“Don’t lecture me, Claude. Of course I know that. Currently that percentage would mean that we need to hold about a million dollars in reserve. So that still gives us 1.3 million of the three million that we need.”
Reginald leaned forward, excited now. This is what he had been working on most of the night. “My wife and daughter together own more than twenty thousand shares of DR&A stock. Yesterday the Dow Jones hit a new record high of three hundred and ten points and DR&A stock hit thirty-two dollars per share, also a new high. This makes their stock worth almost three quarters of a million dollars.”
“And you’re going to sell it?” Rutherford asked skeptically. “Are they all right with that?”
“They’ve asked me to manage their stock, so yes. But I’m not going to sell it. I’m going to use it for collateral to take out a loan in their name for that amount.”
“And which bank is going to do that for you?” Ashbridge asked sarcastically. “Their stock was bought on margin and is worth less than half of its face value.”
Reginald gave him a pitying look. “Which bank do you think, Charles?”
“But—”
Reginald cut him off. “May I remind you that as president of New England Colonial Bank, I have the discretionary power to determine what level of collateral is acceptable to secure a loan? But I shall only loan them five hundred thousand dollars. That’s all we need from them.”
Rutherford’s head came up slowly. “You’re skating on pretty thin ice here, Reginald.”
Reginald went on. “So that now brings us up to about 1.8 million dollars of the three million that we need. So, you, Claude, and you, Charles, are going to borrow four hundred thousand dollars each from your own banks, using your stock as collateral.”
“What?” Ashbridge gasped. “But I’m already down close to what I need to keep in reserve. That would take me under the limit.”
“And I,” Reginald went on calmly, “will borrow four hundred thousand from my bank using my stock as collateral, and that, gentlemen, gives us our three million dollars.”
“You can’t do that!” Ashbridge was almost sputtering.
“Why not?”
“Because—” Ashbridge picked up a pencil and scribbled quickly on the notepad in front of him. He looked up, aghast now. “Because that would leave you with only four hundred thousand in cash reserves, which is far below the minimum required. The bank examiners would have our heads.”
“Your heads,” Claude corrected him. “I can get the four hundred thousand if I need to and leave my reserves intact. Not that I’m sure I’m willing to do that.”
“It’s against the law, Reginald,” Ashbridge blurted. “I won’t do it.”
“It’s not against the law,” Reginald said smoothly. “What the law says is that we must have that minimum amount in the bank when the bank examiners examine our books. In my case that’s not until December fifteenth. And in yours, Charles, they’re not coming until February.”
“I don’t think that argument would stand up in court,” Rutherford said dryly.
“It doesn’t need to,” Reginald shot back, “because by December fifteenth I will have paid off my loan, my wife’s loan, and my daughter’s loan, which will put me over my reserves minimum again.”
“And what if they check the books?”
Smiling lazily, Reginald said, “This is a complex transaction. It might take a while to show up on the books.” His smile broadened. “If it shows up at all.”
Silence lay heavy in the room, and Reginald didn’t interrupt it. They had to come to the decision on their own. He gave them a full minute and then said, “Just remember this in all of your calculations. By the first of the year, we will have paid off the price of that land, and from then on it’s pure gravy. A conservative estimate is that each of us stands to make well over a million dollars by next summer.”
Rutherford’s head finally came up. “I’m in,” he said.
Ashbridge was shaking his head. “I don’t think so, Reginald. There’s too much risk.”
“Fine.” Reginald stood and walked over to the door of his office. He opened it and stepped back. “Charles, thank you for making time this morning. I would remind you that you are under a strict agreement of nondisclosure. The security guard is downstairs. He will let you out.”
Charles Ashbridge licked his lips as he looked back and forth between the two men.
“Come on, Charles,” Rutherford finally said. “A million dollars by next summer. You could open up two or three new branches with that kind of money.”
Ashbridge looked at Rutherford, and then at his notepad, and then at Reginald. He swallowed once, his Adam’s apple looking like a cork bobbing in the water, then again. And then he nodded. “All right. I’m in.”
With a smile, Reginald shut the door and returned to the table. “Wonderful. Let’s get to work.”
October 24, 1929
As the last weeks of the decade known as the Roaring Twenties unfolded, it was a time of high energy, high exuberance, and high expectations. The whole decade had been one of hyper-frenetic activity—hyper-frenetic clothing styles, hyper-frenetic music, hyper-frenetic dances, hyper-frenetic growth of new conveniences that changed the way people lived.
The automobile spawned ten thousand gas stations and auto repair shops. The rapidly expanding railroad and highway system brought food and goods even to remote locations, and in the big cities a new concept called “supermarkets” started springing up like bunnies on a rabbit farm.
Electricity brought an explosion in consumer conveniences such as radios, refrigerators, vacuums, telephones, washing machines, electric irons, electric curling irons, even electric barber shears. Commercially canned food replaced home canning. Packaged laundry detergents replaced the awful homemade soap made by cooking animal fats over a fire behind your cabin. Store-bought bread was now found in more homes than the traditional home-baked bread, causing one wry comic to quip that with Wonder Bread and the new electric bed warmers, there was no need for him to continue looking for a wife.
