Hard Times

by Studs Terkel

  Today, if you want to buy $100 worth of stock, you have to put up $80 and the broker will put up $20. In those days, you could put up $8 or $10. That was really responsible for the collapse. The slightest shake-up caused calamity because people didn’t have the money required to cover the other $90 or so. There were not the controls you have today. They just sold you out: an unwilling seller to an unwilling buyer.

  A cigar stock at the time was selling for $115 a share. The market collapsed. I got a call from the company president. Could I loan him $200 million? I refused, because at the time I had to protect my own fences, including those of my closest friends. His $115 stock dropped to $2 and he jumped out of the window of his Wall Street office.

  There was a man who headed a company that had $17 million in cash. He was one of the leaders of his industry and controlled three or four situations that are today household words. When his stock began to drop, he began to protect it. When he came out of the second drop, the man was completely wiped out. He owed three banks a million dollars each.

  The banks were in the same position he was, except that the government came to their aid and saved them. Suddenly they became holier than thou, and took over the businesses of the companies that owed them money. They discharged the experts, who had built the businesses, and put in their own men. I bought one of these companies from the banks. They sold it to me in order to stop their losses.

  The worst day-to-day operators of businesses are bankers. They are great when it comes to scrutinizing a balance sheet. By training they’re conservative, because they’re loaning you other people’s money. Consequently, they do not take the calculated risks operating businesses requires. They were losing so much money that they were tickled to get it off their backs. I recently sold it for $2 million. I bought it in 1933 for $33,000.

  In the early Thirties, I was known as a scavenger. I used to buy broken-down businesses that banks took over. That was one of my best eras of prosperity. The whole period was characterized by men who were legends. When you talked about $1 million you were talking about loose change. Three or four of these men would get together, run up a stock to ridiculous prices and unload it on the unsuspecting public. The minute you heard of a man like Durant or Jesse Livermore buying stock, everybody followed. They knew it was going to go up. The only problem was to get out before they dumped it.

  Durant owned General Motors twice and lost it twice … was worth way in excess of a billion dollars on paper, by present standards, four or five billion. He started his own automobile company, and it went under. When the Crash came, he caved in, like the rest of ’em. The last I heard of him I was told he ended up running a bowling alley. It was all on paper. Everybody in those days expected the sun to shine forever.

  October 29, 1929, yeah. A frenzy. I must have gotten calls from a dozen and a half friends who were desperate. In each case, there was no sense in loaning them the money that they would give the broker. Tomorrow they’d be worse off than yesterday. Suicides, left and right, made a terrific impression on me, of course. People I knew. It was heartbreaking. One day you saw the prices at a hundred, the next day at $20, at $15.

  On Wall Street, the people walked around like zombies. It was like Death Takes A Holiday. It was very dark. You saw people who yesterday rode around in Cadillacs lucky now to have carfare.

  One of my friends said to me, “If things keep on as they are, we’ll all have to go begging.” I asked, “Who from?”

  Many brokers did not lose money. They made fortunes on commissions while their customers went broke. The only brokers that got hurt badly were those that gambled on their own—or failed to sell out in time customers’ accounts that were underwater. Of course, the brokerage business fell off badly, and practically all pulled in their belts, closed down offices and threw people out of work.

  Banks used to get eighteen percent for call money—money with which to buy stock that paid perhaps one or two-percent dividends. They figured the price would continue to rise. Everybody was banking on it. I used to receive as much as twenty-two percent from brokers who borrowed from me. Twenty-two percent for money!

  Men who built empires in utilities, would buy a small utility, add a big profit to it for themselves and sell it back to their own public company. That’s how some like Samuel Insull became immensely wealthy. The thing that caused the Insull crash is the same that caused all these frenzied financiers to go broke. No matter how much they had, they’d pyramid it for more.

  I had a great friend, John Hertz. At one time he owned ninety percent of the Yellow Cab stock. John also owned the Checker Cab. He also owned the Surface Line buses of Chicago. He was reputed to be worth $400 to $500 million. He asked me one day to join him on a yacht. There I met two men of such stature that I was in awe: Durant and Jesse Livermore.

