Life Insurance and Speculation

I

THREE years ago, the author called the attention of the Atlantic’s readers to the remarkable concentration of banking interests in the city of New York.¹ It was even then apparent that the larger life insurance companies were an important factor in the financial world, and that the money under their control was being freely utilized in the speculative enterprises of the time. The possible dangers of such relations were so manifest that the author was constrained to refer to them in his account of the general banking situation. But at that time, although rumors were abundant, evidence of actual wrong-doing was difficult to obtain; and the most that could be said was that it was unfortunate “to have life insurance and trust companies drawn so largely into the domain of speculative finance.”

The shocking disclosures of the past year have proved that the alliance of insurance with speculative finance was not only improper, upon its very face, but actually productive of such abuses as the slightest knowledge of human nature should have led one to expect. Yet the conditions had existed for many years without arousing serious criticism, and there is reason to think that even now their full significance is not generally understood. The present article, therefore, is devoted to this single phase of the life insurance situation. It proposes to show that the participation of the larger companies in Wall Street speculation explains no small part of the evils that have existed in the past, and points clearly to dangers that will be encountered in the future. It may indicate, also, some of the fundamental conditions which must be met by any plans for genuine reform.

Why the great insurance companies entered the domain of speculation is not hard to understand. For the better part of a generation, they have engaged in a mad race for business, which has been so far successful as to increase enormously the size and scope of their operations. The rapid growth of the funds which they were obliged to hold as a reserve against future liabilities, and the accumulation of large surpluses over and above reserve requirements,² placed in their hands an enormous amount of capital for which they were obliged to find some kind of investment. At the present time the gross assets of legal-reserve companies of the United States exceed two and one half billion dollars; and of this amount, something less than one half belongs to the New York Life, the Equitable, and the Mutual Life of New York, — the “Big Three" of the insurance world. How to invest, safely and profitably, such prodigious sums became many years ago a problem of no little difficulty. Real estate and mortgages in New York City and adjacent districts would not have provided a sufficient outlet without forcing the rate of interest down to unremunerative figures; Western investments would involve Eastern companies in considerable expense, care, and risk; and therefore the insurance millions overflowed into the general security market, — Wall Street.

If the officers of the companies had been content to play the part of disinterested investors, sifting the securities offered and purchasing the best, they would have served their policy-holders well, and their relations with Wall Street would have furnished no ground for just criticism. Indeed, by maintaining the highest standards and avoiding all entangling alliances they might have exerted a wholesome influence in behalf of conservative and honest finance. But conservatism and absolute honesty are virtues hard to cultivate in the face of such temptations as Wall Street offers, and the insurance magnates yielded to the seductions there encountered.

In the first place, they were the masters of hundreds of millions of capital, which must be invested and constantly reinvested. It was free capital, not specialized in buildings or machinery or stocks of goods, but free to find investment in any class of securities; from the very nature of the case, therefore, its managers wielded tremendous power in the security market. Their favor was sought by bankers and others who had securities to sell; and they, in turn, thought to extend their influence, and the field for favorable investment, by making alliances with the leaders of the world of finance. Little by little they forgot that their sole function should be the conservative investment of trust funds, and began to participate in active operations of a speculative character, — operations legitimate enough for one who plays with his own money, but grossly improper for those who act as trustees. And then opportunities came to make personal gains from enterprises in which insurance moneys were invested, often without loss to the companies in their charge. Thus nice moral distinctions were blurred; imperceptibly the ordinary obligations of trusteeship were ignored; and gradually life insurance drifted into the devious mazes of Wall Street finance.

But this was not the view of Wall Street, which was well content to have the insurance millions remain within easy reach, and laughed to scorn the suggestion that there was anything dangerous or improper in the situation. “ Of course the funds of the insurance companies are in Wall Street,”was the universal reply to foolish and inconvenient questions; “where else should they be ? Do you think it possible to find investment for so much money in Boston—or Cambridge?” The alliances with other institutions and interests were declared to be highly advantageous to the companies; and the private speculations of officers and trustees could be criticised only by persons of a suspicious turn of mind. Elsewhere it might be difficult to serve two masters; in a small place like Boston it might be unfashionable to combine private business and the management of trust funds; but in Wall Street both things were carried on together with safety and propriety every day in the year. And the doubting Thomas was invited to contemplate the size of the great insurance companies. “Could such magnificent institutions have been built up in a country village, where the officers would have been hampered by old-fashioned business methods and ‘paternal’ legislation?”

II

Thanks to recent revelations, we can now construct a circumstantial account of the alliance of insurance with high finance. The first stage in the descent to Avernus was the acquisition of large or controlling interests in banks, trust companies, and other financial institutions. The insurance companies had much business for banks or trust companies to do; why not, then, concentrate it in institutions under their own control, and secure the profits which some one must derive from it? So, too, in the making of real estate and mortgage investments, the services of title-insurance and mortgage companies could be utilized; and here, apparently, lay another opportunity for entering subsidiary enterprises. Then, safe-deposit companies would make good tenants for the basements of the buildings erected with insurance money, and by organizing such concerns the insurance companies could profit both as landlords and stockholders. In all these ways the large companies came to participate more or less actively in outside enterprises. The New York Life, for instance, controlled the New York Security and Trust Company; the Equitable was heavily interested in the National Bank of Commerce, the Mercantile and the Equitable Trust Companies, the Lawyers’ Title Insurance Company, and similar concerns in New York and other cities; while the Mutual had large holdings in the Bank of Commerce, the Guaranty, and the Morton Trust Companies, the United States Mortgage and Trust Company, and various other institutions.

At first sight the argument by which these investments were justified — and are still defended — did not lack plausibility. The insurance companies need banking facilities and other services of the sort just described, and it would seem advantageous to handle such matters through their own agents, and thus participate in the profits legitimately accruing therefrom. As a matter of fact, the stocks of allied institutions now owned by the Equitable and the Mutual are valued at much more than the prices originally paid for them; so that these transactions have apparently shown handsome profits. But this view of the case overlooks several important considerations. First and foremost, by the control of these subsidiary enterprises, the insurance managers were carried into a field they ought never to have entered. As powerful bankers and financiers, they almost inevitably became active in Wall Street operations, and lost the independence and conservatism that should have guided all their actions as trustees of insurance funds. It is impossible to gainsay the conclusion reached by the Armstrong Committee, that these investments virtually made the companies partners in enterprises they were never intended to conduct.

