-Caveat Lector-
an excerpt from:
America’s Sixty Families
Ferdinand Lundberg
The Vanguard Press©1937 & 1938
The Citadel Press
New York, NY
578 pages Out-of-print
--[Eb]--
WHO CONTROLS THE PRESS?
Editor and Publisher, which represents American newspaper publishers, in two
reviews of America's 60 Families (January 22 and February 5, 1938),
concentrated upon the chapters dealing with American journalism. But, it is
instructive to see, it, too, was mainly preoccupied, like the aforementioned
critics, with the idea of concentrated ownership and control. In the face of
the bare facts given in the book, Editor and Publisher denied that the press
is controlled by the individual members of the plutocracy.
Very diligently Editor and Publisher went to the trouble of tabulating the
newspaper properties owned by the wealthy families as given in America's 60
Families. It reported that "42 are found to have no press connections
whatever." In doing so it conveniently assumed that there had been an
exhaustive cataloguing of all the press connections of the faction of great
wealth, whereas there had been only a suggestive outlining of a great many of
these connections. The Editor and Publisher "breakdown" showed that America's
60 Families accounted for the press connections of approximately 30 per cent
of the wealthy families.
Triumphantly, Editor and Publisher listed the wealthy families to which Americ
a's 60 Families attributed no explicit press connections. Editor and
Publisher, however, carefully avoided saying that these families had no press
connections whatever; it said only that America's 60 Families did not connect
them with any publishing property. Now, selectivity is necessary in writing
any book conceived as less voluminous in scope than an encyclopedia, and the
author of America's 60 Families obviously could not list every press
connection of the plutocrats. But let us see what comfort there is for Editor
and Publisher in the judicious omissions by the author of America's 60
Families.
Editor and Publisher pointed out that no press connection is given for the
Flagler (Standard Oil) family. The author has evidence, however, which shows
that at one time virtually every important newspaper in Florida was under the
late Henry M. Flagler's thumb, owned, subsidized, or controlled. Today the
Louisville Courier-Journal and the Louisville Times are owned by the family
of Robert Worth Bingham, who married Flagler's widow and principal heir; this
ownership and connection is set forth in America's 60 Families, although Edito
r and Publisher ignored it.
Editor and Publisher also pointed out that no press connection is given for
the Pratt (Standard Oil) family. The author, however, has documentary
evidence showing that the Pratts had an interest in the Brooklyn Daily Eagle a
s of 1937-
The family of James J. Hill is also cited as one for which no journalistic
connection is given. In 1896 James J. Hill bought the St. Paul Globe and at
different times owned various newspapers throughout the Northwest, where his
railroad operated. The. Huntington family was also pointed out by Editor and
Publisher as one having no press connection, yet the late Collis P.
Huntington owned many newspapers, including the old New York Advertiser as
well as Pacific Coast publications.
The Gould family has no press connection established in America's 60
Families, Editor and Publisher said. Yet Jay Gould, through his dominance of
the Western Union Telegraph Company, for many years exerted an extraordinary
influence over newspapers and news-distributing agencies, as was testified by
Charles Francis Adams, according to the memoirs of Clarence W. Barron. Adams,
president of the Union Pacific Railway, told Barron how Gould would undermine
the position of a rival by planting rumors in the press of the nation
reflecting upon the rival's credit.
Editor and Publisher, in short, disliked the thesis that the Amer-ican
press is ruled, owned, and dominated by the plutocracy, and to combat the
argument, tried to take advantage of the fact that America's 60 Families is
not a catalogue of plutocratic press con-nections. The argument, however,
stands, supported by the exten-sive evidence cited in the book and by equally
extensive evidence retained by the author for the further confirmation of his
thesis. Editor and Publisher claimed, erroneously, that William Randolph
Hearst and Frank E. Gannett had been left out of the plutocratic circle of
press control in America's 60 Families. The book, how- ever, places Hearst
among a secondary group of ninety large pro-prietor families that share in
control of the press, and it shows that Gannett has been financed by the
International Paper Company (Mills, Reid, et al.).
