George H. Earle, Jr., Doctor to Ailing Corporations
|George H. Earle, Jr., Doctor to Ailing Corporations by
|From Munsey's Magazine, Vol. XLII, No. V.; February 1910:683-691.|
"Strenuous efforts are already being made to escape liability by debtors of the company, as well as to force liability upon the company ; but I am determined, so far as in me lies, to thwart any such shabby attempts. A taste for blood, once acquired, is not easily assuaged, and dishonesty did not die with Hipple. I hope you understand that should I follow my own selfish interests, I would litigate and liquidate, take no personal risks, and safely collect the compensation, which would be large ; but I hope you all know that in that case I should be a worse enemy of you all than Hipple. Upon this corner must be reared one of the great financial institutions of the future. It may come soon or late, but it must come. The sole question for you to decide is whether that institution shall be yours, or that of others, who are earnestly seeking it, and that question you must now answer."—Receiver George H. Earle, Jr., to the creditors and stockholders of the wrecked Philadelphia Real Estate Trust Company.
TO best a heavy-weight octopus in good condition is a first-class performance, and the man who demonstrates his ability to do it can hardly keep from being dragged into the spot-light.
George H. Earle, Jr., was scarcely known, in a popular sense, outside the peaceful precincts of Philadelphia, until a few months ago, when the Sugar Trust struck its colors to him in the middle of a savage lawsuit. Earle is a fast fighter. He made terms on the spot, without stopping to get his breath or letting the other fellows get theirs. The precise details of the settlement cannot be stated here, as they are still before the court at the time of writing ; but the best-informed estimate of the Philadelphia newspapers was that the trust would have to pay over to Earle, as receiver of the Real Estate Trust Company, a total sum, in cash and securities, of about ten million dollars.
While people all over the United States were still asking who this fellow Earle was, the government's lawyers, armed with transcripts of the evidence, submitted to a Federal grand jury his charges of wrong-doing against the sugar crowd, and secured eight indictments.
In the bright lexicon of everybody's past performance, which in newspaper offices is known as the "morgue," there is some record of most folks, living as well as dead, but George H. Earle, Jr., was not there. The only place where his biography could be had was in Philadelphia, where any man you meet in the street can tell you that Earle is a great "business doctor." Like many other big financial men, he has come stealthily to fame. The achievements of Thomas F. Ryan and the late E. H. Harriman in the money world did not astonish well-informed people as much as did their ability to hide their light for so many years under a stock-market bushel. It is much the same with Earle, save that he never nursed an ambition to be a money king, never started companies, nor bothered with consolidations. He has been busy rebuilding and bolstering up concerns that were down and out.
When he came out of Harvard, in the same class with Theodore Roosevelt, he studied law, and hung up his shingle in Philadelphia. He liked law, and had to do something, but a more cogent reason was that for generations there had always been an Earle at the Philadelphia bar. He was too good an Earle and too typical a Philadelphian to break the sequence. He had a good deal of pedigree—which is one of his hobbies—and, it is now evident, a good deal of brains ; but he had no great amount of money at command, and it would have been a seer who could then have foretold that he would be a head-liner in the financial news.
His name has never been conjured with in Wall Street, nor has it ever bobbed up from the mists of great railroad combinations. He has stuck to his native heath, and continued to do business at the old stand in his own peculiar way—and it is a peculiar way. To-day Philadelphia has come with ample reason to recognize him as its foremost financial surgeon, business osteopath, and healer of sick corporations. He has become an institution. No big company in Philadelphia can fall ill, tangle up its affairs, be mismanaged or robbed, totter, tumble, and go to pieces, but a hurry call is sent for George Earle to come over and patch up the fragments.
His practise of this sort of monetary medicine has grown until it has swamped him, and he says he is getting sick of it. Law he forsook long ago, save as a useful medicament to be employed in the cure of invalid companies, and as a study for the little indoor leisure that business leaves him. He is passionately fond of it, nevertheless, and his houses and offices are all more or less littered with legal tomes. He ranks as one of the three or four best lawyers in Philadelphia, and has made some highly prized contributions to juridical literature, but he never opens his mouth in the court-room when he can get anybody else to do the talking.
