George H. Earle, Jr., Surgeon-General of Finance
George H. Earle, Jr., Surgeon-General of Finance
By Richard Jarvis
Illustration from Photograph
ALL the members of the board of directors were present. They had been present for many weary hours, and during that entire period they had been trying to convince themselves that figures do, after all, lie. But at last the stubborn, blue-black columns in the leathern ledgers had conquered; their silence had worsted the clamor of these financiers; the board was still in session, but Ruin was just about to take the chair.
"Gentlemen," said the president, "there is no use any longer in blinking at truth. The company must go into the hands of a receiver, and when it goes there is only one man who can cure it, only one man who can get it on its feet again, preserve our business integrity and save the money of our stockholders."
The company's lawyer looked up from the pad upon which he had been scribbling aimlessly. "I know," he nodded; "of course you mean George H. Earle, Jr."
And of course the president did—not once, but many times. For this anecdote is not fiction; it is so much fact that it has happened on a score of occasions, each and every one of which has contributed to the reputation of Mr. Earle, of Philadelphia, as a Business Doctor and Financial Surgeon.
It is an axiom of medical research that, for every new disease which is discovered, sooner or later a new cure is made known, and much the same law seems to apply to ethics and to business. Thus the bank-wrecker had be-come a too-familiar danger, and the average receiver was generally, though by no means always justly, looked upon as of small assistance—or worse. But now Mr. Earle has, well-nigh against his will, been forced to pass most of his working life in one receivership or another and has elevated the task of financial salvage into a profession.
A novel type, surely. A ray of honest sunlight, you may well call it, in the dark sky of high finance. Mr. Earle is all that; he has evolved, in short, an absolutely new species which seems destined to become the hope of modern finance, and in evolving that species—the species of the sterling professional business man—he has achieved one of the most remarkable business records of our day.
Bear in mind that here is one who, for the most part, has worked only on wrecks. Their variety has been wide, but their condition has been uniform. And yet this reconstructive genius has come through his tasks to success by the unique process of commanding confidence and rebuilding with painful care.
It was the case of the Real Estate Trust Company of Philadelphia which brought Mr. Earle into national prominence. In the late summer of 1906 that institution, theretofore regarded as a local Gibraltar, fell with a crash. By a single shot from his revolver its president ended his own life and, to all appearances, the life of the institution of which he had been the unworthy head.
Investigation revealed seeming ruin. The head of the company had advanced tremendous sums of money on wild-cat securities. Hundreds of poor people with their little all in those vaults swarmed vainly to the doors. Angry depositors engaged counsel and started a legion of suits. Litigation was begun in such complexity that it would have tied up for years whatever money remained and would have crushed the company's credit forever. To meet a seven million dollar failure there did not appear to be assets worth two millions.
George H. Earle, Jr., was made receiver and proceeded to perform the seemingly impossible. First of all he employed what psychologists call "the direct command," and immediately demonstrated that, in financial illness as truly as in physical disease, half the cure is accomplished when the doctor has secured the patient's confidence.
"Stop these suits immediately!" he ordered.
Wonderingly, the contesting depositors obeyed.
Leave everything to me," he continued.
The depositors nodded.
"Now then, I will save your money."
And already it was as good as saved!
Mr. Earle went to the directors—not at them, but to them. He talked with them and found them willing to advance two and a half million dollars in cash. That sounds amazing. It is amazing. People even hinted that Mr. Earle had "put the screws on" those directors. But he denies this. Like most successful men, he is an optimist. "Personally," he said only the other day, "I have always been wholly sure that any litigation against the directors would fail. They had audits made and had reports submitted, but they were deceived by unquestioned frauds. There was not the neglect that the public suspected, and there was no moral delinquency. Not at all. The appeal I made to them was only an appeal to their sense of honor and personal responsibility, and it was responded to in a way that would make anyone's heart glad who likes to respect his fellow-men. One of them, who gave an enormous sum, had all his property in trust and could not possibly have been reached by law."
REJECTS A $250,000 FEE
Once the money was in his hands, Mr. Earle went even farther in his demands upon the confidence of the depositors and stockholders. He called for proxies.
In return," said he, "I promise to pay the depositors one third in cash and give them, for the balance, preferred stock in the reorganized company carrying an accumulative dividend of six per cent."
