USA > New York > A short history of New York State > Part 62
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A SHORT HISTORY OF NEW YORK STATE
the price of Erie stock whenever they wished. By dumping high quanti- ties on the market they forced down its value. When it had reached a suitable low point they would buy it back, trade in it furiously among themselves to force up the price, sell it profitably when it could be pushed no higher, and then repeat the process. Railroad companies whose stocks were listed often failed to divulge all the facts concerning earn- ings, expenses, and indebtedness.
An act compelling business corporations to make regular reports was defeated in Albany in 1900. Nine years later, however, a special com- mittee appointed by Governor Hughes in 1907 made a number of de- tailed recommendations covering the whole range of stock-exchange activities including internal reforms by the exchange itself. In 1912 the Pujo committee of the House of Representatives went far beyond the recommendations of the Hughes committee both in its denunciation of certain practices of the New York Stock Exchange and in its proposals for reform. As a result, the legislature enacted a number of reform measures. A bill to compel the exchange to incorporate passed the As- sembly but was defeated on the floor of the Senate. Elimination of some of the more flagrant shortcomings of both the New York exchanges had to await the passage of the Federal Securities Exchange Act of 1934.
The importance of the two New York exchanges in the securities business is shown by the table below.
Table 20. Comparative volume of stocks sold on national security exchanges in 1950.
% of market value of all
Exchanges
% of number of all stocks sold on national shares sold on national securities exchanges
securities exchanges
New York Stock
85.99
76.49
New York Curb
6.80
13.39
Fourteen other stock exchanges
in the United States
7.21
10.12
Source: Seventeenth Report, Securities and Exchange Commission (Washington, D.C., 1951).
The state's domestic and foreign markets as well as its trade in securi- ties have been continuously affected since 1865 by the status of the cur- rency, credit facilities, and cyclical change. During the Civil War, when the nation was faced with extraordinary expenses, Congress authorized the issue of $450,000,000 of paper notes, or greenbacks, as they were called from the color of the ink used in printing them. Meanwhile the federal government suspended specie payments, so that gold and silver
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MARKET PLACE OF THE WORLD
passed from circulation, and the greenbacks depreciated in value. In the summer of 1864 they reached a low of thirty-nine cents per gold dol- lar. As a consequence, prices rose sharply. When the war ended, how- ever, the demand for foodstuffs and other war commodities declined. At the same time a movement for contraction of the paper currency and a return to the gold standard was launched. Farmers feared that contrac- tion would depress prices for what they had to sell and make it increas- ingly difficult for them to pay debts incurred for the purchase of stock and equipment. In other words, a return to the gold standard would have meant paying debts contracted in fifty-cent dollars with one hundred-cent dollars. One of the most important aspects of the state's economic and political history from the close of the Civil War to the end of the century was the effort of the farmers and other debtor groups to maintain prices at somewhere near war levels.
With the passage of the Resumption bill in 1875 by the national gov- ernment, which called for the restoration of specie payments on January 1, 1879, those in favor of cheap money and inflation joined the Inde- pendent or Greenback party. When they failed to accomplish their goal by this means, the inflationists sought another expedient, bimetallism, believing that if enough silver could be injected into the monetary sys- tem, at an inflated ratio of sixteen to one, the value of currency would be forced down. The Bland-Allison Act of 1878 and the Sherman Silver Purchase Act of 1890 temporarily established bimetallism, but the Cur- rency Act of 1900 reinstated the gold dollar-a victory for those in favor of "hard" money and deflation.
New York City, with its varied array of financial institutions of all kinds, ranging from a home loan company to the House of Morgan, is the financial capital of the world. Since 1865 New York businessmen have been increasingly dependent upon banking institutions for credit needs. No state in the Union is more amply supplied with commercial banks, savings banks, saving and loan associations, licensed lenders, investment concerns, and insurance companies. Together they constitute a network providing services to business and individuals at approxi- mately three thousand offices throughout the state.
