The Go-Go Years (2 page)

The visible parallels to 1929, in the business and financial spheres, were enough to make a man agree not merely with Santayana, who said that those who forget history are condemned to repeat it, but with Proust, whose whole great book, read one way, seems to say that man's apparent capacity to learn from experience is an illusion.

Before the crash in 1929 the financial sages had insisted repeatedly that there couldn't be another panic like that of 1907 because of the protective role of the Federal Reserve System; before the crash of 1969–70 a later generation observed repeatedly that there couldn't be another panic like that of 1929 because of the protective role of the Federal Reserve System and the Securities and Exchange Commission. In each case a severe market break had taken place about eight years earlier (in 1921 and 1962, respectively), followed by a period of progressively more unfettered speculation. In each case huge, shaky financial pyramids, built on a minimum of cash base, had been erected by financiers eager to take maximum advantage of the public's insatiable appetite for common stocks. Before 1929 they had been called investment trusts and holding companies; now they were called conglomerates. In each case there had been a single market operator to whom the public assigned the star role of official seer. In the 1920s the man to whom the public ascribed almost
supernatural power to divine the future prices of stocks had been Jesse L. Livermore. In the middle 1960s, it was Gerald Tsai.

In each case, certain insiders contrived to use privileged information and superior market technique to manipulate stock prices and thus deceive the public; in the 1920s the manipulators had been called pool operators, in the 1960s they were called portfolio managers. (It is curious to note that, while the operations of both the pools of the 1920s and the high-performance funds of the 1960s were obviously unfair if not illegal, there was no public disapproval of either so long as people were making money on them.) In each case, the practice of slack ethics started in the untended underbrush on the fringes of Wall Street and moved, sooner or later, to the very centers of power and respectability. In 1926 (although it wasn't known publicly until over a decade later), the future president of the New York Stock Exchange committed the first of a series of embezzlements of funds entrusted to his care; in 1929 the president of the Chase National Bank made a personal profit of $4 million by selling short the shares of his own bank. No wrongdoing so melodramatic occurred among the Wall Street leaders of the 1960s—or, at least, none has so far been uncovered. But in 1926 a partner of J.P. Morgan and Company shocked the financial world, which believed the Morgans sat on the right hand of God, by openly touting a stock, General Motors, in which his firm was substantially interested; and forty years later, in 1966, a not dissimilar shudder went through the Street when it became known that two years earlier a key vice president of J.P. Morgan and Company's successor firm, Morgan Guaranty Trust Company, had bought or caused to be bought ten thousand shares of Texas Gulf Sulphur in less than half an hour, apparently on the basis of privileged information of a great ore strike in Ontario.

The parallels go down to certain curious details. In each case, the market collapse occurred under a Republican President who had been elected on the crest of the preceding boom, and who had a strong pro-business orientation. In each case, the crisis was marked by carefully planned and publicized Presidential
meetings at the White House with Wall Street leaders. Finally, in each case the crash gave rise to an orgy of recrimination and finger-pointing.

Of course, there were tremendous differences, too—not just the fact that the more recent crash did not lead to a catastrophic national depression (though it did lead to a severe one), but differences in style and nuance and social implication that will be the main subject of this chronicle. One might, in comparing 1929 with 1969–70, even find a certain appositeness in Karl Marx's famous observation that history repeats itself the first time as tragedy, the second time as farce.

