The Go-Go Years Read online

  To a man, they were of Irish extraction. The boisterous Irish like Mike Meehan and Ben Smith who had first made their mark in Wall Street thirty years earlier were now followed by a generation that had captured a key Wall Street institution, or come near enough to capturing it so that, in the middle fifties, to speak of the Irish-American Stock Exchange was almost a definition, rather than just a joke. But they did love jokes, too, loved them as few in dour Wall Street had ever done before them, and they gave the place a kind of rough levity. Old Joe Haff, for example, an Amex man, used to like to jump off ferry-boats and race them to shore swimming, and at Christmas on the Amex floor, a clerk would dress up as Santa Claus, other clerks would mount headlights on one of the posts and pretend it was a truck, and everyone would get gloriously drunk.

  The reasons this rather aberrant Establishment undertook to shelter the Res—for, in retrospect, it is fairly clear that they did in fact shelter them—can only be inferred. It was not chauvinism; the Res were of Italian extraction. Plainly, it was not a case of conspiracy for profit; there is no evidence that the Amex officials shared in the Res’ boodle. On the other hand, some of them were good friends of the Res, and frequent house guests of the elder Re at his place in Florida. More important, they were by temperament boosters; they believed passionately in the Amex, wanted it to grow and to rise in public esteem; and they knew that the Res were powerful old timers who could not be eliminated without a scandal. Like politicians, they would do almost anything to avoid a scandal. As for McCormick, he may well have had only the vaguest notion of what the Res were up to. Unlike Reilly, Bocklet, Dyer, and Mann, he was seldom actually on the floor, and, as the Amex’s paid administrator rather than a member, he did not know the intricacies of stock trading at first hand. He was the upstairs man, the front man, and when he wasn’t upstairs he was out on the road spreading word of the expanding Amex and bringing new business to it.

  During his ten-year term as Amex president, McCormick had functioned chiefly as a salesman. The holder of a B.A. from the University of Arizona (Phi Beta Kappa, at that), an M.S. from the University of California, and a Ph.D. from Duke, in 1934 he went to work for the S.E.C. in a lowly job that paid $1,900 a year. Over the subsequent years, while clambering up the bureaucratic rungs, he wrote a standard text entitled Understanding the Securities Act and the S.E.C., and in 1949 was appointed a S.E.C. commissioner by President Truman. In 1951 he made the familiar switch from low-paid government work to high-paid private-industry work that has been the bane of the S.E.C. from its beginnings, constantly draining it of talent. Never before, though, had a S.E.C. man—commissioner or staffer—left to become head of a major stock exchange. McCormick’s appointment to the Amex was hailed as the beginning of a new era in which government and the securities business would work in happy cooperation for the public good. As a booster for the Amex, McCormick was notably successful; by 1961, daily share volume had more than quadrupled in a decade, and the price of an Amex seat had jumped from $9,500 to $80,000. The scholar and bureaucrat had turned out to be a born salesman. But with the Amex’s growth, it began to appear toward the end of the decade, a certain laxness of administration had crept in. Restless at his desk, Ted McCormick was always out selling up-and-coming companies on listing their shares on the Amex, and while he was in Florida or at the Stork Club drumming up trade, sloppy practices were flourishing back at Trinity Place.

  Or so it seemed in the light of the S.E.C. report, which pointed out that as early as 1957 a federal court had enjoined the Res against further violations of the Securities Acts and further trading in the stock of Swan-Finch, and that in 1958 the elder Re had been formally accused by the Amex’s Business Conduct Committee of willfully violating the rules governing specialists. Late in 1959, this matter had finally come to a vote of the Board of Governors, which had inexplicably exonorated the Res, 18 to 5. Immediately the Business Conduct Committee had held its own meeting and showed its defiance of the Board by voting to suspend Jerry Re from trading for the month of January—a painless sentence, to be sure, since January was the month Jerry Re customarily spent in Florida.