About half of these are commercial banking offices whose resources constitute over one-fourth of the assets of all such banks in the United States. Ranging in size from small institutions like the National Bank of Schuylerville to the giant Chase Manhattan Bank of New York City, the commercial banks, in addition to their main function of extending credit, render many services related to sound business management. These include acting as fiduciaries in handling the security transactions
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A SHORT HISTORY OF NEW YORK STATE
of corporations, establishing and managing pension trusts and profit- sharing trust funds, serving as transfer agents in the purchase and sale of stock certificates, and administrating wills and trusts.
A catalogue of the New York banking houses which were organized during the last three-quarters of a century is an impressive one. No- where else in the world at the present time are there to be found so many powerful financial agencies. If the number of banks is slightly less in 1956 than in 1926, amalgamation is the explanation. Recent mergers resulted in the formation of the Chemical and Corn Exchange, the Chase Manhattan Bank, and the First National City Bank. Bankers Trust, Guaranty Trust, Hanover, Irving Trust, Manufacturers Trust, Lehman Brothers, and the House of Morgan are among the internationally known New York citadels of finance capitalism.
Of these, the House of Morgan is one of the most influential. Its founder, J. Pierpont Morgan, spent a lifetime in the banking business. Son of Junius Spencer Morgan, an international banker with head- quarters in London, young Morgan after finishing his schooling served an apprenticeship in his father's firm. In 1857 he entered the banking house of Duncan, Sherman and Company of New York. Three years later he became the New York agent for the London financial firm of George Peabody. In 1864 he became the junior partner of Dabney, Morgan and Company, and in 1871 he became associated with the Drexels of Philadelphia and founded the firm of Drexel, Morgan and Company of New York. When, in 1895, Anthony J. Drexel died, the firm became J. P. Morgan and Company. It soon became associated with Drexel and Company of Philadelphia, Morgan Harjes Company of Paris, and J. S. Morgan and Company of London (after 1910 Morgan, Grenfell and Company). Before the end of the century the House of Morgan in New York had become one of the most powerful financial concerns in the world.
The House of Morgan has specialized primarily in financing reorgani- zations and mergers. Railroad reorganizations enabled Morgan to get control of a railroad empire. This dates back to his successful contest with Jay Gould for control of the Albany and Susquehanna Railroad, now a part of the Delaware and Hudson, in the 1860's. In the field of industrial finance, Morgan formed the United States Steel Corporation, the International Harvester Company, General Electric Company, and the American Telephone and Telegraph Company. By 1910 the House of Morgan not only had a powerful voice in banks, trust companies, insurance concerns, a score of railroads, several streetcar systems, the International Mercantile Marine, and many lesser concerns. In alliance with the First National Bank of New York and the National City Bank, it constituted a kind of banking monopoly or money trust. Eleven Mor-
585
MARKET PLACE OF THE WORLD
gan partners held seventy-two directorships in forty-seven of the largest corporations in America. Morgan also made handsome profits when, on occasion, he came to the financial assistance of the federal government.
The savings banks of the state, which now number over 130, are pri- marily concerned with financing small residential properties, modernizing or constructing of commercial projects, and aiding small savers in developing regular habits of thrift. School savings plans and Christmas Clubs are well-known parts of the thrift program. The type of invest- ment in which a savings bank may invest is carefully limited by law. The amount of funds which may be deposited by any one depositor is also restricted.
Savings and loan associations exist primarily to help their members finance home construction co-operatively. Most of the investments of these institutions continue to be made in mortgages. Credit unions serve the purpose of making small personal loans and providing facilities for saving to their members. Participation in these organizations is usually restricted along trade-union or fraternal lines or to those who work for a common employer. Licensed lenders are another source of personal loans. For many years, many needy borrowers who were not sufficiently good credit risks could not obtain funds from banking organizations and fell prey to loan sharks. When other methods of combatting this evil failed, the state adopted in 1932 a Small Loan Law based on the principle of allowing licensed and carefully supervised lenders to charge rates of interest substantially above those permitted to banks. Approxi- mately three hundred of these licensed lending offices now operate within the state.
