by John Brooks
Thus, in the nature of things, the amateur investor remains and probably will remain at a certain disadvantage in relation to the professional. Perhaps his best protection lies in knowledge of that fact itself.
4
All that notwithstanding, Wall Street is changing in a democratic direction, and will surely change more: the public will be better represented in the councils of the New York Stock Exchange (perhaps tied in with the Amex and the smaller regional exchanges), the commissions on more and more trades will be determined by free-market negotiation rather than by fiat of the securities industry, mutual-fund charges and operations will be better regulated. But perhaps the biggest change currently in the wind is not strictly financial, but rather social and cultural.
After it graduated, around the beginning of this century, from being chiefly an arena for the depredations of robber barons and the manipulations of sharp traders in railroad bonds, Wall Street became not only the most important financial center in the world but also a national institution. In the nineteen twenties it was in a real sense what Wall Streeters always cringed to hear it called, a private club—and not just any private club but probably the most important and interesting one in the country, a creator and reflector of national manners and a school for national leaders. In the nineteen sixties, despite declining aristocratic character and political influence, it was still those things, playing out week by week and month by month its concentrated and heightened version of the larger national drama. But after the convulsion with which the decade and that particular act in the drama ended, its days in the old role seemed to be numbered. Wall Street as a social context is apparently doomed not by reform but by mechanization. Already in the early nineteen seventies, a significant proportion of stock trading is being conducted not face to face on a floor under a skylight but between men sitting in front of closed-circuit television screens in offices hundreds or thousands of miles apart. There is a growing movement, forced by Wall Street’s increasingly obvious inability to handle a vastly expanded national securities business, to abolish stock certificates and replace them with entries in computer memory units. The head of the nation’s biggest brokerage firm—Regan of Merrill Lynch—predicted in 1972 that “by 1980 Wall Street will have lost lots of its distinctive flavor. … The Street will be the scene of a lot less colorful action than we have witnessed in the past few years. … Early to go, I imagine, will be that decorative piece of paper [the stock certificate]. … When all the electronic gear is in place, will we still need a New York Stock Exchange? Probably not in its present form.”
Good-bye, then, to the private club. The twin forces that hold Wall Street together as a social unit are the stock certificate, the use of which calls for geographical unity because it must be quickly and easily conveyed from seller to buyer, and the stock-exchange floor, which gives stock trading a visible focal point. If the certificate and the floor go, Wall Street will have moved a long way toward transforming itself into an impersonal national slot machine—presumably fairer to the investor but of much less interest as a microcosm of America. The private-club aspect, however deplorable from the standpoint of equity and democracy, is necessary to the social ambiance; the wishes of a reformer and those of a social historian must be at odds. If the private club goes, with it, perhaps, will go that tendency of Wall Street’s of which I have spoken: to be a stage for high, pure moral melodrama on the themes of possession, domination, and belonging. This may be, conceivably, one of the last books to be written about “Wall Street” in its own time.
Notes on Sources
Since little formal history has yet been written about United States financial life in the nineteen sixties, I have necessarily relied chiefly on business and government publications, contemporaneous newspaper and magazine articles, and, above all, the personal accounts of those involved either as observers or as participants, among them: Louis S. Auchincloss, William L. Cary, Manuel F. Cohen, Orval DuBois, Russell Goings, Jr., Walter Guzzardi, Jr., H. Erich Heinemann, the Rev. Francis C. Huntington, David S. Jackson, Eliot Janeway, Edward C. Johnson II, Edward C. Johnson III, Alfred Winslow Jones, Gilbert E. Kaplan, Kenneth Langone, Bernard J. Lasker, Thomas Marquez, the Rev. John W. Moody, Osgood Nichols, Henry Ross Perot, William S. Renchard, Felix G. Rohatyn, M. J. Rossant, Eugene H. Rotberg, William R. Salomon, Ralph S. Saul, Andrew Segal, Lee J. Seidler, Saul P. Steinberg, Gerald Tsai, Jr., Thomas O. Waage, and John Westergaard.
I owe thanks to all of these persons, and to others who wished not to be identified.
Chapter I
Surprisingly little has been published about Henry Ross Perot’s career prior to his 1970 involvement in Wall Street affairs. See Arthur M. Louis, “The Fastest Richest Texan Ever,” Fortune, November 1968; and “H. Ross Perot: America’s First Welfare Billionaire,” Ramparts, November 1971.