This is one of his many contradictions. Given a listener, and he will talk till his train has gone. His physical courage has been tested under very trying circumstances ; but put him before an audience, and he has stage fright. He says himself that to save his life he can't keep his knees from knocking together.
Earle began his doctoring experiments on himself a long time ago. He had scarcely entered Harvard when he had to leave college, broken down and with the worst of physical prospects. He went away up into the North Woods, and lived out-of-doors until he was tough as an Indian.
But the doctoring habit was fixed on him. When he got to studying law, he began to cast about for a corporate patient to work a cure on, and found one near home.
In Philadelphia there was the Pennsylvania Warehousing and Safe Deposit Company, in which members of his family owned a considerable amount of stock. They had bought it for about fifty dollars a share, and when it hung for several years around five, and no vulgar reference was ever made to a dividend, Earle told the directors that investment was business, and that they had better make him president as a preliminary step toward showing some profits.
They did it, though they couldn't have told why. For a year he cut a dozen different kinds of dead-wood out of the concern ; then he got money together in one way and another, and bought a lot of dock property. People said he was a visionary, if not absolutely crazy, but, a little later, when the great railroads were scrambling for water terminals, it was his turn. The Pennsylvania Warehousing Company sold some of its land at a price which put it permanently on its feet and raised its stock very close to par, and Earle is president yet.
That was his bow in finance. Now he is fifty-three, tall, angular, a little stoop-shouldered, brawny, heavy of frame and feature. He sits humped over a little table in a gloomy little room in the big building in Broad Street which he saved for the Real Estate Trust Company. There are no frills about him. Anybody can go inside to see him. No lackeys frown outside the door. In the hot weather he peels down to suspenders, and his democracy pervades thp whole establishment. If it were not for the marble and mahogany, a visitor might easily forget for how many millions this large, easy-going man speaks.
One after another, he took hold of the Guarantee Trust and Safe Deposit Company, the Finance Company of Philadelphia, the Tradesmen's Bank, and the Market Street National—all of which are to-day flourishing institutions. He also had a hand in the straightening out of the Reading Railroad after the failure of 1893. He was prominent as a member of the Olcott-Earle committee, which reorganized that great railroad property and gave it the basis for its present wonderful prosperity.
By this time financial Philadelphia had begun to realize that it had a magician on its hands. He had reached the point where he couldn't stop. A long time afterward he said as much, in the words quoted at the head of this article.
When the Chestnut Street National Bank and the Chestnut Street Trust Company went to the wall, Richard Y. Cook was asked to act as assignee of the trust company. Mr. Cook stipulated that Earle should act with him, and the appointment was made. Their first decision was that no result could be secured unless there was harmony between the assignees of the trust company and the receiver of the bank. Charles G. Dawes, now president of the Central Trust Company of Illinois, was then comptroller of the currency. He was advised of the situation ; and meanwhile certain politicians asked for the appointment of a political favorite. Mr. Dawes came from Washington to Philadelphia one afternoon, saw Cook and Earle, and thirty minutes later appointed Earle receiver of the bank.
The case was one that would have taxed the ingenuity of a wizard. Both the allied Chestnut Street institutions were full of the paper of the Philadelphia Record. The comptroller could not allow the receivers to protect these loans with the cash assets that were left, so Earle and Cook, after securing the paper's equity with their own money, got control of it, ran it successfully for four years, sold it at a thumping profit, and, instead of pocketing the money, paid the bank's creditors a hundred cents on the dollar, with back interest, and nearly as much to the creditors of the trust company.
Out of all his business accomplishments, Mr. Earle says he holds his part in the rehabilitation of the Record and the restoration of the Chestnut Street banks to be the most creditable. He thinks so, he adds, because at that time public sentiment was generally against him ; but other men agree that the salvage of the Real Estate Trust Company was a bigger thing.
