by Sam Roberts
“You always borrowed more than you put in?” Steuer asked.
“Not with the idea of having a busted bank. It seems to me that you are stressing the fact—”
“I am stressing the fact that each of you directors looked to me to be mighty careful that if a bust should come, you couldn’t lose a nickel.”
“I don’t think that is fair.”
“Show me a director who could lose a nickel?”
“That happened to be a coincidence.”
“How much does your corporation owe the bank today?” Steuer asked.
“Seven hundred fifty thousand dollars.”
“How much was your balance?”
“A hundred thousand some odd.”
“So, you didn’t take much of a chance, did you?”
“No.”
The depositors had, though. Ten days after the Bank of United States closed, three thousand depositors stormed the Foxhurst branch demanding their money.
Nearly a century later, economists still debate two questions about the bank’s collapse: What role did anti-Semitism play in the bankers’ unwillingness to rescue Bernard Marcus? And what role did the bank’s failure play in triggering the Depression?
There was no doubt that immigrants, their descendants who had joined groups of landsmanshaft from their Eastern European shtetls, and members of labor organizations, most of them Jewish, bore the brunt of the bank’s collapse. Like the Marcuses, as Liaquat Ahamed wrote in Lords of Finance (2009), they were also Jews “of the wrong sort”—not the “Our Crowd” German Jews who had striven to assimilate in America since the nineteenth century, but the less cultivated, more recent arrivals who barely spoke English and whom their coreligionists—not nativists, as one might expect—supposedly christened (because so many had names ending in ki) as “kikes.” Those who blamed the bank’s failure on anti-Semitism ranged from Bernard Marcus’s nephew Roy Cohn—who later became chief counsel to Senator Joseph McCarthy’s anti-Communist investigating committee (and said his uncle Bernie was “scapegoated”)—to the distinguished economist Milton Friedman, who wrote that “anti-Semitism almost surely played a role in the decision of the Clearing House to reject the New York Reserve Bank’s plan.”
Privately, the bankers were quoted as saying dismissively that the Bank of United States was patronized largely by “foreigners and Jews,” or, as Russell C. Leffingwell, who would become the chairman of J. P. Morgan and president of the Council on Foreign Relations, put it, the bank had “a large clientele among our Jewish population of small merchants, and people of small means and small education, from whom all management were drawn.” As Milton and Rose Friedman wrote, “The name itself, because it appealed to immigrants, was resented by other banks. Far more important, the bank was owned and managed by Jews and served mostly the Jewish community. It was one of a handful of Jewish-owned banks in an industry that, more than almost any other, had been the preserve of the well-born and well-placed.” Charles Hamlin, a member of the Federal Reserve Board, recorded in his diary that J. P. Morgan Jr. himself said that “he did not trust Jews: that they had killed his father and that sometime he should get even with them”—“they” being apparently a reference to Samuel Untermyer, who, as a congressional committee counsel, had interrogated Morgan Sr. in 1912 a few months before his death (the committee’s investigation led to the creation of the Federal Reserve System). “J. P. Morgan Jr. finally got ‘even with them,’ ” Friedman wrote, “but at what a cost to the nation.”
The bank run in the Bronx, Friedman would say later, was “the pebble that started an avalanche.” December 11 “became a day of monetary infamy, the beginning of four banking crises that eventually carried America and the world into the worst economic crisis in history,” the economist Mark Skousen later wrote. “The bankruptcy was symbolic of bad faith on behalf of the U.S. government, especially the Federal Reserve, the central bank that had been established in 1913 specifically to be a ‘lender of last resort’ and prevent this kind of banking crisis.”
The collapse of the proposed merger to rescue the bank in December 1930, J. M. Daiger said in Harper’s, prompted an unprecedented panic. “Never before had there been such a demand for currency to meet a banking crisis in New York City,” Daiger wrote the following April. “The Bank of United States, although far from large in comparison with many other institutions of vastly greater resources, was the largest American bank ever to fail.”
