From the "Voice of Wall Street" to Prison, the president of NYSE to the president of a textile company, and most importantly from a "savior" to a "traitor", Richard Whitney is most known for saving the stock market panic on Black Thursday in 1929.
Whitney graduated from Harvard and by the age of 23, he was already part of the New York Stock Exchange. His claim to fame was that he was the principal broker of JP Morgan and Company. On Black Thursday, when stock prices were dropping, Whitney made a generous bid on the steel stock and blue chip stocks which temporarily stopped the slide. The next day, newspapers covered articles of how "Richard Whitney Halts Stock Panic", confidence in the stock market was temporarily restored. Little did people know, Whitney's actions would later have consequences, stock prices would crash. The ticker soon caught up and "listed a record 13 million shares sold and a net loss of $11 billion"(1).
Although Whitney appeared to live a perfect life in a nice townhouse and was actively part of sports and social clubs, he was suffering many financial problems. Whitney spent tremendous amounts of money, up to $5000 per day despite the fact that he lost $2 million in the Wall Street Market Crash of 1929. He was also addicted to gambling which caused him to go in debt. As a result, he started borrowing money from many of his relatives such as his brother, his uncle, and even his friends. He had struggled to replenish the Gratuity Fund and had to borrow $1 million from his brother. An official later discovered that the fund fell short, but didn't want to point it out for it would embarrass Whitney. Eventually, rumors about Whitney surfaced and people discovered the truth about Whitney's scams and frauds. In 1938, he was expelled from the NYSE and was bankrupt with "$6 million in debt"(2). After his sentence, he became the manager of a "dairy farm" and owner of a textile company(3).
Why did it take so long for authorities to unfold the truth about Whitney? The "Securities and Exchange Commission" decided that it was the "unwritten code of silence" that allowed Whitney to continue with his fraud and scam(2). The truth is, crime exists all over world, and in every social class. The only difference is that crime in the high class is unspoken of and excused because of the "criminal's" power that threatens to silence those who challenge or unravel their true colors. Of course, Whitney was not the only corrupt businessman to ever commit fraud, Wall Street was crowded with businessmen like Whitney, all scams in disguise. Even today, corruption still exists everywhere in the streets where every businessman goes about abiding to the "unwritten code of silence".
Sources:
1. Harvard Observed: An Illustrated History of the University in the Twentieth Century, John T.Bethell
2. http://archive.pixelettestudios.com/hallofinfamy/inductees.php?action=detail&artist=richard_whitney
3. http://archive.fortune.com/2008/12/16/news/madoff.whitney.fortune/index.htm
4. http://www.u-s-history.com/pages/h1808.html
I like this excerpt on Richard Whitney, I didn't know that he "saved" the stock market according to the American people at the time. Though they did not know that his "save" became more damage than saving, they rejoiced his presence in his time. I think it is very interesting that his life went down the toilet after the stock market crash of 1929. I also think it is very interesting that he did not accept that fact and did not let the public know what was happening to him, it is very similar to many people and things that are happening in the American public today.
ReplyDeletesource-https://en.wikipedia.org/wiki/Richard_Whitney_(financier)
DeleteGreat way of tying whitney's problems into a real world situation and creating a moral to the blog. While many thought that Whitney halted the stocks from plummeting with his 2 million loan, there is actually a huge amount of speculation about the idea that he simply donated in order to help banks draw out their funds before the final, most shocking crash.
ReplyDeleteWhen Whitney speculated by spending millions on shares, did he know that his spending with the end goal of profit would end up crashing the stock market even further? Obviously, if he bought up all the stock and stock value kept dropping, he would lose money; did he project that there would be a permanent boost in confidence that would stabilize the entirety of the market and prevent further drops?
ReplyDeleteI think it's extremely ironic that Whitney was in so much debt, because many of the problems at the root of the stock exchange were that people were buying on margin. In an attempt to stabilize a market falling because of buying on margin, Whitney effectively put 130 million into the market on margin.
Buy and Hold, "Educate Yourself-Richard Whitney", Freedom Investments, https://www.buyandhold.com/bh/en/education/history/2002/r_whitney.html