The Rise and Fall and Rise of Yerkes/Cowperwood

Cross-posted from CreditSlips.

Whether or not there really is an American bankruptcy Balzac (cf. this discussion), still one contender who deserves a respectful mention is Theodore Dreiser—in particular, the Dreiser who wrote the “Trilogy of Desire,” a fictional chronicle that closely tracks the real-life career of Charles Yerkes, financier and scoundrel. A possible complaint about Dickens’ “commercial” writing is that he really doesn’t understand the details all that well: the sentiments are clear enough but the events leading up to the comedy are left pretty vague. A possible complaint about Dreiser is that he understands them to well. In the supposed fictionalization of Yerkes, he sometimes veers dangerously close to straight biography. One has to care about this sort of thing (although the chances of finding an audience are perhaps greater among readers of this website than in the general population).

The real Yerkes made a fortune in Philadelphia in and after the Civil War, failed, went to prison—and then set off to Chicago, where he made a second fortune, and thence to London where he began anew. All this is convenient for a novelist who wants to turn his life into a three-parter. Dreiser’s hero, Frank A. Cowperwood, performs the same trajectory. For sheer story-telling, the best of the three novels is probably the first, The Financier, available in print for purchase, but also free for download at Project Gutenberg (link). A manuscript search of the Gutenberg text will make it clear that Dreiser has plenty to say about bankruptcy, much of it in detail. “In these days also, he [was] constantly to be met with in courts of law, for he was constantly being reexamined in some petition in bankruptcy.” “His worst anxiety was that if he were sent to the penitentiary, or adjudged a bankrupt, or both, he would probably lose the privilege of a seat on 'change…” “[H]e hit upon the idea that in order to forfend against the event of his being put into prison or thrown into bankruptcy, or both, he ought to form a subsidiary silent partnership with some man who was or would be well liked on 'change, and whom he could use as a cat's-paw and a dummy.”

And so forth. But perhaps the most interesting thing about Dreiser’s account is the way he shows Cowperwood using bankruptcy as a business planning technique:

The suspension of the banking house of Frank A. Cowperwood & Co. created a great stir on 'change and in Philadelphia generally. It was so unexpected, and the amount involved was comparatively so large. Actually he failed for one million two hundred and fifty thousand dollars; and his assets, under the depressed condition of stock values, barely totaled seven hundred and fifty thousand dollars. There had been considerable work done on the matter of his balance-sheet before it was finally given to the public; but when it was, stocks dropped an additional three points generally, and the papers the next day devoted notable headlines to it. Cowperwood had no idea of failing permanently; he merely wished to suspend temporarily, and later, if possible, to persuade his creditors to allow him to resume. There were only two things which stood in the way of this: the matter of the five hundred thousand dollars borrowed from the city treasury at a ridiculously low rate of interest, which showed plainer than words what had been going on, and the other, the matter of the sixty-thousand-dollar check. His financial wit had told him there were ways to assign his holdings in favor of his largest creditors, which would tend to help him later to resume; and he had been swift to act. Indeed, Harper Steger had drawn up documents which named Jay Cooke & Co., Edward Clark & Co., Drexel & Co., and others as preferred. He knew that even though dissatisfied holders of smaller shares in his company brought suit and compelled readjustment or bankruptcy later, the intention shown to prefer some of his most influential aids was important. They would like it, and might help him later when all this was over. Besides, suits in plenty are an excellent way of tiding over a crisis of this kind until stocks and common sense are restored, and he was for many suits. Harper Steger smiled once rather grimly, even in the whirl of the financial chaos where smiles were few, as they were figuring it out.

"Frank," he said, "you're a wonder. You'll have a network of suits spread here shortly, which no one can break through. They'll all be suing each other."

In fact, things don’t work out quite that way—there wouldn’t be enough novel if it did. But Dreiser does seem to have a feel for a certain kind of dealer in a certain kind of deal.