Sometimes history delivers up revolutionaries in deceptive packages. Take Richard Whitney.
Whitney was the pluperfect American aristocrat: boasting all the right connections; demonstrating a correct, gentlemanly bearing; and, as leader of the New York Stock Exchange in the 1930s, exemplifying all his fellow wealthy saw as proper and admirable in life.
But while pushing back against the forces of reform, he wrote checks he couldn’t cash and stole money from friends, thus setting up his financial establishment for a moral crisis that changed how Wall Street worked.
John Brooks wrote about business for The New Yorker magazine in a way both gripping and charming. His 1973 classic The Go-Go Years is a contemporary account of activities in and around the New York Stock Exchange in the 1960s; here, he focuses on the 1920s and 1930s, when the NYSE went from bull market to laying an egg, then to test tube for social engineers seeking to devise a kinder, gentler capitalism.
 |
| On the trading floor at the New York Stock Exchange in the 1920s. "Business was in charge of the country to an extent that it had not been
since the post-Civil War era of railroad expansion," Brooks writes. Image from https://www.pinterest.com/pin/675610381595034814/ |
In the character of Whitney, Brooks captures an arrogance and stupidity endemic to the culture of Wall Street:
He had a toplofty way of being able to deal perfectly factually and equitably with people he considered his social inferiors – which meant most people – and at the same time leaving no doubt of just how he considered them; he was master of the bully’s art of flattering people by seeming to treat them as equals while at the same time reminding them they weren’t.
Whitney proves a fascinating study of hubris and hypocrisy. Whether he merits the focus Brooks puts on him is another question.
As he did in The Go-Go Years, Brooks presents his story as a series of essays that detail specific aspects of the investor class in the years leading up to the Great Crash of 1929 as well as the New Deal legislation which followed. Whitney is not a presence in all of them; yet his spirit is palpable from the start.
 |
| Two reasons Richard Whitney was so powerful on Wall Street: His brother George (at left) and good friend Thomas Lamont, who were top-ranking officers at the biggest bank in town, J. P. Morgan & Co. Image from https://www.shutterstock.com/editorial/image-editorial/george-whitney-with-thomas-w-lamont-washington-usa-6661291a |
In essence, this is a story about class, Old Money elites like Whitney who had it and strivers who plugged stocks to Main Street and rode the daily fluctuations their lack of old-school ties exposed them to.
Brooks quotes Princeton economist Joseph Stagg Lawrence in laying out the elite view of the situation: “The Stock Exchange is the stage whereon is focused the world’s most intelligent and best informed judgment of the values of the enterprises which serve men’s needs. It is probable that upon this stage can be discovered the aristocracy of American intelligence.”
An American aristocracy may strike you as a contradiction. For many on Wall Street, it was just the way it was. Even fellow members of the investor class fell afoul of the plutocrats, like Allan A. Ryan, owner of the Stutz Motor Car Company of America, who is the focus of one chapter in this book.
No radical but a bit of a rebel, Ryan found his business under attack by top Wall Street dealers using their insider status to drive down his company’s price. Ryan dared to challenge this, calling out his attackers despite their rank on the Street. For this he was ruined, disowned by his own father and forced to sell in order to avoid bankruptcy. “The Stock Exchange can do anything,” said an NYSE spokesman, providing Ryan’s epitaph.
 |
| A 1920 Stutz Bearcat, a premium sports car of its day. Stutz owner Allan A. Ryan bet on the car being able to outrace Wall Street tycoons who sought to tank the company's shares to punish his hubris. He nearly succeeded. Image from https://hymanltd.com/vehicles/5908-1920-stutz-bearcat/ |
Such was the way of life on Wall Street, pre-Crash. Brooks explains:
Bankers, like royalty in a constitutional monarchy, were in the position of being handsomely paid simply for existing. A plum tree had been grown, tended, and brought to fruit just for their shaking.
However unrepresentative of Americans as a whole, Wall Street at the dawn of the 1920s was a kind of avatar for the nation. When a bomb went off there on September 16, 1920, killing dozens and showering shrapnel on the offices of J. P. Morgan & Co., it was seen as an attack on the whole country.
Wall Street, and in particular the New York Stock Exchange, which rose to global prominence with the collapse of Europe after World War I, enjoyed a status not exactly earned, as Brooks sees it:
Selling paper for money – the basic business of Wall Street – had graduated from a mere way of making a living into a defiance of the country’s enemies, a moral act, and Wall Street was well launched into a decade when it could savor the treacherous and comfortable sensation of feeling its activities to be right as well as profitable.
 |
| Wall Street after the September 16, 1920 bombing, which left 38 dead and many more injured. The following day, a patriotic rally - which had been already planned before the attack - went ahead as scheduled, packing the street. Image from https://www.peoplesworld.org/article/bombing-wall-street-yesterday-and-today/ |
Everything changed in in 1929, when the market suddenly nosedived and took the rest of the national economy down with it. With that came calls for reform that the stockbroking elite ignored at their peril.
