How the Bailout Works

by Samuel Roth, 1934

THE JEW IN BUSINESS

Since, therefore, he neither creates nor labors, how then, you will ask, does the Jew subsist in America?

I find in the March 11, 1865 issue of Notes and Queries, an English weekly of very high character, the following letter signed by W. J. Charlton:

"Are there any Jews who, answering to what we call 'artisans,' work as such in any of our large manufacturing towns, or in any of our cotton mills? I know there are Jews who keep shops but are there any who work as do our carpenters and laborers? Are there, in fact, any class of Jews answering to our class of artisans? I should feel much obliged by this information."

If you will take the trouble to look through Notes and Queries for that year, and for five years after that, you will find plenty of scholarly, impartial correspondence by Jewish rabbis and Jewish journalists on a vast variety of Jewish matters, but no answer whatever to W. J. Charlton's momentous question, a question that has been asked in every civilized country that has offered the Jews freedom of movement, and has always been received with the same frozen silence.

It is my honest belief that nothing the Jew does in America is essential to its welfare. On the contrary, a great deal of what the American Jew does is subversive of America's best interests. Like his creature Jehovah, a teacher he never tires of imitating, the Jew in America is forever engaged in the fascinating pursuit of creating everything he needs out of nothing - his modest opinion of the gentile world about him.

"Alas, we have become a nation of luft-menschen [People who live without visible means of support] moaned the great J. L. Peretz, in the midst of the teeming life of Russian Jewry about him, who were doing in his day in Odessa what the Jews are doing in our day in New York. "We must begin to build," he cried out warningly. "We must make - out of fools, wise people; out of fanatics, men of sense; out of idlers, workers; useful decent workmen who labor for their own livelihood and thereby increase the wealth of society."

These words were written more than thirty years ago. When Peretz died in 1917 he had not lived to see any substantial improvement in the status of his people, either from within or from without. Without, nations were still enacting civil and political restrictions against Jews. Within, the Jews themselves were not at all chastened: they were still a nation of sinisterly busy idlers.

What is this Jewish business of creating everything out of nothing? It is very fascinating, I assure you. The whole thing may perhaps be expressed in one magical word. But since it is a word to which you have in the course of your life attributed other meanings, I better warn you not to jump at conclusions too quickly. The word is merchandising. You will not understand what I mean till I show you how it works out.

John Hanly & Son are running a successful furniture business in Battle Creek, Michigan. John Hanly, who is the senior member today, was the Son of a generation ago. But the business is not only very old. It is very good. They have seven solid busy outlets in the seven biggest cities east of the Mississippi. It would seem that there is not very much left for them to wish for by way of business. John Hanly, Sr., thinks so. John Hanly, Jr., thinks so. And even you might think so. But Mr. Isadore Cohen does not think so.

Mr. Isadore Cohen has just made a big clean-up in the fur business in New York. It will probably be at least three years before anyone else can earn a nickel in the fur business, so effectively has Mr. Cohen cleaned it up and out. Mr. Cohen realizes this and has turned to other fields for new conquests. He has noticed the advertisements of John Hanly & Son. He has even passed through two or three of their bright stores. In the back of his mind Mr. Cohen has made the following note concerning John Hanly & Son: Good furniture makers, but like all goyim, too damned conservative. The whole thing recurs to his mind now. He calls up Mr. Hanly, Sr., establishes an appointment with him, and something like the following conversation takes place:

Mr. Cohen: I believe you sell about half a million dollars worth of furniture a year, Mr. Hanly?

Mr. Hanly: You are correctly informed Mr. Cohen.

Mr. Cohen: Well, how would you like to treble your business in six months' time?

Mr. Hanly: Very much. What's your plan?

(He knows in advance that the Jew has a plan. Every Jew he has ever met has had some kind of plan by which he made money, without hazarding anything like a real investment. And if you can make money just out of a plan, what couldn't you make out of a whole furniture factory?)

Mr. Cohen: I will explain my plan to you by example. There is is the eastern window of your factory building a magnificent dining-room suite, probably the most elegant manufactured for general consumption in America. Approximately how many sets of it do you dispose of in a month?

Mr. Hanly: I would say about sixty. Around Christmas the figure might be doubled.

Mr. Cohen: Would you say that within the class of people for whom this suite was built only sixty people a month are tempted to buy it?

Mr. Hanly: But you forget that it sells for twelve hundred and fifty dollars a suite. Many more are probably tempted. But only those who can afford to spend twelve hundred and fifty dollars, actually get it.

