BULL STREET – The art of the Con

Richard Whitney

Moreover, there is more than one type of confidence man hiding in the shadows. There are those that do it for the money, those that do it for the excitement and those that are so stupid but so well placed that they just do it because it is there. Such a man was Richard Whitney. Whitney, had become a member of the New York Stock Exchange in 1912 at the tender age of twenty-three. Soon after he became a member he began representing the famous J.P. Morgan and Company as their broker on the Floor of the Exchange[32].  However, you see Richard was the RayMe for the Morgan’s. He would do their bidding for a small price, relatively only a pittance more on a relative basis than our neighborhood gopher received . However, whereas Father Gold on occasion would come up with some original thoughts, Whitney was incapable of anything unique in spite of having gone to all the right schools including both Groton and Harvard. By this time though, he was already well entrenched within the higher echelons of society by being a master of hounds in Essex and a member of the exclusive Porcelland Club; but yet he desire much more.

Richard’s career path was sidetracked by World War I and be went to work for what was then called the Food Administration in Washington D.C. for a dollar-per-year. Many of those associated with him during that time indicated that Richard was being highly overpaid. However, the War soon ended and as luck would have it he inherited his father’s business, Cummings and Markwald. In order to show what a major Wall Street force he had already become, the day he took over, he renamed it Richard Whitney and Company. Richard said at the time that it was in memory of his father, but that certainly gave us our first real clue as to the man’s character.

To the Morgan’s he must have represented the ultimate windup doll. Because Richard was so anxious to be accepted in all the right clubs, to be invited to all the right parties and to vacation in all of the right places he knew that he was obliged to do what the Morgan’s instructed him to carry out. They were his ticket to even greater social acceptance. The relationship was entirely symbiotic.

Moreover, Whitney being Morgan’s man on the floor of the highly prestigious New York Stock Exchange, it gave him a presence. The Crash of ’29 was raging almost out of control and the Morgan’s were determined to put a stop to it before it caused some real trouble. They picked a day when the market was in freefall and ordered Whitney to buy massive amounts of the Blue Chips at prices much higher than would have been reasonable in consideration of market conditions. However, they wanted to make a public statement and Richard just happened to be their guy at the post. The other brokers on the Exchange knew he was Morgan’s man and watched with awe as he walked from post to post, seemingly inhaling everything that was being offered. The other floor brokers seemed to think that this was going to stem the tide and joined, with the public soon following; and the market as planned started to rally.

Although too much damage had already been done to the economic infrastructure of the country to save the day and in spite of the fact that Whitney’s heroics were only temporary, he became bigger than life and everyone thought of him as the man that tried to stem the tide. Whitney became a folk hero and was literally elected the acting president of the New York Stock Exchange on the spot. At that time, possibly the most prestigious job in America short of the President of the country was the job that fell into Whitney’s lap. Immediately gravitating to the office Whitney had now become one of their world’s economic soothsayers. Moreover, Richard Whitney was eventually reelected almost unanimously to four additional  terms as President of the Exchange, literally by acclamation.

Crowds gathered wherever he went and people began asking his opinion on nearly everything. The post where he made his first bid on the securities that fateful day in 1929 was literally retired from the Exchange and presented to Whitney by its grateful members. Whitney had attained what he had desired and yet was still unable to walk and chew gum at the same time. However, only his closest associates had a clue, so the secret remained safe.

In order to preserve the newly created aura, Whitney dressed to the nines nearly every day and learned to hold his head erect and to speak slowly as though he had some comprehension about what he was talking about. His tutors had told he that as long as he was definitive about what he said, it didn’t matter too much, what came out of his mouth. People at the time were looking for leadership not philosophy, and Whitney was beginning to fit the mold. Whitney’s entire firm, Richard Whitney & Company was only making a tad more than $50,000 a year in those heady days but everyone thought of him as Daddy Warbucks incarnate. However, they had every reason to believe that way, didn’t he own several large estates as well as a horse breeding farms that alone cost him more money for maintenance than what he was making. He had a wife and three children and numerous club memberships and dues to pay. Richard Whitney living very substantially over his head and not a sole knew about it.

Sadly, Whitney soon started to believe his own press and began to think that he could actually accomplish things on his own. After all, hadn’t the United States Congress themselves come to him personally and asked his opinion on whether the stock markets needed more oversight and regulation. Hadn’t they literally cowered when he had thundered back that the estimable New York Stock Exchange is more than competent enough to police itself and should not be bothered by “meddlesome bureaucrats.” Moreover, hadn’t he recently addressed the Philadelphia Chamber of Commerce and given them a lecture about integrity that had been quoted in every newspaper in the country. His phrase “business honesty” soon became coin of the realm and Whitney was the anointed king. .

What no one considered was the fact that his brother was a senior partner of Morgan and that Richard was being hand fed enough business so that he would not have to go on the dole to his family. Brother, George Whitney, hardly realized it but he was gradually creating the ultimate Frankenstein Monster and right on the floor of the Exchange itself.

People believed that Whitney had big bucks and when Richard, who had now fallen for his own press releases, hook, line and sinker started to make investments that he was certain would soon bring him the millions that he richly deserved. However, keep in mind that he was now finally trying to get rich against a fully stacked deck. The market had indeed rebounded a tad on that faithful day in September, but since that time, it was now even worse than before with bread lines sprouting up all over the place. However, they weren’t on Wall Street and Whitney never believed in poverty in the first place. His was now ready to take the plunge and his credit was terrific. He was New York’s “good ole boy”.

