whatsoever my party commands me to do, that I will do in unquestioning obedience." But Mr. Hughes resents and disowns such a slavish rule. He will be the judge of his own first duty. A party man, he is not a party bondman. It is superfluous to point to the almost fatal character of the blow which Mr. Hughes has dealt Odell. That boss's conduct of the cltv campaign has been throughout a very miracle of mismanagement, and to-day he sits disconsolate in the ruin which he himself has made.

October 12, 1905, page 294,
The New York Life on the Stand.
President McCall's previous testimony had led the public to believe him capable of much moral callousness, but his attitude and admissions on October 4 were more damaging than his worst enemy could have believed possible. If he has any defence at all, it must be along the line of Mirabeau'ssaying about his younger brother: "In any other family than ours, he would be considered a scapegrace." In any other business than that in which the Equitable revelations had been made, Mr. McCall's confessions would be regarded as absolutely damning. It is true that no such palpable mismanagement, or outright looting, as marked the administration of the Equitable has been shown to exist in the New York Life; but the disclosure of its loose methods and reckless payments of huge sums for political corruption—avowed as they are with singular effrontery—has come with an especial and cumulative shock. We think that, the country will he more stirred and feel more outraged by President McCall's latest evidence than by anything that has gone before.

Note, first, how the head of a great fiduciary institution acknowledges that $150,000 can be taken from its funds without a single trace being left on the books. Apparently, President McCall's contributions to successive Republican campaign funds were not even hiddeu under that broad mantle which covers such a multitude of sins, "legal expenses." The $150,000 was taken from the policyholders and left not a wrack behind. Mr. McCall had to confess with mortification that he had not been able to discover any bookkeeping entry showing from what fund the money was withdrawn. It is presumed that "profits" were diminished by so much, though there is no record. But what every policyholder will at once ask is, If $150,009 could thus disappear, why not $500,000? If money of the company can be taken for politics, and no tell-tale track left, why not for speculation, for gambling, for debauchery? In other words, the door for embezzlement seems to stand wide open. This is the. implication of President McCall's statements; and it is almost more amazing than the gifts to politicians themselves, shocking and illegal as these were.

But the positively sickening thing is the final uncovering of the reptile fund to which President McCall has ordered such vast amounts paid from year to year. Within the past four and a half years, he swore, he had turned over $476,927 to a legislative jobber wholly without voucher. During that same period, he had paid out $1,103,920 in "law expenses," a good part of which, it is clear, must have been used to corrupt legislatures. Of course, Mr. McCall did not use the word "corrupt." His phrase was, "produce results"; but he knows, and everybody out of the infant school knows, that the most abhorrent means might have been used, and doubtless in many cases were used, to secure the desired "results" and demoralize our public life. The president of the New York Life must be commended for greater frankness than he displayed when first testifying about his payments to Hamilton: Originally, he talked evasively about "real estate" transactions; now, the only inference from his acknowledgements is that the money was a legislative corruption fund.

Naturally, Mr. Hughes had to go through the form of asking whether any direct proposition to bribe a legislator was ever laid before him, and, naturally, Mr. McCall replied with indignation, "Never." But this deceives no one. Mr. McCall was bred at Albany. He knows from the inside the game that is played there. It is idle for him or any president of a corporation who gives money to Albany lobbyists, to pretend that he does not know what is done with it. No member of the investigating committee could have kept his countenance if he had supposed that President McCall s protestations of ignorance and innocence were meant to be taken seriously. No, the facts stand out clear as noonday: the great insurance companies have poured out money like water to defeat or procure legislation. We have a blunt man out West who tells us Just what to think of this business. Gov. Folk calls it crime. He says that President McCall's payment of trust funds to politicians is "embezzlement"—"just the sanw as if a public official in charge of the public funds were to put his hands into the public treasury."

One knows not whether to wonder more at the criminality than at the folly of the insurance companies in maintaining these bloodsuckers at the various State capitals. In so doing, they really invite blackmail. Their $2,000,000 a year fund, or whatever it is, creates ten "strikers" where it buys one, and raises up harpies on the right hand and the left. President McCall declares that he "trembles" at the beginning of every legislative year. But is not the more correct expression "cowers"? These officers of great insurance companies who surrender to lobbyists and hire bribers, simply advertise themselves as the most gullible of victims. The predatory gang which dogs their steps and snaps up the juicy bones they throw, is doubtless filled with joy at having found such "easy marks." This kind of corruption grows by what it feeds upon. Giving $200,000 one year leads to a demand for $300,000 the next. What is worse, when once you have struck hands with a corruptionist, he has you In his power. All your belated moral scruples he laughs at, and compels you, having gone with him one mile along the crooked road, to go with him twain.

As we have all along maintained, the business aspects of this affair are secondary to the moral. We can endure money losses, but we cannot abide management of great fiduciary institutions which is revolting to every honest instinct. The time has come, we submit, when the policyholders, agents, and directors of the New York Life must seriously ask whether its control can any longer be left with safety or honor iu the hands of a man who has so grossly affronted the uncontamlnated moral sense as President McCall has done.

October 19, 1905, page 311,
Mutual's President McCurdy's view of life insurance as missionary work
President McCurdy's explanation to the legislative committee makes both the end and the means of philanthropy so clear that every one will instantly recognize the disinterestedness of officers of insurance companies. The Mutual Life, said he, is "a great beneficent missionary institution," "participating in a great movement for the benefit of humanity at large." Such a concern would scorn the idea of encouraging a man to pay his premium in the hope that at the end of a year he would receive a dividend. If the policyholder got the dividend, say $7, he would "go home and spend It for cigars and billiards." President McCurdy's real object was "to insure as many men as possible, to pay them at their death, and not during their lifetime one penny." There speaks the true lover- of mankind. Rather than demoralize policyholders with wealth, President McCurdy would draw a salary of $1,000,000 a year, instead of a mere $150,000, and would smoke cigars and play billiards all day. Think of the corrupting influence of $7 in the family of a country minister or doctor, and then thank heaven that President McCurdy, or one of his relatives, is willing to pocket the accursed gold. The new philanthropy calls for a new edition of that once popular juvenile 'Ministering Children.' The part of hero belongs to that sweet young innocent Robert H. McCurdy; and the minor parts may go to the various little McCurdys, McCalls, Alexanders, and Hydes, and their cousins and kin by marriage. The little band of angels was, like the fathers, animated by a single desire—to save the world from the deceitfulness and peril of riches.

October 19, 1905, page 312,
The Sorrows of the Optimist.
One of the significant signs of the time is the dejection of our old friend, the optimist. It is but a few years since his voice was heard in all parts of the land, and his cheerful loquacity had shamed every pessimist into, respectful silence. In industry, in finance, in politics, in religious and social affairs, the reign of the optimist was absolute; and at his command the people were ready to laugh every carper out of court.

