Bear Hunt (Cont'd)

To Brigadier General Charles Gates Dawes the New York Stock Exchange is just a "peanut stand" (see p. 12), but to the Senate Committee on Banking & Currency the low price of Wall Street peanuts is a matter of grave concern. Fortnight ago the committee summoned Exchange President Richard Whitney, heard from him that not short selling or bear raids, but liquidation by "people who are trying to give these United States of ours away" is responsible for the currently depressed stock market (TIME, April 25). Last week the committee continued its bear hunt.

Somewhat irked by Mr. Whitney's composed manner and cool utterances, the committee set off on a new angle of inquiry. Senator Walcott of Connecticut, President Hoover's good friend who started the inquiry, had less to say last week, left the conduct of the investigation to Chairman Peter Norbeck (who was in the West when it was voted) and to the committee's new counsel, William A. Gray of Philadelphia. First move of the committee was to publish the names of 350 traders who were short 2,500 or more shares as of April 8. The 350 included many well known operators, many dummies. Among them:

Matthew Chauncey Brush, president of American International Corp., famed bear and first witness called by the committee after Mr. Whitney. American Brush Co., headed by G. S. Brush, brother of Matthew. Bernard E. ("Sell 'em Ben") Smith, known in Wall Street as "No. 1 bear." W. E. Button &; Co., where Smith makes his office. Ludwig Bendix, no relation to Vincent. Miss M. A. Boyle, who was identified as an associate of Bernard Mannes Baruch. financier and Democrat, but denied she held the account for him. George F. Breen, famed as a "market maker." Harry Content ("most cold-blooded man in Wall Street"). Arthur William Cutten, once Chicago's best known bull. Marquis de San Miguel. Herbert L. Dillon of Eastman, Dillon &; Co. Stnyvesant Fish. Bertha, Joseph and Paolino Gerli (silk). Thomas Montgomery Howell, Chicago grain operator, who last summer cornered 70%, of the visible corn supply, squeezed shorts, said: "I go along, ask no quarter, don't give any." Coleman F. Madden, known on race tracks as "Handsome Coley," who recently told friends he "preferred Wall Street to the horses." B. C. Neidecker, War aviator, managing director of the Travelers Bank of Paris (also listed). Raymond Patenotre, member of the French Chamber of Deputies. Zalmon Gilbert Simmons (beds). Greva Compania, headed by William Greve, president of New York Investors, Inc., vice chairman of Prudence Co., Inc.

Bear Parade. Before the committee reviewing stand began to pass a parade of almost legendary figures--men whose names committeemen and the Wall-Street-conscious public had linked with million-dollar deals, but whose persons had hitherto been concealed in the abysses of Wall Street. Leading the parade was Matthew Chauncey Brush. In marked contrast to Mr. Whitney's quiet precision (which irritated Chairman Norbeck to the point of shouting: "You're hopeless!") was the bluff readiness-to-tell-all of Witness Brush. Mr. Brush greeted Counsel Gray (an old friend), blithely told how he started in Boston with "pretty skinny trading" ten years ago while he was president of American International Ship-Building Corp. In 1929 he was a big bull, did not become a bear until the next year. In 1929 he was 125,000 shares long of the market with a liquidation value of $15,000,000; since then he has been at times 125,000 shares short. He agreed that the Exchange statistics on short sales did not give an accurate picture of bear operations, since they did not include short sales covered the same day. He offered a sharp contradiction to Mr. Whitney's testimony (and to a major point in all Mr. Whitney's declarations in defense of the Exchange) by opining that short selling does temporarily depress the market, that short sales covered the same day do add to breaking prices.

Bear Brush vigorously opposed abolition of short selling. If no bears sold against foolish bidding or covered when there was foolish selling, he said, there would be "terrific swings" in the market. "The use of dummy names has advantages and disadvantages. If word got round that some bad actor was selling short, the market might fall out of bed." He said that pushing a stock up is as bad as pushing it down --"especially if it's done just at the close of day's market. The fellow out on Keokuk tells his brother over a stein of beer: 'See what Telephone or Steel did?' Next morning they rush in and buy some at the advanced price, and the fellow who closed the market up sells it to them.

"It's pathetic, the basis on which the average traders buy stock. They get a circular from Heinie & Kabooble, just over here from Greece two months,* telling them that XYZ is a great buy, and they all jump in. That's no exaggeration."

His own system is to buy and sell over long periods. He said he had never been on the Exchange floor, had been in a broker's office only three or four times. He takes his position, either long or short, and clings to it. "If a stock is a buy at 99 it's a buy at 100. I don't think my short position has any more effect on the market than a rabbit. Patriotism has no more to do with it than that inkwell." He said he was still holding one stock which he thought would sell ten points lower in the next six months, but "the man don't live who can tell what the market will do in the next six months."

