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The Bankers and U.S. Steel

October 4, 2017

President Taft and his predecessor both believed in progressive domestic policies, especially when it came to trust busting.  There were more anti-trust prosecutions during the four years of the Taft administration than during the seven-plus years of the Theodore Roosevelt administration.  Taft did his best to prosecute all businesses which were in violation of the Sherman Anti-Trust Act.  Roosevelt often merely used the threat of prosecution in order get big business to comply with his wishes in other areas.  Such was the case with U.S. Steel.

During the autumn of 1907, while Roosevelt was still President, there was a financial panic on Wall Street.  Part of the bankers’ proposed solution was for U.S. Steel to save the Moore & Schley brokerage house by purchasing the Tennessee Coal and Iron Company.  Since they feared Roosevelt would file an antitrust suit against U.S. Steel, they consulted him, putting the best possible spin on their plan.  Roosevelt went along with the plan and did not prosecute.

In 1911, two years after Roosevelt left office, he testified before Congress and declared in no uncertain terms that he had acted in the public interest regarding U.S. Steel’s purchase of Tennessee Coal and Iron.  But Roosevelt had been deceived by the bankers.  Roosevelt was a smart man, but he was no financial expert.  In a moment of candor he had told a friend: “Of course I can’t know all about everything.  I don’t pretend, for instance, to any technical familiarity with finance.  And I never take any important steps without consulting everybody available who I hope will help me by telling me what they think and why they think it.”

Unfortunately for Roosevelt and for the American people of 1907, the bankers had confused their own self-interest with that of the public.  It was up to Taft to correct the problem, but how could he do that without embarrassing his predecessor?




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