Now, although it can be easily shown that a decisive majority of the families
of wealth in America have or have had some significant connection with the
journalistic enterprises of America, this was not, indeed, the argument at
all in America's 60 Families. Editor and Publisher, apparently thinking it
safe to do, shifted the argument after stating the thesis of the book with
respect to journalistic enterprises. This thesis was, briefly, this: "The
journalism of the United States, from top to bottom, is the personal
affair-bought and paid for-of the wealthy families. There is little in
American journalism today, good or bad, which does not emanate from the
family dynasties. The press lords of America are actually to be found among
the multimillionaire families." (Page 244.)
This is somewhat different from arguing that every wealthy family has a
journalistic connection, which is not nearly so important as saying that few
journalistic enterprises are unconnected with the wealthy families. But even
with the twist given to the thesis for its own convenience Editor and
Publisher is refuted by the facts.
The thesis of America's 60 Families concerning journalism remains unshaken.
No group that has come to economic power has been without direct or indirect
press representation. Newspapers are instruments, like educational
institutions, of economic, social, and political class control. Every
publication in the world, of whatever nature, represents some interest,
usually some privileged group. It is only a question of searching to find the
interest.
Having discovered what it considered a great deficiency in America's 60
Families, Editor and Publisher went on to detect wholesale alleged errors.
For the most part it flatly contradicted many 'statements set down as facts
about newspapers, although, peculiarly enough, the files of Editor and
Publisher were the main source of the author for the questioned facts! Editor*
and Publisher, in other 'Words, on the spur of the moment, merely denied the
truth of news articles it had printed.
There is no "proof" in America's 60 Families of the assertion that the small
daily and weekly press is dependent upon political revenues, said Editor and
Publisher, yet it had noticed that Frank Kent, political editor of the
Baltimore Sun and probably one of the -keenest practical journalistic experts
on American politics, is cited as authority. However, no single authority for
this statement is really needed, for it is a clearly established fact on the
record (much of which is cited in America's 60 Families) that a large
proportion of political campaign funds is siphoned into newspapers. Editor
and Publisher, with deceptive ingenuousness, took this to mean payment for
political advertising, but this was neither said nor implied; -what was meant
was secret, lump payments for editorial policy and not for avowed
advertising. What was meant was flat subsidy, paid over the counter and not
entered upon the books. It would take up too much space here to cite even the
recorded instances of such payments.
In addition to crude secret payments given the "county" press, there are
subsidies available in more generalized forms. One of these
politically-invoked press subsidies is the low second-class mailing rate for
newspapers and magazines, which, for newspapers and magazines, according to Ti
me, January 17, 1938, page 32, cost the government a little more than
$40,006,000 for the year ended June 30, 1937. As this deficiency is
recurrent, the loss in revenue to the government in twenty-year cycles is now
at the rate of nearly $1,000,000,000. Another politically-created press
subsidy was until recently the Federal tax law which permitted newspapers
owned by complicated holding structures to charge off losses in one division
against huge profits in another, thereby making possible low Federal tax
payments. The New Deal knocked over this gravy bowl.
Editor and Publisher, seeking to create the impression that the book was
replete with errors, questioned the statement that 1,000 newspapers have been
discontinued in the United States since the war. It said that this statement
could not refer to dailies, as fewer than 600 daily newspapers had been
discontinued. The figure, how.ever, clearly referred to bi-weeklies and
tri-weeklies as well as dailies, so there is not much point to Editor and
Publisher's carping in this connection.
LEGITIMATE CRITICISM?