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Wall Street, in the geographical sense, was to become an actual battleground that spring, less than three weeks after Earth Day and Ross Perot's Down-to-Earth Day. By Wednesday, May 6, 1970, a week after the Cambodia announcement and two days after the Kent State incident, eighty colleges across the country were closed entirely as a result of student and faculty strikes, and students were boycotting classes at over three hundred more. Most New York City schools and colleges were scheduled to be closed that Friday, May 8, in a gesture of protest, and among the student antiwar demonstrations being planned was one to be held in Wall Street. On Wednesday the sixth, a small group of white-coated students and faculty members from several medical and nursing schools in the city came to Wall Street to demonstrate for peace on their own. There they were greeted warmly by the vigorous, youth-oriented, peace-crusading vicar of Trinity Church, Donald R. Woodward. In the course of the ensuing conversations, the medical people suggested that it might be a good idea, considering the vast daytime population of the Wall Street area, to establish a noon-hour first-aid center at Trinity Church, which, standing as it has since colonial times
right at the head of Wall Street, is at the very heart of the financial district in the physical—though scarcely, it often seems, in the spiritual—sense. If Trinity would provide space, the medical people said, they would undertake to set up and man the first-aid center on a volunteer basis. The vicar gratefully and enthusiastically accepted the offer. The first day that the center was in operation was Friday, May 8—a circumstance that in retrospect seems little less than providential.

That Friday morning—a damp, drizzly, bone-chilling morning such as New York can often produce in early May— beginning at about seven-thirty, boys and girls by the hundreds began debouching from Wall Street's two principal subway stations, the Seventh Avenue–Broadway stop at Chase Manhattan Plaza and the Lexington Avenue at Broadway and Wall. Most of them were from New York University, Hunter College, and the city's public high schools, all of those institutions being closed for the day. Eventually something like a thousand strong, they jammed into the financial district's central plaza, the intersection of Broad and Wall, where they milled around under the apprehensive scrutiny of a good-sized cadre of city policemen who had been dispatched there in anticipation of their arrival. But the students seemed to be in no mood to cause the police any trouble. In light rain, under the columns of Federal Hall, where George Washington had once taken the oath of office as the United States' first President, and facing the intimidating entrance to the great marble building from which imperial Morgan had once more or less ruled the nation, they spent the morning rallying their spirits and formulating their demands. The demands, not too surprisingly, turned out to be the same as those agreed upon a few days earlier by a secret convention of radical youth leaders in New Haven, and now being put forth on dozens of northeastern campuses. One: immediate United States withdrawal from Vietnam and Cambodia. Two: release of all “political prisoners” in the nation—a pointed, not to say loaded, reference to the Black Panthers imprisoned on charges of participating in the torture and murder of Alex Rackley, a Panther accused of being a police informer. Three: cessation of
all military-oriented research work under the auspices of American universities. Unlike many student demonstrations in the spring of 1970, this one was wholly nonviolent. Indeed, it was positively good-humored, and when, as noon approached, the rain stopped and a warm sun broke through, the mood became even better. Most of the demonstrators sat down on the sidewalk to listen to speakers.

Eleven fifty-five: suddenly, simultaneously from all four approaches to the intersection, like a well-trained raiding force, the hardhats came. They were construction workers, many employed in the huge nearby World Trade Center project, and their brown overalls and orange-and-yellow helmets seemed to be a sort of uniform. Many of them carried American flags; others, it soon became clear, carried construction tools and wore heavy boots that were intended as weapons. Later it was said that their movements appeared to be directed, by means of hand signals, by two unidentified men in gray hats and gray suits. There were perhaps two hundred of them.

As they pushed through the mob of seated students, it became manifest that their two objectives were to place flags at the base of the Washington statue in front of Federal Hall, otherwise known as the Subtreasury Building, and to break up the demonstration, if necessary by violence. As to the first objective, they marched toward the statue shouting “All the way, U.S.A.!” and “Love it or leave it!”; their way was barred on the steps by a thin line of policemen; the policemen, overwhelmed by greater numbers, were brushed aside; and the flags were triumphantly planted under the statue. As to the second objective: construction workers repeatedly struck students with sticks, fists, boots, screwdrivers, and pliers. They chased screaming students of both sexes down the canyons of the financial district, striking to hurt when they came within range. They ripped the Red Cross banner, indicating the presence of the new first-aid station, from the front gates of Trinity. The air was filled with the cries of the enraged and the injured, and the acrid, ominous aroma of a storm-troop putsch. Vicar Woodward, brave and exposed, stood through it all by the Trinity front gates, directing victims to the
aid station inside; twice, fearing an actual invasion of the church, he ordered the gates closed.

