“The true meaning of money?” Explaining Banking in Theodore Dreiser’s The Financier

What can a one hundred year old novel tell us about banking and financial systems that remains relevant in the post 2008 depression? Plenty, and much of it troubling and unpalatable, argues Jude Davies in this assessment of Theodore Dreiser’s novel The Financier, published exactly a century ago.

by Jude Davies, Professor of American Literature and Culture, University of Winchester
Posted 23-Nov-2012

1. The Business Novel and Progressive Politics
2. Frank Cowperwood as dialectical hero
3. The True Meaning of Money?
4. Frank Cowperwood and Jay Cooke: Patriotism, “Visions of Empire” and the Mixed Motivations of the Financier
5. The Nation and the Market
6. References

Illustration by Ryan Inzana

“The true meaning of money yet remains to be popularly explained and comprehended.”
– Theodore Dreiser, Sister Carrie (1900)

October 2012 marks the hundredth anniversary of Theodore Dreiser’s novel The Financier. The first volume of a trilogy loosely based on the career of real-life tycoon Charles Tyson Yerkes, The Financier tells the story of the rise, fall, and second rise of one Frank Cowperwood, set against a detailed account of the American financial system as it operated in 1860s and 1870s Philadelphia. The novel has “aged gracefully” according to Leonard Cassuto’s recent article in the Wall Street Journal, not only because “Cowperwood’s world remains familiar,” but also because “readers will recognize the contours of today’s financial markets” in Dreiser’s novel (Cassuto 2012). More than this, I argue that The Financier yields a distinctive understanding of the stock market and those who speculate in it, one whose unpalatable truths are all the more relevant in the current period of confusion following the 2008 financial crisis.

The Business Novel and Progressive Politics

The Financier was one of many reactions against the increasing concentration of wealth and the growth of corporate power in late nineteenth-century America. In particular, as Roark Mulligan shows in his recent critical edition, The Financier stands at the intersection of the literary tradition of the business novel, with the early twentieth-century political tendency known as Progressivism, which sought to reform and regulate American business. The American business novel had been defined by Mark Twain and Charles Dudley Warner’s The Gilded Age (1873), a work so influential as to have given its name to a common view of the period as a betrayal of core American principles in the rush for quick wealth and self-aggrandisement. Twain and Warner pointedly satirised and censured the so-called “robber barons” of the time, focusing especially on land speculators, who preached individualism and laissez faire while manipulating local and national government. Hence the business novel in this period shaped itself an exposé of the dissonance between an overt ideology of unregulated capitalism with a covert dependence on shady deals with legislators and public officials. Later works in this tradition, such as Henry Blake Fuller’s The Cliff-Dwellers (1893) and With the Procession (1895), and novels by writers such as David Graham Phillips, William Dean Howells and Upton Sinclair, maintained the link between literary representations of business and “muck-raking” journalism. In 1908, shortly before Dreiser began planning The Financier, Sinclair depicted American financiers in The Moneychangers (1908) with the same kind of moral outrage that animates The Jungle (1906), his famous and still popular indictment of the meat industry in Chicago.

The Financier tackled a major political controversy, “riding a tidal wave of discontent” (Mulligan 2012: 567) at the American financial system. Bankers’ manipulation of the money supply had caused financial panics in 1893 and 1907, which resulted in deep and lengthy economic depressions, and caused widespread discontent. In the 1890s the Populist movement had articulated a moral and class-based opposition to financiers who kept tight control of the money supply while farmers and workers suffered the consequences, a conflict which resonates with contemporary debates in the United States and in Europe. However, when reform was finally achieved in December 1913, a year after The Financier was published, it was the work of Progressives intent not on social justice but efficient regulation. This was the Federal Reserve Act, which aimed “to establish a more effective supervision of banking in the United States” (see Mulligan 2012: 567). Amended many times since, the Federal Reserve Act remains the cornerstone of the US financial system today. Theodore Dreiser had demonstrated some sympathy with Populist attacks on Eastern bankers in 1896 (see Dreiser 2011: 4), but before starting work on The Financier he was firmly aligned with Progressivism. As editor-in-chief of the mass-circulation Butterick trio of magazines from 1907 to 1910, he took an overtly reformist stand, committing the flagship magazine The Delineator to a “humanitarian” editorial policy (Dreiser 1907) which included campaigning on typically Progressive issues such as pollution, the adulteration of food, and the care of destitute children.[1] But in stark contrast to Dreiser’s own editorials, and to contemporary muck-raking novels and journalism, moral outrage is noticeably absent from The Financier.

