With all the discussion, acrimonious and otherwise, stirred
up by Pope Francis’s tweet about inequality being the root of all social evil,
it’s interesting to see that Judge Grosscup was saying pretty much the same
thing more than a century ago. As His
Honor continued,
Diffusion of Wealth
in the United States
The second fact is, that though the industrial property of
the country is not widely diffused among the people, the people have the
financial means to bring about such diffusion — that it is on their individual
wealth, poured through the financial streams into Wall Street, that all the
great corporations now chiefly rest.
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| Small savings/Working capital |
In the last annual report of the Comptroller of the Currency
it is stated that there are in operation in the United States twenty-one
thousand three hundred and ninety-six banks and banking institutions, with
total deposits of twelve billion six hundred and twenty-eight millions seven hundred
and twenty-seven thousand six hundred and sixty-five dollars. This does not
include re-deposits by one banking institution in another; nor does it include
the large sums held by life insurance companies in trust for their policy
holders. What this huge total of nearly thirteen billion dollars does represent
is the individual wealth of the American public, that, un-invested in the
property of the country by the depositors directly, is put in the financial
institutions of the country, from which it is, of course, eventually taken out
for investment, chiefly by those who borrow it for that purpose.
To some extent these deposits represent what we call the
working capital of the country — the particular amounts that the merchant, the
manufacturer, the railway company, and other individual depositors always keep
on hand in bank, to meet their current needs; and to some extent these deposits
are kept in the bank vaults as reserve. But compared with the whole, neither
this reserve nor this working capital is considerable. Inquiry of one of the
greatest of the railroads, whose securities at present market values are
between three and four hundred million dollars, disclosed that that road
carries an average bank balance of about one million, or less than one dollar
for every three hundred of its market value. Inquiry of a leading merchant
shows that his average bank balance is proportionately larger than this, but
considerably less than one dollar in one hundred of the value of his
establishment. The largest average bank balance carried, as working capital,
that I have discovered, is that of the largest manufacturing corporation of the
United States — the United States Steel Company — a corporation that, beginning
with the raw material, turns it over again and again until the finished product
is delivered to the purchaser — in that way plainly calling for the largest
kind of cash capital. But even here the ratio of bank balance to the total
value of the properties is only one in eighteen; so that assuming that the enterprises
of the country that require distinctive working capital are of the value of
fifty billion dollars — nearly one-half of the country’s entire wealth — the
bank deposits representing such working capital cannot much exceed one billion
of the nearly thirteen billion dollars that constitute the total of the
deposits — an estimate unaffected, too, by the fact whether such working
capital is first borrowed from the bank and then re-deposited, as is often the
case, or is in the first instance deposited out of the depositor’s own ready
means. The truth is, that the great bulk of the thirteen billion dollars — a
deposit without example anywhere else in the world, is either utilized by the
banks themselves, in their business of buying bonds in large quantities and
selling them out at retail, or is loaned by the banks to those who are doing
the actual business of the country, and carrying the corporate securities of
the country. Or, stated in another way, the American people have today in bank
a sum of money unemployed for investment directly by themselves, but employed
by a comparatively small borrowing class, that nearly equals, at their present
market prices, the value of all the railroads of the country put together —
stocks, bonds and all; and that increase by what the people of the country
individually hold, in the way of bonds, stocks and other corporate securities,
constitutes almost the entire wealth on which the corporate business of the
country actually rests. So much then for this great fact — the fact that were
all the banks and saving societies to liquidate at once, paying back to the
depositors at their present market prices, the corporate securities into which,
through the small borrowing class, a great part of these deposits have gone,
there would immediately turn up throughout every quarter of the country, and in
direct possession and ownership of those of our people who have saved anything
at all, in addition to the corporate bonds and stocks already held by them, so
large a part of the remaining corporate securities, that it could be truthfully
said that the owners of the property of America were the people of America —
the property that is incorporated as well as the property that is
unincorporated.
(Next week: “Securing an Interest in Combinations”)
#30#