Inside Trinity, a communion service was in progress—a Mass, as it happened, for peace and in commemoration of the Kent State students and all the war dead in Vietnam. Those in the congregation were first aware of the noise of a rising mob filtering in from the street; then, as the service proceeded, they watched a steady stream of bloodied students walking or being carried down the nave's side aisle to the Sacristy and Clergy Vesting Room where the young doctors and nurses were ready to treat them. In all, about fifty demonstrators were treated at the Trinity first-aid station; another twenty-three were serious enough cases to require attention at Beekman-Downtown Hospital.

For more than a week afterward, Wall Street bristled daily with police as if it were in a fascist state.

To the extent that it had any part in this dispiriting affair—this small but fierce and rancorous struggle that came so close to being a crystallization of the whole nation's tragedy at that moment—professional Wall Street, the Wall Street of finance and law, of power and elegance, seemed to be on the side of the students. Perhaps out of common humanity, or perhaps out of class feeling, the bulls and bears felt more kinship with the doves than with the hawks. At Exchange Place, Robert A. Bernhard, a partner in the aristocratic firm of Lehman Brothers, was himself assaulted and severely cut in the head by a construction worker's heavy pliers, after he had tried to protect a youth who was being beaten. A few blocks north, a young Wall Street lawyer was knocked down, kicked, and beaten when he protested against hardhats who were yelling “Kill the Commie bastards!” But most of the mighty of the Street—Communist bastards or not—had no part in the struggle. They were not on the street. Like the famous, allegedly anarchist bombing on Wall Street in 1920, when thirty persons were killed and hundreds wounded, the riot of 1970 occurred just before noon: not quite lunch time. There was a racket in the street, and everyone above (or everyone privileged to have a window) looked out. The market
was unaffected. Most of Wall Street's elite working population watched the carnage from high, safe windows.

Indeed, there was little else they could sensibly have done; no purpose would have been served by their rushing down and joining the fray. Nevertheless, there is an all too symbolic aspect to professional Wall Street's role that day as a bystander, sympathizing, unmistakably, with the underdogs, the unarmed, the peace-lovers, but keeping its hands clean—watching with fascination and horror from its windows that looked out over the lovely (at that perspective) Upper Bay with its still-green islands and its proud passing liners, and down into the canyon from which there now rose, inconveniently, the cries of hurt or frightened children.

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The event (like the unreal gyrations in the fortunes of Perot) called attention to the relationship, or the lack of one, between Wall Street and the nation in the new times. Did it make sense anymore to live—and live at the top of the heap—by playing games with paper while children screamed under the window? Could not one almost hear the tumbrils to the revolutionary guillotine rattling in the distance? Well, at any rate, if you were a Wall Streeter in 1970 you were at least no longer directly profiting by war. As late as the Eisenhower era the market had adhered to its age-old habit of greeting war news with complacency if not with outright glee, and of greeting peace news— “peace scares” was the local term—with panic and hysteria. But sometime in late 1967 Wall Street had come to decide that the Vietnam war was bad business, and had broken all precedent by turning decisively bearish on war and bullish on peace. The defense contractors were no longer blue chips; one of the biggest, Lockheed, would soon be in danger of bankruptcy. The peace initiatives of early 1968 had caused or contributed to a
huge bull market on record volume. An unheard-of phenomenon; an old shame of Wall Street ended, to sighs of relief from financiers with consciences.

Or again: if you were a conscientious Wall Streeter you could tell yourself that you were contributing to progress by financing industrial expansion that would help reduce poverty and would finally abolish it. But now you knew, or had recently been compelled at last to reflect, that industrial expansion was not an unalloyed blessing; that each new factory, however modern and antiseptic, would mean new money for many but might also mean—through pollution—ugliness, suffering, and death.