Frenzied Finance

Amalgamated Copper was organized in 1899, and Thomas Lawson opens his account of it with one blunt figure: in its first five years it took more than a hundred million dollars from the public.

The share prices show how. The stock went out to investors at an average of about $115 a share, anywhere between $100 and $130. By 1903 it was trading at $33.

Put that in your own pocket. Ten shares bought for $1,150 could be sold, four years later, for about $330. Seven dollars in every ten, gone, in a single company launched by some of the most powerful financiers in America.

That is the hole the rest of the book climbs down into.

Lawson is precise about where Amalgamated was born. The charter came from New Jersey, which he calls "that incubator of trust and corporation frauds." The real delivery room was the National City Bank of New York, known on the Street as the Standard Oil bank.

Its parents, in his telling, were three men: Henry H. Rogers and William Rockefeller of Standard Oil, and James Stillman, the bank's president.

Then comes a sentence worth reading twice. Without the City Bank, he says, the tremendous losses and necessarily corresponding profits could not have been made.

He is telling you where to look. The public's hundred million did not evaporate. A loss that size is also somebody's gain.

Lawson says Amalgamated's huge losses came with "necessarily corresponding profits." What is he pointing at?

• The money investors lost became gains for those who sold to them✓Correct answer
• The mines earned profits that partly offset what investors lost
• The bank earned interest that it later passed back to depositors
• Early sellers made profits that balanced out the late buyers' losses

He is following the money: a hundred million dollars lost by buyers did not vanish, it was collected by the people on the other side of the sale. He is not talking about mine earnings or lucky early sellers evening things out.

Here is what makes this book unlike the other exposés of its day. The man telling the story drew up the blueprint.

"I laid out the plans upon which Amalgamated was constructed," Lawson writes. Had those plans been followed, he insists, the result would have been one of the world's big institutions, profitable and permanently prosperous.

So this is not a journalist reconstructing events from court records. It is the inside man turning witness: a Boston stock operator who worked beside Rogers and William Rockefeller and knew the real figures.

That cuts both ways. It is why the book knows so much. It is also why, from the first chapter, you should remember that Lawson has a reputation of his own to repair.

You might expect a copper story to begin at a copper mine. Lawson begins with gas.

In 1894 J. Edward Addicks, whom Lawson calls the Boston Gas King, pushed into Standard Oil's gas territory in Brooklyn. Standard Oil hit back by moving on his gas companies in Boston. By late 1894 Addicks was losing badly, and early in 1895 Lawson took command of his side.

The fight produced something nobody planned. In August 1895 Lawson and Henry H. Rogers met for the first time, at Rogers' house in New York, and practically settled the war between them.

That is where Amalgamated really starts. The copper deal grew out of a gas war, and out of the working relationship that war created between the two men who had been fighting it.

Lawson writes as an outside investigator who pieced the Amalgamated story together from other people's accounts after the collapse.

False✓Correct answer

False. He drew up the plans Amalgamated was built on and worked directly with Rogers and William Rockefeller. That insider position is the book's whole claim to authority, and also the reason to weigh his motives.