Frank Cowperwood as dialectical hero

While The Financier clearly belongs to the literary tradition of the business novel, and Dreiser affiliated himself with Progressive causes, the exact nature of the novel’s relation to both – and hence the orientation of its account of the financial system – remains provocative. The one reformer figure in The Financier, Skelton P. Wheat of the Citizens’ Municipal Reform Association, is portrayed fairly negatively, his moralistic reform programme easily manipulated by the Philadelphia financial and political elites. More striking is the combination of admiration and condemnation in the novel’s depiction of central protagonist Frank Cowperwood, whose character and career Dreiser traces as exemplifying the “genus financier.” Cowperwood’s most salient characteristics are his immense personal power and charm, and his scepticism towards conventional morality. Following the motto “I satisfy myself,” he views society in terms of a struggle between individuals, with personal strength trumping all other considerations. Dreiser places early in the novel an incident whereby the young Frank witnesses the life and death struggle of a lobster and a squid, which have been fished out of the Delaware Bay and deposited in a tank and displayed to the public. Since the squid has no weapon with which to defend itself, and has no means of escape from the tank, the lobster’s eventual triumph is inevitable. The incident makes a great impression on Frank, resolving the “riddle” of “How was life organized?” in Darwinian terms: “things lived on each other…[and] men lived on men.” (Dreiser 2010: 9) Cowperwood’s subsequent conduct in business affairs reflects this lesson, contrasting significantly with that of his father Henry, a conservative bastion of the Third National Bank of Philadelphia, whose watchwords are honesty and personal integrity. For Frank, these terms have only a limited market value, and he takes advantage of the corrupt system whereby favoured bankers were allowed to invest money from Philadelphia’s treasury without paying interest, so long as the funds were returned by the end of each month. Frank is similarly unconstrained by conventional sexual morality, embarking in his early thirties on an extra-marital affair with Aileen Butler, the eighteen-year old daughter of a business associate. (In a sequel published in 1914, The Titan, Cowperwood has numerous sexual affairs, interspersed with business episodes in a manner that caused one reviewer to liken the structure of the novel to a “club sandwich.”)

Strands of social Darwinism, Nietzschean philosophy, and self-projection (Cowperwood’s rejection of conventional sexual morality chimes with Dreiser’s own behaviour and disgust at what he called “moralic mush”) mean that The Financier can be read as an admiring portrayal of the American capitalist, and Cowperwood as a kind of prototype for Howard Roark, the protagonist of Ayn Rand’s vindicatory novel of individualism The Fountainhead (1943). Yet there is also plenty of textual support, as well as corroboration in Dreiser’s own criticisms of bankers and corporate America, for a view of Cowperwood as an example of the kind of economic and social menace that Progressive legislation is required to regulate. As Roark Mulligan notes, Dreiser portrays Cowperwood dialectically, as both a challenge to the robber barons through exposing their hypocritical morality, and the epitome of their excesses (Mulligan 2010: 560). This dialectical sense was suggested to Dreiser by Edwin Lefèvre’s 1911 magazine article entitled “What Availeth It?”, a key influence which also suggested Charles Yerkes as a fitting novelistic subject:

He was not worse than so many other captains of industry. He merely was less hypocritical than the rest. And, in any event, he had more personal uses for the dollars he took from the community than his more anemic fellow-buccaneers who offer in self-defense the curious plea that their home life at least is above reproach! (Quoted in Mulligan 2012 560-61.)

In this way the overt selfishness and amorality of Yerkes – and Cowperwood – becomes a reproach to the practice of Carnegie and others who justified their inordinate wealth by reference to their private, personal morality, as if their rigid opposition to basic rights for their workers and their violent suppression of labour disputes were completely irrelevant.

The True Meaning of Money?