Mr. Cohen: You mean only those who can spare so much out of their savings can get it - for your terms are cash with delivery.

Mr. Hanly: I guess that's about right.

Mr. Cohen: Would you say that a man who earns five thousand dollars a year can afford such a suite?

Mr. Hanly: Certainly. He makes such a purchase only once in a lifetime.

Mr. Cohen: But most people who earn five thousand dollars a year do not put much into savings accounts. Did that ever occur to you? They like to spend their money lavishly, and they do - on everything except your furniture. In entertainment, for instance. The average man pays a dollar a seat in the theatre, but your five thousand a year man pays at least four, and often as much as ten. In clothing. The average man pays thirty dollars for a suit of clothes, but the five thousand a year man pays a hundred. In furniture. There are companies which soak him twice as much as the prices you ask for things worth not half of the things you manufacture - why? You know the answer. He is not compelled to go to his slender savings. Your five thousand a year man has good taste, and he would infinitely prefer buying your suite to the things he is compelled to get from the installment houses. But you don't let him.

Mr. Hanly: Suppose the five thousand a year man loses his job?

Mr. Cohen: If he hasn't paid for his merchandise, and cannot go on paying it, we take it back from him.

Mr. Hanly: That would never do. To dispose of it, I'd have to go into the second-hand furniture business.

Mr. Cohen: Certainly not, sir. You would have nothing to do with that. I have in mind a man who will buy from you every installment contract you make. You will have none of the trouble of collecting or retrenching on your contract. You will be paid by this man the full amount of the purchase the day after the contract is signed and delivered.

Mr. Hanly: But to produce so much more furniture will require a much larger factory than the one we have. More machinery and more money with which to buy materials and build.

Mr. Cohen: You have nothing to worry about. I know the very man who will supply you with the capital you need at moderate interest.

Mr. Hanly: But such a new system of doing business will require a radically different organization: new methods, new people -

Mr. Cohen: Didn't I tell you that you have nothing to worry about? I'll supply you with the men, the money and the new organization. And you will retain a controlling interest in the business.

What is the result?

Hanly succumbs to the plan. Cohen gets the run of the plant. Israel Isaacs, a friend of Cohen's, agrees to buy all of the new Hanly installment contracts at a discount of fifteen percent for cash, which Hanly adds on to the bills of his customers. Another of Cohen's associates (the same fellows who helped him make that killing in the fur business in New York) Rueben Samuels, lends Hanly the half a million dollars he needs for the expansion of the business along the new lines. Before the Hanlys can realize what has happened, everything about them, in stores and factories, has been so completely changed that it is practically not the same organization. All of their old employees have been discharged. The new faces about them are long and dark, and burn about the eyes with a strange lustful fire.

"It's beginning to look as if we're running a Yiddish colony," complains John Hanly, Jr., dryly.

"What's the use of crying?" says John Hanly, Sr. "They get the business - and isn't that the real important thing?"

"I wonder," says John Hanly, Jr.

The Jews get the business, alright. There is no disputing that. At the end of the first year, Cohen's brightest conjectures have been surpassed. The reorganized firm of John Hanly & Son has sold nearly two million dollars worth of furniture. But for the first time in many years it is in financial difficulties. For there is a grave difference between the book profits of a business and its net profits. The one thing Hanley had not taken into reckoning was the interest on that half a million dollars advanced to him by Rueben Samuels for the expansion of the business. With the bonus, that alone comes to forty-five thousand dollars. A lot of money.

There is more trouble with Israel Isaacs. Mr. Hanly, Sr., discovers that he had made no arrangement with Mr. Isaacs as to what was to be done with reclaimed furniture. When a purchaser of a Hanly suite of furniture defaults in his payments, Mr. Isaacs has a novel way of collecting. He seizes the furniture, sells it to himself (through a dummy) for a trifling sum, and then sues the purchaser and collects from him the full balance through the courts.

How does he collect?

Mr. Isaacs has established such an influence in the courts that you would think, watching how his accounts are called in and threatened, that the district attorney's office is really only a collecting agency functioning solely for the benefit of Mr. Isaacs. Having bought back the furniture at a price much less than it costs the Hanly company to manufacture, Mr. Isaacs can afford to sell it to the public at about half of what the Hanly stores ask for the same set.