The story of Trinity Church’s role in the May 1970 riot is well told in The Trinity Parish Newsletter, May-June 1970.
Chapter II
The reform of the American Stock Exchange is reconstructed (apart from interviews) largely from Amex and S.E.C. documents, along with newspaper accounts in The New York Times, The New York Herald-Tribune, and The Wall Street Journal. See especially the Herald-Tribune, June 25, 1961; “Interim Report of the Special Committee for Study of American Stock Exchange,” December 21, 1961; and the S.E.C. Staff Report on the American Stock Exchange, January 1962.
On Birrell and Guterma: T. A. Wise, The Insiders (New York, 1962).
Chapter III
On Edward M. Gilbert: Time, June 22, 1962; Life, June 29, 1962; The Saturday Evening Post, October 19, 1963. A remarkable and detailed account of Gilbert in Nevada in May 1962, and subsequently in Rio, is contained in an article by M. J. Rossant, The New York Times, June 24, 1962. I am grateful to several other persons who provided information on Gilbert’s career and personality.
Chapter IV
Cary tells his own story of his S.E.C. chairmanship, and gives his views on federal regulation, in William L. Cary, Politics and the Regulatory Agencies (New York, 1967). See also Louis M. Kohlmeier, Jr., The Regulators (New York, 1969), and American Bar Association Journal, March 1963, in which Cary’s “private club” speech is reprinted.
The basic document is Report of Special Study of the Securities Markets of the S.E.C. (Washington, 1963).
Chapter V
On Zeckendorf’s downtown real-estate operations: William Zeckendorf with Edward McCreary, Zeckendorf (New York, 1970).
On the early feminist brokerage firm of Woodhull, Claflin and Company: Johanna Johnston, Mrs. Satan (New York, 1967).
On Bart Lytton: The New York Times, June 30, 1969.
On Atlantic Acceptance Corporation, Ltd.: the complete story is told in Report of the Royal Commission Appointed to Inquire into the Failure of Atlantic Acceptance Corporation (four volumes; Toronto, 1969). A brief and sound early account, by M. J. Rossant, appeared in The New York Times, November 14, 1965.
Chapter VI
The rise of Gerald Tsai is described in Gilbert Edmund Kaplan and Chris Welles, The Money Managers (New York, 1969). See also Business Week, February 2, 1965, and Newsweek, May 9, 1966 and May 13, 1968.
An account of Alfred Winslow Jones and the hedge-fund business appears in The Money Managers.
Chapter VII
The literature on conglomerates, unlike that on most aspects of nineteen sixties finance, is already voluminous. The basic source, up to now, is Investigation of Conglomerate Corporations: Hearings Before the Antitrust Subcommittee of the Committee on the Judiciary, House of Representatives, Ninety-first Congress (seven volumes; Washington, 1970), along with a summary volume, Investigation of Conglomerate Corporations: A Report by the Staff of the Antitrust Subcommittee (Washington, 1971). A useful book for the general reader is The Conglomerate Commotion, by the editors of Fortune (New York, 1970). A detailed account of the career of James Ling is to be found in Stanley H. Brown, Ling: The Rise, Fall, and Return of a Texas Titan (New York
, 1972). Among particularly enlightening magazine and newspaper articles are “Litton’s Shattered Image,” Forbes, December 1, 1969; “Meshulam Riklis: What Makes Rapid Run,” Forbes, March 15, 1971; and “Affinity for Tennis Turned a Mansion Into a Showplace” (on Eugene V. Klein), The New York Times, September 6, 1971.
On accountants and accounting: The Insiders (cited under Chapter II); “The Accountants Are Changing the Rules,” by Arthur M. Louis, Fortune, June 1968; and “A Comparison of the Economic and Social Status of the Accounting Profession in Great Britain and the United States of America,” by Lee J. Seidler, The Accountant’s Magazine, September 1969.
Chapter VIII
On back-office snarls: Hurd Baruch, Wall Street: Security Risk (Washington, 1971), a sound and thorough study by an S.E.C. official; Christopher Elias, Fleecing the Lambs (Chicago, 1971), which is biased and unreliable but nevertheless useful and suggestive; “The Back Office: An Inside View of Wall Street’s New Ball Game,” by John W. Faison (The Wall Street Ministry, New York; pamphlet); The New York Times, 1968 and 1969, especially an article by Marilyn Bender, January 9, 1972. The question of Mafia connections in Wall Street is dealt with in the Times, November 26, 1969.
