Story

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Collier's

tor

27, I ~ S S

The Very Man By George Creel

P

RESIDENT ROOSEVELT never beamed more effulgently than on

t h a t f a i r J u n e day, back in 1934, when h e affixed his signature t o the Scellrities and Caehange Act. A shnz.1-lived joy, however, for almost on the instant he was confronted by the necegrity of selecting a chairman for the Commission. A period of painful bmoding, and then the smile came back t o smooth s w a y every little care line. "Joe Kennedy!" I t was a joyful cry t h a t ran. throuah the White House, causing 41to lo& u p from the magazine article or radio speech nn which the7 were workinp. "The very man!" Mr. Kennedy, i t may be explained a t this paint, was and is a redheaded, harrel-chested Irishman of f o r t y ~ i i nwith a pair of hot blue pyer lighting u p a freckled a n d very combative face. Also a millionaire, having mnnsged t o bite and kick a way to the top from a start about ten feet baek of scratch. Mr. Kennedy was reached a t his home just outside of New Yorli, w h e r e he lay with hi8 leg in n cast, doe t o s fell from a horse. Called t o the telephone, he received t h e President's s u ~ g e s t i o nwith a distaste t h a t must h& made his Gaelic forehears t u r n in their eravee. "You know how I've made most of my money." he said. :'Right in the stock market. Well, think of the howl t h a t will go u p if you name s Wall Street man." "Verylikely," Mr.Ronscvelt answered cheerily, "but i t doesn't seem a bad idea to have s chnirnlan of a Securities and Exchange Commission who knows something about securities a n d exchanges. See you Mnndny!' Joe Kennedy left New Yark with the derisive "yah-yah" of the investment world ringing in his ears, and reached Washington to fivil nn n t m o s ~ h e r eonly a littlc less frigid. Others on the Commission, you see, were James M. Landie. a brilliant young product of the Brandeir-Frankfurter school of thouzht: Frr linanci Prol ra. -nu ? ? r : 1 t a l . a ~ells h n i i1r.t finlibed h, i-v-iti&nril? - f s t r c k . r , n - t , r . i ',r n i c l o r c romlr ....: <;c.>ypC > I A I . . ~,< ~1~8 r, d - t ~ : m Wtst I. . r.etc.:-ire. rti .I. IF. P.. hrrr E. 1Ic:lb ? r,,).? ca~;n?cl fcr the YC:. era1 ride Commission, who had suec e d e d nobly in living dawn his Vermont conservatism. All were polite enough, to be sure, but a certain glassiners of eve n m ~ l vindicated thcir opinion of a w a l l ~c
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COLLIER'S WASHINGTON STAFF WRITER

visitor intimated plainly t h a t such talk gave him a pain in the neck. What seared inrestois off a;ns a steady sueeession af barefaced swindles t h a t rohhed the paor suckers of their sarinks. Of course there was no seeuritr market now. People had been stung too often. But what better way t o restore confidenee than f o r honest men t o get behind a law t h a t had no other object t h a n the elimination of swindlers and awindlinp-? In t h e matter of "governmental interference," would they kindly tell him when they had ever shown any disposition to clean house themselves? W a s there even an attempt a t investinstion and reform t h a t they hadn't fought tooth and nail? And w h a t was t h a t about the law heing radical? JVeuld any of them say t h s t t h e English - e r e radical? Well. then, England has had laws foi. the protection of t h e invcrtar sincc 1844, and agood deal strikter than the American statute. And enforced, tw! Nothine t o Worm About Crisply h u t still politely, he asked them t o cut out the guff a n d talk sense. A s much as anybody else, he himself r a n t e d t h e law to w a v k . Let them point out the stupid, the unnecessary and the unjust, and changes would be made. At the risk of being personal, he mentioned t h e f a c t t h a t he had a x,ife a n d nine growing children, and sincerely trusted t h a t no one present would think him fool enough t o take p a r t in anyP H O T O G R A P H BY IFOR THOMAS

Joseph

P. Bennedp,

chairman of the

issue. On Mareh 1 8 t h eame Standard Gas and Eleetrie with i m n iseues aggregating $20,212,590; March 29th, Commereial Credit Compnny. $27,177,364; March 30th. Southern CaliIornia Edison with the l a r z e s t issue of them all, $71,905,000; anci then the Union Oil of Calif o r n i a with $21,075,000, anrl Kstianal Steel with $50,000,000. Many of the issues were refunding operations, and a striking characteristic was t h a t t h e new h m d s carried interest rates appreciably lower t h a n the old.

