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Workers as Bondholders

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ingman feel at home. I have been going neers Coöperative National Bank of into banks for forty years, and I have not Cleveland, which I am best qualified to got over that chilly feeling which always discuss here because I happen to be presicomes just as I enter. It is in the air. dent of it, has an investment department Any workman who enters one of our which keeps an eye open for the kind of banks knows he is welcome. He is made bonds it can recommend to our customers. to feel easy even if he is not there to do We demand that they shall be good inbusiness. He has always felt out of place vestments. Working people who save are in the other kind of bank because he was always putting their money into investout of place. It wasn't planned for him, ments, like other Americans, for we are wasn't meant for him. But our banks an investing nation; but working people are his banks.

heretofore have often put their funds If labor banks are the workers' banks, into bad stocks and wildcat schemes. then the workers should share in the We are trying to stop that. We are tryearnings. That is a fundamental prin- ing to educate them into safe markets. ciple with us. I realize that bank profit

LABOR BANKS AND WALL STREET sharing is held to be high treason in some places. But even those labor banks "he first time our Cleveland bank which enter the national banking system joined the biggest Wall Street bank can share profits in their savings depart- in a bond purchase marked an epoch in ments with the savings depositors, and American finance. It was historic, not they do. We think that the stockholders on account of the sum involved, but on in bank should be contented with 10 account of the nature of the joint inper cent. on their money. All over that vestors. The Cleveland bank and the rate of dividends, after the carrying National City Company, which is a subcharges have been paid, and a certain sidiary of the billion-dollar National City sum set aside for reserve, according to Bank, took over together $3,500,000 sound banking practice, is pro-rated bonds of the International-Great Northamong the savings depositors. In the ern Railroad Company, at a price to past three years we have paid 4 per cent., yield about 6.35 per cent. to the investor. compounded quarterly, and have paid in It was not an underwriting transaction addition a special dividend to depositors but a joint purchase. Here was a Wall of i per cent. each year beside. And Street bank joining hands with a labor we pay interest on savings from the day bank in a financial deal. In the future the deposit is opened until the day it is there will be many more such deals. taken out, counting actual days.

Their significance cannot be overesti


Now, the Cleveland bank, in marketHE usual savings bank tries to get ing those bonds, offered them first to

its depositors to leave their money the men employed on the Internationalin its care. It can pay 4 per cent., say, Great Northern Railroad. Every lococompounded semi-annually, and still turn motive engineer, every fireman, every the money over at a profit. But we try conductor or mechanic, who bought one to get our savings depositors to take their of those bonds, had a sudden added inmoney out. As soon as a man has saved terest in the railway. He was a creditor. $500 we suggest to him that he put it The first interest of the creditor is in the into a bond. We are trying to get our solvency of the debtor. As the Interpeople into the habit of thrift, for all of us national-Great Northern prospers, so will are creatures of habit. Once a man has its bondholders be assured of a good clipped a coupon for the first time he investment. The workers who hold its wants to cut another, and he begins sav- securities will do their level best to see ing to buy another bond.

that it gets and gives good service, beThe Brotherhood of Locomotive Engi- cause that way prosperity lies.


We think it better for our men to buy money, or even gold? I don't. Part at bonds than to buy stocks. We like the least of this money was in the stocking partnership which stocks confer, but we because the owner feared to trust banks. do not believe that many workmen can We have had some ugly failures in this afford to assume the risks involved. country, and it has upset confidence in Bonds bring that sense of responsibility that class of our population which knows which workingmen ought to have, and least about banking. In fact our bankers they bring a sense of security, if they are as a class are distinguished by probity. good bonds, which stocks seldom give. They are the men we ask to take care of

Labor banks are tapping a big invest- our money-those of us who are educated ment field which has been left heretofore to banking--and they are the men we chiefly to the devices of the wildcatter. ask first to head the subscription list The Brotherhood has its own insurance, when there is a public movement afoot. because the old line companies will not But the fact remains that, partly perhaps insurę us at any price; driving an engine through ignorance, huge sums are being is rated as an extra-hazardous occupation, kept out of banks, where they ought to be. and it is a fact that the average term of We found that out as soon as we opened insured life after a man comes to us is the Cleveland bank. We got deposits not only eleven years and seven days. So merely from unionized working men and the Brotherhood is paying into the homes women, but also from professional men of deceased and disabled locomotive en- and seamstresses and stenographers and gineers about three millions a year. This clerks. We got deposits from every state goes for the most part into the hands in the Union, from the Canal Zone, Cenof inexperienced women and perhaps of tral America, Cuba, Germany, Ireland, children, who have been the prey of get- and Mexico. We have more than 4,000 rich-quick swindlers.