An example of how Editor and Publisher unwittingly questioned the authentic
data given by its own back numbers was provided when it denied that the Hanna
family has an interest in the Cleveland Plain Dealer, as stated in America's 6
0 Families. Editor and Publisher, October 8, 1932, itself related that the
Cleveland Newshad been merged with the Cleveland Plain Dealer, through the
agency of the newly formed Forest City Publishing Company. The Hanna
newspaper interest was retained through this company. But in its January 22,
1938, review of America's 60 Families, Editor and Publisher erroneously said
that the two newspapers in Cleveland owned the Forest City Publishing
Company! A gross misunderstanding by the Editor and Publisher reviewer led
him to believe that the subsidiaries owned the holding company! What the
object of such an anomalous arrangement might be was not explained.
What Editor and Publisher was doing here was to cover up the fact that the
same interests owned a Republican and a Democratic newspaper, giving them
two-thirds of the daily newspapers in Cleveland, where there is only one
other newspaper, the Scripps-Howard Press.
Editor and Publisher also perversely took the author to task for saying the
Baltimore Sun, unlike many other newspapers, was not owned by finance
capitalists but by its leading executives. It then went on to demonstrate
that it did not understand finance capitalists to mean bankers, which is what
the term actually means. Editor and Publisher indicated that it thought
finance capitalists meant simple business men. It said the majority
stockholder of the Sun was Harry C. Black, chairman of its board of
directors. Is not this ownership by a leading executive, as America's 60
Families truly states ?
Having stigmatized as errors of fact these and other correct statements in Ame
rica's 60 Families, Editor and Publisher continued smugly: "The above are a
few of the elementary factual inaccuracies noted in a casual reading. We have
no doubt that a careful analysis would reveal many more, and innumerable
innuendoes and inferences without basis in fact."
The author of America's 60 Families could with equal ease proceed to demolish
the maladroit theses of other hostile reviewers, but enough has been done in
this review to indicate how readily the criticisms collapse. The discerning
reader can continue the analysis along similar lines at his own discretion.
In doing so he should observe, however, that the hostile critiques have
confined themselves in matters of details to fewer than ten pages of the
book. Chapters three through six and eight through eleven, dealing with the
pecuniary control of the national political apparatus and the corrupt favors
obtained through this control, and with the nature of the philanthropies,
educational enterprises, and personal expenditures of the wealthy, were not
touched upon in any detail at all. The analysis of the New Deal, which
accounts for the animosity displayed toward it on grounds other than a
nonexistent radicalism, was also gingerly avoided.
However, there is a lesson to be learned from these hostile criticisms. The
lesson is that these reviewers and the points of interest they represent do
not want America's 60 Families to be read. Although it is "significant,"
deserves "respectful attention," and contains a "mass of facts," it
nevertheless contains "nothing new," "nothing that has not been printed
before," and nothing that requires. attention. And, despite its heavy
documentation, it is false from cover to cover. Why, then, all the excitement?
Those who have read the book know, of course, that the daily-newspapers are
thoroughly exposed in it for what they are. In general, the sharpest attacks
against the book have come from those publications that have been exposed in
it. Some publications have, however, refused to review it at all. The reasons
for their muteness will not be plain except to those persons that have
perused the book
A NOTE ON THE WHITNEY AFFAIR
On March 8, 1938, the Vatican solemnly announced that J. P. Morgan and Thomas
W. Lamont, members of the banking house of J. P. Morgan and Company, had, in
recognition of their distinguished works, been made Knights of St. Gregory by
the Pope. A few hours later the New York Stock Exchange suspended Richard
Whitney and Company for insolvency, and turned over to the Attorney General
of New York records betraying gross irregularities in the firm's affairs. Two
days later Whitney was unceremoniously indicted for grand larceny. Soon
afterward he was again indicted, and was arrested as well by the Attorney
General of New York State, who charged him with theft.
It transpired that Whitney, described as "haughty" by the New York Times
and as "arrogant" by Time Magazine, had made it a regular but surreptitious
practice since 1932 to hypothecate for his personal benefit securities
belonging to his customers and others, and that his personal speculations in
stock of the Distilled Liquors Corporation had gone so badly that he was in
the end unable to make good, although he had been generously advanced funds
by some of the biggest banks in Wall Street. His shortages, the Attor-ney
General's office reported, amounted to at least $6,000,000. Not only this,
but Whitney, as treasurer, had taken bonds of the New York Yacht Club from
the club's safety deposit vault to pledge as surety against a personal bank
loan.