Masterfully he started out purchasing stock in an artificial fertilizer company when the real thing was already too expensive to be afforded during these depression times. Moreover, a dust bowl had devastated the Midwest and farms were being closed while farmers and their families were heading into the city where the bread lines had better and hotter food. Richard had invested substantially into  Florida Humus Company’s whose cost of manufacture was twice that of what the real stuff was selling for at the local feed stores; and no was buying even that. As the stock continued to plummet, not understanding even the slightest thing about economics he continued to buy finally doing it on margin.

“Suckers sell on the bottom, experts buy on the way down,” he would say assuming his most elegant posture. However, by 1931, the net worth of his company was now only $36,000 and he was in debt to his brother George for over $1 million. Thus, considering that his company was a partnership, his net worth was now standing at a negative $964,000. Of course George wasn’t going to tell anyone that his brother, the head of the New York Stock Exchange as well as the highly regarded Richard Whitney & Company, was now officially a pauper. No way, this would ruin it for everyone and eventually, George somehow believed that Richard would find a way to straighten himself out. This was the man that at an earlier time had gotten lost in the Exchange washroom and couldn’t find the exit until someone opened the door.  

Was George ever wrong! George had made a critical mistake, because by not recording his loan, Richard’s credit had remained tiptop and the problem basically was that everyone wanted to loan him money should he need it. He was their hero. Now with his stock collapsing; instead of admitting that the economy and the market were going to hell in a hand basket, Richard was able of parlaying a bad investment into a catastrophe and did it with some degree of aplomb. However, now he began borrowing from the Morgan firm as well as from additional funds from his brother George and when not otherwise occupied he would also solicit loans from people on the floor of the Exchange. However, most  surprisingly his clandestine borrowings which now were incalculable remained a secret from all but those who were his most loyal benefactors.

Richard got a tip that Prohibition was going to be repealed, an amazing and overlooked opportunity. He would buy stock in a chain of distilleries that made high-test applejack. Once he had accumulated a dominant position in the stock he started acting as though he knew what he was doing and created a drink for the company called “New Jersey Lighting”.  He was certain that it would take the country by storm. By this time though, his creditors were getting a tad impatient and he was forced to spend substantially more of his time putting out financial fires.

Probably, for the first time in Richard Whitney’s life, he had been right about something without having to have read it from a script. The shares of Distilled Liquors amazingly tripled and he would have been able to have paid off all of his creditors if he only had sold. However, Richard never sold a share and it appeared as though he was waiting for some divine inspiration to guide him to the next step. That guidance never came and Distilled Liquors started to drop in price like a lead balloon causing Whitney to start receiving unpleasant margin calls requiring immediate attention. Finally, word spread that Whitney was indeed a deadbeat and he no longer could go to his friends to scrounge the necessary funds. However, the man was not without resources and being the treasurer of the New York Yacht Club; he was able to take some of their shinny new certificates that club that just ordered to be printed and used them as additional collateral on his loans. This quieted his creditors for a time but soon he was in trouble again.

Moreover, he was also busily selling bonds that he was issuing on his own authority and unauthorized by the other five trustees of the Gratuity Fund that he represented as a trustee. Most of the members of the club normally slept through its meetings and before the faithful realized what had happened, Whitney, still the President of the Exchange and had managed to steal over $1 million from its Fund. This was a really a sizeable amount of money and it had been put aside for the families of deceased members. However, the New York Stock Exchange trustees just as Rip Van Winkle had done in earlier years finally arose from their self-induced slumber  and noticed that the club had become literally insolvent while they were napping. 

The auditors were called in and it was discovered that the eminent Mr. Whitney had done everybody in. Richard hurriedly called Brother George when the trustees indicated that they were going to call the police and once again George coughed up the required money, but this time he had to borrow it from a friend and it soon turned out that this was only a pittance in the overall problem. The embarrassment and publicity would have only made matters even worse on Wall Street and at this point, things were plenty bad enough thank you. However, Richard already holding the smoking gun made a final plea to the Exchange for mercy after his offered to sell his seat and donate the proceeds to the widows and orphans that were the benefactors of the Gratuity Fund. In an impassioned plea to a quickly assembled jury of his peers he said, “After all, I'm Richard Whitney,"  "I mean the stock market to millions of people."

However, in spite of putting plaster in the dike from time to time, the small leak was now a full blown gusher and George could no longer hold back the flow. Richards’s problem, once believed controllable had by now grown to monumental proportions. “In the end, completely oblivious to what was right and wrong; Whitney withdrew over $800,000 in customers’ securities from his firm’s account and within four months, gathered some $27 million via 111 loans. He literally approached strangers on the Exchange floor, even prior enemies, holding out his hand, and asking for money.”[33]

For his trouble, Whitney was sent to the big house for five to ten years and was banned for life from dealing in the American Securities Markets. It was as though Captain Marvel and Santa Claus had died on the same day. The public could not believe what they heard. His bankruptcy estate auctioned off his assets to pay creditors and the specialist post where he had attempted to save America brought only $5 on the auction block.

In the meantime, George, ever the gentleman made many of  Richard’s debts good. Richard was released from prison with some time off for good behavior and went into farming far away from the rigors of Wall Street. Mr. Richard Whitney had set a record of futility that has seldom been matched in any executive post in the economic history of this country. However, he was not really a thief; he was just plain confused, and over his head and never came in out of his own fog. His demise was like telling the world that there was no Santa Claus and business schools were almost forced to shutter their doors over the tragedy of having Mr. Clean come up looking like a botched lube job. However, he kept the façade up to the very end and wore well pressed, expensive three-piece suits while in jail.

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