The Equitable, the New York Life, and the Metropolitan Life insur- ance companies, cleansed by the Hughes investigation and legislation resulting from the report of the Armstrong committee, have continued to prosper. In 1950 the combined assets of twenty-two companies with home offices in the state totaled about $23,000,000,000. All but three operate from New York City. Four of these home offices are the control centers for almost two-fifths of total assets held by all United States life insurance companies, thus helping to establish New York City as the management and financial capital of the nation. In 1950 life insurance companies domiciled in this state had issued one-third of the total life insurance in force in the United States.
The three major investment outlets of life insurance companies have been corporate stocks and bonds, government securities (federal, state, and local), and real-estate mortgages and real estate. The state has drawn an especially large portion of these investments.
Cyclical changes during the period have been many. Most notable of these have been downward turns of the cycle, resulting in the panics of
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A SHORT HISTORY OF NEW YORK STATE
1873, 1893, 1907, and 1929. While all of the downward turns of the cycle were not of equal severity, in most instances business was hard hit. The crash of 1873, for example, was followed by the closing of the New York Stock Exchange for a ten-week period "to save the entire Street from utter ruin." Prices of commodities tumbled, commercial failures mounted in number, many of the state's mills and factories closed, and unemploy- ment became widespread. It was not until 1880 that full recovery was achieved. The depression of the 1890's was of shorter duration. The bottom fell out of prices, and farmers of the state as well as laboring people were squeezed hard. Severest of all in every way was the Panic of 1929 and the Depression which immediately followed. The pattern, however, was much the same as for earlier panics. As customers be- gan to limit their purchases, business leaders began to retrench. Or- ders were canceled, wages reduced, hours of work shortened, and work- ers laid off. Increasing unemployment and a falling wage-scale were accompanied by a corresponding decrease in purchasing power. The bot- tom fell out of the stock market. Foreign trade declined sharply. Private debts contracted in boom days became an almost intolerable burden. As individuals and business firms defaulted on their obligations, foreclosures and bankruptcies mounted in number. New York, like the rest of the nation, experienced a depression during the 1930's the like of which it had never known.
Even in times of nondepression, the market for certain industries has been affected adversely by seasonal demands, changes in tariff schedules, and the competition of newly invented products.
PART SIX
Culture in an Industrial Age
Chapter 40
The Expanding Classroom
The responsibility of education is for the emancipation of in- telligence from the anachronistic beliefs we cherish and, on the positive side, for the teaching of those meanings, signifi- cances, and processes which our science has experimentally verified. When anything whatever is to be accomplished, proc- esses have to be invoked that can be depended upon. To put into operation processes that will generate specific results is the method of intelligence .- LAWRENCE K. FRANK
EDUCATIONAL facilities in the state have greatly expanded in the past one hundred years, as the state has reorganized its educational system and increased its financial support to elementary and secondary schools. In higher education, too, the state has founded colleges and vocational schools and created scholarship programs, while private phi- lanthropy has established new colleges and universities, proving par- ticularly active in higher education for women.
In the period following the Civil War, educational developments in both the city and the state differed only in detail from educational de- velopments in the rest of the nation. In every section of the United States, there were a rapid expansion of elementary school facilities, an increase in the number of high schools, a broadening of curricula, and the establishment of new colleges and universities. Each of these generalizations can accurately be applied to New York during the post- war years, but neither the state nor the city deserved credit for origi- nating the movement for the enlargement of educational opportunities.