The response to this was instant. Each mail brought in hundreds of proxies, until the receiver had authority to act for every dollar on deposit. That began the last chapter, which Mr. Earle ended by clever deals with the assets: only two months from the time of its disastrous failure the bank reopened, and it stands to-day as one of Philadelphia's soundest institutions.
The directors suggested a $250,000 fee.
"Why, I'd really feel better if I weren't paid at all," said Mr. Earle.
But it was pointed out that other receivers would have to be paid in future instances and that such a sentiment, if indulged, might establish a precedent that would be hard upon them.
"All right," replied the receiver, "in that case we will make it $50,000."
So $50,000 it was made, but only a small part of even that has yet been called for.
"As a matter of fact," said Mr. Earle recently, "I have not made up my mind what I shall ultimately do with the rest."
Is it any wonder that the fifteen thousand stockholders unanimously chose him for President?
"This is the ninth institution which I have been called upon to help," Mr. Earle said when the task was at last completed, "and looking back over the past weeks, when I was often working twenty hours a day, I fully understand just the sense of supreme peace that must have come to the old lady who, having at last married off her ninth daughter, declared that she felt her life's work was done."
Mr. Earle's life work, however, is by no means completed. We give unstinted praise, we Americans, to one man who succeeds in building up one business under favorable auspices; but here is a man whose success lies in his ability to take over businesses of varied sorts that have been all but ruined and then restoring them to their pristine vitality—a man who has done this for banks, for railroads, for sugar refineries. An expert who rebuilds in these days of the destroyers; a man who believes in this day of doubts; a man who, by his own business insight and his own true worth of character, secures the faith of the thitherto deceived and snatches victory from the fangs of defeat—such a man is worthy of some detailed study.
Springing from sound Quaker stock, George H. Earle, Jr., started life with a golden spoon in his mouth and in his mind the intention of making himself into the same sort of a good lawyer that his father had been. He was admitted to Harvard with the class of 1879; left because of ill-health; regained his strength in the Adirondacks, becoming the enthusiastic outdoor-man he has since remained; and, returning to Philadelphia, entered the law firm of Earle & White which his grandfather had founded.
Almost immediately the young man began to demonstrate his ability to patch up torn rents in the cloak of business. In the Pennsylvania Warehousing & Safe Deposit Company his family owned stock which was selling—when it could get a purchaser—at five dollars a share, and which, bought at fifty dollars, had never brought a dividend. Could not this concern be put on its feet? Mr. Earle thought that it could. He convinced the powers that were, and they made him President.
The best pruned trees bear the best plums, and one of Mr, Earle's specialties has always been pruning. He gathered other young men about him, pruned that warehousing company's tree, and began using fertilizer—which came in the shape of a purchase of certain wharves. Why he wanted wharves nobody then knew, but after the purchase—some time after—the Baltimore & Ohio Railroad, entering the city, began fighting the Philadelphia & Reading for wharf room: that warehousing company's stock now fluctuates between seventy-five and a hundred dollars a share.
This was only the start, but business men at once observed Mr. Earle's peculiar talent. In his own city the Guarantee Trust & Safe Deposit Company had been severely shaken by some free and easy speculation; Mr. Earle was called in and restored it to stability. The cure of the Finance Company of Pennsylvania was next affected, Mr. Earle having now withdrawn from the law firm. Then the stock of the Tradesmen's National Bank of Philadelphia was precisely doubled in genuine value and the Philadelphia Market Street National Bank rescued, whereupon Mr. Earle had his part in the restoration of the Reading Railway and reorganized the Choctaw, Oklahoma and Gulf Railroad.
To give the entire catalogue of all that followed would be but to repeat former instances with new names. Finally, however, came the twin failure of the allied Philadelphia Chestnut Street National Bank and the Chestnut Street Trust Company.
GEORGE H. EARLE, JR.,
The Philadelphian who has attained wonderful success in bringing tottering financial institutions from chaos to order.