  We talked of all their holdings. Livermore said: “I own what I believe to be the controlling stock of IBM and Philip Morris.” So I asked, “Why do you bother with anything else?” He answered, “I only understand stock. I can’t bother with businesses.” So I asked, “Do men of your kind put away $10 million where nobody can ever touch it?” He looked at me and answered, “Young man, what’s the use of having ten million if you can’t have big money?”

  In 1934—after he went through two bankruptcies in succession—my accountant asked if I’d back Livermore. He was broke and wanted to make a comeback in the market. He always made a comeback and paid everybody off with interest. I agreed to do it. I put up $400,000. By 1939, we made enough money so that each of us could have $1,300,000 profit after taxes. Jesse was by this time in the late sixties, having gone through two bankruptcies. “Wouldn’t it be wise to cash in?” I asked him. In those days, you could live like a king for $50,000 a year. He said he could just never get along on a pittance.

  So I sold out, took my profits, and left Jesse on his own. He kept telling me he was going to make the killing of the century. Ben Smith, known as “Sell ’Em Short Ben,” was in Europe and told him there was not going to be a war. Believing in Smith, Livermore went short on grain.34 For every dollar he owned, plus everything he could pyramid.

  When I arrived in Argentina, I learned that Germany invaded Poland. Poor Jesse was on the phone. “Art, you have to save me.” I refused to do anything, being so far away. I knew it would be throwing good money after bad.

  A couple of months later, I was back in New York, with Jesse waiting for me in my office. The poor fellow had lost everything he could lay his hands on. He asked for a $5,000 loan, which, of course, I gave him. Three days later, Jesse had gone to eat breakfast in the Sherry-Netherlands, went to the lavatory and shot himself. They found a note made out to me for $5,000. This was the man who said, “What’s the use having ten million if you can’t have big money?” Jesse was one of the most brilliant minds in the trading world. He knew the crops of every area where grain grew. He was a great student, but always over-optimistic.

  Did you sense the Crash coming in 1929?

  I recognized it in May and saved myself a lot of money. I sold a good deal of my stocks in May. It was a case of becoming frightened. But, of course, I did not sell out completely, and finished with a very substantial loss.

  In 1927 when I read Lindbergh was planning his memorable flight, I bought Wright Aeronautic stock. He was going to fly in a plane I heard was made by Wright. I lived in Milwaukee then. My office was about a mile from my home. When I left my house, I checked with my broker. By the time I reached my office, I had made sixty-five points. The idea of everything moving so fast was frightening. Everything you bought just seemed to have no ceiling.

  People say we’re getting a repetition of 1929. I don’t see how it is possible. Today with SEC 35 controls and bank insurance, people know their savings are safe. If everybody believes, it’s like believing in counterfeit money. Until it’s caught, it serves its purpose.

  In 1932 I came to New York to open an office in the Flatiron Building. Macfadden, the health faddist, created penny res
taurants. There was a Negro chap I took a liking to that I had to deal with. He agreed to line up seventy-five people who needed to be fed. At six o‘clock I would leave my office, I’d march seventy-five of ’em into the Macfadden restaurant and I’d feed ’em for seven cents apiece. I did this every day. It was just unbelievable, the bread lines. The only thing I could compare it with was Germany in 1922. It looked like there was no tomorrow.

  I remember the Bank Holiday. I was one of the lucky ones. I had a smart brother-in-law, an attorney. One day he said to me, “I don’t feel comfortable about the bank situation. I think we ought to have a lot of cash.” About eight weeks before the bank closings, we decided to take every dollar out of the banks. We must have taken out close to a million dollars. In Clyde, Ohio, where I had a porcelain enamel plant, they used my signature for money. I used to come in every Saturday and Sunday and deliver the cash. I would go around the department stores that I knew in Milwaukee and give them thirty-day IOU’s of $1.05 for a dollar if they would give me cash.