Whitney, arraigned, promptly pleaded guilty to all charges and took all blame
upon himself, including culpability (even though he admitted he was not an
accountant) for having set up a complicated and obscurantic control account
in his office. Nobody knew anything about his affairs, said Whitney; he had
consulted with no one, he insisted. The suspicion that Whitney was pleading
guilty with such eager celerity simply to block thorough investigation was
voiced in the New York Times (March 22) when it said, "Richard Whitney was
subjected yesterday to the public questioning against which his counsel
protested last week, as being forestalled by his pleas of guilty to grand
larceny."
By acknowledging his guilt Whitney placed himself in jeopardy of a jail
sentence of five to ten years, which was duly imposed on April 11, 1938. The
truly extraordinary circumstance about the case was this plea of guilty, for
it was one of the few times since -the Civil War that a member of the inner
financial oligarchy of the United States had ever felt obliged to admit any
serious wrongdoing.
HOW WAS WHITNEY CONNECTED?
But what has Richard Whitney to do with America's wealthiest families? Who
was Richard Whitney, whose career should terminate with such a sardonic
comment upon itself?
Before answering, briefly, the reader may recall that some horrified critics
of America's 60 Families have denounced its author as a "muckraker," have
described his conclusions as overdrawn, exaggerated, overwrought, or, even
though true, as given unwarranted force because they are concentrated within
the covers of a single book.
The affair of Richard Whitney has come to the surface, however, as living,
immediate verification of the truth of the serious accusations made in
America's 60 Families against the coterie of big wealth. But there was, in
reality, nothing at all fundamentally extraordinary about the Whitney
situation. Such peculations are, as America's 60 Families shows, taking place
all the time in upperclass circles. True, it is now said that Whitney was not
"representative." It was also said, one may remember, that the cases of Charle
s E. Mitchell, president of the second largest bank in the country, and
Albert H. Wiggin, president of the largest bank, were not representative.
Mitchell was acquitted of income tax evasion but the Supreme Court held he
was nevertheless to pay the amount in dispute; Wiggin, faced by civil suits,
had. to make cash settlements with stockholders. It was argued, too, that
Kreuger, working through the old-established house of Lee, Higginson and
Company, Insull, Marcus-Singer, et al., were not "representative."
Richard Whitney, an active field marshal in the junta of great wealth, one of
its subordinate strategists in the gigantic and continuous operation of
retaining social, economic, and political control, was of the creme de la
creme of America's ruling class. And Richard Whitney was, as the New York Jour
nal aptly said, Wall Street's "White Knight." E. H. H. Simmons, a former
president of the Stock Exchange, testified about Whitney that "No imagination
of the wildest kind would have reached to the thought that Mr. Whitney might
do anything wrong. There could not be the slightest suspicion of Mr. Whitney."
A good part of this attitude, of course, was sheer snobbery based only on the
fact that Whitney carried gilt-edged social passports and was, moreover,
closely associated with the Morgan partners. Born in Beverley, Massachusetts,
in 1888, Richard Whitney was the son of George Whitney, a Boston bank
president whose forebears had emigrated from England on the Arabella, the
ship which in 1630 followed the Mayflower to the New World. He was also the
nephew of Edward Whitney, a one-time partner of J. P. Morgan and Company. In
preparation for his career as a gold-plated anarchist who would operate above
all suspicion, he attended the upper-class Groton School and was given his
bachelor's degree by Harvard University in 1911 after remaining in graceful
residence for three years. The family to which Richard Whitney belonged had,
incidentally, no connection with the Whitney group associated with the
Standard Oil Company.
At Harvard young Whitney was, by reason of his pedigree, one of the campus
nabobs. He became a member of the ultra-refined Porcellian Club from which
the "Wrong People" are, in observance of a curiously whimsical tradition,
rigorously excluded. He was, indeed, wearing the emblematic pig of the lofty
Porcellians when he was arrested, fingerprinted, and photographed. . . .
