



Produced by Turgut Dincer, Charlie Howard, and the Online
Distributed Proofreading Team at http://www.pgdp.net (This
file was produced from images generously made available
by The Internet Archive)









Transcriber’s Note: Italic text is indicated by _underscores_, boldface
by =equals signs=.




OTHER PEOPLE’S MONEY

AND HOW THE BANKERS USE IT




  OTHER PEOPLE’S MONEY

  AND HOW THE BANKERS USE IT


  BY
  LOUIS D. BRANDEIS

  [Illustration]

  NEW YORK
  FREDERICK A. STOKES COMPANY
  PUBLISHERS




  _Copyright, 1913, 1914, by_
  THE MCCLURE PUBLICATIONS

  _Copyright, 1914, by_
  FREDERICK A. STOKES COMPANY

  _All rights reserved_

FASCo _March, 1914_




PREFACE


While Louis D. Brandeis’s series of articles on the money trust was
running in Harper’s Weekly many inquiries came about publication in
more accessible permanent form. Even without such urgence through the
mail, however, it would have been clear that these articles inevitably
constituted a book, since they embodied an analysis and a narrative
by that mind which, on the great industrial movements of our era, is
the most expert in the United States. The inquiries meant that the
attentive public recognized that here was a contribution to history.
Here was the clearest and most profound treatment ever published on
that part of our business development which, as President Wilson and
other wise men have said, has come to constitute the greatest of our
problems. The story of our time is the story of industry. No scholar
of the future will be able to describe our era with authority unless
he comprehends that expansion and concentration which followed the
harnessing of steam and electricity, the great uses of the change, and
the great excesses. No historian of the future, in my opinion, will
find among our contemporary documents so masterful an analysis of why
concentration went astray. I am but one among many who look upon Mr.
Brandeis as having, in the field of economics, the most inventive and
sound mind of our time. While his articles were running in Harper’s
Weekly I had ample opportunity to know how widespread was the belief
among intelligent men that this brilliant diagnosis of our money trust
was the most important contribution to current thought in many years.

“Great” is one of the words that I do not use loosely, and I look upon
Mr. Brandeis as a great man. In the composition of his intellect, one
of the most important elements is his comprehension of figures. As one
of the leading financiers of the country said to me, “Mr. Brandeis’s
greatness as a lawyer is part of his greatness as a mathematician.”
My views on this subject are sufficiently indicated in the following
editorial in Harper’s Weekly.

  ARITHMETIC

  About five years before the Metropolitan Traction Company of New
  York went into the hands of a receiver, Mr. Brandeis came down
  from Boston, and in a speech at Cooper Union prophesied that that
  company must fail. Leading bankers in New York and Boston were
  heartily recommending the stock to their customers. Mr. Brandeis
  made his prophecy merely by analyzing the published figures. How
  did he win in the Pinchot-Glavis-Ballinger controversy? In various
  ways, no doubt; but perhaps the most critical step was when he
  calculated just how long it would take a fast worker to go through
  the Glavis-Ballinger record and make a judgment of it; whereupon he
  decided that Mr. Wickersham could not have made his report at the
  time it was stated to have been made, and therefore it must have
  been predated.

  Most of Mr. Brandeis’s other contributions to current history
  have involved arithmetic. When he succeeded in preventing a raise
  in freight rates, it was through an exact analysis of cost. When
  he got Savings Bank Insurance started in Massachusetts, it was
  by being able to figure what insurance ought to cost. When he
  made the best contract between a city and a public utility that
  exists in this country, a definite grasp of the gas business was
  necessary--combined, of course, with the wisdom and originality
  that make a statesman. He could not have invented the preferential
  shop if that new idea had not been founded on a precise knowledge
  of the conditions in the garment trades. When he established
  before the United States Supreme Court the constitutionality of
  legislation affecting women only, he relied much less upon reason
  than upon the amount of knowledge displayed of what actually
  happens to women when they are overworked--which, while not
  arithmetic, is built on the same intellectual quality. Nearly two
  years before Mr. Mellen resigned from the New Haven Railroad, Mr.
  Brandeis wrote to the present editor of this paper a private letter
  in which he said:

  “When the New Haven reduces its dividends and Mellen resigns, the
  ‘Decline of New Haven and Fall of Mellen’ will make a dramatic
  story of human interest with a moral--or two--including the evils
  of private monopoly. Events cannot be long deferred, and possibly
  you may want to prepare for their coming.

  “Anticipating the future a little, I suggest the following as an
  epitaph or obituary notice:

  “Mellen was a masterful man, resourceful, courageous, broad
  of view. He fired the imagination of New England; but, being
  oblique of vision, merely distorted its judgment and silenced its
  conscience. For a while he trampled with impunity on laws human and
  divine; but, as he was obsessed with the delusion that two and two
  make five, he fell, at last, a victim to the relentless rules of
  humble arithmetic.

  “‘Remember, O Stranger, Arithmetic is the first of the sciences and
  the mother of safety.’”

The exposure of the bad financial management of the New Haven railroad,
more than any other one thing, led to the exposure and comprehension
of the wasteful methods of big business all over the country and
that exposure of the New Haven was the almost single-handed work of
Mr. Brandeis. He is a person who fights against any odds while it is
necessary to fight and stops fighting as soon as the fight is won. For
a long time very respectable and honest leaders of finance said that
his charges against the New Haven were unsound and inexcusable. He
kept ahead. A year before the actual crash came, however, he ceased
worrying, for he knew the work had been carried far enough to complete
itself. When someone asked him to take part in some little controversy
shortly before the collapse, he replied, “That fight does not need me
any longer. Time and arithmetic will do the rest.”

This grasp of the concrete is combined in Mr. Brandeis with an equally
distinguished grasp of bearing and significance. His imagination is
as notable as his understanding of business. In those accomplishments
which have given him his place in American life, the two sides of his
mind have worked together. The arrangement between the Gas Company
and the City of Boston rests on one of the guiding principles of Mr.
Brandeis’s life, that no contract is good that is not advantageous
to both parties to it. Behind his understanding of the methods of
obtaining insurance and the proper cost of it to the laboring man lay
a philosophy of the vast advantage to the fibre and energy of the
community that would come from devising methods by which the laboring
classes could make themselves comfortable through their whole lives
and thus perhaps making unnecessary elaborate systems of state help.
The most important ideas put forth in the Armstrong Committee Report
on insurance had been previously suggested by Mr. Brandeis, acting
as counsel for the Equitable policy holders. Business and the more
important statesmanship were intimately combined in the management of
the Protocol in New York, which has done so much to improve conditions
in the clothing industry. The welfare of the laborer and his relation
to his employer seems to Mr. Brandeis, as it does to all the most
competent thinkers today, to constitute the most important question we
have to solve, and he won the case, coming up to the Supreme Court of
the United States, from Oregon, establishing the constitutionality of
special protective legislation for women. In the Minimum Wage case,
also from the State of Oregon, which is about to be heard before