Little Mac's Exit

As they trooped glumly into the wood-paneled splendor of their boardroom one morning last week, 26 governors of the American Stock Exchange steeled themselves for an unpleasant task. An hour later the deed was done. Out of his $75,000-a-year job as president of Amex went genial, silver-haired Edward Theodore McCormick, 50. Out along with McCormick went his right-hand man and chief adviser, Exchange General Counsel Michael E. Mooney, 46.

McCormick's resignatio -by -request was an ignominious end to what had started as a tale of triumph. When he took over as president of New York's junior exchange in 1951, McCormick--often called "Little Mac"--quickly made himself one of the most popular men in Wall Street. His personal history was the kind that warms the American heart: a onetime newsboy, he made Phi Beta Kappa while putting himself through the University of Arizona, then worked his way up from a $1,900-a-year job with the SEC to appointment by Harry Truman as an SEC commissioner.

During his early years in New York, Little Mac, who always pointed out that he was a Democrat in Wall Street, did big things for Amex. When he took over it was still the lowly Curb Exchange. McCormick changed its name to the more resounding American Stock Exchange and set out with notable success to sell more companies on listing their stock. In his decade as president, daily share volume grew from an average 450,000 to 1,900.000, and the value of a seat on the Little Board skipped from $9,500 to $80,000.

The Grumblers. But while McCormick was writing the Amex success story, a chorus of grumbles was beginning to rise from members who complained that things were run too loosely. Little Mac. they said, liked the Stork Club and the excitement of bringing new companies to the board much better than the tedium of tending to the growing administrative problems of the big exchange he was creating.

The grumbles broke into the open when two of Amex's trusted stock specialists, Gerard A. Re and his son Gerard F., were accused by the SEC of five years of market rigging and price fixing that netted them an estimated $3,000,000. McCormick, it turned out, had had personal dealings with the Res in over-the-counter stocks. It was all perfectly legal, but its propriety was dubious. And almost immediately, more sloppy administration at the Amex came to light: the policing of its members was slipshod and records of transactions were incomplete. Then, to the everlasting annoyance of the rest of Wall Street, the federal investigation of Amex was expanded to include the whole securities business.

"A Couple of Things." Anxious to get the house in order, a group of younger Amex members tried to oust the McCormick administration. Their revolt was beaten back, but it spurred the exchange to appoint an investigating committee of Wall Street leaders to do what it could to clean things up before the SEC moved in with public disclosure. Turning its attention to McCormick, the investigating committee soon picked up what its tightlipped members described only as "a couple of things."

Though no one was talking--least of all McCormick, who last week disappeared from all his old haunts--one of the things the investigators reportedly uncovered was McCormick's friendship with Alexander Guterma, former president of the Detroit auto parts firm of F. L. Jacobs & Co., who was sent to federal penitentiary two years ago for stock fraud. The friendship was close enough, so the story went, that when McCormick ran up a sizable gambling debt during a 1956 trip to Havana, he let Guterma pick up the tab for him.

Like McCormick's dealings with the Res, this was presumably legal--and occurred before Guterma's illicit stock operations became known. But once again McCormick could be faulted for ethical misjudgment. Given McCormick's undeniable services to Amex, his colleagues might, in different circumstances, have taken a less stern view of his peccadilloes. But when the SEC investigations get into full swing early next year, the governors of the American Stock Exchange will have all they can do to defend their exchange as an institution, without having to make the case for Little Mac as well.

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