The Isaacs Furniture Company opens its doors to the general public, and it isn't long before a rumor spreads that the furniture at the Isaacs Company is not really second-hand. It is just a way the Hanly Company has devised of selling its surplus of expensive furniture.

Isaacs sales rise. Hanly sales rise, too - but the prices fall. At the end of the second year of the business of the new organization there are not even book profits. There certainly is no money for the interest on Rueben Samuel's loan. And here a real crisis arises.

Mr. Samuels will not accept the interest alone, even if the company can raise it. He wants the whole principle because he has another enterprise in mind. He must have all the money or else. - Or else what? You've guessed it.

Within six weeks another important change takes place in the personnel of John Hanly & Son.

The business remains the same. The name remains the same. But when the legal clouds have rolled away, it is discovered that the new president of John Hanly & Son is Mr. Isadore Cohen. The new treasurer is Mr. Rueben Samuels. The new secretary is Mr. Israel Isaacs.

What has become of John Hanly, Sr., and John Hanly, Jr.? They are lucky if they have been permitted to retain clerkships in their own business.

America is full of businesses bearing old Christian names, but which are really owned by Jews. Most of them have been acquired in the manner I have just described, the way the Jew creates something out of nothing...

The Jew better than anyone else in the world knows how to dispossess the poor and the members of the middle class. To fit this case, the old P. T. Barnum adage needs only a little changing. A gentile enters business every minute, with two Jews waiting to take him out of it.

"What difference does it make that the sun shines, if there is still a Czar in Russia?" sang Lermontov.

So might an American merchant ask: "Of what use is it that J. P. Morgan is king of Wall Street, if when I need money, I have to come to Levy?"

Levy, Levy, Levy. A familiar name. Let's get a little closer to him.

Mr. Levy's office is not on Wall Street, it is on any one of several hundred Main Streets in the United States. Very close to the railway station. Whether this is designed so that he may be in a conspicuous place or to to keep him where he can make his escape at a moment's notice, I do not know. Whatever the reason is, one thing I am quite sure of, Mr. Levy is playing safe.

Mr. Levy's methods are very much like the methods of Mr. Rueben Samuels. But there is just enough difference between them to make a sketch of it interesting.

The case in point is that of Mr. Levy's dealings with Mr. Frederic Linton. [i.e. Case]

Mr. Linton works a farm twelve miles from a railway station on Main Street. Nr. Linton is a pretty shrewd business man even if his business does happen to be farming. For a long time he has managed to extract from his sixty acres just a little more than a good livelihood.

Witness the fact that he has a son at Yale and a daughter at Vassar. It takes a little money to manage that.

But no one is proof against an occasional attack of bad times. Suddenly, almost without a warning sign, Linton discovers himself alarmingly short of cash. It's purely a problem in economic policy. If he does not immediately make certain important repairs in his house, barn and machinery, he will eventually run into much graver trouble with them. His balance at the bank has been, of late, so meager that he is almost ashamed of making his slender deposits. As for asking for a loan. Nevertheless he hardens himself to the task and seeks out the manager of the bank.

The banker listens to Linton's recital of his needs attentively and sympathetically, although it is a story he has had to listen to many times. But in the end he has to shake his head. He would like to make the loan, he tell Linton. He has no doubt that it is a very safe loan to make. But he cannot. There are orders from high up which he does not dare to disregard. The new bank safety, he has been sternly warned, lies in greater restriction in the making of loans.

Since he is already in town, Linton decides to try his luck with some of his friends. Old friends like Eddie Howe and George Brent. he begins by telling them about his visit to the bank. They are sympathetic. But they have been caught quite as badly as he. . . .

"Tell you what," says Eddie Howe. "There's always one man in town who has ready cash to spare. Why don't you try to see Jake Levy?"

"But doesn't he drive a rather shrewd bargain?" objected Linton.

"Sure," agrees Howe. "But when you get down to doing business with Levy it means that you practically have no other choice."

Linton had almost decided to let the repairs go hang when a whim changed his mind. Wonder what sort of man this Levy might be. What sort of security could he ask for that the bank knew nothing about?

The first thing Mr. Linton notices is a sign in Levy's window:

Money Loaned At Legal Interest

Funny, thinks Linton. Like a man hanging out a sign to inform people that he is not a criminal; something queer about it; too damned much legality. Besides, there is a rate of legal interest, and it is six percent. Yet one heard of people paying this Levy the most exorbitant interest for comparatively small loans. . . .