And in the next place, the profits realized from the allied institutions were largely illusory. In order to facilitate the operations of the banks and trust companies, enormous sums of insurance money were kept upon deposit with them, usually at two per cent interest. The annual reports of the three big companies at the end of 1902 showed that no less than $62,300,000 of their resources consisted of cash on deposit with banks and trust companies, — an amount which, judging by the experience of other companies, was from two to three times as large as was necessary for any legitimate purpose. And these figures, moreover, show nothing but what the insurance managers, after doctoring their reports or shifting their assets as much as was considered necessary, were willing to report to the insurance department at Albany. We now know that the Equitable Society was in the habit of reducing these balances at the close of the year considerably below their amount at other times. In 1903, for instance, the company had $37,029,000 upon deposit in November; and then reduced the amount to $24,240,000 at the end of December; only to increase it to $39,677,000 by January 31, 1904, after the annual report had been made. There is little doubt that the Mutual and the New York Life were guilty of similar practices; so that it is probable that the three big companies placed eighty or one hundred millions of money in various banking institutions whenever it was needed for Wall Street operations. Upon every dollar of these excessive balances the policy-holder lost, the difference between the usual two per cent interest allowed by the banks, and the four or four and one half per cent which ought to have been secured. Moreover, it has been proved that at least one of the companies carried excessive balances in the favored banks at times when especially good opportunities were offered for making permanent investments. In August, 1903, when the Equitable Society had $36,399,000 of cash on deposit, President Alexander expressed regret that he was unable to take advantage of unusually favorable conditions in the security market. “We should be buying a good many such things,” he wrote to one of his subordinates, “ were it not that we are so strapped for money by engagements already made. . . . All this is very annoying, because if we had five or ten millions of dollars to invest now, we could make a great deal of money.”³

And in the second place, some of the allied institutions paid absurdly low rents for the offices they occupied in buildings belonging to the insurance companies, so that the dividends upon their stocks represented, in no small part, rents that were withheld from the rightful recipient. The Equitable Society was probably the worst, but by no means the only, sufferer from such practices.⁴ For accommodations in the home office of the Equitable Society, at 120 Broadway, the Mercantile Safe Deposit Company paid an aggregate rental of $483,000 between September 17, 1890, and December 31, 1904; while during the same period the lessor expended no less than $479,000 for alterations, repairs, and similar outlays upon the premises occupied by the lessee. This left the lessor the handsome sum of $4000 to meet the current expenses for heat, light, and service. — to say nothing of a profit upon its investment; and meanwhile the lessee was paying 29 per cent dividends. A similar arrangement with the Equitable Safe Deposit Company of Boston, and its successor, the Security Safe Deposit Company, brought the insurance company a total rental of $168,000 from 1878 to 1904; while alterations and additions to the premises involved an outlay of $162,000 between 1891 and 1904. By this transaction and others, the Equitable Society netted an income of only 1.58 per cent upon its building in Boston, while the Security Safe Deposit Company was enabled to pay 18 per cent dividends. Equally remunerative contracts were made in St. Louis, and probably elsewhere.

Inevitably the development of allied and subsidiary institutions opened the door for corruption. If the insurance companies had owned all the stock of these enterprises, they might have recovered, as stockholders, all they lost as landlords or depositors. But since they owned only a part of it, the other stockholders must share in the pickings; and these others were, of course, the managers of the insurance companies. The late Henry B. Hyde and his friends and successors were stockholders in the concerns that paid infinitesimal rents and declared handsome dividends. They were interested also in the banks or trust companies that held the excessive cash balances at low rates of interest. The managers of the New York Life were interested in the New York Security and Trust Company, and the great men of the Mutual had large holdings in a number of institutions. The philanthropic McCurdy, with others of the Clan McCurdy, organized at his home the Morristown Trust Company, in which the Mutual Life held part of the stock and supplied much of the business. Not only did the managers profit at the expense of policy-holders in the ordinary transactions of the parasitic concerns, but they secured illicit gains in the extraordinary operations that were sometimes undertaken. When the Equitable Trust Company increased its stock, the Equitable Life Insurance Society kindly refrained from taking its full allotment at $150 per share, in order that its officers might enlarge their holdings upon these favorable terms. The society was content to provide for its own needs by purchasing subsequently the same stock at $500 per share.⁵ When the Western National Bank was merged with the Bank of Commerce, the Equitable Society exchanged its stock in the former institution for stock in the new bank at the rate of $140 of new for $100 of old, with a cash bonus of $70, — a total of $210; while stockholders who did not join in the consolidation were offered $600 in cash. At the time, the book value of Western National shares was $245, and the price which the Equitable received was $35 less. Mr. Snyder, a director of the Equitable and the President of the Bank of Commerce, when asked what the Equitable Society had really gained by the merger, was obliged to say, "‘Nothing but promises and prospects.” ⁶

“But anyway,”it is argued, “whatever the hypercritical may say, the companies have actually made large profits from ownership of stock in these allied institutions.”It should not be forgotten, however, that the market values now assigned the shares in banking institutions are not wholly real. Those values represent, to some extent at least, capitalized insurance plunder; and if the fostering care of the insurance companies should be withdrawn, the market quotations of the stock of various banks and trust companies would be materially reduced. The Frick Committee, which investigated the Equitable’s affairs a year ago, was undoubtedly right in declaring: —

“ Profit through the increase in market value of a stock can be made only through the actual sale of the stock. A stock is worth no more than it can be liquidated for; and a pertinent question in this connection would be, could the society withdraw its protecting support from these auxiliary concerns and dispose of its stock holdings at present market rates? If it could not, its profit through the appreciation in stock values is at least partly fictitious.”

Control of financial institutions was the first, step into Wall Street speculation; alliances with the great banking houses and various powerful corporations were the second. It was proper for the companies to call bankers and other men of affairs into their directorates, where they could act in a general advisory capacity; but it was highly improper for such directors to make the companies generally useful to themselves in the corporate or private enterprises with which they were connected. Especially unfortunate was it for some of these gentlemen to serve on important committees that had to deal with investments and other matters in which they were personally interested. Corporation ethics are still in a rudimentary stage of development in the United States, and the duties and responsibilities of directors are but dimly apprehended; yet we already had enough dearly-bought experience to warn us of the dangers of the situation.

