Hetty_ The Genius and Madness of America's First Female Tycoon - Charles Slack [81]
Hetty had avoided any temptation to join in the speculative fever. During the height of the boom, in November 1905, she told a New York Times reporter, “I buy when things are low and no one wants them. I keep them, just as I keep a considerable number of diamonds on hand, until they go up and people are anxious to buy. That is the general secret of business success.” She added, “I never speculate. Such stocks as belong to me were purchased simply as an investment, never on a margin.” Her words must have seemed hopelessly stodgy and archaic to speculators riding the crest of the wave. But by 1907 the wisdom of her investment methods was painfully clear.
When the bottom fell out, she expressed sympathy for hapless investors caught in the panic, telling a Times reporter during a trip to Boston that fall, “Can’t you see that watered stock is in everything? It’s ruinous … I mean the middle class. They’ve got a lot of this watered stock, and the water has been squeezed.” While others watched their fortunes float way on rivers of all but worthless stock, Hetty had the comfort of real assets—the bricks and mortar of her buildings, secure bonds, and tens of millions of dollars in cash that she was prepared to lend to buyers who met her standards.
In mid-1907, with the crisis drying up city coffers, New York mayor George McClellan announced a freeze in the hiring of new police officers, a halt in new government construction projects, and a freeze on salaries for the street cleaning department. As she had done several times before, Hetty came to the rescue, writing a check for $1.1 million, drawn on her Chemical Bank account, in exchange for short-term revenue bonds, paying 5.5 percent. Her money helped keep the government running.
This crisis in particular showcased Hetty’s ability to remain coolheaded while others panicked. Banks, which until recently had been passing out loans like party favors, now indulged their own deepest fears, often refusing loans even to sound, well-run companies needing cash for expansion. When they did lend, they accepted stock as collateral only at rates far below the stock’s actual market prices. After all, the banks reasoned, in these uncertain times the stock could collapse, leaving them holding scads of worthless paper. Faced with a Hobson’s choice of doing without needed loans or mortgaging themselves to the hilt to get them, many companies simply folded. Hetty remained one of the few sources consistently willing to lend money at or near the market value of the stock.
One such company was the Delaware, Lackawanna and Western Railroad, which hauled coal east and west from Pennsylvania and carried seagoing passengers from the Great Lakes at Buffalo to the mouth of the Atlantic at Hoboken. In addition to its choice routes, the DL&W was a forward-thinking railroad—among the first to power its locomotives with cleaner burning anthracite (as opposed to soft bituminous) coal, ensuring its passengers a relatively soot-free ride. Hetty no doubt considered these factors as she extended loans to the company during the panic. On October 19, 1909, two years after the crisis ended, the New York Times singled Hetty out for levelheadedness that had helped save the railroad. “So great was her confidence in the intrinsic worth of the stock that she was willing to take the chance of wide fluctuations occurring during the panic. That she was right about the stock has been shown since the panic, for Lackawanna since October, 1907, has advanced several hundred