The history of education in New York. is complicated by the rivalry between the Board of Regents of the University of the State of New York and the State Department of Public Instruction. While the Board of Regents was a policy-making body in charge of higher education and the superintendent of the State Department of Public Instruction was concerned with the work of the primary schools, the functions of
589
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A SHORT HISTORY OF NEW YORK STATE
the two agencies were not always clearly delimited, and there were many jurisdictional disputes. At times educational progress occurred in spite of, rather than because of, the dual control within the state government.
It was not until the twentieth century that an attempt was made to reorganize the administration of the state's educational system. Under the terms of the Unification Act of 1904, the Regents retained authority over colleges and universities, while a newly established commissioner of education was granted "all the powers and duties in relation to the supervision of elementary and secondary education." In addition, the commissioner of education, as the executive officer of the Board of Regents, had the authority "to create such departments as in his judg- ment shall be necessary and to appoint deputies and heads of such departments, subject to the approval of the Board of Regents." In 1910 the law was amended to make the University of the State of New York a division of a State Education Department, in which the commissioner would serve as an executive and the Regents as a legislative body. After approximately a century of divided control, the management of the state's entire educational system was placed under the authority of a single, responsible agency.
Despite the disadvantages of dual control, New York's elementary and secondary educational system expanded rapidly during the half century following the Civil War. In 1867, with the abolition of the rate bills (under which parents who were not paupers paid public-school tuitions on the basis of the number of school days), the opportunity for an elementary school education was made available to all children on the same basis. In the ensuing years the old academies declined in numbers and influence, and the state's public school system entered a period of unprecedented growth. From 1869 to 1917 public school en- rollment increased from 998,664 to 1,626,051, the number of public school teachers from 17,140 to 51,036, and annual expenditures for public schools from $11,312,325 to $76,408,430. Although high schools did not appear until the Civil War era, they grew rapidly. By 1895 there were 373 high schools in New York, and twenty years later the number had reached 740. At the same time the public school curricula was broadened con- siderably. Kindergartens became increasingly popular, and many school systems offered courses in art, music, physical training, commercial sub- jects, and manual training as well as in the usual academic subjects.
An inventory of elementary and secondary education in the state since World War I reveals three important changes: centralization or the con- solidation of the state school districts, curriculum expansion, and new teaching methods.
New York was one of the first states to lay out its whole area in self- governing school districts. This action was taken in 1812. Frontier con-
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THE EXPANDING CLASSROOM
ditions prevailed, and naturally the districts were made very small; even cities were divided into small districts. By the end of the nineteenth century the small district with its one-room schoolhouse, its one teacher, and fewer than ten pupils was outmoded. In 1911 steps in the direction of consolidation were taken when twelve hundred small districts were abolished within the boundaries of cities. In 1925, on the recommenda- tion of Governor Alfred E. Smith, another act of the legislature provided that districts electing to form one central district would be entitled to additional state aid. The state also agreed to pay 50 per cent of the cost of transporting students to these central schools and 25 per cent of the cost of construction of the central school. These financial induce- ments, together with the growth of sentiment for better schooling in rural areas, had the desired effect. By the summer of 1938 more than 250 central rural districts had been established. There remained, how- ever, 7,756 small rural districts. So great was the momentum of the centralization movement that by 1956 less than 10 per cent of the original number of small districts remained, and it was merely a question of a short time when these would become part of a central system.
