The Proud Shall Stumble

by Gerald N. Lund

  “But you don’t think that’s true of Reginald?”

  “Not based on what you’ve told me,” Aaron said. “I disagree with how he’s done things, but. . . . You have another problem. As I listen to you talk, I sense that you and your father-in-law are not on the warmest of terms. True?”

  Frank snorted. “Now there’s an understatement for you.”

  “So for that reason alone, trying to convince others that one of Boston’s most influential and wealthy citizens is a crook is probably not wise. To put it bluntly, I think they would laugh their heads off as they escorted you out of the courtroom.”

  “Right,” Frank agreed. “And as I said, much as he irritates me, I’m not out to destroy my father-in-law. But what he’s doing still concerns me.”

  “Tell me why, specifically.”

  Frank thought about that and then went on. “All right. Let’s go back to his selling the stock that was fully vested and buying new stock for Celeste and Babette on a twenty percent margin, and borrowing the money to do so from his own bank, which he then puts into his own land investment company. Why would he do that if not to line his own pockets?”

  “Oh,” Aaron said soberly, “I wasn’t suggesting that he’s not lining his own pockets, and those of his partners. I’m just saying that he’s not broken any laws that I can see. It’s not illegal for a bank president to borrow money from his own bank to invest in his own company, as long as he does it properly.”

  “So where did the other eighty percent of the stock price go?”

  “Ah. That’s what’s bothering you. Well, that’s an easy one. By buying on margin, your father-in-law and his partners get a bigger chunk of cash to work with as they are buying up cheap land. I’m guessing he asked your wife and mother-in-law to pay full value originally instead of buying on margin because they needed the cash to get the land company off the ground. Now, he sells the stock—which has doubled or tripled in value—back to himself for the same reason. He needs cash. So he buys the new stock on a twenty percent margin, borrowing the other eighty percent from his bank and paying it to his land company. If all goes well, and the stock keeps climbing like a house afire, they’ll quickly make their investment back, and they can pay off the debt easily. Complex and convoluted? Yes. Illegal? No.”

  That was not what Frank had hoped to hear, and it rankled him greatly. “So they have nothing to worry about?”

  “Oh no, I didn’t say that,” Aaron chuckled. “They have nothing to worry about as long as the stock keeps rising in value. But there’s the rub, Frank. How long will it keep going up?”

  “No one knows that.”

  A slow smile stole across Aaron’s face. “I do.”

  Frank jerked forward. “You do? How?”

  Aaron formed a steeple with his fingers and peered into it, his eyes half closed, as if it were a crystal ball. “Stocks will keep rising as long as people have confidence in the market.”

  Now it was Frank who let out a long, slow, “Ah.”

  “I can’t give you the date when it will change, but it will happen sometime. It always does, because everything in the stock market depends on speculation, not sound investing principles. You bet that the market will go up. We call that a speculative bubble. But it’s mostly hot air inflating the bubble. Like you said to Celeste. She and her mother are very rich women right now, but it’s all paper profit. It’s not like they have that much gold in the bank. It’s a house of cards.”

  Frank was nodding slowly now. “A bank requires collateral for a loan, right?”

  “Of course,” Aaron answered. “That’s how they protect themselves from loan default.”

  “So what did Reginald Dickerson put up for collateral when he took out a loan for the eighty percent of the balance of the stock’s purchase price?”

  “Good question. Probably his mansion. Maybe some of the stock in his bank.”

  “Their summer home in the Hamptons,” Frank suggested.

  “Yes, that kind of thing.”

  “And if, suddenly, Miss Cutie doesn’t turn out to be Banker Bob’s niece but is indeed his mistress, then—”

  “Then the citizens of Plainsville lose their confidence and the house of cards starts to fall. And he could lose everything.”

  Frank gave a low whistle.

  Aaron got up and went to the window. “With the stock market, there’s something else that factors into the confidence level.”

  “What?”

  “Personal debt.”

  Eyes narrowing, Frank asked, “How so?”