That was a mess, if there ever was one. People had called the company the Gibraltar of Philadelphia banks, and Frank Hipple, its president, was thought to be as straight as Broad Street. In 1906, when he went to his bath-room and shot himself, it became known that he was only the hypocritical tool of Adolph Segal, who, Earle frankly wrote to President Roosevelt, " was a fool." Segal had built three sugar - refineries and sold them at a profit to the trust. He thought he could keep it up forever, but when he built a fourth he framed his own downfall, signed Hipple's death-warrant, and put the bad-luck sign on the big bank-building at Broad and Chestnut.
In brushing Segal from its path, Earle discovered, the trust had enmeshed Hipple, who had looted the bank in hope of saving Segal's skin and his own. The building, and a vacant safe therein, were all that the receiver had to work with when he set out to tow into harbor a scuttled, dismantled, and dangerous derelict.
From the beginning of his singular career, Earle's plans of reorganization have been novel in that they were not framed for his own profit, and unique in that plain men could understand them. To the gentle art of professional receivership his method has been a sad blow. Instead of winking at the destruction of values, lining his own pockets, and leaving the bones of an institution for the financial beachcomber, his custom has been to conserve everything of worth—and he could see values where other men could spy nothing but a fee and a lawsuit.
Staid, conservative old figureheads in the finance of Quakerdom complained that the heart-to-heart letters which he wrote to people concerned in the affairs of the Real Estate Trust Company were garrulous, undignified, and unbusinesslike, because they departed from the buckram manner of the counting-house. But Earle, colonial as he is in many things, has a deep vein of modern sagacity and a shrewd understanding of the potency of printer's ink. His experience with the Record taught him how to use a newspaper, and no reporter, seeking something to print, ever went away from his office entirely emptyhanded.
What he wanted in these crises was not the approval of bank-presidents for his literary style ; for the clearing-house had turned its back on his broken trust company and abandoned it to its fate. He needed the confidence of the public at large. It was the masses to whom he was appealing, because the good-will of the company—"which," he said to the directors, "some advise you to destroy"—he calculated to be worth two million dollars in cold cash ; and two millions was a good thing to hang on to when the vaults were empty, the securities rehypothecated, the proceeds squandered, and the bank's credit marked with a minus sign.
What with his letters and his utilization of the newspapers, the public became enthusiastic, and offered a oneper-cent premium for the new issue of preferred stock, even before a plan of reorganization had been made known. Twenty millions of the stock could have been sold as well as four, if Earle had offered it.
"With men above a certain caliber,"he told the directors and stockholders, "more can be done by an appeal to duty and honor than by threats and coercion."He made honor and good repute the keynote of the whole transaction, and then asked for two and a half millions of dollars.
"What do you want to do with it?" they inquired.
"Just what I please," was his answer ; "and you must understand that if I misuse it, you can't recover."
Recognizing the genuine accent of the forefathers, they handed him the money, though it pinched some of them sorely. With this in hand, Earle was in position to offer the depositors, who at one time would have welcomed fifty cents on the dollar, one-third of their deposits in cash, and two-thirds in cumulative preferred stock. The individual consents of six thousand widely scattered creditors were secured, and in sixty days the doors were reopened for business, with the company's potential strength greater than ever. On the first day new deposits to the amount of nearly a million dollars were taken in, and financial Philadelphia smiled again.
If the good-will was worth two millions, as it turned out to be, Earle's brains and courage were worth several millions more. The two and a half millions which the directors had put up to save their reputation and that of Philadelphia banking, turned out to be the best investment they had ever known. To-day they are held up as models to the young.
At the end of the sixty days, Earle went into court to ask for his discharge as receiver. It had been a record job, but the most astonishing part was to come. Legally he was entitled to two hundred and fifty thousand dollars for his services. He told the judge he wanted no fee.
"But," said his friends, "this isn't going to be the last failure on earth. Think what such a precedent means to receivers in the future !"
"Oh, in that case," he replied, "you can fix it at fifty thousand dollars, but no more."
So his remuneration was fixed at that, but to this day he has not drawn out the money. Of course, they made him president of the company, and he has wrought monumental prosperity for it, but his salary is only ten thousand a year. Still, many presidencies count up, and in the "Directory of Directors" Earle stands as president and director of five of the companies which he has rescued or re-created out of debris. He is also director of the Philadelphia Rapid Transit, of Union Traction, and of .the Market Street Elevated Passenger Railway.
