In
1923, a group of the world’s most successful financiers met at the Edgewater
Beach Hotel in Chicago. These tycoons were extremely rich & altogether they
controlled more wealth than there was in the US Treasury. Their success stories
were published everywhere inspiring many to follow their fine examples. Just
look at who they were:
1.
Arthur Cutten – The greatest wheat speculator.
2. Albert Fall – The Secretary of Interior in President Harding’s cabinet.
3. Leon Fraser – The president of the Bank of International Settlements.
4. Howard Hopson – The president of the largest gas company.
5. Ivar Kreuger – Head of the world’s greatest monopoly.
6. Jesse Livermore – The greatest bear in Wall Street.
7. Charles Schwan – The president of the largest independent steel company.
8. Richard Whitney – The president of the New York Stock Exchange.
But
27 years later in 1948, this was what happened to them:
1.
Arthur Cutten died abroad insolvent.
2. The penniless Albert Fall was pardoned from prison so that he could die at
home.
3. Leon Fraser committed suicide.
4. Howard Hopson was insane.
5. Ivar Kreuger committed suicide.
6. Jesse Livermore committed suicide.
7. Charles Schwan was bankrupt & had to live on borrowed money the
last 5 years of his life before his death.
8. Richard Whitney was recently released from Sing Prison.
The introductory section about
all these men meeting at Chicago’s Edgewater Beach Hotel in 1923 is fictional: contemporary
newspapers made no mention of such a meeting nor suggested any event that could
plausibly have brought so many prominent men from several diverse industries to
Chicago all at the same time.
- Charles M. Schwab was the Steel Titan: a
young man who worked his way up from an entry-level job in an Andrew
Carnegie steel mill at age 17 to become president of Carnegie Steel at 35.
Schwab also served as president of United States Steel before taking over
Bethlehem Steel in 1904, where his business acumen and perceptive
risk-taking made him a millionaire many times over by 1923.
Through a combination of bad investments, the 1929 stock market crash, and the prolonged economic depression of the 1930s greatly diminished Schwab’s wealth, he didn’t exactly live the life of a “pauper” — he continued to spend lavishly and maintained a 900-acre estate in Loretto, Pennsylvania, and a $3 million Renaissance palace on Riverside Drive until his death in 1939. He lived his last years on borrowed money, however, and left behind an insolvent estate with debts and obligations totaling over $1.7 million. Ironically, had his executors waited a little longer to liquidate his investments, the rising pre-war market would have increased their value sufficiently to cover all his debts. - Howard Hopson was a former New York
utility regulator who, along with John Mange, bought up Associated Gas and
Electric Company (AGECO), a conglomeration of electric and gas companies
in New York, Ohio, and Pennsylvania in the early 1920s. By 1929 Hopson had
turned AGECO into one of the country’s largest utility holding companies,
but unfortunately he did so largely through fraud, as AGECO essentially
became a huge pyramid scheme which always managed to stay one step ahead
of its lenders and stockholders. Hopson’s financial mischiefs were one of
the driving forces behind the passage of the Public Utility Holding
Company Act (PUHCA) in 1935
and the establishment of regional, regulated utilities. AGECO declared
bankruptcy in 1940 and was reorganized after World War II as
General Public Utilities (GPU).
In 1941 Hopson was sentenced to five years in prison on seventeen counts of mail fraud for swindling AGECO investors out of $20 million, and later that year he was sentenced to another two years (to be served concurrently) for income tax evasion. He lost most of his estimated personal fortune of $74 million and lived out the rest of his life in “obscurity and ill health,” dying in Brooklea Sanitarium at age 67 in 1949. (Whether Hopson could be accurately characterized as having “died insane” is difficult to determine. His 1940 trial was delayed several times by claims of poor physical and psychological health, and he was twice sent to Bellevue hospital for psychiatric evaluations to determine whether he was mentally fit to stand trial. Although Hopson died in a sanitarium, any inference drawn from that fact would not be conclusive because such facilities treated patients for both physical and psychological illnesses.)