  Curiously, or perhaps not so curiously, most of the Amex members had known very little of all this. “Everybody knew there was something smelly in Jerry Re’s corner of the floor, but only in general,” one of the specialists has since said. For many members, the S.E.C. complaint of 1961 provided their first knowledge of the court injunction, the vote of the governors, even the month’s supension. It also provided their first knowledge of the fact that in 1954 and 1955 McCormick had been personally involved in stock transactions with the Res. There is some irony in the fact that he had actually lost money on the transactions. Still, what he had done had certainly been, to say the least, indiscreet. Leaving aside the whole matter of the Res’ later-revealed misdeeds, for the salaried administrative head of a stock exchange to enter into deals with members of that exchange—and specialists at that—would seem to imply a perfectly clear conflict of interest. For one reason or another, only a handful of Amex members seemed to be disturbed by the revelation of McCormick’s indiscretion, or by the implication that the disciplinary actions against the Res had been largely swept under the rug. The members most disturbed were another father-and-son specialist team—or more precisely, a father-and-son-in-law specialist team. They were David S. Jackson and Andrew Segal.

  4

  The big men of the Street are of two kinds: those who come to it from outside with a driving urge to conquer, and those who through inheritance belong to it from the start, and therefore, because they do not need to discover it for themselves, can bring it fresh perspectives. The first kind, obsessed with the need for money and power, are the ones who bring innovations and variations to the craft of money-making, and who usually become the richest. They treat Wall Street purely as an arena; they accept its rules and customs and exploit them, often with some thing close to art, but they do not seek to change its ways. The second kind—who, curiously, often have a temperamental indifference to money but nonetheless stay in Wall Street, never dreaming of turning their backs on it, simply because it is their world—are the ones who most often seek to remold it nearer to their hearts’ desire.

  Jackson, although only a shade over five feet three inches tall, and not even a millionaire most of the time, was one of the big men of the Street in 1961, and one of the second kind. He had been born into it, though hardly in the silver-spoon tradition of, say, J.P. Morgan the Younger. His father had been a hit-or-miss trader on the outdoor Curb, in the money one day and out of it the next, and he himself had been born on Henry Street during the time that the Lower East Side was still a Jewish ghetto. Jackson had gone two years to Brown and one year to St. John’s University Law School before joining his father’s business. A Curb (and later Amex) specialist since 1925, he had achieved a measure of fame, and more than a measure of honor, in 1955 when a Walter Winchell radio tip had resulted in a buying panic in Pantepec Oil, one of the stocks he specialized in (and a venture, incidentally, of the notable progenitor William F. Buckley, Sr.). Jackson, at personal risk far beyond the call of duty, had saved the deluded public from the consequence of its folly by selling short a block of more than one hundred thousand shares of Pantepec, at a price more than six points lower than he might have sold it, in order to keep the market orderly. This quixotically high-minded act had made him, for a time, a sort of Exhibit “A” of the securities industry before Congressional committees (and, it appears in retrospect, an unwitting cover for the actions of other less scrupulous specialists of the era). It had also earned him—and, subsequently, his handsome young partner Segal, a graduate lawyer who joined him on the floor the following year—some surly glances from a few of their colleagues.

  As a result partly of the Pantepec incident and partly of his predilection, so uncharacteristic of many Amex men, for moral issues, Jackson came to occupy a special position there, respected, somewhat feared, and by no means universally liked. This is not
to say that he was generally unpopular. As an ex-governor, he was fond of boasting that he was the first Jew ever to have finished anywhere but last in an Amex election; he attributed his assimilation to the fact that he was “a pretty good golfer and a pretty good drinker.” Far from being an evangelist at heart, he was a liberal by instinct, and a philosopher by choice. “Every institution needs a house philosopher,” he used to say. “I’m the Amex’s.” During the ten years of McCormick’s Amex presidency the two men had become close friends, and Jackson had practiced his philosophy on McCormick. Over those years Jackson had watched McCormick gradually changing from a quiet, reflective man into a wheeler-dealer who loved to be invited by big businessmen to White Sulphur Springs for golf, and the change had worried him. “Ted,” he would say, when they were at dinner at one or the other’s house, “why don’t you read any more?”

  “I haven’t got time,” McCormick would reply.

  “But you’ll lose your perspective,” Jackson would protest, shaking his head.