From the New York Life Insurance Company, President McCall became a director of the First National Bank, and Vice-President Perkins entered the banking house of J. Pierpont Morgan and Co. Then Mr. Stillman, President of the National City Bank, was made a director of the New York Life; and Messrs. McCall and Perkins were added to the directorate of the City Bank. Thus the insurance company was tied up to two of the three largest banks, and the most prominent banking house, in the city of New York. In the Equitable, Mr. Jacob H. Schiff, of the banking house of Kuhn, Loeb and Co., occupied a position on the finance committee; and Mr. Edward H. Harriman, the head of what are coming to be known as the “Standard Oil” railroad interests, became an influential director. In the Mutual Life, Mr. George F. Baker, President of the First National Bank, entered the directorate and was made chairman of the finance committee; Mr. Henry H. Rogers, manager of the speculation side of the Standard Oil interests, became chairman of the agency committee; and Mr. William Rockefeller also entered the board. Other bankers and railroad or financial magnates were among the directors of the three companies, but were not, in most cases, actively concerned in the conduct of affairs. It is sufficient for our present purpose to point out the principal connections established between Wall Street and the business of life insurance. When we recall that the Bank of Commerce, with its $25,000,000 of capital, was under the control of the Equitable and the Mutual, as well as a large number of smaller financial institutions, as described above, it will be seen that the big companies were intimately associated with the three largest banks, two or more of the leading banking houses, numerous chains of banks and trust companies, and the powerful group of Standard Oil capitalists. In 1903 these alliances controlled nearly half of the banking capital of New York, and, in all probability, secured a like proportion of the business transacted; since that time there has been no material change in the tendency toward financial consolidation.

Thus the management of insurance money drifted more and more into the control of persons who were issuing the securities in which the companies invested. The majority of the insurance directors knew little concerning the manner in which affairs were conducted, and the officers, with the support of the executive or finance or agency committees, ran matters to suit themselves. A few men, therefore, began to wield financial power such as the country had never before known, and Wall Street entered upon what it was pleased to call a new era of finance. If a new company was to be launched, an old one supplied with additional capital, or a block of government securities floated, the bankers having the enterprise in charge could safely count upon the aid of the great financial alliances; such support usually secured the success of the undertaking, and the largest operations were put through with the utmost dexterity and despatch. The process dazzled the business world for a time; we now know that the brilliancy of the transactions was due very largely to the fact that the same men were acting as both buyers and sellers.

Precisely how far insurance money figured in these operations we do not know. Mr. Perkins and Mr. Schiff have presented figures showing that the New York Life and the Equitable Society, respectively, purchased but a comparatively small part of the securities which their banking houses placed upon the market during the period in question; but this is not the whole of the matter. In the first place, when two of the big companies, or even all three of them, coöperated, the amount of securities thus disposed of was by no means inconsiderable.⁷ Then, behind them were ranged the numerous subsidiary institutions which held the cash balances of the insurance companies, balances which, upon occasion, probably ranged from eighty to one hundred million dollars, and could be loaned to persons who were in position to claim a share of the profits that were being distributed to the members of the ring. Moreover, the insurance companies made loans upon collateral security, loans which, as reported to the insurance department, aggregated thirty or forty millions, and were probably larger at times when great projects were under way, and the annual reports were not in process of compilation. The fact is that the direct investments of the large companies, their collateral loans, their deposits with allied institutions, and the loans which those institutions were able to make, have been one of the controlling factors in the money and security market for the last six or eight years. Even before the late disclosures, thoughtful observers were beginning to be alarmed at the concentration of such immense power in a few hands, and were dreading the further growth of a financial oligarchy based partly upon the control of insurance capital. Indeed, the rapid increase in the assets of the big companies seemed to foreshadow conditions in which the insurance magnates would dominate the world of finance.

III

Some of the results of combining life insurance with speculation are now matters of record, but it must not be supposed that we yet know all, or, possibly, the worst of the facts. Even Mr. Hughes, through the shortness of the time at his disposal, was unable to do more than wring from unwilling witnesses sufficient evidence to show the kind of things that had been going on. He discovered enough to serve as a basis for remedial legislation, but had to leave many things untouched, He was obliged, also, to confine his attention chiefly to New York companies; and therefore could not do justice to some others, such as the Prudential Life, of Newark, the close ally of the Mutual and Equitable, which is now trying to prevent an investigation of its affairs by the legislature of New Jersey. The truth is that, whenever and wherever the inquisitor’s probe has been inserted into insurance companies having Wall Street connections, a festering mass of corruption has been brought to light. Almost every week that passes discloses new details hitherto unsuspected, and we can only imagine the discoveries that would be made if an honest and independent man like Mr. Hughes, as president of the Equitable, Mutual, or New York Life, were allowed to conduct an investigation from within. It must be remembered, furthermore, that many of the evils, and those the most dangerous, were in their infancy; so that, even if the whole truth were known, we should see but the mere beginning, and not the inevitable end, of organized corruption.

But the facts now at hand are grave indeed. Wall Street magnates constantly borrowed money of insurance companies of which they were trustees, — a practice which seems to have been taken as a mere matter of course. Sometimes they received peculiar favors from companies in which they were not trustees.⁸ Mr. Edward H. Harriman, for instance, obtained a loan of $500,000 from the New York Life, which was extended for a very long period, and then repaid, in June, 1905, without interest. This little oversight was not corrected until after the opening of the present year. The same company showed a disposition to be helpful to the First National Bank, of which President John A. McCall was a director. In 1902 it loaned the bank $5,000,000 of bonds to be used as security for government deposits which were supposed to be secured by bonds owned by the bank. Then, when the bank negotiated a loan of $6,000,000 to Senator W. A. Clark, secured by bonds of an unfinished railroad, the insurance company became a participant in the transaction, lending $500,000 without other security than a letter from the vice-president of the bank, stating that the bank had collateral for the company. It would be interesting, in this connection, to have the loans of the Mutual Life examined, in order to ascertain whether Mr. George F. Baker, president of the bank and trustee of the Mutual, placed a part of this loan with any other company than the New York Life, and if so, upon what collateral. The incident, in any event, illustrates the possible uses which large banks have for insurance companies, and the possible disadvantages of keeping policy-holders’ money too near Wall Street.