New inventions. New technology. New medicines. New styles of living. New freedoms and social norms. New factories and businesses drawing millions of people from the farms into something else that was new: the “suburbs.” The depressed economic conditions that followed the war gave way to a booming prosperity, and more and more of the upper classes were labeled as millionaires. There were even whispers of a stunning new elite called billionaires.
Beneath all of the exuberance, all of the optimism, there were a few stress fractures starting to appear for those who looked more closely. There were indicators that suggested all was not as rosy as everyone thought. Some analysts warned that many stocks were overvalued and did not accurately represent the true value of the companies that sold them. These isolated voices were sneeringly dubbed “doomsayers.” When the farm economy crashed and burned in the mid-twenties and hundreds upon hundreds of farmers lost everything, the rest of the population looked the other way. Economic imbalances and structural failures were there for anyone to see, but they were largely ignored. Statements like, “That’s their problem,” or “That won’t happen here,” or “But the stock market is at its highest point in history” were commonly heard. All you had to do was look around to see that America’s economy was like some giant helix, spiraling upward and outward simultaneously. It really was quite something to behold.
Surely if there was to be a day of reckoning, it was years—if not decades—away.
October 24, 1929, 2:38 p.m.—
New England Colonial Bank and Trust, Boston
Charles Ashbridge burst into the office of Reginald Dickerson, letting the door slam open hard enough that it crashed against the wall, nearly shattering the glass pane in the door. “Where’s Reginald?” he shouted, obviously near hysteria.
“I’m back here.” A m
oment later Reginald stuck his head out from a small room at the back of his office. The sound of a ticker tape machine could be heard chattering in the background. “I’ll be right there, Charles. Have a seat.”
“It’s over!” he wailed. “We’re done for.”
“Oh, for crying out loud, Charles,” Claude Rutherford snarled. He was sitting in one of the chairs in Reginald’s office. “It’s not over. Sit down. Reginald is checking the stock prices right now.”
Ashbridge didn’t move. “I told you. I warned you that this was insane. Oh, what are we going to do? We’re finished. Finished!”
Reginald stepped out and glared at him. “Charles! Sit down and shut up! I will be right there.” He turned to Rutherford. “Claude, get him a glass of something. See if you can calm him down a little.”
Claude got up and went to the sideboard where Reginald kept a supply of liquor and wine. He poured three glasses of Jack Daniel’s Tennessee Whiskey. He drank half of one of the glasses and refilled it before handing one of them to Charles.
Ashbridge gulped the whiskey down with a toss of his head and held out his glass. Rutherford refilled it. Two minutes later, Reginald came out with long curls of ticker tape draped over his arms. He moved to the table, dropped the tape onto its surface, and then sat down. “We’re back up to nineteen and seven eighths. And it’s climbing steadily now.”
“Nineteen?” Ashbridge gasped. “That’s all?”
“It was at fourteen an hour ago,” Reginald snapped. “It’s going up. J.P. Morgan’s move is stabilizing things.”
“Morgan? What did they do?” Ashbridge cried.
“Where have you been? Haven’t you been listening to the radio?”
“No, my wife’s been ill this morning. She finally fell sleep and I came straight here.”
“All right. Here’s a brief summary. As we know, when the London Stock Exchange crashed about a month ago, that sent jitters through every stock exchange in the world.”
“But they were crooks,” Ashbridge blurted. “Frauds. That’s why their exchange crashed, right? And they’re headed for prison.”
“That’s right, Charles,” Rutherford said. “But it sent jitters through the world markets anyway. That’s why we’re seeing so much volatility in the markets lately. We’ve seen days where there’s been a lot of selling, followed by days when the stocks start up again and we’ve seen a lot of buying. And that’s what’s happening right now. J.P. Morgan and some of the other big banks rushed in this morning to shore up the market, and that helped stabilize things.”
“Our stock is down more than ten dollars per share,” Ashbridge cried. “That doesn’t sound like stability to me.”
“I didn’t say we were back to normal yet, Charles.” Reginald was trying very hard to be patient with the man. “People are worried right now. This morning the papers reported that several of the large corporations—GM, General Electric, Ford, and so on—released their earning reports, and they were lower than expected. So the Nervous Nellies panicked and started selling. Others quickly followed suit. On the opening bell of the stock exchange this morning, the market dropped like a rock. It was down eleven percent before we could even blink. Our stock hit twenty-eight, then twenty-three, then sixteen. It was insane. Sell orders have been coming in so fast, the ticker tape machines are running an hour or more behind, which doesn’t help. Suddenly, no one knows what the actual prices are at any given moment.”
Rutherford broke in. “They’re saying that we’ll probably see twelve million shares sold today. That’s unheard of.”
“So it’s possible that the price of our stock could actually have gone back down again by now?” Ashbridge wailed.
“Charles!” Reginald was really getting angry now. “Let me finish.”
“Sorry.”
