So spoke journalist George G. Foster in
his book entitled New York in Slices, published
in New York in 1849. Which goes to show
that Wall Street – meaning not just the street itself but the whole financial
community – has from an early date inspired a mix of fascination, puzzlement,
and censure.
This post is not about the history of Wall
Street, which was dealt with in posts #95, 96, 97; it’s about greed and
addiction. Let’s continue where those
posts left off, with a look at the façade of the New York Stock Exchange, in
the heart, figuratively and literally, of Wall Street. Since 1903 the Exchange’s home has been a
noble neoclassical edifice in white marble fronted by six massive Corinthian
columns at 18 Broad Street, just south of Wall.
It suggests a Greek temple, and its pediment crammed with statuary shows
Integrity Protecting the Works of Man. An
amply robed Integrity looms centrally, with figures representing Agriculture and Mining on the
right, and Science, Industry, and Invention on the left. Who the infants near Integrity’s
feet represent, I haven’t been able to determine.
But Integrity rules over all … at least in the sculptor’s mind. A reassuring thought, is it not?
The Stock Exchange, guarded by security personnel and police with M16 machine guns and police dogs, following the 9/11 attack. Kowloonese |
The crowd outside the Exchange following the 1929 Crash. |
Now let’s flash back to Thursday, October
25, 1929, Black Thursday, when turmoil raged in the Stock Exchange as prices
plummeted, margin calls went out, a crowd gathered outside in the street, and
rumors of suicides circulated. That
afternoon all eyes were on Richard Whitney, acting vice-president of the New
York Stock Exchange in the absence of the Exchange’s president, who was off on
an extended honeymoon in Hawaii. A tall,
handsome, muscular man, at 1:30 p.m. Whitney walked confidently onto the trading
floor and, stopping at Post No. 2, loudly announced, “I bid 205 for 10,000
Steel!” – a bid well above the current market price. Immediately a huge cry went up from the
trading floor. Whitney then placed
similar bids for AT&T, Anaconda Copper, General Electric, and other
blue-chip stocks. Behind him were the
combined resources of the leading bankers of the day, to the tune of $130
million, on whose behalf he was acting.
After this show of confidence by Whitney,
the panic subsided and people took heart; maybe the dramatic slide was
over. Suddenly famous, Whitney looked
like a hero, the “Great White Knight” of Wall Street. In the following year the Exchange elected
him their president, and in that capacity he made speeches around the country
emphasizing the high character of the New York Stock Exchange and the companies
that were traded there. “Business
Honesty” was the name of one of his speeches, and he stressed an ethical
corporate environment as the key to recovery.
Above all, the Exchange was not to blame.
Alas, Whitney’s dramatic gesture on the
trading floor, and the speeches that followed later, were not enough. On Monday, October 28, the plunge resumed, as
the Dow dropped 13%, and on the following day, Black Tuesday, it lost another
12% in the heaviest trading ever. The
Great Crash could not be stemmed; stocks recovered, fell again, recovered a
bit, and fell once more, not reaching the bottom until 1932, by which time the
Great Depression was well under way.
(Wall Street’s history abounds in Black
Mondays, Tuesdays, Wednesdays, Thursdays, and Fridays. Saturday seems to have been immune to
financial disasters, maybe because, in recent times, the New York Stock
Exchange is closed then for trading. And
the Sabbath has of course been spared.)
Who was Richard Whitney, this proponent of
financial integrity? Born in 1888 to an
old patrician family in Boston, he had attended Groton School and Harvard
College, then migrated to New York in 1910 to establish his own bond brokerage
business and purchase a seat on the prestigious New York Stock Exchange. A member of the city’s elite social clubs and
treasurer of the New York Yacht Club, he lived lavishly with his family in a
five-story red brick townhouse at 115 East 73rd Street. He also owned a 495-acre thoroughbred horse
and cattle farm in Far Hills, New Jersey, was president of the Essex Fox Hounds,
and rode elegantly to the hounds on one of his twenty horses. A quintessential Wasp, well groomed, arrogant,
and snobbish, he quietly preventing Jewish applicants from attaining
significant positions at the Exchange.