The second surprise is Mr. Levy himself. Mr. Levy is nothing like Linton has pictured to himself. Mr. Levy is tall, clean-shaven and bears himself supplely, almost graciously. The sort of man one might find in the best clubs, Mr. Linton was thinking when Mr. Levy reached out his hand and greeted him by name. Then Mr. Linton got the uncomfortable feeling that he had been under the surveillance of those shrewd gray eyes for a long time.

"Twelve hundred dollars," muses Mr. Levy. "And how much time do you want in which to pay it back?"

Mr. Linton thinks. "Four months would be plenty of time," he says.

"You're counting on a good market," observes Mr. Levy.

"Have you any reason to believe that it won't be?"

"No Mr. Linton. But it's good business, in such matters, to count on a poor market. Besides, I will charge you for eight months the same rate it would cost you for four. It's a minimum I've set myself, and you may as well get the benefit of the additional time."

So far everything sounds lovely. A little too lovely. Mr. Linton knows that there must be something else. Something hidden.

"And the rate of interest?" he asks.

"The legal rate - six percent."

"Very well, then, will you take my note?"

"Certainly." And here Mr. Levy makes a slight, significant pause. The surprise is coming, Linton says to himself. "There is another condition I have not mentioned, Mr. Linton. We charge a service fee of ten percent on the face of the note."

Mr. Linton is taken by surprise, in spite of himself. "Service fee? What for?"

"Technically, Mr. Linton, it is for bookkeeping, billing, etc. Actually it's for making a loan which the bank considers unsound. You have been to your bank, have you not, Mr. Linton?"

"Yes. But damn it all, you wouldn't make this loan to me if you were not certain of your ability to collect it?"

"The service charge is essential and unavoidable," says Mr. Levy with cold finality.

Mr. Linton takes the twelve crisp, brand new one hundred dollar bills and signs for Mr. Levy a note for thirteen hundred and ninety two dollars.

A week before the note falls due at Linton's bank, Linton receives the following note from Levy. Its surface considerateness puzzles him.

"I am taking the liberty of calling your attention to your note to the amount of $1200.00, which falls due in another week, because it is just possible that you may not be in a position to meet it in full. You are at liberty, should you find it necessary, to arrange for renewal. Please come to see me at your earliest convenience."

Linton wonders how Levy could have guessed that he was unprepared to meet the note. Again he gets that creepy feeling that he is being secretly watched. But there is no alternative. He must see Levy and arrange a renewal.

"This time," says Mr. Levy, "I shall ask you to give me two notes: one payable in ninety days to the amount of twelve hundred dollars, the other for the balance of four hundred twenty-eight dollars and sixty-four cents, due ninety days after that."

Linton feels that he is slowly getting into some kind of trap. But it is too late to retreat. He cannot help himself. To pay the note in full now would leave him without the cash needed for his children's tuition at school for the following year. He signs the notes.

Before the due date of the first note, the one for twelve hundred dollars, there is this time no advance letter from Levy suggesting a renewal. So Linton goes, uninvited, to Levy's house. But as usual, when Levy has determined on a course of action, he is not to be swerved.

"That note for twelve hundred dollars must be met, Mr. Linton. I make it an unbreakable rule never to let my cash stay out more than eleven months."

"But in another three months you will have got more than four hundred dollars for your loan. That's nearly forty percent interest. Surely you can afford to be a little more lenient."

Mr. Levy now rises gravely in his chair. All his elegance has been strained to a fine vanishing point. "I am sorry, Mr. Linton," he says with suppressed excitement, "but I will have to judge for myself how lenient I can afford to be. If your money is not in the bank to meet my note I will have to protest."

The twelve hundred dollar note is duly met, without protest. To accomplish this, Linton has to sell some of the machinery he has had mended, and some cattle he can spare just a little, and ninety days later when the second note, the one for four hundred and twenty-eight dollars and sixty-four cents comes due, there is absolutely no way he can raise the money.

He even tries the bank.

Once more the manager of the bank listens to him. This time with more care than sympathy. "I wish I could help you, Mr. Linton," he says, in conclusion. "Unfortunately you have made yourself quite helpless. There is no way in which a decent banking institution could remedy your difficulties."

And once more we find Linton pleading with Levy.

"Renew," says Levy. "But how can you expect it of me? You've sold pretty nearly everything salable on your land. In a forced sale, what you have left will hardly bring back the amount of this note."