Beyond these moral and political criticisms, The Financier refracts a more widespread Progressive-era concern with the immateriality of money that is intensified by the institutionalisation of speculation under finance capitalism. Almost the first thing that Cowperwood learns about the financial system is its unpredictability and the arbitrariness of valuations. His first employer as a broker explains that “anything can make or break a market […] from the failure of a bank to the rumor that your second cousin’s grandmother has a cold.” (Dreiser 2010: 49). His second, and more unusual insight, is that particularly gifted individuals can take advantage of money’s immateriality and multiply its value through their own solidity and confidence alone. “Money was the first thing to have – a lot of it[,]” Frank reflects to himself during his first great financial opportunity. “Then the reputation of handling it wisely would treble, quadruple, aye, increase its significance a hundred and a thousand fold.” (Dreiser 2010: 81) Clare Virginia Eby perceptively defines Dreiser’s depiction of the immateriality of money by contrasting it with that of the contemporary social critic Thorstein Veblen. As she puts it, “whereas Veblen probes the immaterial basis of business in order to expose its unreality, its make-believe status,” Dreiser “reveals not only the subtleties of the financial world, but also the strangely fictitious nature of what would seem to be hard reality.” (Eby 1998: 106) Eby thus explains the celebratory elements in Dreiser’s portrayal of Cowperwood as one who, through his ability to “harness the immaterial basis of business […] extends into fiction the romanticization of the intransigent cultural critic central to Dreiser’s own persona.” (ibid.) The strong implication is that in posing Cowperwood against the false moralism espoused by Carnegie and his like, Dreiser undercuts the tenets underlying Progressive reform.

Critics such as Donald Pizer, June Howard, and William E. Moddelmog, have teased out this ambivalent relationship to Progressive reform and market regulation (see especially Pizer 1976: 195; Howard 1985: 74; Moddelmog 2000: 215-7). Pizer emphasizes the imbrication of elite-led reform campaigns within venal political struggles for power in Cowperwood’s battle with Chicago financiers in The Titan (Pizer 1976: 195), while Moddelmog remarks upon the novels’ “willingness to acknowledge the limitations of [the] ideology of exposure” upon which regulatory legislation and institutions such as the Federal Reserve were founded (Moddelmog 2000: 215). In a way, these critics resolve the problem of Cowperwood by stepping back to the more expansive perspective of the novelist, who traces the wider historical and philosophical implications of Cowperwood’s struggles. In what follows, I want to move in the opposite direction, to wonder what is at stake in Dreiser’s evocation of both sympathy for and disapproval of Cowperwood. These ambivalent reactions, I suggest, lead us to think of Cowperwood not only as the exceptional member of the “genus financier,” but also as an exemplary figure trying, like the rest of us, to negotiate finance capitalism.

Frank Cowperwood and Jay Cooke: Patriotism, “Visions of Empire” and the Mixed Motivations of the Financier

In a novel of repetitions and variations, Dreiser parallels Cowperwood’s career with that of Jay Cooke, the Philadelphia financier who made his name during the Civil War and whose bankruptcy precipitated the crash of 1873. Through these parallels, The Financier intertwines both men’s financial manipulations with particularly intense periods of American national feeling, and the effects of such emotions on the financial markets.

Cowperwood’s “first great financial opportunity” (Dreiser 2010: 80) arises out of the need to generate capital to finance the Union – in his case, the State of Pennsylvania – during the Civil War. In doing so he follows the example set by Cooke in July 1861 when he took on at par a loan to the State whereas “the general opinion was that it […] could only be sold at ninety.” (Dreiser 2010: 81) Cooke’s masterstroke, as Cowperwood sees it, was to include in his valuation of the loan a calculation of “State pride and State patriotism,” and to sell it directly to “small banks and private citizens.” (Dreiser 2010: 81) The lesson intensifies the already businesslike turn of Cowperwood’s mind. Previously, Cowperwood has sought to maintain as much as possible the autonomy of financial and business considerations from all other contexts. This governs his views of slavery as being of interest solely in relation to the negative economic impact of friction between North and South, of Lincoln as a great man within the political sphere, and the Civil War as a regrettable interlude because “[i]t really delayed […] the true commercial and financial advancement of the country” (Dreiser 2010: 41, 50-1, 100). Cowperwood now sees an opportunity in putting a price on patriotism. What he learns from Cooke is the project of making a rational assessment of the market’s irrationality, in this case the irrationality of feeling for the nation. But for both this apparent super-rationality will flip into its opposite.

A decade later Cowperwood has built a fortune, largely by hypothecating funds from the Philadelphia treasury, but loses it all, and is plunged into bankruptcy and ultimately imprisonment. Cowperwood’s fall pivots on another example of market irrationality, the panic caused by the Great Fire of Chicago in 1871, where he is caught on the wrong side, going “long” in anticipation that the market will act rationally and bottom out. His fall is exacerbated by his failure to account for another irrational reaction – the anger of the politically influential Edward Malia Butler incurred through Cowperwood’s extra-marital affair with Butler’s daughter Aileen. Butler’s desire for revenge ensures that what might have been a commercial hiccup ends with total bankruptcy and a jail sentence for defrauding the State treasury. Still, this failure only sets the stage for the climactic events of The Financier, when the 1873 stock market crash affords Cowperwood the opportunity to rapidly build up another fortune. Reversing his exposure in 1871, he “goes short,” that is, undertaking to sell stocks and shares at a rate discounted from market rates, in anticipation of being able to buy them up at a still lower rate after the market has fallen further.