thing t h a t would menace their futur?. A detail t h a t seemed tn a g i t o k the investment men to the point of fever was the criminal a n d civil liability of directors for fnlso o r mislesdlng statements. Mr. Kennedy refuaed t o share this sense of o u h a g e I f a man wasn't willing to accept responsibility, then let him s t a y ati the board. Protection t h a t U'orks Protests against the publicity feat u r e s of the law failed t a b r i n g t e a r s to W h a t still kept t h e Commission on J o e Kennedy's eyes. Thc government had no eoneern with corporatious t h a t the anxious s e a t was how the new orborrowed their money privately, but ganization had acquitted itself in the when they went out into the open and importantmattera of eamnre and speed. asked men and women f o r their savings, A t the earliest moment they took the t h a t minute they ceased t o be private in first ten hip issues okayed by the Cammission and compared them with t e n a n y honest sense of the world. With respect t o delays and expense. issues of equal rizr put our before the Mr. Kennedy admitted t h a t t h e Com- gnrcrnment "hutted in." W h a t they mission had already found things t h a t fvund was this: the cost of the ten put could he i m p r o ~ e d . He pledged n p e d i - out Prior t o 1934 was one half uf one tion and incupensivenes8. Anything per eont as contrasted with three tenths else? All right, then. If they were on of one per cent f o r the Cumrnisiinn isthe square, they'd play ball. If they sues. Moreover, the total items of weren't on the square, they eauldn't expense directly chargeable t o the Cammission amounted t o less t h a n one fifth olav s t all. ~e kept hit. word. T h e n every p o s ~ of the money paid t o underwriters. A5 sible reform had been effected, the Corn- f o r speed, the mnaimum time f r o m the mission s a t baek happily and waited for filing of the a~,tllication t o final elear-, buaincss. None eame. Weeks went by, anc'wa~ twemt)- days. and no eorporatlon showed u p with a So much for t h e operatiad of t h e Coinfine juicy issue ready for the oven. mission f r o m t h e s t a n d ~ o i n tof the selThere were still doubt a n d distrust. And ler of securities. How hbUutthe buyer? then the break came. l l p t o May 1 , 1935, the number of apOn hlnreh 7, 1935. Swift & Company plication? filed rvas 1.400, apgreqnting knocked a t the door with n $43,000,000 S2,049,000,000. I n ~ L h e r days thcle issue. On March 8th, Pacilic Gas and bonda would h e r e been dumoed on the Electric walked in with a $15,000,000 investing public overnieht, and their sale high~pressured hy bankers, brokers, glib young mcn and tipster sheet^, COLLIERIS STAFF PHOTOGRAPHER W h s t happened under the new dispensation: Of the 1.400 applications, 1,016 \$.ere approved, s total of $1,720;000.000. Exactly 76 were turned down, representing $40,000,000 kcpt off the market: 202, anlounting t o $101,01111,000, were withdrawn, and 10G, totalling $188,000,000, were eLili U ~ ~ P Iexamination . a t this writing. Even with these figures, it is not passihlr to estimate accurately t h e amount saved to investors, f o r isrues withdrawn and issue* rejected tell only half the Story. T h e mere f a c t t h a t the\. would hnv; t o run the gantlet of examination has kept hundreds of fake. s n d skin games out of the field. Only s year old, yet the organization is far-flung and effective. T h e headquarters in Washington are working with meed and precision, a n d regional affieea have been set up in New York. Chicem, Boston, Denver, F n r t Worth and San Francisco. The field force has l-1 I$ i ~ 8tl.n.i t p n r t n g oq r j p ! ra. tionr w . t , . . i : ~ ~... g I f , r -kin gal: i. and el., r k z . * r w I:P t o see t h a t m o r e r drrived from newissues is spent as +omised. If they find a diversion of funds, or other use t h a n t h s t specified. down comes a heavy hand. "And just one other thing." Joe Rcnnedy eoneludcd, signing his secretary to brinq thc next caller. "We're not trying t o kill speeulatinn. Crooked stuti, pool operations and market ripginp. hnve got tn go, but how can you stop a nlan from buying stock C I I I the lhope t h a t i t will go u p ? All we can do i.r to give him the infolmation t h a t will enable him ti, huv intelligently, a n d guard him against rascals, sure-thing men and t h e getrich-quick bays. And I think we're doing lt." Securities a d Errhnwe Commission