Chapter IX
On the youth boom in money management, see The Institutional Investor, October 1968; Business Week, March 15 and May 3, 1969; Forbes, January 15, 1969.
Abbie Hoffman’s 1967 exploit at the Stock Exchange is described in his Revolution for the Hell of It (New York, 1968).
Trinity Church’s community programs are described in “New Hope for the Wall Street Ghetto,” by Mary Cole Hanna, Sign magazine, August 1969, and The New York Times, June 5, 1969.
Chapter X
Extensive documentation of the Leasco-Reliance merger and the Leasco-Chemical encounter are contained in Investigation of Conglomerate Corporations, Volume 2, and in the Report by the Staff. Among the more enlightening of many articles that have been published about Saul P. Steinberg are “Fast Money Power,” by Chris Welles, in Clay Felker, ed., The Power Game (New York, 1969), and “Steinberg’s Complaint,” Forbes, May 15, 1969.
Chapter XI
On the offshore business as a whole, see Business Week, March 22, 1969, and The New York Times, October 12, 1970; on Gramco in particular, The Sunday Times of London, October 11, 1970.
On Cornfeld and I.O.S.: Godfrey Hodgson, Bruce Page, and Charles Raw, “Do You Sincerely Want to Be Rich?” (New York, 1971), in which the story is told in exhaustive detail; and Bert Cantor, The Bernie Cornfeld Story (New York, 1970), in which it is told with gossip and brio.
On Parvin-Dohrmann: S.E.C. vs. Parvin-Dorhmann et. al., initiated October 16, 1969, in the U.S. District Court for the Southern District of New York. A good popular account is contained in John F. Lawrence and Paul E. Steiger, The Seventies Crash and How to Survive It (New York, 1970).
National Student Marketing Corporation: Andrew Tobias, The Funny Money Game (Chicago, 1971), and “How Cortes Randell Drained the Fountain of Youth,” by Rush Loving, Jr., Fortune, April 1970.
On institutional investing and its effect on the securities markets, with comments on offshore funds, hedge funds, and letter stock: Institutional Investor Study Report of the Securities and Exchange Commission: Summary Volume (Washington, 1971). However, this long-awaited study must be rated a disappointment.
The full text of the famous Nixon letter on the securities industry is reprinted in The New York Times, October 2, 1968.
Statistics on concentration of capital are derived from Investigation of Conglomerate Corporations: A Report by the Staff.
Chapter XII
The allusions to the events of 1929 are drawn from J. K. Galbraith, The Great Crash, 1929 (Boston, 1961), and from John Brooks, Once in Golconda: a True Drama of Wall Street 1920–1938 (New York, 1969).
Donald T. Regan’s account of the White House dinner of May 27, 1970, is contained in his A View from the Street (New York, 1972). The menu on that occasion, and other engaging details, come from an article by Terry Robards in The New York Times, May 31, 1970. Galbraith’s article drawing parallels between 1929 and 1970 appeared in the Times on May 3, 1970.
On the economic dimension of the 1969-1970 crash, relative to that of 1929, see “The Great Crash in Growth Stocks,” by Max Shapiro, Dun’s Review, January 1971.
The action of the Federal Reserve in the Penn Central bankruptcy is described in Perspective ’70: Economic Highlights of the Year (pamphlet; the Federal Reserve Bank of New York, 1971), and in Business Week, October 24, 1970.
Chapter XIII
There are a number of well-researched early accounts of various aspects of the 1970 Wall Street capital crisis. These include “Wall Street on the Ropes,” by Carol J. Loomis, Fortune, December 1970; “The Unbelievable Last Months of Hayden Stone,” by Mrs. Loomis, Fortune, January 1971; “Ross Perot Moves in on Wall Street,” by Arthur M. Louis, Fortune, July 1971; and articles by Terry Robards in The New York Times, December 17, 23, and 31, 1970, and March 28, 1971. See also Baruch, Wall Street: Security Risk.
Background material on the du Pont family is drawn from William H. A. Carr, The du Ponts of Delaware (New York, 1964).
The November 1970 dispute over Haack’s Economics Club speech is described in The New York Times, November 22, 1970.