It is safe to say out-of-town accounts, and less than 1,500 that nine tenths of this money has been of them are of members of the B. of L. E. wasted within a year.

We have suc- We do an immense volume of banking. by ceeded in changing this. From the time mail. I cannot but believe that some of

I the Cleveland bank was started we have this money was concealed in stockings averaged about a million a month in and tin cans until the labor banks began deposits. This is only one bank. The to come into being. And the labor banks saving power of American workingmen is will justify the faith thus manifested in so great that, if they would save and care

them. fully invest their savings, in ten years they Before I leave the matter of savings and could be one of the dominating financial investments, I want to say that we have powers of the world.

no great preference for listed bonds.

Many persons seem to think that if bonds BRINGING OUT HOARDED FUNDS

are listed on the Stock Exchange they ABOR banks are not only becoming have a greater marketability. We looked

the reservoirs of money which would into that, and we found it was not quite be wasted or badly invested otherwise; true. In 1921 there were 847 issues of they are also bringing funds out of the railroad bonds listed, but in 178 of these stocking and marmalade jar. Not long issues there was not a single transaction, ago the actuary of the United States and in about half of them there was a sale Treasury estimated that there was about averaging only one bond a week. Of the

. $400,000,000 hidden away out of the total volume of business in these bonds, sight of banks. He seemed to think that half was confined to twenty-four active this was just miserliness, but all of us and, for the most part, speculative issues. know that the people of this country are Our people want to avoid speculative more likely to be skeptical and distrustful issues. They are not willing to pay that than miserly. Do you know any one who price for “marketability.” likes to gloat over the mere sight of paper It may be said that 1921 was an ex

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A Window on Wall Street

ceptional year. Well, let us go ten years in Wall Street, and the head of its biggest further back, to 1911. Railroad bonds bank, that statement has a hopeful sound. were at the height of their popularity As for labor, it has an idea that it can then. Yet there were 173 railway bond profit by keeping an eye on Wall Street,

. issues listed on the New York Stock Ex- to see how Big Business does things. change, in which there were no transac- The Brotherhood has bought a big interest tions whatsoever that year, and they in the Empire Trust Company, New constituted nearly one fourth of the total. York City. I like to call this “our winIn a great many other issues there were dow on Wall Street.” It enables us to sales of only two or three bonds during know what is going on, and, what is more, the year. In or issues, or 13 per cent. of it enables a representative of organized the total, the sales averaged less than labor to talk across the directors' table ten bonds per week.

as man to man with those who own the

industries, which employ labor. A WELCOME BY WALL STREET

Not being able to do this has been one


with the National City Company, Suppose the locomotive engineers on a Charles E. Mitchell, president of the line in the Northwest, let us say, were National City Bank, made a statement in seriously concerned with shop conditions. which he welcomed the competition of It was a matter of life and death with labor banks. He said they would be a them. If they took out engines badly good thing for the whole banking business, repaired, they took as much risk as the because it would show the very people passengers and freight. But when they

. who distrusted bankers that they, the wanted to talk things over they had to banks, had no special privileges but were deal with some minor official who was performing a real public service; and be- there to get results. They couldn't talk cause it would encourage thrift, which is with the men who owned the road and good not only for the individual but also really had its efficient operation at heart. for the community. Now let me quote a They couldn't talk with the bankers who few sentences verbatim:

were lending money-or inducing their

customers to lend money-on its propWe think the result will be more savings, more banking business, increased demand for

erty, and who were therefore keenly inlabor, greater prosperity, and an impetus to

terested in its general prosperity. We social progress.

went into Wall Street so we could do that. Furthermore, we think the logical tendency And incidentally we“ bought into” a from this development of labor banks will be bank of such prestige and size as would for labor to take a larger part in all kinds of have taken us twenty years to build up. business, and that this will be for the general good. We do not think that the wage-earners

ADVANTAGES TO THE PUBLIC should be nothing but employees, but that HESE are some of the advantages they should plan to share in ownership. The modern form of corporate organization makes it possible for thousands of persons to

the Brotherhood of Locomotive Engineers participate in the ownership of an industry, alone, but to other organizations as well either as bondholders or stockholders, and we

—from setting up their own banks. But believe that it will be for the good of the coun- the advantages which will accrue to the try to have the railroads and larger industries public bulk even larger in my mind. For owned in this manner. We do not want a this movement affects the whole future sharp line drawn between the owners and of labor and capital, and the whole future workers, but rather that the two shall be the

of the public which consumes their joint same or closely intermingled. The result will

product. be better understanding and more effective

Organized labor in the United States coöperation.