The relations of the companies to private bankers have occupied an important place in the discussion of the past year, and are probably understood by most readers of the Atlantic. Mr. Perkins, a partner in a prominent banking house, was vice-president and a member of the finance committee of the New York Life. In this dual capacity he participated in transactions in which he inevitably figured as buyer and seller of certain securities brought out by the banking house and purchased by the company. An inconvenient statute of New York provides that no officer or director of an insurance company shall “receive any money or valuable thing” for “selling or aiding in the sale of any stock or securities to or by such corporation;" and, accordingly. Mr. Perkins turned over to the company his share in the profits realized by the banking house upon such sales. He has testified that he endeavored to serve both masters well, and was confident that he had done his full duty by both; but the net result of his activity seems to have been that the insurance company furnished a reliable market for “Morgan securities,” — digestible and indigestible. Particularly open to criticism were the participation in underwriting the unfortunate International Mercantile Marine Company, and the purchase of collateral trust bonds secured only by the deposit of stock taken at a high valuation.⁹ On the board of the Equitable Society, Mr. Schiff refused a position upon the committee analogous to that on which Mr. Perkins served in the New York Life; but so far overcame his scruples as to accept a place upon another committee that was entrusted with the duty of inspecting all investments which the executive committee made for the society. His position, therefore, was not free from serious embarrassment. In 1904, the Equitable Society bought from Kuhn, Loeb and Co. a block of Japanese bonds at 93½, L which it resold to the bankers a few months later at about 91, a loss of 2½ points on the transaction. From the same firm the Equitable bought Metropolitan Street Railway refunding bonds, not underlying securities, and paying but four per cent, at about 97. These bonds are now selling at 90 or 91, and are an interesting illustration of the fact that it is sometimes better to buy in the open market than to have close relations with a banking house. Then, too, the Equitable bought certain collateral trust bonds, a kind of investment which, as Mr. Schiff has since admitted, an insurance company “on principle " would better avoid. His experience, therefore, in supervising the Equitable’s investments may well deter others from entering into relations of such delicacy.

Not content with serving in his dual capacity, Mr. Perkins undertook even a third rôle, and became a trustee of “Nylic,” a parasitic association of highlypaid agents of the New York Life. This made his part in the game extremely complex, as the following incident will show. Upon one occasion Messrs. J. P. Morgan and Co. were invited to coöperate in the purchase of a block of Mexican Central bonds, and the matter was referred to partner Perkins, who decided that “business reasons ” made it undesirable for the firm to accept, the proposal. The project seemed an attractive one, however, and he agreed forthwith to take $1,000,000 of the bonds for “Nylic.” But “Nylic” did not have the needed cash in its treasury, so that it was necessary to borrow; and, accordingly, Mr. Perkins secured from the New York Life Insurance Company, at five per cent interest, a loan by means of which the transaction was carried through. Here we have Perkins, the partner, rejecting a business proposition ; and then, after a " constructive recess,”Perkins,the “ Nylic” trustee, accepting the offer, upon confidential information that Perkins, the New York Life Director, would consent to finance the undertaking. There were probably good business reasons why the banking house should not accept the bonds; but if is not so easy to see why the insurance company, which furnished all the money, should not have received all the profits. As it was, Mr. Perkins allowed the New York Life five per cent interest for supplying the money; and allotted the profits,amounting to $40,000, to “Nylic,” which contributed to the venture nothing but the services of a trustee. He found difficulty in explaining the affair to Mr. Hughes, and might find it still harder to explain to Mr. Jerome why the payment of $40,000 to “Nylic” was not an unlawful diversion of insurance funds.

In late years, participation in “underwriting” enterprises has been a favorite method of combining life insurance and speculation. When a banker undertakes to bring out large issues of securities for which he guarantees the issuer a certain price, he invites the coöperation of financial institutions and private capitalists in order to divide the risk attending the operation. If the banker underwrites securities at 91, he may form a syndicate to take up a large part of the securities at 91½, thus allowing himself an initial commission of one half of one per cent. If he then succeeds in selling the securities in the market at an average price of 96, there will be a handsome profit to be divided among the members of the syndicate. If, however, it proves impossible to sell the securities at 91½, the members will have to pay the full amount of their subscriptions; and will lose the difference between the price they pay and the price the securities ultimately command. Where an issue finds a ready market at a high price, the syndicate is called upon for little or no cash, but reaps large profits; and this, in prosperous times, is all that underwriting is thought to involve. But in such a project as the flotation of the International Mercantile Marine Company, the underwriters have to pay their subscriptions in full, and the syndicate receives a batch of indigestible securities which cannot be unloaded upon the market without great loss. Underwriting, therefore, is a speculative enterprise, in which success or failure depends upon the future prices of particular stocks or bonds, frequently those of new and untried companies. For a person who invests his own money, it may be both pleasant and profitable; for one who handles trust funds, it is no more and no less objectionable than any other speculation in securities.

But it has been argued that the large insurance companies were justified in joining underwriting syndicates, because in this way they were enabled to “get in on the ground floor.” and obtained desirable investments at less than the subsequent market prices. This argument would apply, in any case, only to syndicates in which the companies underwrite securities which they desire to hold as permanent investments, and are allowed to withdraw the bonds or stocks for which they subscribe. If this is done, the companies may obtain investments a little under the market price: ¹⁰ yet not in all cases, since securities sometimes sell at a lower price than that at which they were underwritten. But in most syndicates the members were not allowed to withdraw in this manner; and if they desired permanent investments, were obliged to go into the open market, and purchase at the regular price. The syndicate transactions, therefore, were purely speculative ; and in many instances dealt with securities that the companies would not have thought of holding as regular investments. Nevertheless, for fully a decade, life insurance funds were freely used in most of the important underwriting ventures in New York.

The matter was made worse by speculating directors, who, while contributing to the success of a project by committing their company to it, proceeded to enter the speculation upon their own account. At first, insurance directors would slink into the offices of bankers, and beg for a small personal participation in the syndicate; later, they demanded it as a condition precedent to favorable action by their companies; and at last they formed syndicates among themselves, and reduced the practice to a science, making little attempt at concealment. Wall Street, of course, knew what was going on, and considered it the most natural thing in the world. When they appeared before the Armstrong Committee, the offenders pleaded that they did not allow their personal interest in the speculations to affect their judgment as directors, and protested that it would be impossible to find officers for corporations if private investments were to be restricted by puritanical notions about the obligations of trustees. Yet when Mr. Hughes confronted them with the plain question, “Do you think it proper that you should make money out of purchases of securities by your company ? ” they could only say they had never looked at the matter in that way. In point of fact, they had usually sent their companies into the open market to support by purchases the prices of the securities upon which their personal gains from the syndicate transactions depended.