Two years after leaving Harvard young Whitney, with a. loanfrom his uncle,
bought a seat on the Stock Exchange, prepared to work his way up from the
bottom of the ladder. His brother, George, a Harvard-Porcellian man of the
class Of 1907, had preceded him to Wall Street, first joining the
old-established Boston banking firm of Kidder, Peabody and Company
immediately after his graduation, later becoming a Morgan partner. Kidder,
Peabody -and Company was closely associated with J. P. Morgan and Company,
which only recently reorganized it.
In 1916 Richard Whitney married Mrs. Samuel S. Sands, a young widow who was
the daughter of George R. Sheldon, New York banker, former president of the
Union League Club, business associate of the elder J. P. Morgan, and
treasurer of the Republican National Committee; Mrs. Sands was the
daughter-in-law of Mrs. William K. Vanderbilt through her earlier marriage to
Mrs. Vanderbilt's son by a former husband. Richard's brother George had ,also
married well in 1914, when he became the husband of Martha Beatrix Bacon,
daughter of Robert Bacon, former Morgan partner, member of the Taft Cabinet,
Ambassador to France, and a political agent in general for Wall Street. The
Bacons were also Bostonians, Harvardians, etc., although since becoming
connected with 1. P. Morgan and Company they have concentrated on New York
and national affairs. The elder Bacon at one time was associated with Lee,
Higginson and Company. Robert Low Bacon, a son, is today a member of
Congress. Gaspar Griswold Bacon, another son, is a lawyer and an overseer of
Harvard University.
A MORGAN BROKER
Richard Whitney and Company was formed in the year of Richard Whitney's
marriage. It soon became known as one of the brokerage houses closely
affiliated with J. P. Morgan and Company, handling Morgan business. Although
he was of conscript age, Richard Whitney did not serve in the armed forces
during the World War. By 1928 he had advanced himself so that. he was
vicepresident of the Stock Exchange and a member of its board of governors.
In recognition of what was regarded as distinguished services during the 1929
panic he was allowed to serve as president of the Exchange from May, 1930, to
May, 1935.
It is instructive to observe, in connection with the thesis of America's 60
Families that a relatively few closely interrelated families of wealth
dominate the financial and economic life of the United States, that through
Richard Whitney the firm of J. P. Morgan and Company had as an agent the
senior officer of the Stock Exchange. Similar associates of the wealthy
families are found strewn about in strategic financial, political, academic,
journalistic, judicial, commercial, and public administrative posts of every
conceivable type. Some have been humbly born, but have married well; others
are to the manor born but are poor relations of rich stockholders or the
relatives-by-marriage of successful business partners. from the lower
classes. As a member of the board of governors of the Stock Exchange, Richard
Whitney did not object to the listing of Van Sweringen stock before the
market crash of 1929, although a warning had been written by a technical
expert of the Stock Exchange that the issue was not above suspicion as
contrary to the public interest; Richard Whitney was one of the governors
whose names appeared on the Morgan "stock favor" list as a recipient of some
of this same Van Sweringen stock at a price substantially below the market
price. These facts were adduced in Senate investigations of Wall Street
against which the controlled newspapers of Wall Street protested as blows to
"public confidence" in business and businessmen, by which they merely meant
the small coterie of the richest beneficiaries of the business system rather
than business and businessmen in general.
There were further Whitney connections with the reigning family groups.
Whitney testified at the public hearing of the Securities and Exchange
Commission about his case that he had obtained unsecured loans of $100,000
each from Harold S. Vanderbilt and the late George F., Baker II, and a loan
of $50,000 from Marshall Field III. As the privileged field marshal of great
wealth he had also obtained large unsecured loans from lesser figures of the
Wall Street community like Frank Crocker, J. A. Sweetzer, Herbert Wellington,
Otto Abraham, J. W. Prentiss, George H. Bull, ).4 B. Mabon, and E. A. Pierce.
