Was it by design that other news might be hidden behind the news of the Equitable Building fire? Apparently not. The banner headline in the final edition of the January 10, 1912, Evening Telegraph, places news of the fire subordinate to Andrew Carnegie's appearance before Congress that day, although why a recounting of his personal history in the steel business eleven years after he had left the business was relevant to the committee isn't clear. What is clear is his statement that the United States banking system is a "Disgrace to Civilization," and what it led to. The Federal Reserve Act was enacted December 23, 1913, and it's passage bears the same relationship to the Equitable Building fire as does the Patriot Act bear to the attacks of September 11th 2001.
CARNEGIE ON STEEL RACK
PANICS ARE DUE TO BAD BANKING SYSTEM, HE SAYS
Tells Congress Committee on the Witness Stand That Method Practised Here Is "Disgrace to Civilization."
SURPRISED THAT HE WAS SUCH A FOOL AS TO SELL PROPERTY TO STEEL CORPORATION "ON BASIS"
Adds "I Am Not Surprised at Anything Nowadays"—Makes Statement Regarding Conditions in Steel industry and Tells of His Early Business Career.
Washington. Wednesday.--Mr. Andrew Carnegie was an involuntary witness today before the House Committee probing the affairs of the United States Steel Corporation. Mr. Carnegie, who was first requested to appear and upon declining that invitation was peremptorily summoned to Washingon, was wanted to elucidate many of the details of the organization and operation of the "Steel Trust" and its domination of an industry in which he was for so many years a prominent figure.
Mr. Carnegie reached the hearing room ahead of time. He talked commonplaces with the chairman. Mr. Stanley, and other members of the committee. Mr. Carnegie had once expressed willingness to appear but recently declined to testify on the ground that he was named as a defendant in the govermnent's suit against the Steel Corporation.
Fools to Sell He Says.
Mr. Carnegie explained how the Carnegie Steel Company had purchased five-sixths of the Oliver Mining Company's stock in the nineties. Mr. Stanley asked him why the final sixth was purchased on a valuation basis of $17,000.000 for the whole tract, though originaly the company was capitalized at only $1,200,000.
Mr. Carnegie expressed surprise at this question.
"At that rate," he exclaimed, "we would have paid $53,000,000 for the whole tract. I am not surprised at anything nowadays. If that is true, what fools we were to sell our property to the United States Steel Corporation."
It was then explained that the $17,000,000 valuation basis was that of the whole tract and not the sixth. Even then, Mr. Carnegie said that if such a sum as inditacted by those figures was paid he was surprised that he "was such a fool as to sell our property to the Steel Corporation on the basis of $430,000,000."
Then after a moment Mr. Carnegiq turned to the chairman.
"My friend," he said, "you will have to ask somebody who knows about those figures. I never heard of them before."
Tells of Career In Business.
When Mr. Carnegie took the wi t n e ss stand he furnished the committee wi th a statement regarding s t e el industry conditions and told of his career in the business from the outset.
Mr. Carnegie was accompanied by J.H. Reed. of Pittsburg, his counsel. The committee room was crowded with spectators, including many women.
He was sworn by Mr. Stanley. Mr Carnrgie said he began his steel career in November, 1861, with the firm of Miller & Small, and that in 1862 he borrowed $1,500 from the National Bank of Pittsburg to enage in a partnership in the Keystone Bridge Company at Pittsburg.
"Five or six of us," he said, "were engaged in this. In 1866 we built the locomotive works in Pittsburg and in 1867 we united two other mills in Pittsburg. That was the beginning of the Carnegie Steel Company, Limited.
"In interesting other men with you in these early days," Mr. Stanley asked, "did you do so by selling stocks in Wall Street or other exchanges or did you get men of experience in the iron business?"
Had Very Little Capital.
"Oh no, I did not look for men who had no experience in the iron business. I was one of the youngest of these men and we had very little capital. At different times we would put in $20,000 or $30,000 wach."
"What was the capital of your properties in the sixties?"
"My dear sir, I have no more idea than you have."
"I have an idea," replied Stanley. "Was it as muh as $300,000? "
"Oh yes; the Superior mill alone was worth that, but I do not want to guess. Give me time and I will give you all the figures. I have had so much to think about for forty years, and in the last eleven years I have not engeged in the metal business, and so much has daded from my memory."
Mr. Carnegie related how when he was superintendent of the Pennsylvania Railroad he had iron rails taken up every six weeks and had sought some process for hardened steel.
Mr. Carnegie denounced the banking system of the United States as "a disgrace to civilization."
"When panics come in this country, " he said, "they are due to the face that we have the worst banking system in the world. Panics spread ruin, and if the bill now before Congress is passed you will have something to prevent such panics."
Mr. Carnegie in the written statement filed with the committee, pointed out that the Steel Committee's task had arisen from the fact that the law of competition in business has seemed recently to be impaired in certain fields, notably those of natural oil, steel and tobacco. Even now a gigantic railway system, embracing nearly one-half of the world's railway mileage, has been affected, and several retail companies have been tried and convicted uner the Sherman law."
In a Transition Stage.
"We are in a transition stage," said Mr. Carnegie, "and naturally suggestions are numerous and divers for effective compliance with the Sherman act as interpreted by the Supreme Court. That a satisfactory measure will finally be evolved is certain---one which does not go further than actually nevessary to prevent restraint of trade and monopply. These two and unedurable evils prevented, government and courts may well rest from further action until experience dictates any necessary modifications. There is no cause at present for either alarm or haste upon the part of the courts, Congress or producers or consumers, whose interests will become mutual whenever freedom of trade from monopoly is established. Nothing revolutionary is required."
Continuing the story of his life, Mr. Carnegie said that during the civil war he suffered a sunstroke, and was ordered to spend his summers in a cooler climate.
"I went to my native land, Scotland, and there I watched the Bessemer process of making steel. There, too, I met a Mr. Dodds, who had invented a patent for hardening the face of steel. I purchased the patent and brought Mr. Dodds to Pittsburg, where we built a furnace and made the first hard surface rails in this country."
Mr. Carnegie referred to "That great mechanical genius, Charles Schwab," as the "greatest man I ever knew in that line."
Mr. Carnegie said he suggested to Mr. Schwab that he test a process for making ore in open hearth furnaces and then "build an open hearth furnace."
"Charlie," according to Mr. Carnegie, "said he would try and it was not more than a week later that he came to me in my office in New York and laid on my desk plans for eight magnificent open hearth furnaces. We sold open hearth steel for $3 a ton more than other steel."
No Restraint of Trade.
Mr. Carnegie said that in the open hearth mills at Homestead, "the greatest in the world," the committee would find "no restraint of trade."
Mr. Carnegie frequently pounded the table with his hand.
"Why," he said, "we were going to build at Conneaut, Ohio, an enormous tube mill that would have astonished the world and outdistanced competition. That's where Charlie Schwab comes in again. He told me he was satisfied he had a plan whereby we could build a tube mill that would save $10 a ton in the cost of manufacture over any other tube mill in the world."