In industry, it will be remembered, the advent of the Trust promoter had banished competition and introduced the reign of that kindly and sympathetic cooperation which Mr. Perkins has recently declared to be the very life of the insurance business. Panics were to be abolished, and industry was to be scientifically "integrated" in a manner that should defy the forces of industrial depression. In finance, we were told, a new era had been introduced, in which the old rules were not to apply, while the teachings of past experience should count for nothing. Our financiers, their eyes in a fine frenzy rolling, were filled with boundless optimism concerning the value of securities, digested or undigested, and banished the last vestige of the old and pessimistic methods of appraising commercial assets. Sympathetic cooperation, with Christian charity for human frailties, prevailed universally in dealings between the promoter who supplied the watered stocks, the banker who agreed to underwrite them, and the insurance companies that furnished the money by which the deals were carried through. All hands were agreed to be as good trustees as they conveniently could; and it did seem that the coming of the financial millennium could not be long deferred. And this, of course, the optimist hastened to proclaim in season and out of season. President Alexander contributed to the Atlantic a roseate description of the new methods of caring for the funds of widows and orphans; Mr. Schwab, In the pages of the North American, severely castigated Russell Sage for expressing doubt concerning the new order of industrial society; while Chauncey Depew!

The same genial spirit pervades all the political world. By assuming "new duties and responsibilities" in the East we all became model citizens at home. When it was rumored that graft still existed in the Executive departments at Washington, optimists Payne and Wilson declared the reports to be mere "hot air"; so that our complacency remained undisturbed. Then Dr. Hale assumed his duties as Senate chaplain, and discovered that his flock was composed of pure-souled children of God, who had been cruelly maligned by the rumormongers. It was clear, therefore, that national political life was on a higher plane than ever before in our history; and we were urged to inaugurate an era of good feeling, In which cruel criticism of public men should disappear, and all should take a hopeful view of the policies of the Republican party. Not to be outdone, sundry members of the clergy gave thanks to God thai such an opportunity had come to spread the blessings of our civilization and religion in the benighted East. When, they asked, had God ever given a nation such a noble mission or such enlightened and righteous rulers?

But visions of Paradise so nearly regained were rudely shattered In 1902, when most unexpectedly the bottom fell out of the stock market. Something had gone wrong with the new plan for abolishing hard times, and pessimism as profound as the optimism of 1901 suddenly took possession of Wall Street. Then the lid was taken off from the Post-Office Department, and an unsavory mass of wretched scandals was revealed at Washington. Straightway the popular magazines instituted a systematic investigation of the darker nooks and corners of American life, and published, month after month, unpleasant stories of lawlessness and graft in city, in State, in industry. This made at first but little impression upon our indomitable optimists, who insisted that the evil was confined to a few sporadic cases. They were inclined, in fact, to attribute all the trouble to a few "soreheads" and "croakers," and put forth strenuous efforts to drown out the voices of the pessimists.

Yet, struggle as they would, thoir best efforts were in vain. The Post-Office revelations were followed by the exposure of the public-land frauds; and hardly had the courts begun work upon a new batch of Senators and Representatives when the scandals in the Agricultural Department came to light. Meanwhile, outside of official cifcles. some eminently respectable insurance grafters had fallen out with one another and begun to wash their dirty linen in public. In vain did Mr. Depew assure the people that the troubles would soon be "adjusted," and that the Equitable would speedily be "stronger than ever before"; vainly, too, did insurance magnates of other companies protest that not a suspicion of graft could attach to their own methods of doing business. Revelation followed revelation. Saddest of all was the discovery that the chief of the optimists, the genial Depew, was among the meanest of the grafters.

The Nation has been sometimes accused of pessimism; and it is true that, prior to 1902, when the optimist reigned triumphant in the land, this paper did express doubts about the immediate coming of the millennium which was expected to follow the new developments in industry, finance, and "world-politics." Indeed, in the exulting of the optimist we saw reason for the most serious misgivings. But in the process of heart-searching and house-cleaning now in progress, the Nationperceives only happy auguries for the future. It was the loquacious optimist who led us into the moral quagmire; now that his voice is silenced, even temporarily, there is hope that we may give heed to wiser counsels and retrace our steps to the safe, if narrow, highway of financial and political integrity. Perhaps from our recent experiences we may yet learn where and how to erect some fences that will prevent the future traveller from straying off in the bad company of the chattering optimist.

November 2, 1905, page 350
Mutual Life's Trustees Special Committee to Investigate.
The appointment by the Mutual Life Insurance trustees of a special committee to investigate the affairs of the company, is a step the importance of which will depend wholly on the spirit of the committee in undertaking its work. The three committeemen selected are trustees of the Mutual; but this is the usual procedure in an inquiry of this sort, and it by no means follows that, because they are connected with the management, their work will be biased or superficial. The Frick committee on the Equitable scandal is a case in point; all of its members were trustees, and some were supposed at the time to be fully in sympathy with one faction or the other in the Hyde-Alexander quarrel. Yet the report, when it appeared, was thorough, impartial, and unsparing; it dealt with the management's abuses frankly and quite without respect of persons, and it made reform in the Equitable's practices inevitable. The gentlemen selected for the Mutual's investigating committee all have a standing before the public which they will surely be anxious to preserve, and they are necessarily aware that an evasive or whitewashing report, in a matter with which the public is daily familiarized through the Armstrong committee's work, would gravely impair the reputation of men who signed their names to it. We sincerely trust that, like the Frick committee, they will extend its Inquiries and recommendations beyond the field of extravagance, political corruption, and syndicate participation, and will overhaul thoroughly the present methods and practices of life insurance. The question which needs to be dealt with speedily and intelligently is how this stupendous accumulation of surplus capital is to be modified or prevented. This is a problem which should appeal particularly to a committee of insurance trustees, for the reason that it cannot be directly dealt with by a legislative committee.

November 2, 1905, page 350,
Northwestern of Milwaukee Refuses to Make Political Contributions.
There is at least one life insurance company, the Northwestern of Milwaukee, which declined in 1896 to rescue the country from the free silverites. When Messrs. McCall, McCurdy, and others like them were giving Mr. Hanna sums of $50,000 and more to save our Institutions from perishing, the Northwestern was also approached. Its agent in Dubuque was asked by the chairman of the Republican Congressional Committee to obtain a contribution of $100 to help defeat Mr. Bryan. The agent referred his request to the head office, and received the following reply from the vice-president of the company, the late Willard Merrill, which is so correct in its point of view that we reprint it in part:

"This company has never made a contribution of that sort. We are aware that some companies have made contributions in some of these cases, but, under our charter and as we understand our duty, we have felt compelled to decline when requests have been made. There are both Democrats and Republicans on the official staff of this company, but we are without exception this fall In favor of sound money and shall vote accordingly. We have no sympathy with the free coinage of silver, but we do not feel at liberty to take part as a company in any political campaign. Undoubtedly, a large number of our policyholders believe In the free coinage of silver, and they certainly would have a grievance if the officers of the company should contribute toward expenses in opposition to their view."