Most of these latter we're prominent brokers.
Richard Whitney and Company, although not well known to the public, did a
large and, until recently, lucrative business owing to its intimate
relationship with J. P. Morgan and Company. As pointed out by District
Attorney Thomas E. Dewey in a memorandum handed up to the Court of General
Sessions before Whitney was sentenced, the Whitney brokerage firm had over a
period of years handled an average of more than 10 per cent of the entire
bond transactions on the New York Stock Exchange and its customers had
included some of the largest banks.
Whitney leaped to national prominence as an ostensible public savior at 1:30
P.m. on October 24, 1929, the blackest moment of "Black Thursday," when he
placed a dramatic order for 10,000 shares of U. S. Steel common at 205. In
the next hour and a half, darting ostentatiously around the floor of the
Stock Exchange, he showed the stuff of which heroes are made by placing bids
for a score of stocks in similar huge lots. His orders aggregated in all an
estimated $20,000,000 to $30,000,000. It was informally reported that he was
acting for J. P. Morgan and Company, and the report was not denied.
In the next five years Whitney achieved even greater prominence by defying
investigators of the Senate Committee on Banking and Currency in 1933 and
fighting vehemently against the enactment of effective restrictive and
regulative provisions in the Securities and Exchange Act. It was, poetically,
the increased regulation inaugurated and stimulated by the New Deal of
Franklin D. Roosevelt that entangled the erring Whitney in its net. From 1932
onward Whitney made bellicose speeches before business groups in many parts
of the country against government "interference" with Wall Street or the
Stock Exchange, which he termed a "perfect" institution. As the Stock
Exchange was one of the central mechanisms for controlling the money and
credit of the country, there was ample reason for alarm on the part of
Whitney and his associates. Whitney, in short, was an ardent anti-New Dealer.
As a big figure in Wall Street, with a brother believed to be the coming direc
ting influence of J. P. Morgan and Company, Richard Whitney became treasurer
of the New York Yacht Club, director of the Corn Exchange Bank (not a Morgan
institution as the term Is understood in Wall Street), and master of the
Essex Fox Hounds at Far Hills, New Jersey, where he had an extensive estate,
a twenty-seven-room house, and palatial stables filled with blooded steeds;
in New York City he owned a $210,000 town house. His corporate directorates
were, however, confined for the most part to small semi-speculativc personal
enterprises in which he was the dominant factor. The only "Morgan"
directorate he held was in the Morris and Essex Railroad, a subsidiary 'of
the Delaware, Lackawanna and Western Railroad (Morgan). His brother, however,
held many important corporation posts. The exalted social position of George
Whitney is, however, perhaps best indicated by pointing to the fact that he
is a member of the small and select financial coterie that sits as overseers
of Harvard University. Richard Whitney was, ironically, a member of the
visiting committee in the economics department of Harvard University, under
the chairmanship of Walter Lippmann.
Richard Whitney's illegal practices had been going on, it was fully
demonstrated, even while he was president of the Stock Exchange and even
while he was freely advising the government and the public what the country
really needed to make it prosperous. The plain fact is that Whitney was
against regulation because it made it difficult for him to function
improperly, as the upper circles of Wall Street have been, in various ways,
functioning for decades, according to the official findings of numerous
governmental investigating bodies.
Although J. P. Morgan and Company may not have been fully cognizant of
Richard Whitney's affairs, it knew a good deal more about them than Richard
Whitney admitted at public hearings, according to the memorandum of District
Attorney Dewey. Ac-cording to this memorandum, "As early as the Spring of
1931 Francis D. Bartow, a partner of J. P. Morgan and Company, who was also a
director of the Corn Exchange Bank Trust Company, noticed that the bank had
made an unsecured loan to the defendant in the sum of $300,000. At that time
the defendant was president of the
New York Stock Exchange and was also a director of the Corn Exchange Bank
Trust Company. The impropriety whereby the defendant, who was in the
securities business, procured an unse- cured loan from a bank of which he was
a director was called by Mr. Bartow to the attention of the defendant's
brother, Mr. George Whitney, who was also a partner of J. P. Morgan and
Company.