Whatever the motivation for not saving the bank, federal and state examiners left little doubt about their diagnosis of its collapse. The plunging share price, they concluded, “is the result of poor foresight on part of the management in carrying on its policy of over-expansion without regard for common-sense principles of economics.” They added: “It seems incredible that the management of a banking institution of this size could in two years cause a loss to its stockholders of its entire net worth of $25,200,000 and does not speak particularly well of the management’s ability.” After twelve weeks of testimony, capping what was then the longest criminal trial in Manhattan’s history, Marcus was convicted of fraud. He spent twenty-three months in Sing Sing (and was subsequently pardoned by Governor Lehman). In 1937, the man who was considered a financial wizard declared bankruptcy, listing debts and liabilities totaling more than eighteen million dollars; he returned to the garment business, manufacturing men’s pajamas, and died in 1954. Joseph Broderick, the banking superintendent who had insisted that the bank was not insolvent and could have been saved, was ultimately vindicated: when claims against the bank were finally settled in 1944, depositors had recouped about 84 percent (or roughly 78 percent after inflation) of their losses.
Almost a century later, the former bank no longer would be mistaken for a branch of government. (George Samoladas)
After the shuttering of the Bank of United States, the little building at Freemont Street and Southern Boulevard became a branch for several other banks. In the early 1980s, the city seized the property for back taxes, along with so many other derelict hulks in the South Bronx. The property was later sold to private investors and, in one of its most recent incarnations, housed the Fragrancia Laundromat. A red-and-white sign in one of the windows advertised an ATM inside that dispenses ten-dollar bills twenty-four hours a day, which is more than could have been said when it was still a bank branch in mid-December 1930.
23
THE EMPIRE STATE BUILDING
Who was the tallest of them all? The question wasn’t answered until the Chrysler Building passed 40 Wall Street, and then only briefly. (New York Times)
Not long after Governor Alfred E. Smith of New York lost the rancorous 1928 presidential race, he and Eddie Dowling, a Ziegfield Follies hoofer and Broadway actor, were standing at adjoining urinals in the Lotos Club when John Jakob Raskob, a DuPont and General Motors millionaire who had been Smith’s campaign manager, entered the men’s room. According to an account by Dowling (who may or may not have discovered Kate Smith, and later became a Pulitzer Prize–winning producer), Al Smith was not only lamenting his loss but complaining bitterly that the only income he would have after leaving Albany was his meager government pension.
“Don’t worry, Al,” Raskob declared. “I’m going to build a new skyscraper—biggest in the world—and you’re going to be president of the company.” Whether the Empire State Building was, indeed, born in a men’s room at the Lotos Club, which was then on West Fifty-Seventh Street, is arguable, but the episode is plausible because it epitomized Smith’s bitterness and Raskob’s impetuousness. In August 1929, when the average American’s monthly salary was below ninety dollars, Raskob, in an article in the Ladies’ Home Journal headlined “Everybody Ought to Be Rich,” urged working-class Americans to buy fifteen dollars’ worth of shares monthly in an investment trust. Barely two months later, the stock market crashed.
But Wall Street would recover from the crash long before Raskob’s heirs would recover his investment in New York’s signature skyscraper, wh
ich he built on an abiding faith in his own judgment and in the city’s future. Clad in Indiana limestone, punctuated by sixty-four hundred windows and perched on a five-story base, the Empire State Building would survive the Depression, King Kong, and a direct hit (accidental) by an American bomber. The classic 1957 film An Affair to Remember would immortalize it, too, as Cary Grant and Deborah Kerr, steaming up the Hudson on the Constitution, agree to meet atop the tower again in six months. To which Kerr exclaims: “Perfect! It’s the nearest thing to heaven we have in New York!”
Two centuries earlier, much of midtown was farmland belonging to the Murray family, after whom Murray Hill was named. Legend has it that after American troops landed at Kips Bay on the East Side as they fled from the British in Brooklyn, Mary Murray entertained William Howe and his fellow Redcoat generals with tea and cake long enough to let the remnants of the Continental Army retreat to Upper Manhattan and the Bronx.
In 1893, William Waldorf Astor, the grandson of John Jacob Astor Sr., perpetuated the neighborhood’s reputation for hospitality by opening the Waldorf Hotel on Fifth Avenue and Thirty-Third Street. Three years later, retaliating for the construction debris that the Waldorf had deposited on his mother’s house next door, William’s cousin, John Jacob Astor IV (who would die in 1912 on the Titanic) built the rival Astoria next door. When they merged after agonizing negotiations, the Waldorf-Astoria, with thirteen hundred bedrooms, was the largest hotel in the world.