  During the later 1950s Jackson served two terms on the Amex Board of Governors, and, although he wasn’t serving at the time of the court injunction, he learned enough about the Res’ operation to argue before the Floor Transactions Committee that they ought not to be allowed to serve as specialists. His motion was defeated. Jackson, incidentally, had always liked Jerry Re, in the rough-and-ready manner of Amex friendships. Back in the forties Re had organized a softball team up at Monroe in the Catskills, where he had a summer place, and Jackson had sometimes gone up there to play on it. “Jerry looked like a crook, and it’s my tendency to sympathize with people whose appearance is against them,” Jackson said long afterward. “For example, take me. I’m not exactly prepossessing in appearance myself.”

  Now came the S.E.C. exposure and suspension of the Res, and—more shocking to Jackson—the peripheral revelations about McCormick. These things led Jackson and Segal, almost alone among Amex members, to be seriously concerned about whether McCormick was fit to be their president. His dealings with the Res back in 1954 and 1955; his presumed part in brushing the Re injunction under the rug in 1957; and his taking part in the exoneration, or whitewash, of the Res by the Amex board in 1959—all those actions, Jackson and Segal felt, had been a good deal less than presidential. One day in May 1961, Segal made up his mind and said to his senior partner, “I’ve decided to go to Ted and ask for his resignation.”

  Jackson nodded unhappily; his thoughts had been running in the same direction. McCormick was his friend, after all. But all through the two weeks or so that had passed since the S.E.C. complaint had become public, he had been asking himself what to do. At home, on East Sixty-eighth Street, he had agonized so constantly and obsessively that at last his wife, Fritz, had said, “You’ve got to do one of two things—demand Ted’s resignation, or sell your seat.” And he had agreed that she was right.

  Now he said to his son-in-law, “Don’t you do it, Andy. Let me take care of it.”

  So Jackson formally requested an appointment with McCormick, and it was granted. Upon arriving at the presidential office, alone and unsupported, no longer a member of the board, knowing he represented a minority view on the floor, he found McCormick flanked by the top brass of his administration, the formidable Chairman Reilly and Vice-chairman Bocklet. Whether or not they knew exactly what to expect, they clearly enough expected trouble.

  Jackson said, “I don’t know how to say this, Ted, but you’ve got to resign.”

  McCormick’s reaction was so violent that Jackson has since said he felt physically frightened. The president picked up a batch of papers from his desk and slammed them down. Then he walked to one of the walls of his office and punched it several times, hard enough to bruise his fist. Finally he said, “I don’t know what you’re talking about. I’ve never done anything dishonest.”

  “No, I don’t think you have,” Jackson said, his voice shaking. “But you’ve been indiscreet.”

  The confrontation ended inconclusively, with Jackson repeating his demand—indeed, extending it to include the whole top echelon of Amex officers and the Amex counsel, Michael E. Mooney—McCormick rejecting it, and Reilly and Bocklet remaining silent. Jackson made it clear that he did not intend to let the matter rest there. Afterward, Bocklet, clearly a McCormick supporter and therefore now Jackson’s political enemy, took him aside and said, with a kind of admiration, “Davy, you go home and tell your Fritz that she’s married to a man.”

  Reilly also took Jackson aside, to make another kind of comment. “You haven’t got any proof of anything against Ted,” he said—rather irrelevantly, it would seem, since Jackson’s charge was based entirely on published material that was now common knowledge. “The thing for you to do is to appear before the Board of Governors, and argue your case there.”

  “Joe, you know perfectly well that would be like pissing up Niagara Falls,” the house philosopher replied.

  Jackson and Segal—a fifty-nine-year-old maverick and a thirty-two-year-old upstart—were now official enemies of the Amex management. Through the summer and into the fall, they went on arguing their case, but not before the board. Instead, Jackson committed what in the view of the Amex management was almost the ultimate sin—he argued it in the newspapers. This was in defiance of explicit orders from Reilly to all Amex members, and particularly specialists. The House Committee on Interstate and Foreign Commerce had scheduled hearings on the Amex for that summer, and the S.E.C. had laid similar plans for early fall. Anticipating that many Amex members, and specialists in particular, would be called to testify at the various hearings, Reilly began taking them aside separately and in groups. “When you talk to the government people, don’t tell them anything you don’t have to,” Reilly, according to Segal, would caution in his characteristic corner-of-the-mouth style. He would go on to say that, in view of the delicate state of affairs at the Amex in the wake of the Re exposure, in the Exchange’s best interest it was equally necessary to avoid talking to the press under any circumstances. And in the case of Jackson, Reilly added a further urgent instruction—do not, he said, press the matter of McCormick’s resignation any further, at least until the hearings are over and things have had a chance to cool down.