The 1873 crash, upon which Cowperwood’s second rise is predicated, is represented in The Financier as a farcical repetition of key elements from 1861-2. Centre-stage again is Jay Cooke, now the head of a respected firm, which as in the previous period, backs a national project – the Northern Pacific Railroad and sells subscriptions to middle class people who would not normally invest in the market; as Dreiser puts it, “vending his wares to direct to the people – clergymen, grocers, etc.” (Dreiser 2010: 546). According to The Financier, the bubble of investment in railroads that caused the 1873 crash was rooted in the distorting power of “a vision of empire,” in this particular case the economic “development of […] the extreme northern one-third of the United States.” “Here, if a railroad were built,” according to this vision, “would spring up great cities and prosperous towns,” a project that resembled in scope the contemporary construction of the Panama Canal and “bade fair apparently to be as useful to humanity.” (Dreiser 2010: 545) Trying to repeat the strategy that had proved successful during the Civil War, Cooke is led astray by the lure of fostering America’s economic development, the dream of being useful to humanity, and the wish to democratise access to the financial markets, as well as the simple desire to make money. It is Cowperwood’s suspicion of all this save the desire to make money, and his sense that the emotive pull of the Northern Pacific had led to its over-valuation, that gives him “a great opportunity” which he seizes with both hands. (Dreiser 2010: 546)

Were this all, The Financier might justly be celebrated as a powerful portrayal of an amoral financial manipulator in a system which is partly arbitrary and partly rigged by behind-the-scenes deals. Yet Dreiser will have Cowperwood succumb repeatedly to the lure of exactly the kinds of visions of national power, economic development, social utility, and human productivity that – as The Financier depicts it – had bankrupted Jay Cooke and Co. and precipitated the crash of 1873. Instead of simply playing the market, Cowperwood concerns himself with trying to leave a material legacy, amassing a major art collection and, over The Financier and its sequel, The Titan, developing much of the urban infrastructure essential to the modern cities of Philadelphia and Chicago. His deepest and most authentic longing is to develop street-car lines, the urban mass transit of the day. Even at the climax of The Financier, at the height of his triumph as a “bear,” Cowperwood is overcome with disgust at financial speculation and his own activities on the exchange:

“If I get out of this safely,” he said to himself, “this is the end. I am going West, and going into some other line of business.” He thought of street-railways, land speculation, some great manufacturing project of some kind, even mining, on a legitimate basis. Anything, not to be a broker any more. (Dreiser 2010: 552)[2]

In short, Cowperwood makes most money dealing with money in the abstract, purely as a medium of exchange, unrelated to the material world or economic growth. Yet his strongest desire is to be genuinely productive – a desire that is self-defeating. This dialectic determines the repetitive structure of the trilogy, of success followed by failure, followed by renewed success, until Cowperwood finally succumbs to Bright’s disease.

The Nation and the Market

The Financier then suggests there are two modes of financial speculation: rapacious, which usually brings a success which is unsatisfying; and intentionally productive, which brings hubristic over-reach and failure. Pushed to its logical conclusion, this dualism explodes the distinctions through which Progressives sought to regulate the “abuses” of capitalism and ensure its productivity, efficiency, and moderation. Of course Progressivism is long spent as a political force, and in some respects The Financier foretells its swing to the political right and subsequent dissipation during World War I. But it also makes uncomfortable reading for those of us who are drawn to excoriate unethical banking practices, while depending upon global financial systems for credit, capital, investments and pensions. Dreiser’s novel spectacularly refuses the kind of moral rhetoric that post-2008 opposes “hard-working Americans” to “greedy” bankers.

A widespread sense of the inability of our political institutions to address the contemporary crisis suggests that in some way we are already familiar with the implications of The Financier. The financial system Dreiser depicts is a shadowy, even mystical presence that co-opts attempts to control or regulate it, whether on the part of individuals or in the name of the nation. Indeed, far from imposing a stabilising framework upon speculation, Dreiser shows the nation as adding to the irrationality of the market, both directly in economic terms, in forms such as the land grants made to encourage railroad construction, and in giving rise to the less tangible but equally powerful “vision of empire” (Dreiser 2010: 545) that turns out to be “only a vision of empire” (Dreiser 2010: 548, emphasis added).