"Mr. George Whitney agreed that, in view of the defendant's position, the
transaction was improper. On June 29, 1931, the de-fendant borrowed from J.
P. Morgan and Company the sum of $500,000, which, to the extent Of $300,000,
was used to liquidate the Corn Exchange Bank loan to the defendant. This loan
by J. P. Morgan and Company was subsequently reduced to $474,000 and
remained unpaid at the date of the failure on March 8, 1938, after successive
renewals."
J. P. MORGAN AND COMPANY TO THE RESCUE
J. P. Morgan and Company, in other words, bailed Richard Whitney out of an
improper loan.
"The records of the Corn Exchange Bank Trust Company," continued the Dewey
memorandum, "disclose that as early as June 6, 1932, shares of the stock of
the Corporation Trust Company were unlawfully pledged by the defendant as
collateral for an overnight loan of Richard Whitney and Company in the amount
of $200,000. . . . Similarly from April 29, 1936, until. November 26, 1937,
the same stock was pledged by the defendant with the Corn Exchange Bank Trust
Company as part security for a loan of Richard Whitney and Company in the
amount of $200,000. During this period Central Hanover Bank and Trust
Company, as co-trustee of the Sheldon estate, had requested the defendant to
surrender custody of the-securities constituting the corpus of the trust in
conformity with the regulations of the State Banking Department.
"After some discussion and correspondence the defendant categorically refused
to comply with this request on the ground that the securities in question
were just as safe in his custody as in that of the bank. . . "
The inner meaning of this is that a broker closely associated with J. P.
Morgan and Company, his head kept above water only by a Morgan loan, was able
successfully to defy a big bank that is not a Morgan institution.
"In December, 1936," said the Dewey memorandum, "the unwholesome condition of
the defendant's business affairs first came to the attention of his brother,
Mr. George Whitney, who then discovered that the defendant had borrowed
substantial sums from various friends . . . and that he had used securities
belonging to .others.' Although these transactions had apparently been
authorized by the owners of the securities so utilized, Mr. George Whitney
advised the defendant that they were detrimental to his credit and created an
undesirable situation in view of the defendant's prominent position in
financial circles and his business relations with the firm of J. P. Morgan
and Company.-
"Accordingly, at Mr. George Whitney's request, the defendant furnished a
memorandum of his financial condition which was reviewed by Mr. George
Whitney and also by Henry P. Davison, another partner of J. P. Morgan and
Company. On January 8, 1937, Mr. George Whitney made a personal loan to the
defendant of $650,000 for the purpose of repaying the money the defendant had
borrowed from Mr. Baker and of releasing the securities belonging to the
other three individuals."
George Whitney insisted at this point on having an audited statement of
Richard Whitney and Company. He was given a false financial statement,
apparently not independently certified by accountants. "Mr. George Whitney
questioned his brother at length concerning the solvency of the firm, to
which questions the defendant now concedes that he gave 'untruthful
answers,"' according to the Dewey memorandum. "Mr. George Whitney states that
he was finally satisfied, as a result of the defendant's representations,
that Richard Whitney and Company was solvent . . ."
On the afternoon of March 5, 1938, after his brother George had left for
Florida unaware that the Stock Exchange felt impelled by some "obscure"
reason, according to Dewey, to push ahead with the case, Richard Whitney
informed Mr. Bartow of the true state of affairs, according to the Dewey
report. "Mr. Bartow said that he could not offer any advice or assistance,
but agreed to confer with counsel," said the Dewey report. From then until
the failure, according to the Dewey memorandum, Mr. Bartow consulted with J.
P. Morgan and the Morgan lawyers, who advised that the banking house or its
partners could not "properly" assist in view of Richard Whitney's criminal
offenses. Further assistance to Richard Whitney was apparently withheld owing
to the danger of assisting someone to escape the consequences of a felony.