Leading the resistance to any change was NYSE President Whitney, who showed courage in the first days after the Crash by placing some stabilizing high bids but remained inflexible despite growing demands for needful change. This helped to usher in President Franklin Delano Roosevelt and the New Deal.
Roosevelt’s pro-inflationary policies did turn the tide for a time, and brought around some on Wall Street, but eventually proved too much correction. Eventually Roosevelt settled on greater market control with the establishment of the Securities and Exchange Commission, which Whitney regarded as dictatorial overreach.
Brooks, writing in the late 1960s, clearly favors a closely regulated market, but he presents both sides of the argument at all times. Not completely in the New Deal camp, he describes the theory of an early FDR economic adviser as amounting to populist voodoo economics:
To reverse the roles by trying to make gold prices affect commodity prices was like a man in a building lobby trying to move an elevator from floor to floor by pushing the indicator dial from place to place: it wouldn’t work, and it could easily end up ruining the whole mechanism.
 |
| Author John Brooks, as seen in a display promoting another book of his published in 1969, Business Adventures. Brooks (1920-1993) focused on the human side of high finance. Both Warren Buffett and Bill Gates are said to be among his many admirers. Image from https://investopress.com/business-adventures-by-john-brooks-a-business-classic |
But as Brooks focuses more on Whitney and his wanton elitism, not to mention his embezzlement in pursuit of propping up bad investments, an argument becomes clear: More government is preferable to less.
Brooks quotes journalist John T. Flynn, no supporter of the New Deal but a critic of the established order: “The game of speculation is one played by some three or four thousand insiders and some half a million outsiders on terms of complete inequality.”
Whitney makes an easy focal point for the book, once Brooks gets around to him. Until then, Once In Golconda is diverting enough, if too episodic in structure. While financial books can be off-puttingly abstruse and technical, Brooks’ focus on the human (at times all-too-human) nature of the market is an enormous plus. Not to mention his wit.
Of one fabled stockbroker, he writes: “He published a book explaining his stock-market techniques – a tip-off that they were no longer working for him.” A broker seen entering Trinity Episcopal Church, just off Wall Street, was bad form. “Evidence of the urge to pray was a cause for tongue-clicking and a sign of impaired credit.”
 |
| One big-money guy who benefitted from New Deal reconfiguration of Wall Street was Joseph P. Kennedy Sr., whom President Roosevelt made the first chairman of the Securities and Exchange Commission in 1934. Kennedy's pro-business outlook did not prevent him from being a tough regulatory watchdog, Brooks writes. Image from https://www.irishamerica.com/2013/01/joe-kennedy-the-hollywood-years/ |
The book’s title, a reference to a fabled city of wealth in India that gave visitors an inflated appetite for riches, is meant to connect up with the experience of Wall Street but sets a tres-fancy tone itself. So do off-hand references to Walter Scott poetry and Ibsen plays. More than just high-toned, Brooks can be smug in detailing the sufferings of his subjects.
Whitney as a centerpiece enhances the book’s readability, but I wonder if he was really as representative a figure as Brooks makes him out to be. His fall is presented as the last domino in getting Wall Street in line with needful regulation, but by the time of his arrest in 1938 the SEC had been operating for some time, and the New Deal had altered the American economy with or without the NYSE’s cooperation.
Also, Whitney’s behavior, which extended into embezzling from his wife’s relatives as well as his yacht club, was hardly a Wall Street norm.
Of course, what Brooks is after – more than the structures or sinews of capitalism – is the unthinking attitude of elites who bound them in place. Whitney was the kind of man who could borrow from his social inferiors (many of them Jews barred from places like J. P. Morgan but with investment houses of their own) unconcerned about what they thought of him as they ultimately didn’t figure in his world.
 |
| Richard Whitney leaves Ossining Correctional Facility, a. k. a. Sing Sing, in August 1941. A decade before, he had spent over $5,000 a month on living expenses while owing over $2 million he could not pay. Image from https://justcriminals.info/2016/11/12/richard-whitney-1931/ |
At Whitney’s arraignment, Brooks makes clear how class defined him and his situation, all the way through to the bitter end:
While Bowery derelicts stood around watching with bewilderment or glee, Whitney was booked at the Elizabeth Street police station by a sergeant who said, “Mr. Whitney, I’m sorry to see you in this trouble and I wish you luck.” “Thank you,” replied Whitney, and the two men shook hands – the sergeant with the abashed and delighted air of one unexpectedly hobnobbing with celebrity.
The
strengths of Once In Golconda are many; if focus is not one of them,
Brooks does offer a panoramic view of Manhattan’s investment community at a
time when it was coming into unrivaled prominence, with a sharp eye for
colorful anecdotes and an easy, smooth tone. This is a fine financial history
for experts and novices alike.
No comments:
Post a Comment