If this discredits both laissez-faire and regulatory regimes, and outflanks positions on the left and the right of the political spectrum, it might also lead to a counsel of despair and quiescent resignation. However The Financier was not Dreiser’s final word on the topic. Having continued Cowperwood’s story in The Titan (1914), Dreiser returned to the projected trilogy at intervals and was still working on the final volume, entitled The Stoic, when he died in December 1945. Shifting geographical focus, The Stoic depicts Cowperwood’s involvement in the financing of London’s underground railway. It rehearses the inevitable decline and ultimate failure to realise his visions, his death, and the subsequent dissipation of his fortune, his art gallery and other possessions, all of which had been foretold in an appendix to The Financier. Still, a potentially different form of human agency is exemplified by Berenice Fleming, Cowperwood’s main (though not exclusive) lover throughout the volume. She spends several years in India studying Hindu mysticism, and then returns to New York where she uses her inheritance from Cowperwood to found a hospital for the poor of the lower east side. Generations of critics and readers have been disappointed by this ending, which goes against Dreiser’s habitual emphasis on the limits of human agency, and betrays the philosophical register of the trilogy summed up early in The Financier by Cowperwood’s conviction that those who espoused “ethical and religious” principles “were following false or silly standards.” (Dreiser 2010: 66-7) But in another way Berenice’s time in India brings full circle a trajectory begun with Frank’s earliest encounter with the abstracting power of financial instruments, when his father shows him “a series of shares in the British East India Company” whose plain looks belie their value (Dreiser 2010: 12). If The Stoic’s investment in religious mysticism is found unconvincing, Dreiser might be read nevertheless as pointing towards the building of an international and humanist response to global capitalism. Such an interpretation is given weight by a short piece entitled “Interdependence,” that Dreiser wrote in 1945, in the midst of working on The Stoic and only a few months before his death. Responding to the dropping of the atomic bombs on Hiroshima and Nagasaki, Dreiser tried to envision a post-war world characterized by a progressive cosmopolitanism. “People must move into other countries,” he urges. “They must study strange and unfamiliar ways and customs and try to learn from them. They must learn to understand, and wish to, their fellow men [sic.] on the globe.” (Dreiser 1945: 70)

References

Cassuto, Leonard. “A Life Driven by Desire.” The Wall Street Journal, May 5 2012, C13.

Dreiser, Theodore. “Between You and Your Editor: Personal Talks with the Delineator Family.” Delineator 70:3 (September 1907), 284. [unsigned]

Dreiser, Theodore. “Interdependence.” Free World 10, (September 1945), 69-70.

Dreiser, Theodore. The Financier. The Critical Edition. Ed. Roark Mulligan. Urbana: University of Illinois Press, 2010.

Dreiser, Theodore. Political Writings. Ed. Jude Davies. Urbana: University of Illinois Press, 2011.

Eby, Clare Virginia. Dreiser and Veblen, Saboteurs of the Status Quo. Columbia: University of Missouri Press, 1998.

Howard, June. Form and History in American Literary Naturalism. Chapel Hill: University of North Carolina Press, 1985.

Moddelmog, William E. Reconstituting Authority: American Fiction in the Province of the Law 1880-1920. Iowa City: University of Iowa Press, 2000.

Mulligan, Roark. “Historical Commentary” in Theodore Dreiser The Financier. The Critical Edition. Ed. Roark Mulligan. Urbana: University of Illinois Press, 2010, 557-89.

Pizer, Donald. The Novels of Theodore Dreiser: A Critical Study. Minneapolis: University of Minnesota Press, 1976.

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[1] For summaries of Dreiser’s political writing on Ev’ry Month and the Delineator see Dreiser, Political Writings 3-5, 8-11.

[2] Cowperwood’s interest in using finance productively is even stronger in The Titan and The Stoic, novels which complete Dreiser’s trilogy narrating Cowperwood’s story. It is worth noting that Moddelmog also emphasizes the attachment to the material that belies Cowperwood’s ability to manipulate the abstracting and irrational nature of the market. For him, Cowperwood’s attraction to physicality and property ownership are aspects of his attachment to earlier forms of financial accumulation. See Moddelmog 2000: 208-11.