As significant as the development of centralization and better facilities was the expansion of the average school's curriculum. The elementary schools, which at one time had taught little beyond the "three R's," en- larged their curricula to such an extent that by 1930 some of them included as many as thirty different subjects. There was a corresponding multiplication of courses in the high schools. Since large numbers of pupils were drawn from every background and represented different degrees of intelligence, considerable emphasis was placed on "practical" subjects "for living and making a living." Boys were taught machine- shop practices and woodworking; girls attended classes in sewing and cooking; all could study typewriting, stenography, and bookkeeping. By 1950 there were forty-two vocational high schools in the state-twenty- six in New York City, seven in Buffalo, two in Rochester, and one each in Syracuse, Schenectady, Utica, Yonkers, Elmira, Niagara Falls, and Ogdensburg. In forty other communities trade and technical courses were offered as departments of local high schools. Trade courses for boys include: electrical trades, auto mechanics, carpentry, printing trades, sheet-metal trades, commercial art, plumbing, building maintenance and construction, photography, baking, tailoring, pattern-making, welding, and refrigeration service. For girls: dressmaking, beauty culture, garment- machine operating, millinery, cafeteria and tea room service, commercial art, clothing trades, and vocational dramatics. Technical courses open to girls are electrical techniques, mechanical design, architecture, drawing, industrial chemistry, aviation, and structural drafting. Traditionalists com- plained that the schools were teaching young people how to earn a
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A SHORT HISTORY OF NEW YORK STATE
living rather than how to think and that no amount of vocational training was an adequate substitute for a thorough grounding in the accepted academic subjects.
In some of the state's schools, curriculum changes were accompanied by new teaching methods sponsored by the advocates of progressive education. Learning by rote and complete reliance on textbooks gave way to an emphasis upon individual differences among pupils and an attempt to make learning an exciting experience rather than a series of dreary tasks. Severe classroom discipline was abandoned for a more informal attitude based on the assumption that interested pupils seldom present behavior problems. Efforts were also made to integrate subjects, and frequent use was made of available library resources. Tests were used to determine individual capacities and interests; slow learners were given special assistance; and children of unusual ability were permitted to progress at a much more rapid rate than others. Traditional schools were characterized by their rigidity; progressive schools were distin- guished by their willingness to experiment and their flexibility.
With the increase in population, the cost of maintaining the public school system mounted. Early in its history the state accepted the prin- ciple implanted by the Dutch in New Amsterdam in 1638 that the re- sponsibility for the support of common schools should be shared jointly by the state and the school district. By 1900 the total amount provided by the state was approximately $3,700,000, or about 11 per cent of the total cost of education. Shortly after the turn of the century (1902) the amount of state funds to be distributed was based upon the assessed valua- tion of the taxable property within the district, recognizing the dif- ference in ability of school districts to support education. Under this arrangement each district with an assessed valuation of $40,000 or less was entitled to $150, and each of the wealthier districts to $125.
During the first quarter of the present century many methods were adopted for increasing the amount of state support by means of special quotas. As a consequence, by 1924 no fewer than twenty-five various bases were in use for the distribution of $41,402,497 of state aid. For- tunately, in 1925 the legislature enacted the historic Cole-Rice Law, effectively establishing the principle of equalization. Every district re- ceived $1,200 (later $1,500) for every "teacher unit" in the elementary grades and $1,600 (later $1,900) for high school work-less $1.50 (later reduced to $.60) on each $1,000 of the true value of the property in the district. Two years later a special commission headed by Michael Fried- sam recommended that the amount of state aid be increased to $89,- 000,000 by 1930. By acting favorably upon this recommendation, the legislature not only adhered to the principle of equalization but shifted part of the tax burden from property owners by distributing state funds
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THE EXPANDING CLASSROOM
derived from other than property taxes to the localities that did not have recourse to such forms of tax. By 1943-1944 the amount of state aid had risen to $111,814,000.
With the inflation following World War II, further revisions of the equalization formula were imperative. During the years 1945-1951 a series of changes were made. The pupil was substituted as the unit of measure for state aid instead of the teacher. Most important of all, the amount of aid from the state was increased from $100 for each elementary and secondary pupil to $220 and $274 respectively. More recently the Temporary Commission on Educational Finances, appointed in 1954" and headed by Dr. Henry T. Heald, then chancellor of New York Uni- versity, recommended that the amount of state aid be further increased by $56,000,000, and this received legislative approval. Thus the total amount of state contribution beginning with the school year 1957 was $457,000,000, or 25 per cent over the $366,000,000 for the school year 1955-1956. A substantial part of this increase went to raise teachers' salaries.
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