We fancy that either Mr. McCall or Mr. McCurdy would now give a large sum to be able to draw a similar statement from their own letter files. As it is, the Springfield Republican, remembering the admirable career of the late Col. Jacob Greene of the Connecticut Mutual, who also died poor, is justified in wondering whether all the life-insurance leaders of the austere school of Mr. Merrill and Col. Greene are in the other world.

November 2, 1905, page 354,
A Converted Press.
The news that our big insurance companies are carrying on missionary work among editors as well as legislators will surprise nobody. The interesting thing is the method of operation, as laid bare by Charles E. Hughes at the investigation on October 25. Recently we learned a great deal about a house which Richard A. McCurdy, the philanthropic president of the Mutual Life, has been maintaining at Albany—a house dedicated to the noble cause of reclaiming Senators and Assemblymen from the error of their ways. Missionary McCurdy has also cast a loving eye upon a press sunk in Iniquity, and has called upon it to repent and be saved. The apostle to the legislators was the saintly A. C. Fields, who is now modestly avoiding a subpoena. The apostle to the editors is none other than that shining exemplar of all the virtue3, Allan Forman, editor of the Journalist,and manager of "The Telegraphic News Bureau." "If I am ever to redeem the wicked press from sin," said Mr. McCurdy to himself, "I must beware of journalistic parasites and prostitutes. The man for my money is honest Allan Forman."

Forman immediately started to hold revival services. The devil who walketh about as a roaring lion seeking whom he may devour, is, according to his notion, none other than the Associated Press. This malignant organization actually sent out news not wholly laudatory of that benevolent enterprise, the Mutual Life. But Forman promptly circumvented the evil one by dispatches through his "Telegraphic News Bureau," tinnouncing that "the profits derived by the policyholders of the Mutual Life and obtained through transactions arranged by the subsidiary trust companies amounted, up to date, to $16,000,000"; that President McCurdy complained that the Inquiry was an inquisition, and Mr. Hughes "admitted it was an inquisition"; and that President McCurdy's testimony "made a distinctly favorable impression." So anxious was the Mutual to supply the sincere milk of the word to benighted editors, that it paid Forman a dollar a line for every newspaper that printed the matter. How rruch of the money Forman passed on does not appear. The complaisant papers which were named at the hearing were the Wilmington (Del.) News, Boston Herald, St. PaulPioneer Press. Toledo Blade, Buffalo Courier, Florida Times-Union, and Atlanta Constitution. If these converted journals, innocently and without hope of reward, published Forman's dispatches from pure love of tiuth, then all we have to say is that every gold-brick operator in America and every dealer In green goods knows where to look for victims.

This wretched business, however, has a serious as well as a comical side. The president of the Mutual—and in this venture the Mutual Is not alone—has been trying to avoid tihe consequences of his mismanagement of affairs by practising a deliberate deception upon the American public. Paid advertisements—at least Forman is paid—are sent out in the guise of "pure readingmatter." The obvious intention is to convey the Idea that this dollar-a-line stuff is the view of an independent observer. Since the investigation began, the Mutual has spent more Chan $12,000 of policyholders' money in this mean and dirty trick. The facts speak for themselves. Presidents McCall and McCurdy have no ground of complaint against the "yellow" press or any one else if plain men, of no pretension to knowledge of high finance, now commonly regard insurance officers as both thieves and liars.

But the men who have plundered our life-insurance companies are not the only ones who have outraged decency and honesty. Their accomplices after the fact are some of our high-toned newspapers—for every one of the dailies just mentioned prides itself on its respectability. Call it venal, and it would burst with indignation. And yet the editor has either been the guileless dupe of Forman, or else for a dollar or less a line he has practised a deliberate imposition on his readers. The feeble little paid puffs of soap or sarsaparilla, disguised as news, are bad enough, though they are so obviously advertisements as to deceive nobody. But the coloring of reports from a public hearing of immense importance to all policyholders is a more subtle and therefore dangerous form of fraud.

There is yet another grave aspect of the case. The insurance companies are heavy advertisers, and they have never hesitated to shake their big stick at the newspapers. "Hold your pen or lose the full-page advertisement of our annual statement" is a convincing argument in every part of the country. But newspaper readers are not such fools as to suspect no subterranean connection between lawless corporations and the press. And this well-founded suspicion explains in part the popularity of "yellow" journalism. Certain sensational newspapers make hostility to corporations their stock-in-trade. They exaggerate grossly, but at any rate they are not afraid of the money power. "Here," says the small wage-earner "is a paper that dares to speak out about the iniquities of men In high places. Reckless and disreputable this newspaper may be, but none the less it is trying to redress my wrongs." Thus every newspaper that goes into whitewashing at a dollar a line, and every insurance company that pays the dollar, helps strengthen the hold of the yellow demagogue.

November 16, 1905, page 393
The Metropolitan's Industrial Insurance,
The missionary aspect of the life- insurance business as delineated by President McCurdy of the Mutual continues to crop up in the legislative inquiry---most strikingly in the matter of industrial insurance, which must be probed more deeply by the committee. People who buy this form of insurance pay very high rates for it, partly, at least, because of the cost of collecting the small premiums. Solicitors go from house to house, gathering ten-cent pieces and quarter-dollars from housemaids and mechanics. From the point of view of the policyholder, this seems, on the face of it, a wasteful method of saving---if we may employ a contradiction in terms. When the 51 per cent. of lapses---certified to by Metropolitan officers---is reckoned in, the extravagance is yet more startling. No one can deny that though the Metropolitan itself is prosperous, its system, which lays such a burden on the poor, is now open to the gravest suspicion.