But to most observers he was the epitome of the gentleman banker.
Everything about Richard Whitney said
money; in fact, it almost screamed it.
The trouble was, he didn’t have enough of it. His life style required an income that, even
with all his connections, he simply didn’t have. He speculated, he suffered severe
losses. So finally he went into debt and
went in deep.
Flash forward to 1938, when the
comptroller of the New York Stock Exchange reported to his superiors that he
had absolute proof that Whitney, who had retired as the Exchange’s president in
1935, that Whitney’s company was insolvent and Whitney himself an embezzler. He and his company soon declared bankruptcy
and on March 10 he was indicted for embezzlement by District Attorney Thomas E.
Dewey. It soon came to light that he had
stolen money from the Stock Exchange’s Gratuity Fund, the New York Yacht Club,
and his father-in-law’s estate. The
financial elite might have forgiven him
almost anything, but stealing from the Yacht Club was unpardonable. Urbane and self-possessed, Whitney pleaded
guilty to the charges and was sentenced to 5 to 10 years at Sing Sing. Thousands showed up at Grand Central Station
to witness a former head of the Exchange being taken to prison handcuffed to
two petty racketeers. Informed of his downfall,
President Roosevelt, also a graduate of Groton and Harvard, shook his head
sadly and murmured, “Poor Groton. Poor
Harvard. Poor Dick.” (He might have added, "Poor Stock Exchange," or perhaps, "Poor Yacht Club.") Though Whitney symbolized the very interests that
the President’s New Deal was fighting, Roosevelt refused to demonize Whitney,
perhaps because they shared the same privileged background.
At first censorious, public opinion had turned
sympathetic, seeing in him a stoic martyr who even in disgrace remained a
gentleman. Respect for him extended even
to Sing Sing, where other inmates as well as guards lifted their caps to him
and asked for his autograph. Assigned at
first to mop-and-broom duty, he was soon teaching in the prison school and
playing on the baseball team. A model
prisoner, he served 3 years and 4 months of his term, was released on parole in
August 1941, and was reunited with his ever loyal wife. Banned from dealing in securities in New York
State, he became manager of a dairy farm and, later, president of a textile
company. Living quietly in Far Hills, he
died there in 1974.
Richard Whitney was neither the first nor
the last Wall Streeter to be caught cheating.
Today, the wake of the 2008 panic and resulting Great Recession, the top
executives of the biggest (“too big to fail”) U.S. banks have looked suspect to
many. Jamie Dimon, top honcho of my own
dear J.P. Morgan Chase, has been
criticized for presiding over his bank’s six-billion-dollar loss in a 2012 trade
in its London office, and its sale of risky mortgages to investors unaware of
the risks, leading to an unprecedented $13 billion settlement with the U.S. Justice
Department in 2013, with further investigations and resulting settlements
pending. Like Whitney, Mr. Dimon is a
handsome, well-tailored, clean-cut gentleman, but so far, one unsmirched by
prosecution. When questioned by the
Senate Banking Committee in 2012, he was treated deferentially like a visiting
dignitary and a financial guru oozing deep wisdom, and not like an
irresponsible operator who, so his critics assert, had endangered the whole
financial system of the country.
Immaculately groomed and urbane, though at times showing signs of
nervousness, Dimon, like Whitney long before him, seems to elicit admiration,
sympathy, and respect. (Dimon is of Greek American stock and not a WASP, which shows progress of a kind, I suppose.)
Jamie at Davos, Switzerland, in 2013, at the annual World Economic Forum. Immaculately groomed, and looking like a Ruler of the World. World Economic Forum |
What
drives these Wall Street people? The
nineteenth-century speculator Daniel Drew confessed to a friend, in a rare
moment of candor, that it wasn’t the money itself that he loved, but the wild
excitement of the game: “I must have excitement, or I should die.” But I would suggest that it’s both the money
and the excitement of the game, and that it’s a matter of addiction. I used to think that addiction involved only
substance abuse -- alcohol, tobacco, and drugs. But then a friend confessed to me that he was
addicted to sex – for me, an innocent when it comes to addiction, a novel and
enigmatic idea. To explain, he said
that, periodically, if he didn’t go out every night and have sex with another
man, he felt totally unworthy and depressed.