- Richard Whitney was the Harvard-educated
son a Boston bank president who went to work in a banking house, bought a
seat on the New York Stock Exchange (NYSE) at age 23, became
principal broker for J.P. Morgan & Co., was elected to the
governing board of the NYSE, and on 24 October 1929 (also known
as “Black Thursday,” the day the stock market crashed) performed one of
the most famous feats in the history of Wall Street: strolling across the
floor of the exchange and placing generous orders for a variety of blue
chip stocks in order to halt the panic by convincing frightened brokers
and investors that bankers still had confidence in the market. He was
proclaimed a hero in the next day’s headlines after the market rallied,
and for his efforts he was rewarded with four terms as the president of
the NYSE. (This item introduces an anachronism into the list, because
Whitney did not become president of the NYSE until six years after the
purported 1923 meeting at the Edgewater Hotel described in the examples
above.)
Unfortunately, Richard Whitney proved to be a very poor manager of his own financial affairs, living it up to the tune of $5,000 per month even at the height of the Depression. As he fell deeper and deeper into debt, he turned to embezzlement to keep himself afloat. Because Whitney cooperated with authorities when he was eventually caught in 1938, he was tried only on a single count of grand larceny (for misappropriating funds from his father-in-law’s estate) and given a sentence of five to ten years in Sing Sing prison. The statement that Whitney “spent the rest of his life serving a sentence in Sing Sing Prison” is way off the mark, and the claim that he was “released from prison to die at home” is grossly misleading. Whitney was release on parole after serving less than three and a half years of his sentence, and he lived on for another three decades before passing away at the ripe old age of 86 in 1974.
- Arthur William Cutten, of Guelph, Ontario,
left home at the tender age of 18, hopped a train to Chicago, and found
work as a bookkeeper with A.S. White and Company, a brokerage firm where
he learned the rudiments of grain trading. Cutten managed to save up
enough money to buy a seat on the Chicago Board of Trade, and within ten
years his prowess in the grain trading market had made him of one
America’s most successful speculators and a millionaire to boot. By the
1920s he was one of America’s richest citizens: in 1924 he earned a profit
of $2 million, and in 1925 he reportedly paid a whopping
$540,000 in income tax.
Cutten was suspected of being the ringleader of one or more insider consortiums that artificially boosted the stock market to an all-time high in the spring of 1929, leading to the Great Crash in October of that year. He was called to appear before the Senate Committee on Banking and Currency which investigated the stock market collapse, but he professed to having a poor memory for details and was not charged with any market-related crimes. Cutten did lose a great deal of money in the stock market crash (reportedly up to $50 million), but he remained far from a pauper, later mentioning that he was down to his last $17 million. In 1936 Cutten was indicted on a charge of evading over $400,000 in income taxes (and two more indictments on similar charges were pending), but he passed away a few months later before being brought to trial. Cutten died of a heart attack at the Edgewater Beach Hotel in Chicago at age 66 in 1936.
- Leon Fraser was a PhD graduate of Columbia
University (he later added a law degree to his résumé) who worked as a
reporter for the New York World, was admitted to the New York
bar (even though he did not yet hold a law degree), and returned to
Columbia to teach public law at his alma mater. Fraser’s support of
pacifist causes in the years before America’s entry into World War
I caused Columbia to drop him as an instructor, but when America
declared war on Germany, Fraser enlisted in the Army as a private. He rose
to the rank of major by the end of the war and was awarded the Distinguished
Service Cross for his efforts.
After the war, Fraser held a variety of administrative positions in both government and private industry, serving as a director, trustee, chairman, and treasurer for a number of businesses and charitable organizations. Fraser and another American, Gates McGarrah, served as the first two presidents of BIS, the Bank for International Settlements. (Fraser is another anachronism in this piece: the BIS was not founded until 1930 and Fraser did not become its president until 1935, so he could not accurately have been described as “president of the Bank for International Settlements” in 1923.)
In
1945, while the 55-year-old Fraser was president of First National Bank of New
York, he shot himself in the head at his summer home in North Granville, NY. He
left behind a suicide note stating that he had been “depressed mentally and
[had] suffered from melancholia that gets steadily worse.” Obituaries noted
that he had been in “low spirits” since the death of his wife two years
earlier.