November 23, 1905, page 411
Piatt's endeavor to oust Odell from boss ship 411

November 23, 1905, page 412,
Paralysis of Memory In Prominent Witnesses 412
A visitor from Mars, newly landed in New York, would write home that in this topsy-turvey land the one essential to worldly success is total lack of the faculty known as memory. The most eminent financiers and statesmen of the commercial capital of this continent, he would remark, have recently been giving testimony under oath. While each displays markedly individual traits of speech and taste in dress, they are alike in their absolute inability to remember. A brisk young man named Frank B. Jordan, son of a former comptroller of the Equitable Life Assurance Society, had forgotten everything so completely that, were he a resident of Mars, he would belong in an asylum for imbeciles. A United States Senator, former president of a great railway, and still member of many important directorates, has apparently risen to his present height of glory because, in the course of a few weeks or months, all names, faces, letters, sums voted for various purposes, policies of action, and reasons of state melt and swim in a hopeless delirium. A former Governor of the Empire State, leader of the dominant political party, a second man who is a brilliant financier, master of one of the most extensive railway systems in the world, and a third, a young graduate of the oldest and most famous university in America, a patron of art and literature, whose services to an insurance company and certain allied corporations were reckoned to be worth $127,500 a year—these three gave testimony on the same point, and no two of them were able to agree. Presidents of insurance companies with salaries ranging from $100,000 to $150,000 annually had seemingly lost track of all they ever knew about the details of their business—especially the work of their legislative agents. In brief, the visitor would warn his friends who contemplated coming here to live that they must drink of nepenthe.

The publishing of frequent reports by the Mutual Life investigating committee seems to us altogether wise. The investigation may be prolonged; a very considerable time must certainly elapse before the committee can formulate its broader opinions on the present theory and practice of insurance. But in the meantime the Mutual'e own situation is one in which delay in the introduction of needed reforms would be most unfortunate. The budget of recommendations reported by the committee on Thursday is entirely to the point. Premising that "certain of the practices and methods are so palpably loose and unsound as to call for immediate attention and correction," the committee advises, first, that all matters pertaining to legislation affecting the company be handled exclusively by the law department, with full responsibility for each and every transaction. This is a stroke at the subterranean lobby system maintained by the Mutual, almost wholly through improper and Irregular use of policyholders money for that purpose. The business of the Albany "House of Mirth" the company declares must be promptly ended, and "Watcher" Fields discharged. The "Department of Supplies and Printing," whose administration of the corruption fund was the most flagrant of all the scandals brought to light, must be reorganized, the committee declares, as to both personnel and methods.

Finally, the "commission agency contracts," whereby the McCurdy family was progressively enriched, and of which the committee remarks that they "were originally made and have since been continued or modified" in an "apparently Irregular manner," should be brought, the Truesdale committee thinks, to an immediate termination, and be replaced by employment of salaried managers. These recommendations make a good beginning, and promise thoroughness in the committee's dealings, later on, with other important aspects of the situation. Not the least striking paragraph of the report, if one reads between the lines. Is the committee's answer to President McCurdy s proposal to cut down his $150,000 salary. In his letter he "considers that it has been earned," but cautiously defers to "the judgment of some policyholders that it is too large." The committee's answer, in declining to deal with the matter as requested, is, that to alter such a salary, and fix its future status, might involve "the committal of the company to the continuance of the personnel of the present management."

November 23, 1905, page 414,
A Misunderstood Statesman.
We extend our sincere sympathy to Benjamin B. Odell, jr. After reading his testimony before the insurance inquiry on Thursday last, it is apparent that a more misunderstood statesman never figured in American political life. Mr. Odell has apparently been pursued for years by some malign fate which has sought, by means of astounding coincidences and misleading appearances, to entangle this good man in such a way as to all but destroy his fine reputation and to dig that premature political grave beside which Thomas C. Piatt already stands weeping. After studying Mr. Odell's career, it is easy to understand how innocent men are hanged on circumstantial evidence. The brain of Poe himself could not have woven a more astounding mesh of false inferences with which to bind and deliver an innocent hero to his enemies than that from which Mr. Odell is struggling to cut himself loose.

Mr. Odell is a man of a peculiarly sensitive nature, which leads him to burn v.ith indignation whenever he behold3 injustice, particularly if the public is the one to suffer. Naturally, therefore, his anger flamed forth when he discovered that, through Alexander & Green an 1 the Mercantile Trust Company, widows and orphans were being fleeced of their all by alluring prospectuses of no less than fifteen stock-jobbing companies, conceived in Infamy and brought forth for purposes of plunder. At once the Governor sends for Senator Ambler and declares that the wrong must stop. Forthwith this fellow-purist introduces a bill repealing the charter of the Fireproof Warehousing Company, under which the Mercantile Trust Company was doing its business. This was ever the Governor's Impulsive way—show him a wrong and he would draft you overnight a bill to stop it. But, on sober second thought, this knight-errant recalls that he himself has a claim against the Mercantile Trust Company, quite forgotten in the heat of his ire— and this is coincidence number one. With his usual delicate feeling about what is right and proper in a public officer, Mr. Odell sees that his action would be misinterpreted — curiously enough, it already had been by some newspapers—and so he orders the remedial legislation killed. Widows and orphans and other lambs might be sheared, but their rescue should not be purchased by the staining of the Governorship. Rather than injure the good name of the State through its executive, the Governor put his indignation aside, and the Mercantile Trust wolves had leave to continue to pull down their prey.

Meanwhile, of course, as Mr. Odell hel-l that the Governor of the Empire State should not b" concerned with Shipbuilding bonds- since they had proved worthless—he once more showed his readiness to injure himself at the behest of duty by selling these bonds at a loss of $125,482.36. It is, we submit, merely coincidence number two that they should have been purchased when Mr. Odell was serving his first term as Governor. Must not a governor, like other people, invest his moneys? But the Governor, freed by the sale, felt that some punishment must be meted out to those who had betrayed him. Hence his suit against the Mercantile Trust—and more astounding coincidences. It was an accident, merely, that Mr. Odell met Mr. Hyde at the offices of Mr. Harriman, with whom the Governor never had any business relations. And there Mr. Odell informed Mr. Hyde of the stern decision he had arrived at that there should be no legislative punishment of the Trust Company. Noblesse oblige. Mr. Hyde knew how to respond in kind, and the check for $75,000 was promised, though not until further negotiation had taken place.

By another unhappy coincidence, long before this happy conclusion had been reached, Mr. Odell's sense of duty impelled him to advocate the election to the Senate of some other person than Senator Depew, since 1877 a director and a legal adviser of the Equitable, which owned the Mercantile Trust. There was absolutely nothing behind Mr. Odell's opposition to Mr. Depew but a worthy desire to improve the State's representation at Washington. But, as he himself afterwards admitted, he had misread the sentiment of the up-State Republicans. When he found that he had erred,and that Mr. Depew's retention was the wish of the party, he announced, in the morning newspapers of December 30, 1904, that he withdrew his all-powerful opposition, and that. Mr. Depew would continue to represent the State—and the Equitable—in the Senate. Alas! his cruel fate had one more terrible blow in store for him in the shape of another, on its face, damning coincidence. That same day, December 30, I'M.'/, in his morning's mail, Mr. Odell found the long-promised check for $75,000 from the Mercantile Trust Company. Mephistopheles himself could not have planned more subtly to undo virtue.