The SEC learned that a large number of Wall Street people had known for some
time that Whitney was in difficulties. T. W. Lamont had contributed to a
Whitney loan in November, 1937-.
A UNIQUE MALEFACTOR
Whitney's case diverged saliently from that of preceding Wall Street
malefactors in one important particular that deserves notice: Whitney did not
mulct the general public as others have done. His clients were relatives and
close associates and big banks, which from the strictly Wall-Street point of
view only made his truancy more heinous. The brusque treatment Richard
Whitney has been accorded by newspapers and prosecutors, therefore, has been
pro-voked not because he cheated the public but because he betrayed a
fiduciary responsibility to members of his own class, including his wife, his
stepson, a sister-in-law, fellow club-members, partners, and banks.
As America's 60 Families makes clear, it is extremely difficult to amass and
retain a large fortune by honest methods. It can be done, and it has been
done, although the day is gone when it can be done easily. In view of this,
those persons who desire to amass and retain much money and power see to it
that loopholes exist which they can conveniently utilize in their own
interest. The loopholes are especially essential in maintaining discretionary
control over "other people's money," which the Richard Whitneys of this world
find it so pleasant to use.
It was, indeed, the wider implications of the Whitney affair that were the
most significant and the most sinister; for it appears, after all, that
Whitney had been indulging only in practices that were quite general and
that, in his case, led by pure mischance to the abyss. The New Republic (April
6, 1938) touched upon some of these wider implications when it said Wall
Street in the Whitney case was trying "to keep the finger of suspicion
pointed only at the central figure.... For example, there is the matter of
the million, dollar fund created to protect widows and orphans of the
Exchange members. Bigwigs of the Exchange are appointed trustees to
safe-guard this fund. Government authorities now believe that some, at least,
of these trustees have used their power over the fund so as to give
themselves commissions, and have rotated the fund from one trustee to another
for their personal benefit. This is why, according to a seemingly
well-informed article in the Scripps-Howard newspapers, the securities of the
fund were in Richard Whitney's hands instead of in a safe place. They should.
have been turned over to another man last summer, but he was unable to get
them until November. This incident proved, or should have proved, to
Ex-change leaders that something was wrong. If they knew, why did they not
act? If they did not know, how can they explain their incredible ignorance?
"Their ignorance was equally incredible regarding manipulation of a listed
stock in which Whitney's firm created a corner....
"Richard Whitney's brother, George, a member of the firm of J. P. Morgan,
having already loaned his brother $2,000,000, last November gave him another
million. In spite of this, the records do not indicate that he suspected
anything was wrong. . . .
"The New York Trust Company is a big bank within the sphere of influence of
J. P. Morgan and Company., It lent Richard Whitney money on the security of
his vast country estate and agreed to conceal the fact that the property was
being mortgaged. Did the bank suspect nothing was wrong? If so, what a naive,
what an innocent, what a trusting attitude it took!"
The New Republic observed in conclusion that the New York Sun, which
frequently runs journalistic errands for Morgan's, exonerated everybody else
in Wall Street while writing "sob-stories" about Whitney. "Serious as were
Richard Whitney's own acts," said 'The New Republic justly, "in our judgment
the attitude of others in Wall Street is even more serious."
Added point to the observations of The New Republic was given several days
later when the report of J. N. Stanislaus, of the Probation Office of the
Court of General Sessions, appeared. This report remarked upon an
"overanxiety" on the part of Richard Whitney that suggested "he may be
shielding some one, but who or for what particular reason are questions yet
to be answered." This judgment was based upon the unusually guarded way
Whitney discussed his thefts while talking freely about other matters.
The case of Richard Whitney, to conclude, is a contemporary, fresh reminder
of the thesis in America's 60 Families that hostile and pseudo-friendly
critics have tried to conceal from the public: faithless men of great wealth
from a small irresponsible group are in control of the levers of society and
move these levers in their own wayward interest.
pps. 501-533
-----
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