When somebody told him that his reorganization of the Real Estate Trust was his greatest feat, he replied:
"Perhaps so. but I hope it will be my last. I'm tired of it."
But it seems that he simply cannot stop. It was no time at all, after that, before he had taken charge of the Interstate Railways—the electric lines running from Wilmington, Delaware, north into Pennsylvania and New Jersey—which had gotten into a sorry financial tangle.
Persistency is ingrowing with him. He looks easy, but is as stubborn as a mule, even in small things. In his automobile, one day, he set out to show a guest William Penn's farm of Stoke Pogis, and missed the way.
"It isn't absolutely necessary that you should see Stoke Pogis," he said, "but it is necessary that when I start to go to Stoke Pogis, I shall go there ; " and he did.
In conversation he is as deliberate as a chief justice ; in execution, lightning fast.
"Do you think," he said to a man who berated him for some act of his as director of Philadelphia Rapid Transit, "that you could fill the job better ?"
"Yes, anybody could fill it better."
"Then you are the man to be there."
Accordingly, Earle wrote his resignation and compelled them to elect his critic to fill his place, though the man had cooled down and protested against it. But just before the recent strike, when Rapid Transit got into its muddle, the mayor called upon Earle to serve as director in the city's interest. He accepted, and to clear for action sold his personal stock at the market price—which, of course, was depressed just then.
When he went to the first meeting, they said they were glad to see him back.
"It cost me twenty thousand dollars to come," was the laconic reply, and with his acceptance he handed in a sealed envelope. "I may differ from you on the course to be pursued here," he said to the president ; "in this envelope is my resignation. You can use it whenever you wish."
In Philadelphia there is only one opinion now about Earle's ability. There are several about his personality. One man tells you he is a "live wire." The next you meet says he is a "sure-thing man." Both phrases are graphic. A codirector, who possibly has had to give in to him, says he is a "Jesuit," who lets nothing stand in the way of what he aims to do. That he has craft is plain. If he hadn't, he would have stood a fine chance with some of the financial jugglers he has had to deal with—bankpresidents, for instance, who replaced missing currency with "stage money." done up in bundles so cleverly that the bank-examiners checked it up for legal tender and credited the asset.
He has the intuitions of a woman and the foresight of a Hebrew prophet. When they were in the thick of the Real Estate Trust Company failure, an attorney for one of the looters came in and had a long, friendly interview in which he told a lot about the Sugar Trust's part in the collapse. Next day he sent in a bulky envelope marked "Facts re Sugar Trust."
The secretary was about to open it.
"Stop !" shouted Earle.
"Why? It's the memorandum of those facts about the Sugar Trust."
"Yes, and I surmise there is a stipulation there not to use them, but I propose to use them for all they are worth !"
Later on, when he did, the counsel taxed him with breaking faith. Earle grinned, and produced the envelope, unbroken, double-sealed, and indorsed with the date of its receipt.
"Of course, I've made enemies," said he, when some of the harsh things people said were told "him." But the interesting feature of this reorganization business is that I am criticized between times. They always forget it when there's a broken-down company to pull out of a hole, and somebody's money to save."
For saving money, for making money, he has a natural talent, but perhaps the queerest of his quirks is that he doesn't care—at least, so those say who know him best—whether he makes it for himself or for somebody else.
" I believe in making money," he said, "up to a certain point. I think every man should make as good provision for his family as he can, but I never did believe in letting money make me."
Thrift has always been a trait of Earle's—inherited from his Yankee strain, perhaps. He took up coin-collecting as a boy, and to-day has one of the finest collections in the world, but all the time he was in college he cleared up enough to pay his expenses by buying and selling rare specimens. One of the first things he did, after becoming president of the Real Estate Trust Company, was to make alterations in the upper floors so as to double the number of rent-paying offices. When he went to the Adirondacks for his health, years ago, he took a far look ahead, and bought for two hundred and fifty dollars a tract of land in the St. Regis. It was primeval wilderness then. To-day it is still primeval wilderness, but owned and inhabited by the richest men in America, and a camp-site costs wellnigh as much as a seat on the Stock Exchange.