The creditors faced the cheerless prospect of getting twelve cents on the dollar, but Mr. Earle and Richard Y. Cook became receivers. The president of both concerns had borrowed heavily on securities of the Philadelphia Record, and when the Comptroller of the Currency refused to permit Mr. Earle to protect these loans with the money remaining in the bank, he got the president of the company to assign to him and Mr. Cook the equity of the paper, so that if the loans were paid the creditors of the institutions could get the value. The next move was to secure control of the newspaper: the two receivers raised the money and ran the business for four years. It prospered; profits increased, and the Record was sold at a great profit.
A fortune had been made. According to an opinion handed down by the courts, the profits belonged to Messrs. Earle and Cook, who had saved the newspaper with money advanced at their own risk. But Mr. Earle's action showed the character of the man. The creditors of the bank received one hundred and thirty cents on the dollar, being principal and interest for five years.
When you go into Mr. Earle's office you enter a high-ceilinged room, green carpeted, and see, sitting at a massive roll-top desk and behind a little wall of methodically arranged papers, a slightly stoop-shouldered man whose age, however, you would be unlikely to set at fifty-two years. This man's clean-shaven face is a picture of strength, eye clear, mouth firm; but the manner is that of business man and gentleman; always courtly, never gruff; and, most of all, impressive in its quietness.
Modest of his achievements, and scrupulous in his regard for the confidences involved in his delicate financial relations, he prefers to talk, in his easy, deliberate way, of his splendid thousand-acre estate, well called "Broad-acres," near Bryn Mawr, Pennsylvania, with twelve miles of drives within its limits and situated only that number of miles from his office door. He enjoys showing the visitor there one of the best private collections of pictures—especially rich in modern French masters—in America. He likes to tell, too, of his enthusiasm for a country, even an athletic, life; and he is fond of exhibiting his rare coins.
Do not suppose, however, that just because he was born to wealth on the one hand, and forced, so to speak, into the profession of financial surgery on the other, Mr. Earle has wholly lost interest in the law. On the contrary, he could not have done what he has done had he not been a lawyer, and when you ask his colleagues what sort of a lawyer he is, there is a single reply:
"One of the four best in the city."
As a matter of fact, Mr. Earle's legal talent is like his financial talent—constructive.
"I still occasionally plead a case in court," he says, "when I think a wrong has been done, or when I am interested personally, or as a matter of principle."
That does not sound very portentous, but it is only Mr. Earle's way of referring to his casual legal battles, one of which practically established the present libel law of Pennsylvania, while in another he developed an interpretation of the Sherman Act which is now accepted in all courts.
And his legal work is like his financial in yet another respect—the manner in which it demonstrates his infinite capacity for taking pains. In one case he looked up every decision regarding restraint of trade ever handed down by an English or American judge. Then, having launched these at the head of an honorable though bewildered court, he took a day's vacation and embodied the results of his researches in a little volume, "The Liberty to Trade as Buttressed by National Law," which in its particular field has come to be regarded as an authority.
Mr. Earle has seen some strange things in his time. In one instance where the president of a banking institution had stolen its entire capital, he was astounded to find that a court after the thefts, had appointed three able lawyers to audit the concern's accounts and that these lawyers had returned a highly complimentary report. This required investigation, and in the end the investigator discovered that, hearing of the approaching audit, the president, who had "used" one hundred thousand dollars, wrapped up and sealed a huge roll of perfectly blank paper, told his officers that it was a special deposit of one hundred thousand dollars to be returned with the seals unbroken if a certain deal did not "go through," and so received the one hundred thousand dollars credit on the books which was necessary to satisfy the auditors!
You would think that such experiences would breed suspicion in any soul, but you must remember that Mr. Earle is an optimist. In his own words:
"The most striking thing in my career has been, to my mind, the quickness with which my little financial rebuildings are forgotten in the interims between disaster, and the certainty with which they are remembered when disaster comes again. Whenever I have been engaged in one of these tasks, I have been magnificently supported and magnificently attacked. It is true, too, that, in the interval, criticism is my chief lot, until I might be tempted to feel that any slight service I may have rendered has quite faded from public memory; but that is sure always to be negatived when something fresh happens, for then I find that people have not, after all, been unmindful of what little I have done."
That is, of course, a far too modest estimate, for Mr. Earle's life is something more than he would have one believe. Many men who have observed the careers of our most conspicuous money-makers have asked: Does it pay to play fair?" George H. Earle, Jr., is the answer, and the answer is "Yes."