His thick grey hair rumpled, his face twisted into a wry smile, Bear Brush announced: "I'm going to be shot when I get back to New York." Senator Brookhart: Have they got rackets like Al Capone up there? Mr. Brush: Al Capone is a piker compared to that racket.

New Yorkers smiled, remembered colorful Mr. Brush's reputation for giving a party every night, for sending birthday telegrams to hundreds of people. He has a passion for elephants, owns 1,100 elephant figures in gold, ivory, wood, silver. Once he had a live one hoisted to the roof of a hotel where he was giving a party.

A far different witness was baldish Percy Rockefeller. Shy and beady-eyed, looking to the camera much like his cousin's friend Soul Surgeon Frank Buchman (see p. 22), he was prodded unmercifully by Counsel Gray. He said he could not remember what stocks he had sold last January (12,000 shares), although he had covered them only five or six weeks ago. Mr. Gray could get no substantiation of stories that Mr. Rockefeller, sitting on bank boards, would learn what stocks would be forced on the market at certain figures, after which the bears would force prices down below the level at which the banks would continue loans, enabling the bears to cover at big profits. Mr. Rockefeller denied he had any knowledge of when banks would call loans.

Q. There has been a rumor that you broke with President Hoover and became a short seller to depress prices. Is that rumor correct? A. Now what object would I have in doing a thing like that?

Q. Perhaps to hurt Mr. Hoover's chance for reelection. A. Oh. no! I am a Republican.

Q. Senator Walsh just said he believes international bankers have smashed the market to force the United States into a position where we must cancel War Debts. Do you think he is correct in that belief? A. All those stones are ridiculous, it seems to me. Mr. Rockefeller told the committee he met Ben Smith when Smith sold him one of his first automobiles, some 20 years ago. His own losses, he said, had been "terrible."

Senator Couzens: How much is "terrible?" Mr. Rockefeller: A good many millions.

Finally, he told the committee he had not sold short in the last five weeks. Senator Copeland of New York (who had just dropped in to listen) got up and walked out. Said he: "They are conducting this like a police court."

Next in line came Bernard E. Smith and Thomas E. Bragg. Bear Bragg estimated he had been short as much as 50,000 shares at one time, "but right now my short accounts are between 12,000 and 15,000 shares." But far more interesting to the committee than his short operations was his story of a $32,000,000 bull pool in Anaconda Copper just before the 1929 crash.

Q. How much did you put in? A. About $500,000. I think Mr. Smith put in a half million and Mr. Rockefeller $120.000.

Q. Go ahead and name the others. Mr. Bragg named John Jacob Raskob. chairman of the Democratic National Committee ; William F. Kenny, contractor friend of Alfred Emanuel Smith; William Crapo Durant, onetime president of General Motors Corp.; General Motorsman Frederic John Fisher, and Michael J. Meehan, theatre ticket seller who rose to Wall Street power by riding Radio from $25 a share to $549.

Senator Couzens: How did the operation come out? Mr. Bragg: I lost $400,000. Others may have lost more. Senator Couzens: What representations were held out to get people to join? Mr. Bragg: Possible profit. Counsel Gray: Wasn't that pool formed because of the ability of this group to manipulate the market? Mr. Bragg: I don't think there was any manipulation. Counsel Gray: Oh, be a little frank with this committee. You didn't just take $32,000,000 into the market and then sit down and wait. Tell us some truth. Senator Glass: I protest against bully ragging the witness that way.

Bear Smith told the committee : "People do call me one of the big operators, but nobody has ever called me a big bear raider to my face." Mr. Gray tried but failed to get him to admit that the floor specialist in a stock would give to pools information as to buying and selling orders on his books.

Counsel Gray: But take the radio pool. Meehan, the exchange specialist, was a member. Mr. Smith: Mr. Meehan has never been a member of any pool. The pool account has always been in his wife's name.

While the committee was debating whether to call Messrs. Raskob, Fisher and Kenny, Mr. Raskob was waiting patiently in Washington, had even dropped into the hearing one day to see how things were going. Broker Meehan hastened from New York to testify; William H. Danforth of Boston arrived from Florida. Meanwhile Counsel Gray and his assistant David Stock were reading hundreds of anonymous letters giving tips about specific operations and operators. With so much material on hand and so many witnesses waiting to testify, the committee decided to send special investigators to New York, voted to make a full investigation of the stockmarket if it took all summer.

*Witness Brush was, of course, speaking figuratively. His mind was dimly echoing a name once famed in Chicago, "Heinie Keboobler." That was the name of two famed oldtime saloons --one on Quincy Street, one on South State. Both were full of practical-joking devices--stairways which suddenly folded under you, telephones that spit in your eye, rubber pretzels, dribble glasses, electric wiring to give a shock with your change at the bar or to the unwary in the lavatory.

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