NYT: From White Knight to Thief

From the New York Times:

In August 1941, Richard Whitney, the former financier and New York Stock Exchange president, emerged from prison at Sing Sing, on parole after serving three years of a five- to 10-year sentence for grand larceny.

Whitney had stolen from the New York Yacht Club and from Harvard (where, as a member of the class of 1911, he had rowed for the crew team); from his wife’s family estate; as well as from the widows and children who depended on the Stock Exchange Gratuity Fund, of which he was trustee.

Dick Whitney had once been hailed as a “Great White Knight” of Wall Street. At the start of the terrifying market plunge of October 1929, he had bravely helped shore up the market by parading around the exchange floor, placing bids for shares of U.S. Steel, as well as other blue-chip holdings.

In the early 1930s, the top-hatted Whitney had a reputation as a “perfect snob,” quietly blocking Jewish aspirants from reaching important positions in his exchange. With a thoroughbred-horse-and-cattle farm in Far Hills, N.J. — he was also president of the Essex Fox Hounds — and a five-story, red brick townhouse at 115 East 73rd Street, his lifestyle required a formidable cash flow. And soon he found himself in severe debt.

Evidently intrigued that his Harvard schoolmate Joseph P. Kennedy, who had followed him by a year, had made millions selling Gordon’s Dry Gin and Haig & Haig Scotch, Whitney tried to achieve a similar trick — while Prohibition was winking out in 1933 — with Jersey Lightning applejack and Canadian rye. But these and other more fly-by-night gambits failed, and Whitney started his secret life of crime.

Both Whitney and President Franklin D. Roosevelt, who was six years his senior, were born into the old American, Northeastern, Protestant, moneyed patriciate; both had attended Groton School and Harvard. This shared inheritance, however, didn’t keep Whitney from leading a fierce campaign, summoning his full throw-weight as chief of the New York Stock Exchange, to attack Roosevelt’s proposed Wall Street regulations.
At the White House, Whitney warned the president that such drastic change could ravage the American financial system, with the result that “grass will grow in Wall Street.” Defending his organization, Whitney told United States senators and their staff members: “You gentlemen are making a huge mistake. The exchange is a perfect institution.” But Congress approved Roosevelt’s reforms, which were enforced by Joseph P. Kennedy, then the chairman of the new Securities and Exchange Commission.

On Halloween 1936, three days before his landslide re-election, Roosevelt signaled his intention to crank up more pressure against Wall Street. At a huge, raucous rally at Madison Square Garden, the defiant president declared that “government by organized money is just as dangerous as government by organized mob.” Using language that sounds almost contemporary in 2014, he said the “forces of selfishness,” of “reckless banking” and “class antagonism” were “unanimous in their hate for me, and I welcome their hatred.”
With the crowd shrieking, Roosevelt went on to exclaim, “I should like to have it said of my second administration that, in it, these forces met their master!”

Then, 16 months later, the president was informed of Whitney’s indictment for grand larceny, and details of the embezzlement. The president’s strategist-speechwriter Thomas Corcoran — whom Roosevelt called Tommy the Cork — recalled to me decades later that, in response to the news, the shocked Roosevelt lowered his head and murmured: “Poor Groton. Poor Harvard. Poor Dick.”

As in recent times, an American president had to make a decision about how personal he should get about the transgressions of Wall Street titans. The revelations about Whitney seemed to hand Roosevelt a powerful foil. Some of his advisers encouraged him to exploit and dramatize the Whitney scandal, making the financier a national avatar of Wall Street misbehavior.

But to their surprise and dismay, Roosevelt, in public, never cited Whitney, his offenses or his downfall. Although so often derided by many of his social peers as a “traitor to his class,” Roosevelt refused to exploit Whitney’s troubles; he did not instruct his staff and political allies to ask friendly journalists and legislators to help them make the fallen financier into a demonic household name. This is one reason that Whitney’s name is so little known today....MORE

HT: Value Investing World