Bernard Baruch

From the Preface

Bernard M. Baruch and I were at each other’s sides for four years, he in posthumous, archival form. We had our ups and downs together. I began work on his biography with the hypothesis that there was less to the legendary investor and mythical Adviser to Presidents than met the eye. Bringing out the truth, I hoped to put a famous American life in the context of almost a century of American financial history.

I was successful in one thing, at least. I was able to show conclusively that Baruch, as a moneymaker, was only human. Thus, he did not sell out at the top in 1929—he was, indeed, bullish—a fact that may prove to be of more than academic interest in the highly speculative market environment of 1996. However, what I quickly came to understand was that this fallibility was worthy and appealing. Certainly, the success that the mortal Baruch enjoyed through trial and error was harder won than any that the legendary Baruch might have achieved through pure clairvoyance. My skepticism turned to admiration.

And presently, admiration was mingled with affection. As I read Baruch’s correspondence and talked to some of his surviving friends, I began to like him. (“I nearly laughed myself sick at the idea of your looking dignified at the time the degree was conferred upon you,” Baruch wrote to his old friend Frank Kent, star political columnist of the Baltimore Sun, on the occasion of Kent’s receiving an honorary degree for which Baruch had nominated him. “Your poor wife! Your poor wife!”) I, too, became his friend. And then, as the years passed and as my research moved into the public phase of his career, all previous feelings gave way to an overwhelming sense of exasperation. By the time the first book was published, in 1983, I was glad to see the back of him. Then, again, I have no doubt, Baruch would have been delighted to be done with me.

From Chapter Three: Baruch’s Wall Street

Considered as matters of timing, Baruch’s apprenticeship in Wall Street was unlucky but his journeyman years there were heaven sent. The signal event of his early career at A. A. Housman & Company was the Panic of 1893 and the long depression that followed it. Railroads failed (William H. Vanderbilt had assessed the prospects of that basic industry a decade before: “In a year or so we may have no Government. We must have railroads.”), violent strikes erupted, and the nation passionately chose up sides over the currency. In 1894 a seat on the New York Stock Exchange was sold for what would prove the lowest price from that day to this: $14,000. In Chicago, soup kitchens were thrown up to accommodate the casual travelers who had drifted to town for the Columbian Exposition of 1893 and who had been stranded by the panic as if by a blizzard.

Not until after the defeat of William Jennings Bryan and the silver movement in the 1896 presidential election did the depression run its course. The ensuing boom smiled on Baruch’s stockbroking years. In 1896 a wave of corporate mergers began that would culminate in 1901 with the capitalization of the United States Steel Corporation at $1.4 billion, a sum a third again as large as the public debt. Industrial companies were organized, railroads were reorganized, and new securities poured from Wall Street. The stock market, which in the early 1890s had been in the hands of professionals, increasingly engaged the public. At the turn of the century more people traded more common stock than ever before. Endowed with what a later generation would call “glamour,” the shares of a trolley line, Brooklyn Rapid Transit Company, in 1899 leaped from 61 to 137, much to the delight of the waiters and clerks who had had no idea that money was so easily gotten. Late in the 1890s, 400,000 shares was considered a good day’s business on the Stock Exchange. In 1901, a single session brought 3,000,000 shares and a seat changed hands for $80,000. “Everybody was making money,” a fictional but authentic account of those days related:

The steel crowd came to town, a horde of millionaires with no more regard for money than drunken sailors. The only game that satisfied them was the stock market. We had some of the biggest high rollers the street ever saw: John W. Gates, of “Bet-you-a-million” fame, and his friends, like John A. Drake, Loyal Smith, and the rest; the Reid-Leeds-Moore crowd, who sold part of their steel holdings and with the proceeds bought in the open market the actual majority of the stock of the great Rock Island system; and Schwab and Frick and Phipps and the Pittsburgh coterie; to say nothing of scores of men who were lost in the shuffle but would have been called great plungers at any other time. A fellow could buy and sell all the stock there was. Keene made a market for the US Steel shares. A broker sold one hundred thousand shares in a few minutes. A wonderful time! And there were some wonderful winnings. And no taxes to pay on stock sales! And no day of reckoning in sight.

So intimately bound up with Wall Street is Baruch’s story that a social, financial, and geographical digression on that place as he first knew it might now be in order. To begin with appearances: the financial center, of which the epicenter was the New York Stock Exchange, at Broad and Wall Streets, was small, sunlit, and equine. The Trinity Building, up Broadway from Wall and just north of the Trinity churchyard, was six stories high, not the twenty-one stories of the current successor Trinity Building. Across Broadway, the Equitable Building rose eight stories rather than the current thirty-eight (a mass which at its construction in 1915 constituted the highest office structure in the world). The streets downtown were thronged with horse-drawn transport: wagons, hansom cabs, and streetcars; also with pushcarts and with men who invariably wore hats. To venture outdoors bareheaded or in shirtsleeves was to risk the open derision of passersby. (Wall Street was very much a man’s world. In 1900 the census counted exactly 240 women brokers and bankers in all of New York State as against 11,293 men, of whom 7 were black.) Before the arrival of subways in 1904, the main locomotive transportation downtown from the Upper West Side was the Sixth Avenue Elevated. For Gates, famous as a barbed-wire salesman, stock market speculator, and gambler, organized the American Steel & Wire Company, one of the components of the US Steel consolidation. Drake was a financial and racing associate of Gates’s, and Smith was a real estate operator. Once in a baccarat game at the Waldorf, Baruch recounted, Gates drained the blood from the faces of Smith and Drake by betting them $1 million. With him, not against him. (Bet-a-Million, as Gates was fittingly known, won and lost a half million on that game—a heart-pounding draw.) The Reid and Moore in the “Reid-Leeds-Moore” crowd were Daniel G. Reid and William H. Moore, important stockholders in the National Steel Company, American Tin Plate Company, American Steel Sheet Company, and American Steel Hoop Company. To each man’s enormous profit, the businesses were merged into US Steel. Before the consolidation, William B. Leeds was president of Tin Plate. Charles Schwab, Henry C. Frick, and Henry Phipps, of course, were also leading steel executives. a nickel the El bore passengers down past Central Park and the Plaza Hotel, past the reservoir at 40th Street and by Macy’s and Union Square, down to Chambers Street and around the steepest railroad bend in the world, past Newspaper Square and City Hall and the old Post Office (a magnificent granite neo-Renaissance pile, razed in 1938–1939), by the churchyard at St. Paul’s and the Jersey City ferry slips to Rector Street; all in all, from Baruch’s first house at 245 West End Avenue near 72nd Street, a trip of about forty minutes. Baruch’s first year as a clerk in 1891 was the last year before the advent of the Stock Exchange Clearing House. Every share that was bought or sold was received or delivered by hand even if a subsequent offsetting transaction made the receipt or delivery redundant. A few blocks east of this old-fashioned clerical swirl, longshoremen drove horse carts to the sailing ships that were moored along the East River and boys swam nude, in season, from the docks at the Fulton Fish Market. In all seasons at the Curb market, antecedent to the American Stock Exchange, brokers traded stocks in the open air.