To make matters still worse, busybodies are re'calling that when Mr. Odell receded from his opposition to Senator Depew, Senator Brackett charged him with saying that he must do so or break with his "dearest friend"—an unofficial explanation which, if true, would, after ail, merely reflect Mr. Odell's loyalty to his friends. Nor is there reason to criticise Mr. Odell because at Mr. Harriman's request he wrote to Mr. Roosevelt urging Mr. Hyde's appointment as ambassador to France. This was not an effort on Mr. Odell's part to get back his $75,000, but was merely an example of his Christian readiness to do a good turn to one who had wronged him. It is quite absurd to insinuate that, in aiding Mr. Hyde's ambition, Mr. Odell was also aiding his "dearest friend" to get Hyde out of the country, so that the "dearest friend" might get at the Equitable's surplus. It was again only a coincidence that the letter should have been sent before Mr. Odell received his check of $75,000. Truly, as a victim of so many trying coincidences, we believe Mr. Odell to merit the sympathy, not the carping, of every charitable soul.

November 23, 1905, pages 414-15,
The Unholy Alliance.
Mr. Hyde's testimony last week stripped away the last shreds of the veil behind which grafting financiers and grafting politicians have been hiding. Suspicion has now become certainty. We see the whole politico-financial conspiracy revealed. It was not only great speculators who were driven wild by the sight of the vast life-insurance surpluses; politicians also went frantically to work to get their clutches upon a part of the huge accumulation. The dovetailing of greed and corruption, in finance and politics, is now clearer to the public vision than ever before. Mr. Hyde, with either the innocence of an enfant terrible, or the quiet resolve of a man with his back to the wall to tell the whole truth, has given the world a picture of the unscrupulous politician in alliance with the conscienceless financier, which no subsequent protests or attempts at correction can blur.

Ex-Gov. Odell, for example, is a ruined man. "Questions of veracity" between the masters of many millions are always "painful" for a society in which wealth has insensibly come to be a synonym for virtue. We shall not undertake to decide whether Mr. Hyde or Mr. Harriman committed perjury, but may remark that the chief issue between them is narrower than some seem to suppose. It is simply whether Mr. Harriman did or did not suggest to Mr. Hyde that Odell ought to have his demands satisfied because he was so powerful politically. If he did, he but made himself an echo of what Albany correspondents and the New York newspapers were saying week after week. It was "in the air" that Odell was too big a politician to be trifled with by any mere millionaire, vulnerable at many points. Whatever is to be said of the ex-Governor's explanations, it is clear as daylight that Odell has now to fight for his political life. Whether or not his exculpation be pronounced technically and legally adequate, the blow has fallen upon him, and the signal for an assault upon the stronghold of his power, the State Chairmanship, has been given both at Albany and Washington Odell Is a man of great vigor and d?termlnation, and has many political resources. He may, for a time, sustain himself: but if he does, he will sink his party in this State.

In the field of national politics, too, we have further details of the same unholy alliance. Republican fingers burned to get at trust funds. The Equitable also paid $50,000 to elect Theodore Roosevelt. That sum—$50,000—appears to have been the "assessment" of each of the big companies by the National Committee. Treasurer Bliss, Mr. Hyde testified, got that amount at the expense of the Equitable policyholders, the plain understanding being that "many large corporations" were also contributing heavily. And yet we seem to remember a fine moral indignation at Judge Parker for asserting this to be the case a year ago. If our memory serves, a heated document issued from the White House on that subject. True, Judge Parker made specific allegations of blackmail by Mr. Cortelyou, which he could not sustain; and the President's denials were technically correct. Still, if the facts now known had been known last November, the public would have thought the case as bad as Judge Parker asserted. But all this was before Mr. Hyde went to the White House to ask for the ambassadorship to France in return for the Equitable's contribution. On this point, Mr. Hyde testimony is illuminating- To be sure, Treasurer Bliss requested money so as to save the country from the Democrats, but that did not prevent the saviours from coming in for something handsome. Both he and Mr. Frick felt that Mr. Hyde's qualifications for the Embassy at Paris rose with every $25,000'he took from the policyholders to give to the campaign fund; and they backed him—or fooled him—to the top of his bent.

This matter cannot rest here. We have had a good deal of financial housecleaning, in consequence of the insurance revelations, but the political housecleaning is yet to come. And there can be no doubt who should take charge of it. President Roosevelt is the leader of the party which has been sadly smirched. He himself stands as the presumptive beneficiary of the concealed gifts of corporations. It is beside the point to say that his great popular majority showed the shady financial soliciting of his committeemen to have been unnecessary. Neither he nor they knew it to be unnecessary. The money was asked for on the ground that it was indispensable. These huge sums were taken and used, and used for Mr. Roosevelt's benefit. That he did not, in fact, need the tainted money, does not excuse its being sought and accepted; nor does it relieve him from the duty of publicly repudiating his agents (which he has not yet done), and taking vigorous measures to prevent the repetition of such scandals as those with which they have stained the Republican party. We look to President Roosevelt's forthcoming message for plain speaking on this subject, and for recommendation of laws to prevent his party, or any party, from disgracing itself and debauching the electorate with money secretly and corruptly obtained from corporations. Only by some such step can Mr. Roosevelt both clear his own skirts and do the country a service for which the times are crying out.

November 30, 1905, page 434,
Piatt's levy for State campaigns on insurance companies 434
Perkins's shuffling over shady transactions 434
Tarbell on deferred dividend policies 434-435
"Preserving the gold standard" is too good a phrase to be lost; we should incorporate it permanently in our political vocabulary. In 1896 the big insurance companies were paying $50,000 each to the Republican campaign fund in order to preserve the gold standard. In 1900 the standard still seemed to be in danger. In 1904, ordinary men ceased to have apprehensions; but the far-sighted presidents of our insurance companies continued to see the menace on the distant horizon, and cheerfully handed out the $50,000—taken, as usual, from the pockets of the policyholders. Nothing but the salvation of the country and the preservation of the gold standard, they assured us solemnly, could have induced them to contribute to a political party. They regarded State issues and local issues as beneath their notice. On November 21, however, Senator Thomas C. Piatt testified In effect that he had a little gold standard of his own which he was preserving very industriously. He was not interested in the national but In the State, campaign; and yet the Equitable paid him $10,000 a year, and the Mutual often gave as much. President Richard A. McCurdy, by the way, who swore that the Mutual did not give to the State campaigns, was the man with whom Piatt had dealings. Plat is not the only man who had a gold standard. The Equitable has carried on its payroll for twenty-three years an old Tammany politician, Thomas Coman, at a salary ranging from $2,000 to $6,000. His duty has been to preserve the gold standard of individual officers of the company, and he mentioned specifically Mr. Alexander, Mr. Hyde, Mr. Tarbell, and Mr. Jordan. He would keep these gentlemen on good terms with the city government and get their tax assessments reduced. For such eminent services to the country $6,000 a year from the money of the policyholders was a miserably small reward.