Hearing that, I had to accept the fact that sex too could be an
addiction. So how about money? Can greed also be, in the full and literal
sense of the word, addictive?
Relevant here is the article “For the Love
of Money” by former hedge-fund trader Sam Polk, which appeared in the Sunday New York Times of January 19, 2014. Polk tells how his dreams of being rich had
been nourished by his father, a salesman with huge dreams that never seemed to
materialize, while the family lived from paycheck to paycheck off his mother’s
salary. When, at age 22, Polk walked
onto the trading floor at Credit Suisse First Boston to begin a summer
internship, and saw an array of glowing TV screens, high-tech computer
monitors, and phone turrets, he knew at once what he wanted to do with the rest
of his life: play this video game to become rich and have power.
So began his career as a trader. Three weeks into his internship his
girlfriend dumped him: “I don’t like who you’ve become.” Devastated, he consulted a counselor who
showed him how he was using drugs and alcohol to blunt the powerlessness he had
felt as a kid; his underlying trouble, she explained, was a “spiritual
malady.”
A year or so later, having gotten off
drugs and alcohol and graduated from Columbia College, he pestered a managing
director at Bank of America until the manager took a chance and hired him. At the end of his first year he was
thrilled to receive a $40,000 bonus. But
a week later a trader only four years his senior was hired away by another
outfit for a salary of $900,000 – 22 times the size of his bonus – and he was at
once consumed by envy, and then excited by how much money was available.
So
it went. He worked hard, moved up the
Wall Street ladder, became a bond and credit default swap trader (whatever that
is). After four years in his new job
Citibank offered him $1.75 million a year.
At age 25 he reveled in money and power.
But when, at a meeting, he suggested that the new hedge-fun regulations that everyone
on Wall Street was decrying might be better for the system as a whole, the room went
quiet and his boss shot him a withering look and said emphatically that he
couldn’t think about the system as a whole, only about his company. At which point Polk began to view Wall Street
with new eyes.
Now Polk noticed how traders hurled
vitriol at the government for limiting their bonuses after the crash, and were
infuriated by any mention of higher taxes.
Having always envied the men who earned more than he did, he now began
to be embarrassed for them and himself.
Though he made more money in a single year than his mother, a nurse
practitioner, had made in her whole life, he realized that, unlike her, he
wasn’t really doing anything, wasn’t useful or necessary to society. And having foreseen the 2008 crash and made
money off of it, he himself now didn’t like who he’d become. So he decided to get out.
Polk now realized that he was an addict,
craving more money just as an alcoholic craves alcohol. And like any addict, he had an incredibly
difficult time shaking his habit. All too often he woke up in the middle of the night terrified at the thought of running
out of money, of later feeling like an idiot for giving up his one chance to be
really important. In time these feelings
abated, and he realized that he had enough money and, if he needed more, he
could earn it. But just as a recovered
alcoholic still craves alcohol, so he still at times craves money and buys a
lottery ticket.
Avarice, an engraving by the Dutch artist Jacob Matham (1571-1631). |
Now Polk speaks in jails and juvenile
detention centers about getting sober, teaches a writing class for girls in the
foster system, and manages a nonprofit called Groceryships to help poor
families struggling with obesity and food addiction. Which reminds me of a recovered alcoholic I
once knew who enlisted in Alcoholics Anonymous to help other alcoholics get
free of their addiction. Yet there is no
12-step program for wealth addicts. Why
not? he asks. Because our culture
supports and even praises the addiction.
The superrich appear on the magazine covers at every newsstand, have
become our cultural gods. So we all bear
some responsibility, Polk insists, for letting wealth addicts exert so much
influence over our nation. To which I
would add the suggestion that, in a capitalist society, this is close to
inevitable. We have always adulated
wealth and those who have it.
Sam
Polk’s article – well worth reading in its entirety – provides a clear and emphatic
answer to the question posed earlier.
Can greed become an addiction? Yes!
Coming soon: I haven't the slightest idea. I just hope it happens.
© 2014 Clifford Browder