Chapter XIV
Irwin Friend, Marshall Blume, and Jean Crockett, Mutual Funds and Other Institutional Investors (New York, 1970).
Collapse of the hedge funds: Fortune, May 1971, and Robert Metz in The New York Times, March 16, 1972.
Leasco’s unprovability: Forbes, January 15, 1971.
William McChesney Martin, Jr., “The Securities Markets: A Report, With Recommendations, Submitted to the Board of Governors of the New York Stock Exchange, August 5, 1971.”
Index
Accounting, 158–64, 262, 283–84
Accounting Principles Board, 159–60, 162–63, 262
A.I.C.P.A., 159–60, 162
Albano, Vincent F., Jr., 33
Alcoa, 42
Aldrich, Hulbert, 248, 250, 252
Alger, Fred, 140, 212
Allende, Salvador, 179
Allis-Chalmers, 175
Altec, 166
American Colortype, 168
American Home Products, 155, 262
American Institute of Certified Public Accountants, 159–60, 162
American Motors, 96
American Patriots for Freedom, 215
American Photocopy, 96
American Stock Exchange, 29–54, 87, 261, 292
American Telephone and Telegraph, 139, 183, 213, 239, 301, 312
Americana Fairfax Apartments, 273
Ames, Amyas, 85, 93, 217
Amex, see American Stock Exchange
Ampex, 27
Amtrak, 309
Andersen (Arthur) and Company, 281
Anderson, Robert, 301
Angell, Norman, 217
Antiwar demonstrations on Wall Street, 6–10, 214–15, 217, 226
Applied Logic, 184
Argus Research, 211
Armour, 42, 172
Armstrong, J. Sinclair, 217
Ash, Roy, 153, 173
Asiel and Company, 319
Atlantic Acceptance Corporation, Ltd., 119–25
Atlantic Richfield, 301
A.T.T., see American Telephone and Telegraph Auchincloss, Louis, 114
Auchincloss, Parker and Redpath, 281
“Automatic” Sprinkler Corporation, 174
Automation, stock trading and, 193, 194–95
Babson (David L.) and Company, 212
Bache and Company, 132, 317, 334
Bache, Harold L., 146
Back offices, 185–87, 191–200
Baerwald and DeBoer, 317
Bangor Punta, 153
Bank of Canada, 124
Bankers Trust, 239, 248, 282, 285
Barish, Keith, 272–73
Barr, Andrew, 162
Baruch, Hurd, 185, 190
Bauman, Arnold, 77
Bay Street (Toronto, Canada), 97, 118, 125
Bear raid, 243–44
Bear, Stearns and Company, 264, 327
Bedingfield, Robert E., 46–47
Beekman-Downtown Hospital (New York, N.Y.), 9, 226
Belle, Earle, 75
Berkley, Bill, 211
Berkley, Dean and Company, 211
Bernhard, Robert, 9
Birrell, Lowell McAfee, 30–31, 32, 33, 75, 97
Black Thursday (Oct. 24, 1929), 25, 293, 303
“Blackie,” 200–4
Blacks on Wall Street, 110–11, 208–10
Blair and Company, 324
Bliss (E. W.), 171
Block positioning, 263–66
Blough, Roger M., 56
Blue Monday (May 28, 1962), 56–58, 72
Bluhdorn, Charles, 170–73
Blume, Marshall, 349
Bocklet, Charles, 34, 35, 41
Boise Cascade, 262
Bon Ami Company, 51
Bonanza International, 280
Bond trading, 264
Booz, Allen and Hamilton, 233–34
Borg-Warner, 155
“Bottom-line,” 156–57;, 160, 262
Brokerage firms: back offices of, 185–87, 191–200; capital structure of, 311–18; collapse of, 318–47; commissions of, 261, 339–40; mergers of, 317, 325–28, 329–33, 335–45
Brokers: earnings of, 221, 355; ethics of, 219–21
Bronfman, Phyllis, 119
Brown Brothers, 217
Bruce (E. L.) and Company, 61, 63, 68–77
Brunswick, 27
Buckley, William F., Sr., 38
Budge, Hamer H., 277, 288–89, 296
Burns, Arthur, 301, 302, 303
Butler, John V., 222
B.V.D., 169
Cadwalader, Wickersham and Taft, 30