The testimony of Mr. George W. Perkins on Monday did not reveal him in an absolutely new light—it was of a piece with what had gone before; but it was astonishingly replete with evasions, shifts, doublings, reluctance to come to the point, hollow excuses, pretences, and finally the most damaging admissions. Here was an enormous fiduciary business managed In the spirit of a Bowery shop for second-hand clothing. Deceit and misrepresentation were the chief stock in trade. The public was bamboozled, the Superintendent of Insurance was hoodwinked, the policyholders were deceived and cheated. Accounts were doctored, minutes of Important meetings were falsely kept, blackmailers were allowed to bleed the company at will, political contributions were made under lying entries In the books, and the whole vast system of irregularity and crookedness and graft covered with a thin veneer of the most disgusting hypocrisy. Mr. Perkins and his fellows have made themselves impossible. They have forfeited all respect, and must lose their trust positions. If any of the trustees of either the Mutual or the New York Life think that their business can be saved except by the. most radical changes of personnel, they are living in a fool's paradise. Why, policyholders by the thousand are turning to Tom Lawson in preference to McCall or McCurdy or Perkins! That is only a hint of the desperate situation which requires desperate remedies. Public confidence can be restored only by dismissing the men who have destroyed it.

Mr. Tarbell's views in the matter of deferred-dividend policies are such as would naturally be expected from the head of a life-insurance company's agents. Mr. McCall, in his testimony of October 7 before the Armstrong committee, defended the "twenty-year policy," and expressed his objection to "straight life" annual dividends, on the ground, very largely, that to get good solicitors the company must pay good commissions, and that agents' commissions on a deferred-dividend policy are much larger than on ordinary life-insurance contracts. This argument would naturally appeal to an officer Whose duty it is to "show results" in new insurance. Mr. Tarbell undertook, however, to set forth arguments In defence of the deferred-dividend principle Itself. Briefly, his points are that such policies, maturing at a stated date, add to the safety of insurance by the large surplus funds accruing In the Interim; that they provide for the family when the policy matures; that they are cheap insurance, because no dividends so higlh can be paid on the annual basis; that they attract "good lives," because men not in good health would mistrust their chance of surviving to get the benefits of the "pool"; that they induce men to In-sure who would not insure if a "death risk" alone were the basis of their insurance; and that they do not lapse as "straight life" policies often do.

These arguments do not impress us. To say that withholding dividends for twenty years, and then paying them in a lump, adds to the safety of insurance, begs the whole question. If the funds reserved against such accruing dividends are calculated merely on the basis of safe insurance, then the company as a whole is protected neither better nor worse than it would have been without them. On the other hand, if the monstrous evils, extravagance, and corruption of which our great companies have been guilty, do not lie directly at the door of the abnormal surpluses thus accumulated, then the Armstrong committee's researches have been in vain. As to the second point, a "twenty-year policy" at least provides no better for a family than a savings-bank account maintained by similar payments during the same period; it is capable of proof, indeed, that its provision is far less adequate. That these policies, with their excessive charge for premiums and their exceedingly meagre return of accumulated dividends, are the cheapest form of insurance, we had not supposed even Mr. Tarbell would seriously contend. If allowance he made for those who lose all their dividends through death in the period prescribed, we take it to be the most extravagant form of insurance in the field. Mr. Tarbell's other arguments hardly call for answer. Our own view of the matter is summed up in the Frick report's conclusions, which we have quoted heretofore; we may add, with approval, the following remarks, addressed to the Insurance Commissioners' Convention last September by Insurance Commissioner McGivney:

"The purpose of a mutual life-insurance company is not to have its members gambling on the misfortunes of its other members. The deferred-dividend plan is the medium of building up large surplus funds which are not required by law to earn any interest; It furnishes a ready means to mnke up losses from extravagance and waste, and is a temptation to the management for hazardous and risky speculation in the policyholders' funds."

"For ways that are dark," but for tricks that have not been vain, commend us to the insurance grafters. John A. Nichols received for some years $1,000 from each of the three great companies with which to stop the mighty Ten of the "rantankerous friend" at Albany, W. S. Manning. But the latter swears he got of late only a miserable |300 annually as his "legal" retainer. Profit for Nichols, just $2,700 a year. As for the mighty McCalls and McCurdys and Alexanders, this leaves their boasted business ability in a sorry light. Any up-river graybeard with a sanctimonious air could stand them all up against a wall and make them hold up their hands while he extracted from their pockets just what he wanted. So easy was this game that it makes the trade of a blackmailing society editor seem like an elaborate business transaction. But the magnates knew their methods were crooked, and so they paid every one who came along to save themselves from exposure. Assemblymen, strikers of the Manning type, avaricious lawyers. United States Senators—all knew a good thing when they saw it, and worked their mine for all it was worth. What mattered it if the money was stolen from men and women who toiled and slaved and saved pennies to pay premiums? The woods were full of them; the agents roped them in by the hundreds; surpluses piled up; the State Insurance Department connived willingly, no danger was in sight, and all went merrily. Is it any wonder that the McCalls and McCurdys have a sense of deep personal injury at the thought that their little paradise has been rudely Invaded?

November 30, 1905, page 436
A Little Insurance History.
The reappearance of the name of David B. Hill in connection with life-insurance affairs recalls an incident which took place while he was Governor of New York. In the year 1880 the State Legislature passed a law to tax life-insurance companies. It imposed a tax of one per cent, per annum on the gross amount of the premiums,- interest, or other income (except from rents), received by such companies of this State from persons residing in this State, or from investments represented by, or based upon, property situated In this State. This act was chapter 534 of the Laws of 1880.

The companies paid the tax until somebody discovered that It might be unconstitutional. The State Constitution provided that every law imposing a tax should state the object to which it was to be applied. The law of 1880 did not do so. The amount received from the tax had passed Into the Treasury and had been appropriated to the general expenses of the State. The companies thereupon ceased paying until the arrears amounted to $1,000,000 or thereabouts. Meanwhile, the Legislature had passed another tax law without any mention of the object to which the revenue should be applied. This was the collateral-inheritance law. Under this act a case arose In the courts almost Immediately which was destined to settle the dispute. Mrs. Mary McPherson died, leaving a will containing bequests to other persons than her direct heirs. The taxing authorities demanded the portion due to the State, which the executors refused to pay, on the ground that the law fixing the tax was unconstitutional, since it did not state the object to which it was to be applied. It was at once perceived that the decision In the McPherson case would cover the question raised by the life-insurance companies. Accordingly, its progress was watched with great and growing Interest, and it came to pass that before it reached the Court of Appeals a dozen or more of the ablest lawyers in the State ranged themselves on the side of the McPherson heirs. The fees of these lawyers, if charged at the usual rates, would have swallowed up the estate In controversy several times over, and the natural Inference was that the life-insurance companies were fighting the battle of the McPherson heirs.