  But Jackson had made his decision; he talked to the press— Ed Cony of the Wall Street Journal in particular—and he pressed his case against McCormick in conversations with other members on the floor. In early summer, Reilly took the unusual step of mounting the podium overlooking the floor and interrupting trading to make a brief speech. In it, he asked the members for loyalty in a time of crisis, emphasized that the good name of the Amex must come first in all considerations, and defended McCormick, whom he said had been publicly maligned. But he made no mention of Jackson or Segal. Then in July the House held its hearings, at which both McCormick and Reilly testified in public. McCormick listed some of the mighty American companies that in their salad days had been traded on the Amex— Armour, Swift, Cities Service, Eversharp, Alcoa, Gulf Oil, Pittsburgh Plate Glass, Quaker Oats—and said roundly, “I will stack the honesty and efficiency of our specialists against any other specialists … in the country.” He admitted his 1954 and 1955 dealings with the Res, but pointed out that such things belonged to a closed chapter in his past: “I have not owned a single share of stock traded on the American Stock Exchange since 1957.” The implication—though only an implication—was that the Congressmen were looking at a penitent who had reformed. The reason McCormick would not come out and say that he was reformed was, of course, that such a statement would be an admission that he had previously been unreformed.

  Reilly, after telling the Congressmen about his rise from lowly beginnings in a huge, impoverished family, described in some detail the Amex’s rules for specialists and its disciplinary procedures against erring members. He insisted that the only reason the stock manipulations and nominee trading of the Res had not been uncovered by the Amex authorities as early as 1957 was the fact that they, unlike the S.
E.C. and the courts, lacked subpoena power over nonmembers of their institution like the useful dummy Charles A. Grande. This seemed to Jackson to be a poor excuse, and when Reilly stopped him on the floor a few days later to ask what he had thought of the testimony, Jackson replied that he had found it inadequate.

  5

  By this time, the floor was seething. A little cluster of a dozen or so other members, most of them under forty and soon nicknamed the Young Turks, had rallied to Jackson’s and Segal’s standard and joined them in calling for McCormick’s resignation and a complete reorganization of the Amex. But they were badly overmatched in both numbers and influence, and soon they found the power of the in-group pressing upon them most uncomfortably. According to Segal’s account, the classical arm-twisting methods of ward politics were applied to the dissenters by representatives of the administration. One Young Turk, for example, was pointedly reminded of a questionable stock transaction in which he had been involved some years earlier, and of how easily the matter could be called to the S.E.C.’s attention; to another it was suggested that certain evidence at hand, if revealed, could make a shambles of his pending suit for divorce; and so on.

  So it was a hot summer on Trinity Place for the Young Turks, and when Labor Day came bringing with it the first breezes of autumn and the real beginning of a new Wall Street year, they were all but routed, leaving Jackson and Segal standing almost alone. And then came the turning point. It came in a strange form—that of a savage attack, or what Jackson construed as such, on him by the only people he still had reason to think of as his allies in the cause of reform. On September 18, Jackson, under subpoena, appeared before representatives of the S.E.C. at their New York office on lower Broadway. The S.E.C. men present were the agency’s top investigators—Ralph Saul, who had headed the Re investigation, and two other lawyers, David Silver and Edward Jaegerman. Possibly the investigators came to the hearing with the preconceived idea that Amex specialists were a bad lot and that, the Pantepec affair notwithstanding, Jackson was no better than the rest. At all events, for more than four hours they grilled him with what seemed to him to be hostility, scorn, and sarcasm. Their attention focused on a single incident several years earlier in which a former member of Jackson’s firm had, by his admission, done a poor job of specializing. But the S.E.C. men were not to be put off by admissions; hour after hour they bored in until Jackson, on the verge of hysteria, found himself in tears.