  “Debt is a wonderful thing in some ways,” Aaron said soberly. Then he grinned. “That’s the banker in me speaking. If people didn’t borrow money, we’d be out of business. But there’s something about being in debt that creates this sense of unease within us. It worries us, especially if we borrow more than our means can justify, or if we take out multiple loans, even if they’re small ones. In those cases, the debt load starts to nag at us, because we know we are vulnerable. It’s like we know we have this sword hanging just over our heads, and that erodes our confidence in ourselves and our circumstances. Yes, there’s our word again. Confidence.

  “The second thing I’ve learned is this,” Aaron continued. “The really successful long-term investors or stockbrokers all have something in common. They have this uncanny ability to sense the mood of people, to sense when the anxiety and lack of confidence is building to dangerous levels. So guess what they do? They don’t wait for the speculative bubble to burst. They sell just before it does! They sell while the prices are high and buyers are plentiful. Or if they’re brokers, they counsel their clients to sell. And guess what follows?”

  “Others lose their confidence and decide to pull out too,” Frank answered.

  “And you have a run on the bank, just like the one Farmer Bill started.” Aaron was staring out the window now, as if his thoughts were far away. “Frank, we have serious downturns in the economy regularly. We call them economic cycles. The economy goes up and we call that a boom. The economy goes down and we call that a recession, or, if it’s more serious, a depression. There have been several serious recessions or actual depressions in the last hundred years: 1837, 1857, 1873, and 1893. And do you know what name the people put on those downturns?”

  “No, what?”

  “We call them the Panic of 1837; the Crash of 1857; the Panic of 1873, the Panic of 1893. And that’s what it is, Frank. Sheer panic. Wild panic. Irrational panic. Once the leaders start selling, the sheep blindly follow them in a mad rush. They panic because they can’t pay off their debts now and they stand to lose their mansions and their summer homes in the Hamptons. And when that time comes, confidence doesn’t just erode; it explodes!”

  Frank was silent for a long moment, lost in his thoughts. Finally, he got to his feet and went over and extended his hand. “Thank you, Aaron. This has been most enlightening. I’d better go. I have a train to catch.”

  “I’m afraid I wasn’t much help to you,” Aaron said apologetically.

  “On the contrary. It has been most helpful.”

  “Is there anything else we can do for you?”

  There was a derisive laugh. “Yeah,” Frank said. “Come out to Boston with me and talk to my father-in-law.”

  Aaron hooted. “Sorry, that’s one service we little Utah banks don’t provide for the big boys back east. But when you do talk to him, go in with low expectations.”

  At first Frank looked surprised. Then he laughed ruefully. “Oh no, I’m not going to try to tell Reginald Dickerson anything, especially not how to run his business.”

  September 4, 1929, 1:10 p.m.—

  Union Pacific Train Station, Ogden, Utah

  “Dickerson residence.”

  Frank felt a surge of relief. It was Holmes’s voice.

  The operator came on. “This is the long-di
stance operator. I have a collect call from a Mr. Frank Westland in Ogden, Utah. Do you accept the charges?”

  There was a long pause. Though he had been warned not to, Frank spoke. “Holmes, it’s me. It’s urgent I speak to Celeste.”

  “Mr. Westland,” the operator cut in sharply, “you are not to speak until I say.”

  “We will accept the charges,” Holmes said calmly.

  “Thank you,” chirped the operator. “You may proceed, Mr. Westland.”

  “Holmes? Is Celeste there? I am about to board a train and I urgently need to speak to her before I leave.”

  “She is out on the terrace, Mr. Westland. Give me a moment.”

  Frank breathed a sigh of relief. A moment later he heard the faint sound of footsteps walking swiftly on marble. “Frank?”

  “Thank heavens. Yes, Celeste, it’s me.”

  “Is something the matter? Where are you?” He heard a soft gasp. “You’re not back in Boston already, are you?”

  “No, I’m in Ogden, Utah.”

  “Where?”

  “Ogden. It’s about fifty miles north of Salt Lake. I’m just ready to board my train.”

