Julius Nelson of the N.F.A.
Julius Nelson was Administrator of the National Financial Administration from 1889 to 1904. Nelson was appointed by Governor-General Ezra Gallivan on 5 March 1889 with a mandate to enact Gallivan's Fifth Point: to remake the agency into a nationwide source of venture capital to encourage the establishement of new businesses. During Nelson's tenure as head of the N.F.A., the agency made 3,764 loans totalling over N.A. £9 million. At the time of his retirement, 39 of the leading 100 corporations in the Confederation of North America had originated with N.F.A. loans.
During his first two years in office, Nelson restructured the N.F.A., established offices in the confederations of the C.N.A., and arranged for new financings. Only 55 loans were granted in this period, since the C.N.A. was still recovering from the Great Depression of the early 1880s, and the nature of the agency's new mandate was not widely known among potential borrowers.
The first important financings under Nelson occurred in 1891, when N.F.A. loans led to the founding of Kenton, Ltd., Indiana Milling, Ltd., and Parkins, Ltd. Sobel notes that much of Nelson's success could be attributed to easy money policies and a rapidly rising securities market. Nelson himself attributed his record to "sound, conservative procedures in evaluating and making financial arrangements."
Nelson's critics, however, claimed that it was just this conservatism that enabled him to maintain the agency's low failure rate while, as Marshall Perkins wrote, "subverting the intent of the N.F.A." Under Nelson's direction, the N.F.A. financed only those individuals who showed an excellent chance of success, and ignoring the others. Samuel Frier of the Textile Union argued in 1900 that Nelson's own statistics indicated the extent of his failure. "The N.F.A. was not supposed to be a money-making operation, but a service to the people. A commercial bank might be pleased to show a failure rate of 13.3. To us it indicates that Mr. Nelson has not been taking the kind of risks he should. In 1899 the N.F.A. granted 314 loans and financings, nine more than the previous year. Mr. Nelson does not tell us that the N.F.A. processed 2,539 applications and culled the 314 from that amount. What of the other 2,225 men who failed Mr. Nelson's test? These are the people the Governor-General told us were to be helped, and these are the men the N.F.A. ignores." Likewise, columnist Milton Fields claimed that the "N.F.A. should be making 30,000 loans and financings a year, not 300."
Meanwhile, Andrew de Molay, head of the New York Bankers Association, charged Nelson with "stealing business from commercial banks, and not serving the purposes for which he has been named to office. Almost every N.F.A. financing could have been handled by a member bank of this Association, but the borrowers went to Nelson instead, since by law his rates can be lower than ours. This is not creating new business; it is taking money from one pocket and putting it in the other."
Nelson's total capitalization upon assuming office was N.A. £50 million. At the time of his retirement in 1904, the agency had N.A. £175.8 million in cash, N.A. £203.4 million in secured bonds, and common stock valued at N.A. £259.9 million, against N.A. £265.7 million in liabilities. At the same time, the SEB Index rose from 93.4 on the day of Nelson's appointment to 325.6 on the day of his retirement. The number of financings per year rose from 21 in 1889 to 355 in 1904, while the failure rate fluctuated between 12% and 15%, and mostly between 13% and 14%.
At the time of Nelson's retirement, Govenor-General Christopher Hemingway called him "the greatest banker of his age." Sobel goes further, saying that Nelson was in large part responsible for the great economic growth of the C.N.A. during his lifetime and after, and in his own way was a more powerful figure than even K.A. President Diego Cortez y Catalán.
Following his retirement, Nelson published his memoirs, Financing a Nation: My Years at the N.F.A. in 1910.
Sobel's sources for Julius Nelson's career as head of the N.F.A. include Nelson's own Financing a Nation (New York, 1910). Other sources include Perkins' Behind the Mask: The Life and Works of Julius Nelson (New York, 1920); Case Springer's The Remembered Man: Nelson in Action (New York, 1965); and John Friendly's A History of the National Financial Administration (New York, 1967).
This was the Featured Article for the week of 25 August 2013.