  In 1933, the night Jake Factor, “The Barber,” was kidnapped, an associate of mine, his wife, and a niece from Wyoming were dancing in a night club. Each of us had $25,000 cash in our socks. We were leaving the following morning for Clyde, and I was supposed to bring in $100,000 to meet bills and the payroll. We were all dancing on $25,000 apiece. In the very place where Jake Factor was kidnaped for $100,000. The damn fools, they could have grabbed us and had the cash.

  Jimmy McPartland

  Jazz musician. A trumpet player, he was regarded by Bix Beiderbecke as his successor. He came East, out of Chicago, in the late Twenties, along with Benny Goodman, Bud Freeman, Gene Krupa, Eddie Condon.

  So MANY GUYS were jumping out of windows, you know, because they lost their money. Goodness gracious, what for? We used to say to each other: Are they nuts? What is money? We were musicians, so what is money? That’s nothing. The important thing is life and living and enjoying life. So these guys lose all their money, what the hell’s the difference, we used to say, “You’re still livin’, aren’t ya?” They can start all over again. I mean, this is what we used to think.

  Actually, we didn’t think about money. I personally didn’t, because I always made it. For me, things have come so easy. I’m ashamed of myself. But money never bothered me. I’d give it away, if somebody needed money.

  I remember the band was out of work. This was ’28, ’29, before the Crash. Bix was working with Paul Whiteman’s band. We were out of work, six or eight weeks. We had no money left, and, man, I’m starvin’ to death, no money to eat.

  They’d invite you to a party, the social set, the money set. You’d play. The best whiskey and everything like that—but no food. (Laughs.) Just all the liquor you could drink. We used to say: “You got a sandwich?”

  So I got to this party on Park Avenue, we’re invited: Benny Goodman and the guys. So who else is there, but the whole Whiteman band, Bix Beiderbecke and all those guys. So we’re drinking and playing and jamming. Some big guy is the host. I get Bix on the side and I say, “Jesus, Bix, we aren’t working. Can you lend me five bucks? I haven’t eaten in two days.” So God, he goes into his wallet, he had but two $100 bills and one fifty. He insisted I take the two $100 bills. I says, “No, I don’t want that. All I want is $5, $10. I just want enough to buy some food.” “Kid,” he says, “you take this money and when you’re working again, you pay me back.”

  Bix became ill and he left Whiteman, went home for a rest period, a dry-out actually. I was working in the show Sons of Guns, and I’m making $275 a week, just in the show. In the daytime I’m working in the studios, $10 an hour. Making $300, $400 a week easy. So I got plenty of money and we used to meet at Plunkett’s, a speak-easy. So I come in one day and Bix is there, flat broke and sick. He said to me, “Kid, you got any money?” I said, “Sure, you want some money?” I had abut $175 in my pocket. The same thing happened. I gave him one fifty. I says, “Here.” If I had more, I mean, he coulda had anything I had. He said he had a job, he’d pay me back. And don’t you know, he died five or six days later, ’32. He got pneumonia.

  In the speak-easy, we knew some guys not doing so well. What the heck, you’d take out a $50 bill or ten, twenty, and slip it in their pocket and say, “Here, use it.” When they get workin’ again, they pay it back. And if they don’t, so what? That was the feeling we used to have. I know Tea-garden was that way, Bix was that way, and a lot of other guys.

  It was during Prohibition. Between sets, we’d sneak into a speak-easy for a drink. One night we couldn’t get in the speak. Jeez, the police were out. Some gangsters killed about three guys. They were pretty top-flight guys, so that was the end of that speak-easy. They used to make token raids once in a while. Everything was wide open. The police, I imagine, were in on it.

  One night at the Park Central Hotel, somebody came in and said, “Somebody just got shot.” It was Arnold Rothstein.36 And we heard about the whole deal. Because we’d seen all these monkeys comin’ in and out all the time. All the hoodlums in that era. They always liked us. Of course, we didn’t bother with them. They’d come into the hotel, downstairs, in the basement. Dinner and dancing.

  There were engagements in clubs and ballrooms throughout the country in the mid-Thirties, with various big bands and small combos. “We played nice places, the best hotels. There was dough. Some people didn’t get jobs, but there was still plenty of money around. What would guys in the band talk about? Girls, mostly.” (Laughs.) During this period, he was master of ceremonies at a Chicago jazz club. Three Deuces.