  “How is Reginald? Oh, I am so excited to see him again.”

  “Uh. . . .”

  “What?” There was a sudden tinge of panic in Celeste’s voice. “Is something wrong?”

  “Reggie isn’t with me, Celeste. I left him in Monticello with my parents until we sort this—”

  “You what?” It nearly split his eardrum.

  “You heard me, Celeste. I was planning on bringing him right up until yesterday, and then—”

  “You left him there?”

  “Celeste! Listen to me! I’ve only got a few minutes before my train leaves. I know I have done some pretty stupid things lately, but this isn’t one of them. As I was helping Reginald pack his things yesterday, I had the strongest feeling that the best possible thing for him right now is to let him stay in Utah. So I told him what’s going on between us and that I’ll come back to get him at Christmas.”

  When Celeste spoke, her voice was trembling with rage. “You promised that we would decide when to tell him together. So, Frank, you call your parents right now and you tell them that Leonard Richardson will be out there tomorrow or the next day at the latest and to have Reginald’s things packed.”

  “No, Celeste, I won’t do that.”

  “How dare you? We agreed to this, Frank. Leonard is coming, and if your family tries to stop him from bringing Reginald back, I’ll sue them for everything they’re worth.”

  Frank sighed. He was so weary of the petty threats. “In spite of what you and your father think,” he said coldly, “suing people is not the way to get what you want.”

  “Oh, yeah? You just watch me.”

  “I left a letter with Mom and Dad granting them legal custody until one of us returns for him. I also left a copy of that letter with the local constable and the local judge. Until the divorce is final, I have every right to do that as his father. So if you send Leonard, it will be for nothing.”

  He could hear Celeste’s heavy breathing on the other end of the line and could picture the fury on her face. “All right,” she finally said. “Have it your way. But it’s over, Frank. While you’ve been gone, I’ve been wondering what we could do to fix things. Well, you’ve fixed them, all right. The papers will be waiting for you when you arrive.”

  “I understand. And as I said before, I won’t fight you on it, unless you try to restrict my rights to see Reggie.”

  “Good-bye, Frank. And I really mean it this time. I don’t want to see you ever again.”

  “Fine, but there’s something of extreme urgency I need to tell you and your mother.” Frank took out his sheet of notes that he had made after he had left Aaron Brockhurst. “This isn’t about me and you. It’s about you and your mother possibly losing all of the money you invested in your father’s company. I’m talking all of it, Celeste. Hundreds of thousands of dollars.”

  “What are you talking about?”

  “Don’t take my word for it. Go to the bank. Get into our safety deposit box and carefully examine your stock certificates. You’ll find that your father has made some—”

  That was as far as he got. Celeste slammed the phone down so hard that it made him jump. A moment later the dial tone started to buzz.

  For several seconds, Frank stared at the phone. Then, muttering bitterly, he crumpled his notes and dropped them in the small trash can in the booth. “You’re right,” he muttered. “It’s over.”

  September 14, 1929, 9:40 a.m.—

  New England Colonial Bank and Trust, Boston

  Reginald Arnold Dickerson leaned forward, watching his two partners as they dithered back and forth with each other. Whatever in the world had possessed him to think that they had the backbone to see this thing through to the end?

  “I don’t like it,” Claude Rutherford said slowly. “We’ve already extended ourselves beyond the point of wisdom.”

  Charles Reed Ashbridge was nodding vigorously. “My sentiments exactly. I know this is a wonderful opportunity, Reginald, but I’m afraid we’re going to have to pass.”

  Reginald said nothing as he studied the two of them. Rutherford was a big man, broad of shoulder, with ruddy features and an aquiline nose that made Reginald wonder if there wasn’t some Indian blood somewhere in the man’s ancestry. He was an inch or two taller than Reginald’s six feet and had the body of a bull. Oh, he was smart enough. His gift for grasping complex tables of figures and sifting through mountains of detailed data was amazing. That was what had led Reginald to invite him into the partnership in the first place.