The case was decided in favor of the State in February, 1887, without a dissenting voice. The court held that the provision in the Constitution which required that every law Imposing a tax should state its object, applied to the annual recurring taxes known at the time of the adoption of the Constitution (1846), i. e., the general property tax, but did not apply to the special taxes subsequently devised and enacted. It was absurd to suppose that the State could not reach new sources of revenue without specifying in each instance how it should be apportioned among the several objects of public expenditure. This case is known as "the matter of McPherson" (104 N. Y. 306). When the decision was announced, it was generally assumed that the delinquent companies would pay the back taxes due to the State, but no such thing happened. A bill was forthwith introduced in the Legislature, then Republican in both branches, not only to release them from the arrears, but to repeal the law of 1880 altogether, and this movement gained such headway that the State Comptroller (Hon. Alfred C. Chapin), in order to save this source of revenue for the future, proposed a compromise, relinquishing one-half of the arrears and keeping the law of 1880 in force. Charges of bribery and corruption began to reach the newspapers from their Albany correspondents, and these rumors worried the supporters of the bill not a little, but did not stop the measure. Comptroller Chapin's bill was voted down and the repealing bill was passed by both branches. It is chapter 699 of the Laws of 1887.

Undoubtedly some votes were cast for it honestly; some men voted for it then who would not do so in the light of recent revelations. Senator Fassett, for example, supported it on the ground that the money released by the State would, in the case of the three leading companies (the Equitable, the Mutual, and the New York Life), enure to the benefit of the policyholders, who ought not to be taxed. The possibility that the State might lose the money, and the policyholders lose it also, had not presented itself to the Senatorial mind. Moreover, the superstition that policyholders ought not to bear any part of the burden of government was stronger then than it was in 1880, or than it is now. Making all possible allowance, however, for the simplicity of legislators who voted to these rich companies a million dollars actually due to the State Treasury, and many other millions to become due, there can be no doubt that this bill was "handled" by such characters as "Judge" Hamilton and "Al" Fields, backed by the use of money.

The bill passed the Senate on the 19th of May, and went immediately to Governor Hill, who took a long time to consider it. Not until the 25th of June did he make up his mind what to do. Meanwhile, the Legislature had adjourned. If he should simply withhold his signature, the bill would be dead, and the Comptroller would forthwith collect the back taxes. The companies must have been very much in the same state of mind as the Mercantile Trust Company was last year, with the Ambler bill hanging as a sword of Damocles over its head. But the Governor made up his mind at last that it was a good bill and ought to pass. So he signed it. And now we learn that in 1895, while he was a Senator of the United States, Mr. Hill received from the Equitable Life an offer of a retainer, which he accepted with thanks, saying that it came very "handy" at that time.

December 7, 1905, page 454,
G. W. Perkins to quit New York Life,
With Mr. Odell's reported desire to have Postmaster-General Contelyou and Cornelius N. Bliss questioned by the Insurance Committee as to the political contributions they received from the insurance companies, we are in hearty accord. Mr. Odell's motive is obviously to discredit those pure Washingtonians who are now bent on reading him out of the party. To our mind, justice to Mr. Roosevelt and Mr. Cortelyou calls for a clearing-up of this whole question of the methods of the Republican National Committee. The Insurance Committee has already performed an inestimable service in demonstrating the alliance between corrupt politicians and the corrupting corporations; we want the picture complete, bringing out the national aspect of the matter, lest people notice its unfinished condition, and lay it to tenderness for President Roosevelt. We heartily welcome the report that he had declared that both Piatt and Odell must go. That would be in line with his best traditions, and should be the kind of warfare in which he could most delight. Piatt and Odell —and Depew. These three must be retired forthwith unless the party desires to be pulled down by them to defeat as well as disgrace.

George W. Perkins will retire from the vice-presidency and the chairmanship of the finance committee of the New York Life. When he attempted to be both vice-president of the life-insurance company and partner of J. Pierpont Morgan, the latter gravely doubted whether it was possible, even for a man of Mr. Perkins's energy and vivacity, to hold the two positions. The event has amply justified Mr. Morgan's misgivings. Among the most unpleasant revelations of the insurance investigation have been those in regard to Mr. Perkins's performances in his dual role. As officer of the insurance company he had to drive hard bargains with the partner of Morgan; and as partner of Morgan he had to see that the officer of the insurance company ("the trustee for widows and orphans," as the beautiful phrase is) did not overreach him. The plain statement of facts on the witness stand made it obvious to everybody that Mr. Perkins could not try to serve two masters without damaging both them and himself. His retirement from the insurance business Is the first open step toward house-cleaning in the New York Life; but it cannot be the last. The McCall management and President John A. McCall himself no longer command public confidence. To blink this fact is useless. The juggling of the annual statement of the company, the secret ownership of stocks which were presumably sold, the dabbling in the Steel stock syndicate through an Intermediary, the elaborate and costly machinery for the corruption of legislatures—all these things have served to write down the name of McCall in that black-list of insurance officials who must resign.

December 14, 1905, page 475
Ryan threatened by Harriman with legislative Influence,
When philanthropy is at the mercy of "eminent counsel," we get such unhappy spectacles as Mr. Ryan presented at the insurance inquiry on Friday. Conscious of having performed a great public service in snatching control of the Equitable from envious and angry financial rivals, he was eager to inform Mr. Hughes about the manoeuvres and threats of his quondam competitor, Mr. Harriman, but was cruelly stopped by "advice of counsel." This was obviously a great surprise and disappointment to Mr. Ryan, and nothing but his respect for Mr. Cravath as an authority on the whole duty of a financier skating on thin ice induced him to obey that gentleman and commit a misdemeanor. For the statute is clear. If Mr. Hughes's questions were "material" and "proper," Mr. Ryan made himself liable to fine or imprisonment, or both. And there was no reasonable doubt that the questions were material and proper. They went straight to the heart of the matter the committee is investigating---that is the corrupt alliance of Insurance companies with great speculators and powerful politicians. If Mr. Harriman tried to frighten Mr. Ryan by threatening to turn Boss Odell loose on him, it was of the highest public importance that the fact should be known. A little persuasion from Mr.Jerome loosened Mr Ryan's tongue on Tuesday, and we now know that Mr. Harriman, on being refused a half share in the Equitable, threatened to use his "legislative influence" against him.

