ARTHUR.T Stories ----A Study in Finance ----VI---Page 33

Somehow, Prescott's speculations never succeeded. Occasionally they

would make a good turn and get a few bonds back, but the next week there
would be a new fiasco, and John would have to visit the Overland 4s
again. That performance of the accountants had given him a huge contempt
for bankers and banking. He knew that if he wanted to he could grab up a
million any day and walk off with it, but he didn't want to. All he
desired now was to get back to where he was before. All the speculation
was in the hands of Prescott, and Prescott never seemed worried in the
least. He called on John almost daily for what extra bonds were needed
as additional collateral, and John took his word absolutely as to the
result of the transactions. He could not do otherwise, for one word from
Prescott would have ruined him.

Before long the pile of two hundred Overland 4s was gone. So was a large
quantity of other securities, for John and Prescott had dropped cotton
and gone plunging into the stock market. Here, however, they had no
better success than before. Of course, a difficulty arose when the
interest on the Overland 4s came due. The coupons had to be cut by some
one in the bank, and although John usually cut them he did not always
do so. Sometimes the loan clerk himself would take a hand, and call for
a particular lot of bonds. John, however, was now fertile in devices.
The owner of the larger pile of six hundred bonds usually wrote to have
his coupons cut about the twenty-seventh of April. John would make up a
collection of six hundred bonds of the same sort, carry them up and cut
the coupons in the loan cage. The other man generally sent in a draft
for his interest on the second or third of May. But now the bonds were
away, scattered all over the Street. So John started a new operation to
get the bonds back and straighten out the coupon tangle. He substituted
with the brokers an equal number of bonds of other companies, the
interest upon which was not yet due. There was a large block of Electric
5s and Cumberland 4s which served his purpose admirably, and thus he
kept up with the game. When the coupons became due on the latter he
carried back the first. It kept him and Prescott busy most of the time
juggling securities--at least John knew _he_ was kept busy, and Prescott
claimed to be equally so.

There were many loans of brokers and others all secured by the same sort
of collateral. Most of these John appropriated. When it was necessary to
check off the loans, John, having retained enough of the same kind of
bonds to cover the largest loan, would bring up the same bundle time
after time with a different name upon it. If one of the customers wanted
to pay off a loan and his bonds were gone he would be given some one
else's collateral. Apparently the only thing that was necessary was to
have enough of each kind of security on hand to cover the largest loan
on the books at any given time.

Once, when the examiners were at work on the vault, John had to make up
one hundred thousand dollars in Overland 4s or 5s from the different
small loans in the loan vault and put them in a package in the deposit
vault in order to make it appear that certain depositors' bonds were all
there.

The most extraordinary performance of all was when, upon one of the

annual examinations, John covered the absence of over fifty bonds in the
collateral covering a certain loan by merely shoving the balance of the
securities into the back of the vault, so that it was not examined at
all. He had taken these bonds to substitute for others in different
brokers' offices, and it so happened that there were no similar
securities in the building; thus the deficiency could not be covered up
even by John's expert sleight of hand. Of course, if there had been
other bonds of the same kind in another vault it would have been a
simple matter to substitute them. But there were not. So John pushed
the remaining one hundred and fifty bonds into a dark corner of the
vault and awaited the discovery with throbbing pulses. Yet, strange to
relate, these watchdogs of finance, did not see the bonds which John had
hidden, and did not discover that anything was wrong, since, for
purposes of its own, the bank had neglected to make any record of the
loan in question. It would really have been safer for John if he had
taken the whole pile, but then he did not know that the accountants were
going to do their business in any such crazy fashion. The whole thing
came to seem a sort of joke to John. He never took any bonds for his own
personal use. He gave everything to Prescott, and he rarely, if ever,
saw Prescott except to hand him securities.

One day Prescott walked right into the bank itself and John gave him one hundred and sixty-five bonds, which he stuffed under his overcoat and carried away. Remember that this is a _fact_.

The thing, which began in August, 1905, dragged over through the

following year and on into 1907. John weathered two examinations by the accountants, the last being in October, 1906, when they certified that
the company was absolutely "O.K." and everything intact. On that
particular day John had over three hundred thousand dollars in Overland 4s and 5s scattered over the Street.

In the first six months they lost one hundred thousand dollars in

cotton. Then they played both sides of the market in stocks and got
badly bitten as bears in the temporary bull market in the autumn of
1906, selling Union Pacific at 165, which afterward went to 190,
Northern Pacific at 185, which went to 200, etc., etc. Then they shifted
their position, became bulls and went long of stock just at the
beginning of the present slump. They bought Reading at 118, American
Smelters at 126, Pennsylvania at 130, Union at 145, and Northern Pacific
at 180. At one time John had five hundred and fifty thousand dollars in

bonds out of the vaults.