  Ashbridge’s attraction was the amount of money he brought to the table. But in the last nine months, Reginald had learned that he was a whiny little man in every sense of the word. In his three-piece business suit with its gold watch chain and red carnation in the buttonhole, he always reminded Reginald of a painting he had once seen of Ichabod Crane, Washington Irving’s famous character from The Legend of Sleepy Hollow. Ashbridge was a skeletal-looking figure with a hawk nose, sunken cheeks, and a pinched mouth. To further cement the image, he wore a ridiculous pencil-thin mustache on his upper lip. When he was nervous, which was most of the time, he fluttered like a hit bird. Reginald could think of no better way to describe it, and he was fluttering now.

  Just then, a shadowy figure passed the glass window in the doorway to his office. Reginald visibly jumped. “Hold on,” he hissed. He leaped up, strode to the door, and yanked it open. A few steps down the hall, a woman whipped around. She wore a full dress and had a scarf wrapped around her hair. She was carrying a bucket of water with a mop in it. Startled, she nearly dropped the bucket. “Oh!” she cried.

  “What are you doing here?” Reginald snapped.

  “Beggin’ your pardon, sir, but I be the charwoman. I mop the floors every Sat’day morning, sir.” She had a broad Irish accent.

  “Out!”

  “But, sir.”

  “Out!” he shouted. “Go. Come back tomorrow.”

  “But tomorrow be Sunday, sir. I’ll be going to church.”

  He took a step toward her. “Get out of here now,” he snarled. “And don’t come back until tomorrow.”

  “Aye, sir,” she said, averting her face as she hurried past him, slopping water out of the bucket in her haste. He watched her until she got on the elevator and it descended. Then he strode back into his office and picked up the phone, dialing three numbers.

  A man’s voice answered. “Yes, Mr. Dickerson?”

  “The charwoman is coming down. Show her out. Is there anyone else in the building?”

  “No, sir, only me and the three of you.”

  “Then see to it that no one else gets in. I don’t care what their reason is. And you are to stay on the main floor. N
o one is to come up here. Do I make myself clear?”

  “Yes, Mr. Dickerson. I’ll see to it.”

  He slammed the phone down and returned to the small conference table. “All right,” Reginald said, glaring at his partners. Seeing his anger, they both looked a little cowed. “Let me go through this one more time. We have been negotiating for that four-thousand-acre parcel of land just north of Chicago for several months now. The owners have finally agreed to sell. There are other buyers in the wings, eagerly hoping that we can’t put a deal together. We have until Monday to give them our answer and until November first to close the deal. And they want the full purchase price at closing.”

  “Which we don’t have,” Ashbridge broke in. “That’s three million dollars, Reginald. Are you forgetting that?”

  Reginald ignored him. “Our surveyors have confirmed that even after setting aside five hundred acres as a site for a new town center and another three hundred for roads and streets and a park or two, that still leaves us 3,200 acres for home sites. At four lots per acre, that is 12,800 lots. Disregard the profit we’ll make on selling business sites in the city center and consider this. Our cost per lot is approximately 235 dollars. We already have an offer from a major home builder in Chicago to buy a thousand lots for 1.2 million dollars. So that’s nearly half of our total purchase price right off the bat. And a second buyer wants a $750,000 piece of the action. So there’s almost two million of our money back within a few days of purchase.”

  “Then ask them for half of it now,” Rutherford broke in.

  “We will, Claude. And they’ve agreed to that. But they’re not going to do that until we actually own the property. They’re a little fussy about that.” He threw up his hands and swore. “What part of that don’t you understand?”

  “I understand that we do not have three million dollars in cash lying around,” Ashbridge said, his jaw jutting out belligerently.

  Reginald stood up and began pacing. “We have 2.6 million in cash reserves in the vault right now, and—”

  “Most of which, by law, we cannot touch,” Rutherford cut in. “Come on, Reginald. You know as well as I do that the banking laws require us to maintain a substantial percentage of our assets in liquid form in order to meet any demands by our customers.”