Rumor puts the amount of Earle's personal fortune at ten million dollars, but this estimate is contradicted by close friends, who say that though he has made a great deal of money, it has been chiefly for other people. It is certain, however, that he is very comfortably endowed with this world's goods. Besides the St. Regis place, he has a handsome town house in Philadelphia, and, just outside of the city, two thousand acres of fields, woods, and waters, well away from the railroads, in perhaps the most beautiful countryside on the continent. Here there is a venerable stone house with cavernous fireplaces, which was there when his grandfathers were fighting the British. In fact, they settled most of the land he now owns, but he has bought it back little by little from later owners, and expects to see, some day, all his seven children, and their children, located upon it.
He had seven ancestors in the Mayflower and three in the Welcome. He traces his lineage back through Putnam, Warren, Mad Anthony Wayne, the Otises, and I know not how many more leaders in the Revolutionary struggle. There never seems to be absent from him the consciousness that for everything he does he must by and by be able to render clean accounting to his forefathers.
In his country home there is a spacious study, with a huge window-seat on which I noted a score or more of law-books. From the window one looks out over rolling fields, yellowing in the sunshine. There are three or four automobiles at hand, and twelve miles of delightful road to drive them over before you quit the Earle domain, which is aptly named Broadacres.
It was here, on a hot day last summer, that this healer of debilitated corporations unfolded, little by little, his diagnosis of the trust malady, which so sorely troubles that greatest of stock companies, the United States of America. His habit of mind is persistent. He approaches questions of sociology and government with the same divination of essentials that marks his management of a broken bank.
Business, with him, is simply business. His experience with the Sugar Trust has opened up a wider field to him than that of mere finance. When he handed in his resignation as a director of the Rapid Transit, he had in mind a plan for the public treatment of service corporations. He believes that they should be allowed to make a large profit, and then compelled to expend most of it in improvements and perfection of service. There is strong ground for belief that he has an idea of doctoring the country's ills in the same manner as he would a sick corporation.
There are little lakes at Broadacres, which he has made by damming a brook, and groups of bathers can be seen there almost any day in the summer.
"The place is wide open," he said in explanation. "I have always had a profound sympathy for the man who from the day of his birth has had no foot of land that he could call his own. The least I can do is to give every one free use of mine."
When told that Mr. Rockefeller, on his estate at Pocantico Hills, had gone in for high iron fences everywhere, he shook his head gravely and said:
"That is the sort of thing we shall have to do away with some day."
It was an astonishing sentiment, coming from the president of so many corporations. It is talk of this kind that makes Earle a puzzle to many men. With millions of dollars profitably invested, with an estate that is little short of ducal, lying almost within one of the greatest and richest cities of the country ; with a penchant for golf, cricket, and motoring, a mania for collecting old coins and old masters—an aristocrat, if there be any such thing in America—he is still not only an every-day man, but at times he utters sentiments that fall nothing short of socialism.
In his conversation he makes frequent reference to liberty, but if you listen you will discover that it is the liberty of Patrick Henry and Franklin, and not of Gorky or Karl Marx. He declares his belief in the doctrine of Malthus, and says that before long we shall have to reconstruct our ideas of tillage, care for our soil, and stop our extravagance, and that a lot of people will have to go to work.
"We are earning enormously now," he said, "but in every rank of American life people are living beyond their means, trying to keep pace with their neighbors. Even the rich are continually borrowing to keep up a competitive measure of fashion, and practically living from hand to mouth. The greatest maxim of political economy is ' Root hog or die,' and it is well that it is so ; but the abuses of wealth will cure themselves, if the people ever come to see straight."
Here again was a speech that might have come from a socialist orator.
"I mean," he explained, "that the American public has been confused with much noise. It has no clarity of vision and no singleness of view-point. One reason is that it is made up of several races, and the greater part of this population doesn't know what American liberty really is or means. The liberty our forebears established when they cut loose from. England, and which they thought they had safeguarded so that it could never be invaded, has been lost to us for the last twenty years, but very few know how or why. We talk about liberty and shoot off firecrackers, but what we always have in mind is liberty of the body, which is really the smallest part of the matter.