In some of the underwriting projects the insurance companies made considerable money; but in a few, they met with losses. The first United States Steel syndicate conducted a very successful speculation; the Mercantile Marine underwriting proved an unsuccessful venture. In most cases the gains were moderate, since the lion’s share of the profit was diverted into other hands. Directors had to get part of the underwriting; subsidiary banks or trust companies must be allowed to participate;¹¹ and occasionally the profits were expended for political and other purposes that would not look well if recorded upon an insurance company’s books. Then by opening “ joint accounts ” with some favored banker, the company would receive but half the profits from deals in which it supplied all the cash; the banker, who received the other half of the profits, supplying nothing but “facilities.”Of this class were the celebrated transactions of the New York Life, which Mr. Perkins negotiated with the firm of Fanshawe and Co. The most interesting, perhaps, of all these speculative deals was the $50,000,000 pool in Union Pacific preferred stock, engineered for Mr. Harriman by Kuhn, Loeb and Co. As a favor to Mr. Hyde, Mr. Harriman allowed the Equitable Society to purchase some $1,900,000 of the stock under an agreement that the securities should not be sold, but should be held as long as the operations of the pool continued. Even if the profits from such ventures had been uniformly large, they would have been all too dearly bought by insurance companies; for if speculative deals undertaken at the behest of bankers and railroad magnates had continued, ultimate disaster would have been almost certain.

With the other abuses disclosed during the past year this article is not concerned, except in so far as they bear upon the alliance of insurance and speculative finance. Control of the mutual companies, like the New York and Mutual Life, had fallen absolutely into the hands of the managers through their power to obtain proxies. In sole possession of the names and addresses of policy-holders, and with the aid of the agents in the field, the officers could bid defiance to any one who attempted to organize an opposition. With the directors divided into classes, of which only one class could be displaced in any year, the task of a policy-holders’ committee, under any ordinary conditions, would have been simply overwhelming. The directors, as a rule, “did not direct,” and knew comparatively little about their companies; while the few who were active in the management were usually gentlemen who had ulterior objects in view. And then of legal interference there was slight danger, since the notorious Section 56 of the New York insurance law made it impossible for policy-holders to bring suits against a company without the consent of the attorney-general;¹² and with that official the companies expected to have the last word. Finally, political influence, at Albany and elsewhere, made legislative interference unlikely. Irresponsible control, by executive officers and a coterie of speculating directors, seemed to be impregnably defended by the firmest ramparts ever erected for entrenched rascality. Thus ideal conditions were assured for operations in “high finance,” which, whatever its form, always means irresponsible control of other persons’ money.

The various states, of course, had provided insurance departments to supervise the companies and protect the interests of the policy-holders. In Massachusetts an able and honest official a few years ago brought the Prudential Life to book for its proposed merger, upon scandalous terms, with the Fidelity Trust Company. But such cases were not common, and the average state commissioner was inefficient or corrupt,—or both. The annual reports of the insurance companies were systematically manipulated in order to conceal the true condition of their affairs, and the complaisant officials at Albany conducted but perfunctory examinations. Campaign contributions were not properly recorded, although the law provided that falsifying books should be punished as forgery in the third degree. The New York Life availed itself of its intimate relations with the New York Trust Company, successor to the New York Security and Trust Company, to conceal the fact that it owned corporation stocks, a kind of investment which the company announced in annual reports and public statements that it did not hold. Then Mr. Perkins’s connection with a banking house enabled the company, between December 31, 1903, and January 2, 1904, to juggle investments in such a way as to conceal its participation in $800,000 of Mercantile Marine underwriting, and to falsify its sworn report to the insurance department. The Equitable Society utilized similarly its connection with Kuhn. Loeb and Co. by arranging year’s-end loans to office boys and clerks of the banking house, in order to facilitate the doctoring of its sworn reports. In these and some other transactions the insurance magnates probably laid themselves open to criminal prosecution, — even in New York, “the city of refuge for the criminal rich.”Yet so firmly were they entrenched — financially, legally, and politically — that they would probably be in full control to-day, if internal dissensions had not revealed enough of their wrong-doing to make public investigation inevitable.

IV

For several months the large companies, with singular obtuseness, showed no appreciation of the situation. They had weathered other storms, and believed that this one would soon blow over and be forgotten. With effrontery that now seems incredible, the Mutual and the New York Life sought to utilize the early disclosures concerning the Equitable for the purpose of making a raid upon the business of that company. Even within the Equitable Society, the most dangerous of the Wall Street directors hoped to oust the Alexander management, and bring the organization under their absolute control. Only when startling revelations had raised popular indignation to a pitch that made further trifling dangerous, did the offenders begin to see the error of their ways. And then, of course, they professed complete change of heart, and assured the public that all abuses would be speedily righted. The matter, they said, was one which called for little or no legislative interference; life insurance, like trusts or the tariff, should be reformed by its friends.

The advertised process of reform began in the Equitable Society. Realizing that his position was no longer tenable, Mr. James H. Hyde sold his controlling interest in the stock ($51,000 out of $100,000) to Mr. Thomas F. Ryan for the sum of $2,500,000. At the same time, and virtually as a part of the transaction, Mr. Paul Morton was made president of the society. Mr. Ryan then placed his stock for a period of five years in the control of three trustees who are empowered to select directors, twenty-four according to their own views, and twenty-eight after ascertaining the wishes of policy-holders. Under this arrangement some good men have been placed upon the board of directors; but the plan is hardly more than a makeshift, and cannot be considered a permanent solution of the difficulties attending stock ownership of insurance companies. It is stated that Mr. Ryan has agreed to sell his stock to the society for the price which he paid plus interest at four per cent, but no movement has yet been made in this direction. Meanwhile, under the new management, various economies have been effected, and certain abuses have come to an end, — at least, for the present. Among other things, the cash balances kept with subsidiary banks and trust companies have been greatly reduced. With these changes the process of reform is now declared to be complete.