December 21, 1905, page 495,
Morton's Letter to Equitable Policyholders.
Quite the most important pledge given by Mr. Morton to Equitable policyholders, in his letter published on Monday, is his assurance that the new administration will no longer strive to create the "biggest company in the world." It will not, he promises, seek to obtain new business at the expense of existing policyholders, and if its efforts to get business in any section of the world are shown to be unprofitable, that field will be abandoned. This is a programme whose scope, if the promise is faithfully carried out, is likely to be larger than most readers would imagine. When it is considered that the patronage of the man who really wishes to have his life insured may be obtained at a trifling cost, the ratio of last year's expenses to total premium income in the three great life companies, ranging as it did from 23.73 to 24.65 per cent., proves clearly that such a patron Is not being fairly dealt with. Mr. Morton's statement Is important as showing that the new managements realize on what points the future protest of policyholders is likely to converge.

December 21, 1905, page 496,
Harriman and Odell.
Who was E. H. Harriman that he should threaten T. F. Ryan with "legislative action"? He held no office. He was not, so far as known, a member of any political committee. What, then, was that "political influence" with which he menaced Ryan, in order to frighten him into surrendering half the stock of the Equitable? No names were mentioned in Ryan's testimony; none was uttered directly by Mr. Hughes in any of his questions; yet everybody knows who was meant. It was perfectly understood by all concerned—understood at the time by Messrs. Ryan, Root, and Cravath, understood at the inquest by witness, counsel, committee, and spectators—that Mr. Harriman claimed to have such power over the party boss, Benjamin Odell, that he could, through that agent, get anything he wanted out of the New York Legislature. Hence his threat to Ryan.

Had he not, six months previously, got a United States Senator out of the Legislature? Odell's final consent to Depew's election was extorted from him by Harriman. At least, that was openly asserted and not denied. On December 31, 1904, Senator Brackett made a public statement that Odell had given aa the only reason for deserting Black and going over to Depew that "it would break one of the dearest friendships of his lifetime should he persist in his support of Gov. Black." That was the excuse he gave to six of Black's protesting friends. To show that they knew the secret of that "dearest friendship," they objected that "when the bargain was struck by which he was made the chairman, and by which Gov. Black was to become the Senator, it was not made conditional upon approval by Mr. E. H. Harriman." But that gentleman and what Depew called "optimism" carried the day; Odell threw over Black, and Depew smiled—for a time.

There was every reason, therefore, to suppose that Harriman's threats were based upon his hold on Odell. Now let us see where Odell was, and what he was doing, at the time when Harriman was assuming power to do with the Legislature what he liked. Mr. Ryan testifies that he bought the Hyde stock on Friday, June 9. The angry interviews with Mr. Harriman were on following days down to Tuesday. During that period, therefore, there were, as the Sun remarked at the time, "subterranean efforts to thwart" Ryan. Now Odell returned from Europe on Saturday, June 10—just In the nick of time. On Sunday he went to Newburgh. At that place, on Monday, the Tribune reported the State Superintendent of Insurance, Mr. Hendricks, "in consultation with ex-Gov. Odell." On Tuesday, the latter came to his headquarters in this city, where he saw "many visitors." Among them was Senator Depew—a fit errand boy for Harriman—who talked with Odell "nearly an hour." Later on, Odell parried questions put to him by the reporters, and said he "didn't know whether anything other than the Hooker matter would be taken up at the extra session of the Legislature." So here we have a violent suspicion that Harriman was pulling the Odell wires in those critical days. We know, as a fact, that Odell came out openly later to demand an Investigation by the Legislature, although Gov. Higgins was against it. Was not this Harriman's "political influence" visibly at work?"

Some good lawyers have argued that the questions put to Ryan were not "material and proper," and that he should not have been compelled to answer them. Perhaps not, if it were a legal issue joined in court; but In a proceeding under the subpoena of a committee of the Legislature, with broad powers to inquire into all the ramifications of the insurance business, we do not see how there can be two minds about the propriety and relevancy of the questions. One of the chief subjects of investigation was the corrupt alliance between insurance magnates and politicians. To bring out the truth about Harriman's threats was just as material as to elicit the facts about illegal campaign contributions to elect Roosevelt, to probe the payments made by the companies to "Judge" Hamilton and other lobbyists, and to expose the whole set of political leeches fastened upon the insurance treasuries. Harriman's claim that he could checkmate Ryan, or ruin the property which the latter was buying, by using at pleasure the Legislature of the State of New York, was simply part and parcel of the whole nefarious system of secret compact and unlawful undertaking which It was the committee's business to expose. Ryan's testimony on this point was of the last public importance. It shows us to what a pitch of effrontery and recklessness the corrupt alliance between high finance and low politics had reached.

The political bearing of Harriman's statements on the stand fills all minds. Even at Washington it is dominating. Republicans are said to have gone to the President and told him plainly that It is now a question of life or death for the party in New York; being no longer the scandal of Piatt's control or Depew's lobbying for corporations or Odell's tyrannical bossing, but of the subjection of the Republican party to Harriman and the interests which he represents. Mr. Harriman himself, with the most splendid naivete, assumed to be the monarch of all he surveyed. He appeal to Odell for that politician's support? Really, the inquiry was a little too much to make of the owner of 16,000 miles of railway. He would have the committee know that whatever political influence Odell possessed was due to Harriman. The contrary supposition was almost insulting; and the witness proceeded to Inform the committee that, when he wanted things done at Albany, he was in the habit of giving his orders direct to the Governor and Speaker. No useless go-between was employed, such as a Senator or Assemblyman whose constituent Harriman happened to be; he dealt with Higgins and Nixon at first hand. And when the chairman of the committee anxiously endeavored to make it appear that this was only the ordinary appeal of bothersome constituents, by which all members of the Legislature are afflicted, Harriman proudly said that he must not be ranked with that common herd. It must not be supposed that he was running or telephoning to Albany about every trifle. He did not move unless he had some big thing of his own on hand, and then he moved straight upon headquarters.

The effect of Mr. Harriman's calm revelation of the true hiding of Republican power in this State, during recent years, will be either a party revolution or an unexampled party disaster. Things cannot go on like this. The Government of New York cannot be run by telephone from the Stock Exchange. We have had Piatt's confessions of where he got his bribe-money. Odell's shame is completed by Harriman's cool announcement that the ex-Governor is simply a "kept" politician. An end must be put to these leaders and their methods, or the voters will put an end to the party that endures them.

533 Index.

Jan. 5, 1905,
page iii,

March 2, 1905,
page 180,

February 2, 1905,
page 102,

March 9, 1905,
page 180

April 6, 1905,
page 258,

May 4, 1905
page 344,

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