- Jesse Livermore, also known as the “Boy
Plunger,” the “Great Bear,” the “Wall Street Wonder,” and the “Cotton
King,” was one of the most flamboyant and successful market speculators in
the history of Wall Street. During his three-decade career as the King of
the Speculators he reportedly made (and lost) four separate
multi-million-dollar fortunes, was the subject of a best-selling biography
(Reminiscences of a Stock Operator) and authored the classic 1940
work How to Trade Stocks. He was also one of the prominent
speculators later blamed for having precipitated the Great Crash of 1929,
during which he claimed to have made over $100 million.
Livermore committed suicide at New York’s Sherry-Netherland Hotel a week after Thanksgiving in 1940. - Albert Fall was a New Mexico rancher,
lawyer, prospector, miner, legislator, and (after the New Mexico territory
was admitted to the Union as the 47th state in 1912) a U.S.
senator. He was appointed Secretary of the Interior by President
Warren G. Harding in 1921, but his tenure in that cabinet office was
short-lived, as he resigned in 1923 after being implicated in the Teapot Dome oil
fields scandal. (Fall leased two government oil reserves, Teapot Dome and
Elk Hills, to private oil companies.)
A 1926 trial on charges of conspiracy to defraud the government acquitted Fall, a 1927 prosecution on related charges was declared a mistrial amidst charges of jury tampering, and a 1929 trial convicted Fall of accepting a $100,000 bribe from oilman Edward L. Doheny. Fall was fined $100,000 and sentenced to one year in prison. (He was released without ever having paid his fine, presumably because he could not afford it.) Although Fall was paroled (largely for reasons of ill health) after serving ten months of his one-year sentence, he was “pardoned from prison so that he could die at home” — he lived on for another twelve years before passing away at age 83 in 1941.
- Ivar Kreuger was the “Match King,” a
Swedish businessman who founded and ran Kreuger & Toll, a
multi-billion-dollar match conglomerate. Kreuger, like other financial
crooks of his era, was essentially running a huge pyramid scheme through a
complex structure of hundreds of subsidiary shell companies, hiding his
manipulation by cooking the company books and insisting that financial
statements not be audited.
Kreuger & Toll securities were among the most widely held in the United States, and when the company went under in 1932 (nearly $250 million worth of claimed assets were found to have never existed) investors lost millions in the largest bankruptcy of its time. The scandal led to the passage of laws requiring mandatory audits of all companies with listed securities.
Kreuger shot himself on 12 March 1932, although rumors have persisted that his death was a case of murder and not suicide. - Samuel Insull was another utilities giant,
an English immigrant who served as private secretary to inventor Thomas
Edison and managed the company that would become General Electric. After
moving to Chicago in 1892, Insull assembled an empire of utility and
transportation companies including Commonwealth Edison, People’s Gas, and
the Northern Indiana Public Service Company, and he acquired several
electric railways in Indiana and Illinois.
The Great Depression brought Insull’s empire crashing down in 1932 due to an overly leveraged financial position of his main holding company, and Insull lost his utilities holdings (once rated at $3 billion) and his personal fortune (estimated at somewhere between $75 million and $300 million). He fled to Greece to live on a meager income of $18,000 per year but was returned to the U.S. to stand trial on charges of mail fraud, embezzlement, and violation of the bankruptcy acts. He was acquitted in three separate trials, but his ordeal left him in poor health. Six years after his fall, at age 78, Insull died of a heart attack in a Paris subway station with twenty cents in his pocket.
The lessons we’re to take from
this item are many and varied: money and power don’t bring happiness so be
careful what dreams you pursue; a lust for wealth is necessarily a corrupting
goal; playing golf more and working less will do wonders for your lifespan (and
possibly your wallet).
OTHER
LESSONS
1. Wealth dishonestly earn, diminishes quickly. It is the blessings of the Lord that makes
one rich. You can make money by fraud but it wouldn’t last.
2. Don’t put your trust in riches because it is temporal; put your
trust in God because he will never disappoint you.
3. As your live your life, one of the most important decision you
have to make is where to spend eternity whiles you are alive. These great men worked hard to become the
best in their fields but they die without having a relationship with God.
4. Guard your heart against bribes as you work. The bribe you are taking today will come back to haunt you.
Source: snopes.com
INCREDILBE PRINCE
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