Unfortunately there are the best of reasons for believing that the present position of the Equitable Society is far from satisfactory. The first of these is found in the history and present affiliations of Mr. Ryan himself. He has testified that in his purchase of the Equitable stock he was actuated by purely altruistic motives; but his past record in American Tobacco, in New York traction enterprises, in Consolidated Gas, and in city and state politics, proves that he is not in the habit of combining altruism with business. It so happens, moreover, that in his relation to the Washington Life Insurance Company he has demonstrated precisely what his notions of philanthropy are, at least as applied to the business of life insurance. That company having become embarrassed, Mr. Ryan acquired one third of its stock in 1904, and was made a member of the executive committee. Prior to that time the company had invested mainly in real estate and mortgages; but under its new management large purchases of securities were begun, and, curiously enough, forty per cent of them were made through the brokerage firm of which Mr. Ryan’s sons were members. Then, too, by a similar coincidence, many of the securities bought were those of the American Tobacco Company and other concerns in which Mr. Ryan and his associates were interested. Finally, the insurance company transferred its bank accounts to institutions controlled by Mr. Ryan and his friends. On December 21, 1902, it had but $232,000 in office and in banks; but in January, 1905, its deposits in the Morton Trust Company, controlled by the new managers, amounted to $1,157,000. These performances are enough to show that, whatever his success in other lines of philanthropy, Mr. Ryan is almost the last man whom one would entrust with the control of an insurance company, large or small.

Although opposition may yet develop among some of the new members of the board of directors, Mr. Ryan is now supreme in the affairs of the Equitable Society. In the president’s chair he has placed a man who knew nothing about the business of life insurance, and came to New York wearing several ineffectual coats of whitewash, which failed to conceal his previous record as a violator of the Interstate Commerce Act. Conspicuous among the offenses of his railroad had been the granting of rebates to his own brothers, a fact that would indicate that Mr. Morton’s ideas upon the application of altruism to the transportation industry exactly coincide with Mr. Ryan’s notions about the relation of philanthropy to life insurance. Mr. Morton has made no radical change in the all-important executive committee of the Equitable Society, upon which he is content to sit with several of the directors who belonged to the notorious underwriting syndicates, which, more than anything else, led to the retirement of Messrs. Alexander and Hyde. He has not taken the first step to sever the Equitable’s relations with the financial institutions which connected the society with Wall Street; but, on the contrary, has accepted positions on the boards of the Bank of Commerce and the Equitable Trust Company. Prominent on the executive committee of the Equitable Society are the presidents of these allied institutions; and overall hovers Mr. Paul Cravath, Mr. Ryan’s personal counsel.

As this is written, Mr. Morton has appeared before a committee of the New York Legislature to protest against the passage of a bill prohibiting insurance companies from investing in corporation stocks or collateral trust bonds secured mainly by hypothecated stock. He stated that he accepted the conclusion of the Armstrong Committee that it is undesirable for insurance companies to “control or dominate” financial institutions, but pleaded that they be allowed to own stock in banks and trust companies up to the limit of twenty per cent of the total capital. Since the Equitable Society and the Mutual Life are heavily interested in the Bank of Commerce and some other financial institutions, Mr. Morton’s proposal would hardly disturb existing conditions; and a little judicious redistribution of present holdings would be all that would be needed to keep the control of other concerns well in hand.¹³ In similar vein, he urged that, under some restrictions, insurance companies should be permitted to purchase collateral trust bonds, the favorite device by which magnates obtain irresponsible control of railway properties,¹⁴ and should not be forbidden to participate in underwriting syndicates. If his views should be accepted by the legislature, the proposed reform of the insurance laws would impair the usefulness of the Equitable Society to Mr. Ryan as little as the alleged reform of its management has done.

It is true, indeed, that the past year has seen the end of certain abuses and the introduction of important economies in administration; but, so far as Wall Street affiliations are concerned, the position of the Equitable Society is distinctly worse than before the late upheaval. President Alexander, whatever his faults, was the creature of no financial magnate; and, when compelled to choose, finally placed himself squarely between the society’s millions and the speculative clique which sought, to control them for personal ends. No similar obstacle stands in Mr. Ryan’s way, unless, perchance, some of the new directors prove refractory. It is true that “ mutualization ” is contemplated, but this will merely eliminate stock control. The policy-holders may receive the right to elect directors, but the machinery of the company is now in Mr. Ryan’s hands, and his influence will not necessarily be shaken. In the past, the mutual companies have been controlled absolutely by their officers; and the Equitable’s present owner is perfectly aware of that fact. Mutualization, he doubtless expects, will simply relieve him of the necessity of keeping $2,500,000 tied up in $51,000 of securities that yield but $3,570 per year. Nothing but a radical change in the law relating to the election of directors in mutual companies, supplemented by a general uprising of policy-holders, is likely to upset his plans.

So long as the insurance disclosures were confined to the Equitable Society, the Mutual and the New York Life maintained an attitude of conscious virtue, and endeavored to draw business away from their rival. Last fall, when their managers were obliged to go before the Armstrong Committee, they set their publicity bureaus working over time in order to enlighten the public,and filled the newspapers with interesting reading matter, inserted at one dollar per line, assuring us that their records were beyond reproach. It took Mr. Hughes but a short time to expose the secrets of these whited sepulchres, and blast the reputations of their principal officers. The necessity of radical changes soon became evident ; but the companies displayed no indecent haste in undertaking the work of reform. At length, however, Messrs. McCall and McCurdy resigned, and committees were appointed to clean and disinfect the premises.

The Mutual Life set its “housecleaners” at work late in October, Mr. W. H. Truesdale was chairman of the committee, and Mr. J. W. Auchincloss and Mr. Stuyvesant Fish were the other members. None of them had been identified actively with the previous management, but Mr. Fish was the only one who possessed the courage and independence needed for the task ahead of them.¹⁵ Plans were made for a thorough investigation of the company from top to bottom, an investigation that must necessarily have laid bare the shortcomings of the Wall Street directors under the old régime. Immediately a movement was started by Mr. George F. Baker and Henry H. Rogers, chairmen, respectively, of the finance and agency committees, to secure a new president for the company. The better element in the directorate opposed precipitate action, but, through the methods of persuasion of which Mr. Rogers is a past master, were finally induced to give their consent. The choice fell upon Mr. Charles A. Peabody, law partner of the brother of Mr. G. F. Baker, counsel of the First National Bank, and director in various corporations. Without considering what other qualifications he may have possessed, it is evident that. Mr. Peabody was utterly disqualified for the main work before him, — investigating the very men who had placed him in office, and taking the Mutual Life Insurance Company out of Wall Street.

Before long it was apparent that some mysterious influence was interfering with the investigation by the “housecleaning” committee. Rumors were rife for a time; then Mr. Fish resigned from the committee, and, soon after, from the directorate of the company. Authenticated documents, now matters of record, enable us to determine the material facts in the episode.