"But you don't understand, Mr. Levy, that I want to pay you back? Why talk of a forced sale?"

Mr. Levy looks across the littered table with tremendous earnestness.

"Because there will be a marshall's sale if you do not meet this note, Mr. Linton."

The note is not met. Judgment is entered. A marshall appears on the property and levies on it full. The sale takes place. And Mr. Linton's poor sixty acres from which he had derived such a proud livelihood go - do you know to whom? You've already guessed it. To Mr. Levy.

A disillusioned man, Mr. Linton hunts up Mr. Levy in his house several hours after the sale. "This is going to be terrible news to my children at school," he explains in the flat even tones of a man whom you cannot possibly punish anymore. "Can you try to arrange to give me some time in which to adjust my affairs so that I will be able to break it to them gently?"

Here the inborn messianic qualities of the man Levy rise to stupendous heights. He places both hands on the shoulders of Linton.

"But you don't have to leave at all if you don't want to," he says soothingly. "Why can't you and your wife remain on the farm and continue to run it as if it were your own? You can move into the smaller house, and when your children come back from college they can help you run things. You don't mind occupying the smaller house, will you? I have some relations in mind for the bigger one. And they will work along with you gladly, happily to make things hum on the farm. What do you say?"

If Mr. Linton had thought before that he had been reduced to the final stage of humiliation he now knew that he had been mistaken. All the ruthless scheming of the Jew, all his apparent unaccountable hardness, had been directed towards this one terrible point. There were some people of his, Jews, who needed a place in the sun - and Levy had supplied it to them out of his, Linton's, life. Levy might have made more money on him by continuing the loan, but that was not really what Levy had been after.

Someone had to be dispossessed that his relations might have a home. Linton realized with a sinking heart that he really had no chance. His whole life had been lost the moment he crossed Levy's threshold. He had been dealing not with a man but with a whole people.

There is nothing for Mr. Linton to do, however, but to accept.

Mr. Levy shakes both his hands vigorously. The man is almost warm again.

"I knew you'd be a sport," he cries. "And I'm sure you'll be very comfortable."

Maybe. But the likelihood is that poor Linton will never again be comfortable till they stretch him out in a good strong pine box, out of reach of the swarm of Levys that have been loosed on the farm, to direct him, his wife and his children.

What Linton will never understand, even if he lives to be eighty, is how a loan of twelve hundred dollars at legal interest can have made such a difference in his fortunes.

*****

Linton and Hanly belong to the more substantial part of society. The damage done there is deadly, to be sure. But the Lintons and the Hanlys have some hope.

Under the title Bootlegging Blood Money, Isaac Don Levine gives an account of the workings of the Loan Shark among the poor masses of America. He cites the case of a man in Dallas, Texas, who paid $640 over a period of four years on a loan of $20, and still owes the principal. Another of a young clerk who paid ten dollars a month over a period of two years on a fifty dollar loan, and has not yet got rid of the loan shark. A woman who paid $194 in interest on an original loan of $5 and did not complain to the police until the usurer threatened to seize her furniture. Also the case of a youth of nineteen who "enmeshed by a loan shark before he had reached the age for making a legal contract, paid $148 on a $5 debt to an automobile finance company, which was able to extort 1000% interest from the victim with the aid of a justice of the peace and two constables."

Most dramatic and noteworthy, however, is the case of David Law, a Tampa negro who borrowed $5 from a loan shark company, and was so hounded by the usurers that he killed one and dangerously wounded another and - in Florida where negro lynchings are still plentiful - was freed on the plea of the prosecuting attorney who held that, under the circumstances, the negro was fully justified in the shooting.

What measures cannot be justified against people who, for the advance of a small sum of money, tie up salaries, practice black-mail, sell-out and ruin estates, and even prey on the slender incomes of helpless war veterans!

*****

We see the Jew, then, in business, as promoter, money-lender, salesman par excellence, the author and chief instigator of a system of credit by which a nation-wide usury rises like a Golem with a million hands on a million throats, to choke the honor and the freedom-of-movement of a hard-working people.

These Levys who make money simply by lending it shrewdly at tremendous heart-eating interest, it is not in their miserable souls to bring anything into existence, nor is it in their hearts to sustain the life of those bright beautiful things which have been brought into the world of life by others. They know only the great bargain by means of which they make themselves the masters of the things manlier men than themselves have dreamed out.

Extracted from 'Jews Must Live and Now and Forever'

by Samuel Roth, published 1934