  We had Billie Holiday in the show. She used to sing “Strange Fruit.” Oh, beautiful. We got along great together, Billie and I. And I used to read in the back room sometimes to Art Tatum. He played intermission piano. ’Cause he couldn’t see, you know. I used to bring books. He always talked about it: “Remember how you used to read to me, Jimmy?” He’d sit there and drink beer, and I’d read to him.

  I never had this black and white feeling. Jesus, if you could sing or play, jeez, that was it. I never knew it was that bad till I went down to New Orleans in ’34. Where we played, they had a gambling joint, Club Forest. They had a bunch of sheriffs around there because it could be held up. They even had a machine gun in an enclosed cage up above. They all carried guns.

  One time, late at night, we were out drinking. There were three or four of these sheriffs. One of the guys said, “Hey there’s that nigger son of a bitch. I’m gonna get him and blast his brains.” They started towards him. He was really gonna shoot him. I pushed his hand away and I said, “Don’t shoot him. I don’t want to see you kill a guy.” It was just a minor, simple little thing. I saved the guy’s life just by pushin’ this sheriff’s hand away. They were gonna beat my brains out, the sheriffs. Oh, they started gettin’ the pistol, one guy was gonna hit me. Another guy stopped them. Then I realized: Holy jeez, these guys are murder. They’re gonna kill a guy for nothing. Just because—… wow, boy.

  There was more camaraderie. It didn’t make any difference if you were colored or white. If you were a good musician, that’s all that counted. Now the colored guys say we can’t play real jazz, soul music. What the hell else we play with but our soul? Every guy’s soul is not the same. Know what I mean? Miles Davis thinks I’m great—he likes me, and I like him. But so many others say: the white guy can’t play. He hasn’t got the soul. Who they kiddin’? There’s nobody with a lock-up on soul. If I let myself go and play just the way I feel, that’s my soul, isn’t it? Whether it be white or black, you gotta play the way you want to.

  The music of the Thirties was good. I don’t mean you stand still. I haven’t. But I must play the way I feel. If my style is any good, it will endure, Thirties or Sixties. Or Seventies.

  I think everybody should have a job, and the Government should see that they get a job. That WPA deal, that was a darn good idea. I was one of the lucky guys that didn’t need it, but this is what I believe. Everybody should work, but do what they want. I don
’t mean this as a communist thing, maybe it’s socialism, I don’t know. Like I’m a musician. Just pay me to do concerts for nothin’. Let people listen for nothing.

  The Government should work something out so people have something to do. There are so many things to be done in these cities. You feel much better if you’re workin’ instead of gettin’ a handout. You’ll get self-respect, which is number one. Drama, dancing schools, musicians…. You could give guys like me jobs as teachers, to teach jazz. So you perpetuate what I’ve learned in my lifetime. You could give that to some younger person and let them carry on, make their own choice, but at least they’d have the background. It’s like studying history. It’s like being part of history… .

  Sidney J. Weinberg

  Senior partner, Goldman-Sachs Company, a leading investment house. He served during Roosevelt’s first two Administrations as an industrial adviser.

  OCTOBER 29, 1929—I remember that day very intimately. I stayed in the office a week without going home. The tape was running, I’ve forgotten how long that night. It must have been ten, eleven o’clock before we got the final reports. It was like a thunder clap. Everybody was stunned. Nobody knew what it was all about. The Street had general confusion. They didn’t understand it any more than anybody else. They thought something would be announced.

  Prominent people were making statements. John D. Rockefeller, Jr., announced on the steps of J. P. Morgan, I think, that he and his sons were buying common stock. Immediately, the market went down again. Pools combined to support the market, to no avail. The public got scared and sold. It was a very trying period for me. Our investment company went up to two, three hundred, and then went down to practically nothing. As all investment companies did.

  Over-speculation was the cause, a reckless disregard of economics. There was a group ruthlessly selling short. You could sell anything and depress the market unduly. The more you depressed it, the more you created panic. Today we have protections against it. Call money went up—was it twenty percent?