So general is the employment of these hedging or insurance operations that in the case of cotton--to cite but one instance--the business is regarded by practically all cotton merchants as an absolute necessity under modern methods of conducting business. “An idea of the value of the hedging function may be obtained,” says Herbert Knox Smith, Commissioner of Corporations, “when it is stated that in Great Britain banks very generally refuse to loan money on cotton that is not hedged. Moreover, it is almost universally conceded that, since the introduction of hedging, failures in the cotton trade, which had previously been frequent, have been materially reduced as a direct result of the greater stability with which transactions in spot cotton can be conducted.”[39] In conclusion it may be noted that as early as 1732 an attempt was made in England to prevent short sales by law, that the law was recognized a mistake and subsequently repealed. To-day there is no law on the English Statute books restricting speculation in any form. In America the New York State Legislature enacted a law in 1812 and the Federal Government in 1864, both designed to prevent short selling. These laws have also been repealed and they will not be revived. The bear has come to stay. As a spectre to frighten amateurs, he may continue for a time to stalk abroad o’ nights; as a necessary and useful part of all business he is a substantial reality. And he is not “immoral.”[40] CHAPTER IV THE RELATIONSHIP BETWEEN THE BANKS AND THE STOCK EXCHANGE “A million in the hands of a single banker is a great power,” said Walter Bagehot; “he can at once lend it where he will, and borrowers can come to him because they know or believe that he has it. But the same sum scattered in tens and fifties through a whole nation is no power at all; no one knows where to find it or whom to ask for it.” This explains the power of Wall Street. Money flows there for the same reason that water flows downhill. The great agricultural districts of the West, for example, will gather from their crops this year several hundred millions of dollars. They have no real economic use for all this money in the farming districts; the large commercial and industrial undertakings that help to make America rich and powerful are not in that neighborhood.