Philip Dru: Administrator/Chapter XXXVII
Chapter XXXVII
The Cotton Corner
In modeling the laws, Dru called to the attention of those boards that were doing that work, the so-called “loan sharks,” and told them to deal with them with a heavy hand. By no sort of subterfuge were they to be permitted to be usurious. By their nefarious methods of charging the maximum legal rate of interest and then exacting a commission for monthly renewals of loans, the poor and the dependent were oftentimes made to pay several hundred per cent. interest per annum. The criminal code was to be invoked and protracted terms in prison, in addition to fines, were to be used against them.
He also called attention to a lesser, though serious, evil, of the practice of farmers, mine-owners, lumbermen and other employers of ignorant labor, of making advances of food, clothing and similar necessities to their tenants or workmen, and charging them extortionate prices therefor, thus securing the use of their labor at a cost entirely incommensurate with its value.
Stock, cotton and produce exchanges as then conducted came under the ban of the Administrator’s displeasure, and he indicated his intention of reforming them to the extent of prohibiting, under penalty of fine and imprisonment, the selling either short or long, stocks, bonds, commodities of whatsoever character, or anything of value. Banks, corporations or individuals lending money to any corporation or individual whose purpose it was known to be to violate this law, should be deemed as guilty as the actual offender and should be as heavily punished.
An immediate enforcement of this law was made because, just before the Revolution, there was carried to a successful conclusion a gigantic but iniquitous cotton corner. Some twenty or more adventurous millionaires, led by one of the boldest speculators of those times, named Hawkins, planned and succeeded in cornering cotton.
It seemed that the world needed a crop of 16,000,000 bales, and while the yield for the year was uncertain it appeared that the crop would run to that figure and perhaps over. Therefore, prices were low and spot-cotton was selling around eight cents, and futures for the distant months were not much higher.
By using all the markets and exchanges and by exercising much skill and secrecy, Hawkins succeeded in buying two million bales of actual cotton, and ten million bales of futures at an approximate average of nine and a half cents. He had the actual cotton stored in relatively small quantities throughout the South, much of it being on the farms and at the gins where it was bought. Then, in order to hide his identity, he had incorporated a company called “The Farmers’ Protective Association.”
Through one of his agents he succeeded in officering it with well-known Southerners, who knew only that part of the plan which contemplated an increase in prices, and were in sympathy with it. He transferred his spot-cotton to this company, the stock of which he himself held through his dummies, and then had his agents burn the entire two million bales. The burning was done quickly and with spectacular effect, and the entire commercial world, both in America and abroad, were astounded by the act.
Once before in isolated instances the cotton planter had done this, and once the farmers of the West, discouraged by low prices, had used corn for fuel. That, however, was done on a small scale. But to deliberately burn one hundred million dollars worth of property was almost beyond the scope of the imagination.
The result was a cotton panic, and Hawkins succeeded in closing out his futures at an average price of fifteen cents, thereby netting twenty-five dollars a bale, and making for himself and fellow buccaneers one hundred and fifty million dollars.
After amazement came indignation at such frightful abuse of concentrated wealth. Those of Wall Street that were not caught, were open in their expressions of admiration for Hawkins, for of such material are their heroes made.