"I believe in the people. Put this matter so that every man can understand it, and I'll bet on the decision of the people every time. The real issue has been obscured by clamor against massed capital. There is the first mistake. People are frightened by big money. Massed capital, the corporation, and organization, are essential to keep us in the forefront of the world's trade, and to support our population. Business can no more be handled nowadays by small capital than I can carry off the City Hall.
" 'Yes,' they say,' but massed capital has engendered the trusts, which are robbing us.'
"True, they are robbing us, but what has made the trusts a menace is our lack of understanding and our habitual neglect of essentials. We have spent so much time complaining about the trusts taking our money that we have gone blind to the infinitely greater robbery. We have put the cart before the horse, American fashion.
"When the people, one and all, understand that the right of plenty and the right to engage in trade are the fundamentals of liberty, trusts will no longer be productive of anything but good, because it will be possible to regulate them so that their operation shall never approach the stage of confiscation. The danger lies in their monopoly of production, secured by means which are a wrong upon our liberty of will. The perpetuation of that wrong is to-day our greatest national peril ; for the will is like a muscle—if it has no exercise, it will become atrophied.
"Socialism is offered as a remedy. It is pretty to look at, but it does not mean liberty. It means just the other thing, because it brings us face to face with the same old equation. We know what the socialist leaders would do, for human nature does not change.
"Now we have, as a legal weapon to combat the trespass of the trusts, the Sherman Act. I am told that the trusts are already planning a campaign for the modification of this law. They believe that it threatens their freedom of operation. They, it seems, have quickly found the hole in the bag.
"The Sherman Act looks like a strong and righteous engine until you come to examine it in the light of history and basic English law. What it really does is to confer upon the President, or his legal officer, the right .to determine whether a trust shall be prosecuted or not. It does exactly what ostensibly it was framed to prevent—gives to these two men the power which the English took away from King James, and which has been the attribute of despots from the beginning of time, namely, the power of conferring monopoly.
"What is this act going to do to the United States? Suppose that some Alcibiades should come along, by and 'by, and take it into his head to grant monopoly to some one friendly to him. You say the people would rise up and put him out? It is very amusing. Let us see. This monopoly might take a hundred million dollars unjustly from the people. That is a very possible sum. The beneficiary would certainly be willing to surrender ten per cent of it to perpetuate his privileges—and think what effect ten million dollars, judiciously expended, might have on an election !
"Men have said to me:
" 'Why, it is impossible that these people, with unbounded wealth, would resort to such petty forms of thievery as cheating the customs ! '
"Nothing that promises gain is impossible to the man who from his youth has made the dollar his guiding star. Any trust that is evil must of necessity be doing these things.
"But it is our fault. When a trust robs the government of duties by a secret removal of cargo, or by undervaluation, the government is as guilty as the trust is. When a trust robs a city's coffers by stealing water for which it should pay, the city is as guilty as the trust is. Even after avoiding such honest obligations of honest business, they still find it necessary, it seems, to pay a trustee a million and a quarter to betray his trust by not running a seven-hundredthousand-dollar plant which has been built to produce sugar. That is only an incident, but it is typical, and it certainly looks as if the trusts appreciated the value of this liberty of will, in dollars and cents.
"No. If any amendment is to be made to the Sherman Act, it should be to provide that under it any .man, who can give security for the costs of action, shall have the power to prosecute a trust.
"Legislation, under present conditions, offers no hope of cure. We are not clear in our understanding, we are too mercurial, and lawmaking has become a disease. For any trying condition, and on the flimsiest pretext, we rush to enact laws, ill - considered, ineffectual, some of them in bad faith ; and in a twelvemonth we regret it.
"The courts, in my judgment, are our one safeguard—the greatest and the best engine in history.
"And what of the administration? Do you think we have come to Alcibiades ?
"Far from it. I have the greatest faith in Taft."
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This work is in the public domain in the United States because it was published before January 1, 1923.
The author died in 1928, so this work is also in the public domain in countries and areas where the copyright term is the author's life plus 80 years or less. This work may also be in the public domain in countries and areas with longer native copyright terms that apply the rule of the shorter term to foreign works.