Upon the basis of evidence easily obtainable, the Truesdale Committee recommended that suits be brought against various members of the Clan McCurdy to recover excessive salaries and commissions paid them without proper authority. But many dark places remained unexplored, some of the books and records had been destroyed, employees had been spirited out of the state, and the committee was obliged to ask the president to institute inquiries concerning various acts of officers, employees, and trustees, including particularly their relations with allied and subsidiary companies. Such information, it stated, would be absolutely necessary for the preparation of further suits that might need to be instituted. This was carrying the war into Africa, into the very heart of the Dark Continent ; but it was the least that honest investigators could do.

The institution of suits against the McCurdys would have been a simple matter, except for the fact that such litigation might bring out unpleasant information about men still on the board of directors. Mr. Rogers, for instance, was chairman of the agency committee which was supposed to supervise the scandalous contracts made with Robert H. McCurdy, Raymond and Co., and other agents. Mr. George F. Baker was chairman of the subcommittee which fixed the excessive salaries to which some of the suits would relate; and other directors might be involved in the illegal campaign contributions and even more serious matters. Accordingly Mr. Julian T. Davies, the Mutual’s legal adviser, had from the start urged the Truesdale Committee to effect some compromise with the McCurdys, and thereby avoid litigation. After long delay, the board of directors decided to begin legal proceedings. If the suits are not compromised in the meantime, they may, in the congested New York courts, be brought to a conclusion in three or four years.

But far more important than the prosecution of a few scapegoats was the demand of the investigators that the searchlight be turned upon persons still connected with the company, as officers, employees, or trustees.¹⁶ This brought from President Peabody the suggestion that, while it was practicable for him to investigate all the employees, he believed that this course would accomplish “no good purpose,” and might disturb or disorganize the force. Although he knew that the records and vouchers of the supply department were destroyed, that former employees had taken to flight,¹⁷ and that he was in charge of a concern generally supposed to be honeycombed with the meanest kind of dishonesty, he declined to proceed unless the committee would bring specific charges against particular persons, — a thing which could be done only after, and not before, such a general house-cleaning as it was proposed to begin. Then, so far as the trustees were concerned, Mr. Peabody flatly refused to make any inquiries, but suggested that the committee might do so.

Meanwhile, Mr. Peabody was conferring with the chairman of the committee, who, without authority, informed him that he need not comply with the committee’s request for information. Mr. Truesdale also gave out to the press, a clearly inspired statement that the officers of the company had done everything in their power to facilitate the work of the investigators. Moreover, the management began to solicit proxies from policy-holders for use at the approaching annual meeting of the company, and persuaded Mr. Auchincloss to become a member of the committee of three to hold the proxies as they might come in. From this arrangement the policy-holders and the public naturally inferred that the Mutual’s management and the house-cleaning committee were working in perfect accord. To make assurance doubly sure, Mr. Peabody himself told the newspapers that he knew of no dissensions among the investigators, and that a complete examination was certain to be made.

Everything depended upon the action of Mr. Fish, and tremendous pressure was exerted to compel him to accede to a policy of masterly inaction. Tactics such as the Standard Oil magnates usually employ were brought to bear; and Mr. Harriman, their railroad manager, started a campaign to secure immediate control of the Illinois Central Railroad and oust Mr. Fish from its presidency. When the right, moment came, Mr. Fish forced the hands of Messrs. Truesdale and Auchincloss. At a final meeting he proposed that, inasmuch as Mr. Peabody had refused to investigate the conduct of the trustees, the committee should take him at his word and institute such an inquiry. When this motion was promptly negatived, he then proposed that the committee renew its original requisition upon the president, with which Mr. Peabody had been informed by Mr. Truesdale that he need not comply. Again Messrs. Truesdale and Auchincloss voted no; and Mr. Fish then tendered his resignation. Within an hour, in order to encourage other investigators of the Mutual Life’s affairs, Mr. Peabody, as director of the Illinois Central, made a personal demand, supported by a written memorandum, for an investigation of President Fish’s administration.

Subsequent, events have merely made the situation clearer. Messrs. Truesdale and Auchincloss at once modified the requests made of President Peabody, eliminating all inconvenient questions about directors. Reform in the Mutual Life, according to Mr. Peabody’s notions, is not going to begin at the top, but must be confined to clerks, janitors, and scrubwomen. These persons must remember that they are in charge of funds destined for widows and orphans, and need no longer expect to be furnished with wine, Persian rugs, and free telephone service at the expense of the company. Meanwhile, policy-holders are requested to send in proxies, valid for five years, to be voted by the present management in furtherance of insurance reform.

Following Mr. Fish’s resignation, a number of the other directors, Mr. Morris of Philadelphia, Mr. Olcott of Albany, and Mr. Speyer of New York, severed their connection with the board, where it was evident that they could no longer be of service to the policy-holders, and their positions might be misunderstood. Some of the remaining directors are contemplating similar action, but the usual pressure is being exerted to keep them where they are. The Wall Street directors, of course, retain their posts upon the important committees, and seem convinced that the company cannot dispense with their services. Some of them are the men of whom the Armstrong Committee said: “In these syndicates officers and members of the finance committee have in many cases participated, with the result that not only has the company joined in underwritings foreign to the purpose of its organization, but through its purchases of securities its officers and those controlling its investments have largely profited.” Naturally enough, they are enthusiastic supporters of President Peabody’s administration. Reorganized upon the same conservative lines followed in the Equitable Society, and with its honest directors resigning to save their reputations, the Mutual Life is the victim of a reform that makes its last state decidedly worse than its first. Unless an internal explosion or an uprising of policy-holders occurs, the company will fall under the absolute control of a Wall Street clique in which Standard Oil influence is at present the dominating factor.¹⁸

In the New York Life, President McCall was finally induced to resign; yet Mr. Perkins was allowed to remain a member of the board, relinquishing his post as vice-president, but adhering tenaciously to a position on the finance committee. In December a committee was appointed to undertake the Augean task of cleaning the company’s house; and then, for the formidable task of rehabilitating the discredited corporation, the trustees chose a new president seventyfive years old, and already burdened with the chairmanship of the New York Rapid Transit Commission.