has gone through three cycles (some of Coming from one of the biggest figures the unions are still in the second). : The




first was the period during which class During the sixty years of its existence consciousness was being aroused. It was the Brotherhood of Locomotive Enginecessary at the outset to evolve a sense neers has been recognized as the leading of solidarity, before there could be any progressive railroad labor union. Durcollective effort toward better wages and ing that more than half a century the better working conditions. The railway brotherhood has never broken a contract, brotherhoods, by the very nature of their and has advanced consistently toward the occupation, were the first to emerge from third cycle. It has been fortunate in its this period and to exhibit a remarkable leadership, having had but three execucohesion. I think I may say that with tives in its sixty years of existence. It but few exceptions every competent loco has never been troubled with the type of motive engineer in the United States, agitator who has been the bane of many Canada, and Mexico is now a member of other industries. It has never gone out our organization. We have 96 per cent. after insane isms and has never denied of the total in this country.

the right of capital to a just return on its

investment. The brotherhood is 98 per OPPOSED TO PEACE :

cent. native born, for one thing; and HE second stage was a defensive stands second to none in its love of

struggle for the principle of collective country and love of flag. bargaining. This was and is a period of This process of advance has been slow, warfare. It involves the use of force, but not so slow in the United States as sometimes economic and sometimes physi- elsewhere. Let me quote in support of cal, on both sides. There are labor lead that statement a recent utterance of ers to-day who think only in terms of T. N. Carver, Professor of Political force. They cannot believe that the Economy at Harvard University: ends and aims of labor can possibly be

The labor movement in America is far in achieved through understanding and co

advance of that in any other country. This operation. They deny that there is an

will sound strange to those ears which are actual identity of interest between the

tuned to the current phrases regarding labor employer and the employed. Even when

movements. Those who are still thinking in there is no open warfare under such lead terms of the primitive tactics of class war ership, even when there are no strikes, will, of course, repudiate it at once. The there is no real peace; there is only an labor movement in this country is passing out armistice, a breathing spell before another of the primitive fighting stage in which leaderfight.

ship concerned itself mainly with the immeIt is commonly said nowadays that

diate tactics of battle. It is passing into a stage

in which it is concerning itself with the higher collective bargaining has won its place in

strategy of maneuvering for permanent adour industrial life. This is not entirely vantage. In no other country is there any true. The fact that many industries are

indication of this change. The labor leaders trying to establish the open shop shows of no other country show any sign of being it is not true. There can be no collective aware of the first principles of the higher bargaining in an open shop. What is strategy; nor, for that matter, do the more called an open shop is more likely to be vociferous of the self-appointed champions of a closed shop against organized labor.

the "cause of labor" in this country. They Until collective bargaining is recognized

are still fighting capital either directly or as the established right in any industry, laborers to become their own capitalists, or

politically. They are not even encouraging organized labor in that industry has not

to get possession of the machinery of producpassed the second phase.

tion by the one effective method of purchase. The third cycle or phase lies in constructive development toward a system So far as the railway unions are conof coöperation rather than war; and the cerned, there is still an impediment to most striking evidence of this phase is collective bargaining. The Railroad Lathe labor bank.

bor Board, to which must be submitted


The Best Remedy for Industrial Hostility


all questions involving wages and condi- home, and therefore had wealth; even tions of work, is an economic absurdity. though he was in one sense a producer and

in another a distinctly different person, AN AID TO INDUSTRIAL PEACE

a consumer, he still supposed that there HE Railroad Labor Board is sup was some essential difference between him posed, I believe, to represent a myth- and his employer.

and his employer. He thought a sharp ical person called the Public, or to have line could be drawn between them. And such representation in its personnel. the employer thought so too, in most inWages and rates on the railways, how stances. He thought the worker was ever, are fixed, or should be fixed, by the getting as much as he could for as little interplay of economic forces. The public as he could give. There was suspicion becomes a party in case of a strike, and is and hostility between them. sometimes the injured party. But the Various devices have been tried to employer should deal with the employees remedy this situation, and some of them collectively in any dispute about pay or have been productive of genuine good. working conditions, so long as that dis But I do not believe any artificial device pute is amicable and may be settled over will ever be so good as a better underthe conference board. The Railroad standing. Labor Board puts the brotherhoods in the Whether we have public ownership or position of a litigant in court, rather than private ownership, or group control or an organized labor union.

any other kind of control, we have all the That, however, is beside the question good engineers there are, and this country of an identity of interest between the will need locomotive engineers. That employed and the employer. Until the phase of the future doesn't bother us. labor bank came into being it was difficult We are concerned wholly with arriving at to find a common ground. Labor and a better understanding with those who capital were islands, as the phrase goes, must employ us, those whose freight we shouting at each other across seas of mis must pull, and those who put their lives in understanding. Even though the work our hands as passengers on trains. And man owned his tools, and therefore was a we regard the labor banks as our best capitalist; even though he owned his hope of reaching that understanding.

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