“I have a brother-in-law in New York City. He works for one of the banks down near Wall Street. So I gave him a call. Things were pretty crazy. Everyone thought that things would stabilize after the initial panic. But they didn’t. So, according to him, representatives of five of the big banks there, including J.P. Morgan, got together and agreed to start buying up large blocks of blue chip stocks, offering significantly more than their current price. The effect was almost immediate. Selling slowed. And now buy orders outnumber sell orders, and prices are going back up again.” He looked directly at Ashbridge. “That’s what’s happening, Charles. The crisis is over.”
“Not on your life,” the smaller man exclaimed. “You know what this is going to bring? Every bank examiner in the country is going to come riding in on their white horses, demanding to see our books. And what are they going to say?”
“Do you want out?” Rutherford barked. “Because if you decide to sell, you’re not only going to lose a lot of money, but you’ll take us down with you, and that wouldn’t be wise, Charles. Not wise at all.”
“No!” Ashbridge’s eyes were wide and fearful. “No, I won’t do that. But it’s not a big deal for you, Claude. You didn’t short your cash reserves like Reginald and I did. If the examiners do come, you’re all right. We’re not. I think maybe I’ll leave town for a few days. My wife’s been wanting to visit her mother in Georgia. Maybe now’s the time.” He got to his feet.
Reginald waved him down again. “Hold on. Let me check the price of our stock again.” He went into the ticker tape room. Two minutes later, he came out smiling. “We’re at twenty-three, and climbing fast.”
“Thank the Lord,” Ashbridge breathed.
“The Lord’s got nothing to do with this,” Reginald growled. “Charles, if you want to run, then run. I’m holding fast. Two more weeks and we close on the deal. When news of that gets out, our stock is going to go through the roof.”
Just then the phone rang. Reginald moved quickly and picked it up. “Yes, Mary?”
“Mr. Dickerson, your wife is on line one.”
“I’m just finishing, Mary. Tell her I’ll call her back in a few minutes.”
“She’s somewhat upset, Mr. Dickerson. She’s been listening to the news.”
“All right, give me just a minute.” He put his hand over the mouthpiece. “I have to take this. We’ll meet again on Friday, then again next Tuesday. Hold steady. We’re going to weather this.”
Charles nodded and left without a word. As Claude reached the door he turned back. “I’ll see if I can put a little backbone into him.”
Reginald waved and sat down at his desk. “Okay, Mary. Put her through.” A moment later he heard Babette’s voice. “Hello, dear,” he said, trying to put a smile in his voice.
“Reginald, I know you must be very busy right now.”
“You’ve no idea.”
“Just one quick question. Celeste is here with me. We’ve been listening to the radio all afternoon. What’s happening to our stock?”
“It took a hit, but it’s climbing back rapidly,” he said. “I predict it will be back where it was by the day after tomorrow.”
There was a soft cry of relief. “That’s wonderful. So you’re not going to sell your shares?”
“Of course not. They’re going to go through the roof here in a couple of weeks.”
“Good. Promise me that if you sell, you’ll sell my shares and Celeste’s too. We have to trust you on this.”
“I’m not selling, Babette. If that changes, you’ll be the first to know. Now, I’ve got to run. Love you. Give Celeste a hug for me.”
October 28, 1929, 8:30 p.m.
When the phone rang, Reginald hesitated for a moment. He was sure it was Babette, so he took a deep breath before he picked up the phone. He forced a lightness into his voice. “Hello, dear.”
“Oh, Reginald!” she cried. “You sound exhausted. Can’t you come home and rest? You’ve been there all weekend. There’s nothing there that can’t wait until morning.”
Oh, how I wish that we
re true! He forced himself to keep his voice light. “I need to monitor the ticker tape here. But Mary had a bed brought up for me.”
“Good. I called her and told her to do that.”
To Reginald’s surprise, his eyes were suddenly burning. “Thank you, my dear. So, I’ll stay close by. But I am very tired. I’ve tried to nap, but the ticker tape machine creates such a racket that it’s hard to get any sleep.”
“Then come home!” Babette cried. “Even if just for an hour or two. You need to be sharp.”
“I just can’t, Babette. But I had Mary buy me a bottle of sleeping pills. I’m going to take two tonight. The machine’s got a buzzer if something critical comes in, so I’m hoping I can sleep for two or three hours.”
“Promise me you will?”
“I promise.”
“So tell me what’s happening. Celeste is right here beside me listening.”
“Hi, Daddy.”
“Hi, my darling.” Reginald took a quick breath. “All right, this is what’s been happening. When the big banks decided to shore up the market last week, that really made a difference. By the end of the day on Thursday, the market closed down only six points from the day before. That was a huge comeback. And our stock came back up to twenty-seven.”
“Oh, that’s great news,” Celeste chimed in.
“On Friday, the rally continued, as it also did for the half day they opened on Saturday. Which is just what happened in the Crash of 1907. When the big boys stepped in and started buying, that turned everything around. So I was quite optimistic, and that’s when I came home. However. . . .”
“Oh,” Babette said, “I don’t like the sound of that.”
“This morning, things turned downward again. Because so many of the stocks have fallen in value, a lot of the companies who sold them on margin are now making margin calls because the stocks are worth less than what the people put in on margin. While I know they have to do that, I’m afraid it could create a problem of its own.”
The Proud Shall Stumble Page 45