At the time of writing, the house-cleaners have gone no farther than to recommend that suits be instituted to recover from Andrew Hamilton and the McCall estate money illegally disbursed for political and legal expenses. They have not yet taken up such subjects as joint accounts, crooked bookkeeping, and underwriting enterprises. So far as now appears, the disposition of the board is to lay all blame upon a couple of scapegoats, and then await developments. It is not probable, however, that matters can rest there; for it is incredible that all of the trustees should have been ignorant of the irregular and dishonest transactions that have been brought to light.¹⁹ Already the insurance commissioners of five Western states, after completing a joint examination and disclosing new abuses, have declared; “If our criticisms are just, as we believe them to be, many of them must be directed against the entire board of trustees.” In the case of Mr. Perkins, at least, there can be no shadow of doubt that he has outlived his usefulness as an insurance trustee; and so long as the other members of the board are content to have him as a colleague, they must not wonder if the man in the street doubts their zeal as reformers. Moreover, the extraordinary measures recently adopted in order to obtain proxies are suggestive of the worst traditions of the old régime. Like the Equitable and the Mutual, the New York Life has not yet brought forth fruits meet for repentance.

V

A candid survey of the present condition of the three largest companies yields no evidence that their managers have the slightest intention of divorcing life insurance from Wall Street control. On the contrary, the Equitable and the Mutual are under more dangerous influence than ever before; while the New York Life has thus far followed a temporizing policy, waiting, apparently, for the incidents of the last year to be forgotten. Though caught red-handed but a few months ago, they now reappear at Albany as the natural guardians of the widow and orphan, to protest against the enactment of the only legislation that can put an end to the speculative control of insurance funds. Amazingly indifferent to awakened public opinion, and unabashed by their recent experience in the pillory and stocks, they patronizingly admit the good intentions of the Armstrong Committee, and then attack the most essential reforms that the Committee has proposed. Under these conditions there can be no doubt concerning the sort of action to be taken.

In the first place, the size of insurance companies must be restricted, — unAmerican as the proposal may sound. Already a company of the largest size holds assets of four hundred millions, or more; to-morrow, if nothing is done, billion-dollar companies will be the order of the day. The difficulty experienced by a single management in finding safe investment for so much capital, and the temptation offered designing men to control such resources for purposes of their own, make the further concentration of financial power in a few hands a public danger of the first magnitude. In New York city a moneyed oligarchy is now in course of formation, which has sought to dispose of the insurance millions at its pleasure; enforced decentralization has become an absolute necessity. Either by limiting the aggregate amount of insurance that a single company may write, or by restricting the amount to be written in any year, — which, of course, will ultimately limit the total insurance in force, — the race for mere bigness must be brought to an end.

In the next place, as the Armstrong Report recommends, forms of policies must be standardized, and measures adopted to enforce an annual accounting with the policy-holders and abolish the deferred dividend, tontine, et id genus omne. It is perfectly clear that the growth of huge surpluses for which the companies were compelled to render no account produced both extravagance and dishonesty, and made it possible to take speculative risks without danger of exposure in case the ventures proved unsuccessful. Conservative and non-speculative management will not be had until the companies are obliged to make an annual accounting for their stewardships.

Then, investment in stocks and collateral trust bonds secured by stock must be restrained. Mr. Paul Morton’s plea that the companies be allowed to retain bank stock up to twenty per cent of the outstanding capital, hold collateral trust bonds, buy railroad stock, and participate in underwriting syndicates, is merely evidence of singular obtuseness as to the conditions under which life insurance is hereafter to be conducted. Investment in financial institutions has had a fair trial, and has proved too dangerous a thing to tolerate in any degree whatever. The ownership of other stocks may be less objectionable, but must be restricted to an insignificant proportion — as one or two per cent —of any issue, if life insurance companies are to be removed from active participation in industrial and financial affairs. Perhaps an absolute prohibition, as recommended by the Armstrong Committee, will prove ultimately to be the only practicable course. And as for syndicate transactions, —these are now part of a dead past which insurance managers would best leave undisturbed. Further attempts to resuscitate that issue may end Mr. Morton’s usefulness, even to his present employer.

Finally, our insurance laws must hereafter extend to policy-holders in a mutual company a reasonable opportunity to make effective the control they are supposed to possess over its affairs. Hitherto the officers of the companies, having sole access to the names of policy-holders, forcing the insured to execute proxies, and making judicious use of the agents in the field, have been practically undisturbed in their positions. Hereafter the names of policy-holders should be disclosed, and satisfactory machinery devised for securing a full vote and an honest count. Upon this point, as upon most of the others, the recommendations of the Armstrong Committee blaze the path for future reforms. Whether stock control of life insurance companies can be long permitted is too large a question to discuss here. But when we reflect that, unlike a fire-insurance contract, a contract for life insurance binds the insured to a particular company for life, or for such periods as twenty or thirty years, it may be doubted whether the stock company can offer the security afforded by companies that are mutual in fact as well as in name.

These suggestions, while far from covering the whole field of reform, may point the way to the divorce of life insurance from speculation, — at least so far as legislation can effect the separation. But no changes in statutes will dispense with the need of intelligent and persistent action on the part of policy-holders, present and prospective. The law can enfranchise, but must then leave the responsibility with the enfranchised; it can organize life insurance upon the right basis, but the working of the machinery will depend largely upon the men who are placed in control. The insurance business needs better laws; but it stands in far greater need of better men in positions of trust and power, and such men can be had only if the policy-holders exercise intelligent discrimination in eliminating the unfit. If directors of New York mutual companies are legislated out of office, as is now proposed, there will be a fine opportunity to start anew with a clean slate. The names of the faithless directors and trustees of the old régime are on record, and these gentlemen can be invited to devote their talents to other fields. The officers of such speculative concerns as the Amalgamated Copper Company, and of oppressive trusts, like the Standard Oil Company, are well known, and need not be continued in charge of money destined for widows and orphans. These gentlemen are conspicuous in the professions of speculative finance and commercial piracy; they are not well qualified to care for the pittances that men of modest means set aside to provide for their families. Then, partners in banking houses and officers in great banks that have many uses for insurance companies should not be deemed eligible, if they have manifested in the past a desire to “dominate” all corporations within their reach; in the future the business of life insurance should not be “dominated” by great men of the world of finance. Some directors will be found upon the boards of the three big companies who fall within two or more of these classes, and in such cases one who desires to make life insurance protection and not speculation need have no difficulty in determining his vote.

And similar discrimination must be practiced in subsequent years, until the large companies have severed their last connections with Wall Street, and have had time to recreate their traditions. This will not be the work of a day, for the spirit of speculation and theft will not be readily exorcised; “this kind goeth not out but by prayer and fasting.” Legislation, after all, while it must create some needed safeguards, and abolish certain forms of temptation, cannot go to the root of the difficulty. Unless we are ready to turn the business over entirely to the government, the elimination of speculation from life insurance will rest ultimately with the policy-holder.