But by the late 1920s, even faded elegance would have been an extravagant description of the hotel property that Prohibition and the ongoing uptown migration had doomed. While the intersection was relatively isolated from mass transit, Raskob coveted the site because under the city’s zoning regulations its oversize footprint would grant him more leeway to reach for the sky. Unfazed by the onset of the Depression, he would do for his new skyscraper what no one could accomplish for the stock market: push it higher and higher. His architectural prototype was deceptively simple and, reversing roles, it was the client who initially demonstrated it to the designers: Raskob extended his arm at a ninety-degree angle and flourished a newly sharpened pencil. But the same 1916 Zoning Resolution that allowed him to build higher was also enacted to safeguard the diminishing light and the circulation of air threatened by sprouting skyscrapers. The law required setbacks, which meant that buildings had to be tapered as they grew taller. A pencil as bulky as half a city block would not pass muster.
Since 1909, when Metropolitan Life Insurance Company completed its 560-foot spire on Madison Avenue and East Twenty-Fourth Street, New York had been home to the tallest building in the world. The clock tower and its illuminated beacon (“the Light That Never Fails,” the insurance company boasted), modeled on the Campanile in Venice, held first place only until 1913, when Cass Gilbert’s “Cathedral of Commerce,” the Gothic 792-foot-tall, sixty-story Woolworth Building was completed on lower Broadway. After World War I, the boom in real estate development reflected the sudden emergence of the United States as a creditor economy, and no place in the nation epitomized that more than the capital of capital. The volume of office space in Manhattan doubled in the 1920s, with more than fifty buildings of thirty-five stories or more either completed or underway.
“All a man has to do,” the architect Kenneth Murchison said, “is to announce, mysteriously, that he is going to erect a hundred-story building and, presto!, he gets on the front page.” In the giddy last days of the decade, two hundred-story towers had been proposed, one by the architect Harvey Wiley Corbett on Madison Square for the Metropolitan Life Insurance Company (which ultimately decided that fifty floors was conspicuous enough for a conservative firm), and the other by the Fred F. French Company on the site of the Hippodrome at Sixth Avenue and West Forty-Third Street. Abraham E. Lefcourt, a prolific developer in the garment center, proposed a skyscraper that would soar 1,050 feet high in Times Square. And the Noyes-Schulte Company (in partnership with Raskob) audaciously tendered plans for a sixteen-hundred-foot, 150-story behemoth at Broadway and Worth Street downtown whose one-acre roof could accommodate a landing field for airplanes. That one would die by delay when the developers discovered that they would have to wait until 1937 for leases on the property to expire.
In 1928, Walter P. Chrysler, founder of what by then had become the nation’s third-largest automobile manufacturer, bought the lease (the land itself was owned by the Cooper Union) for the trapezoidal plot (slanted because it bordered the original Boston Post Road, which predated the street grid) at East Forty-Second Street and Lexington Avenue from former state senator William H. Reynolds, who developed Coney Island’s Dreamland Park. The Roaring Twenties were verging toward a humbling finale, but even at the end of the decade, it seemed as if the real estate market had nowhere to go but up. Construction on William Van Alen’s auto-themed Art Deco jewel began in early 1929. (If the Empire State Building is everybody’s Best Actor among New York milieus, James Sanders, the author of Celluloid Skyline, has said, the Chrysler Building invariably wins the Best Supporting Actor prize.) Within a few months, the Bank of Manhattan Company started construction on its own 840-foot tower downtown.
On August 29, 1929, former governor Smith announced that he would become the president of a company that would build an eighty-story office tower, nearly one thousand feet high, that would be called the Empire State Building. (No one seemed to notice that New York already had an Empire State Building, the nine-story factory loft built in 1897 at 640 Broadway, which had been named for the previous occupant of the site, the Empire State Bank; it still stands today.) The New York Times, as Murchison had predicted, published Smith’s announcement on the front page. The newspaper had reported on the other proposed projects, too, but “of all these projects,” Robert A. M. Stern and his coauthors wrote in New York 1930, “the only one to survive the stock market crash was Shreve, Lamb & Harmon’s Empire State Building.” That October, the very month the stock market crashed, the race to the sky got underway in earnest as excavation began for the Empire State Building’s foundation.
How tall the Empire State Building would wind up was a long-standing question, except that Raskob stipulated that it must surmount both 40 Wall Street and the Chrysler Building, which were seesawing on the downtown and midtown skyline for bragging rights as highest. As architects, engineers, and investors argued over precisely what should replace the old Waldorf-Astoria, construction proceeded on its two rivals. In April 1930, 40 Wall Street (the new Bank of Manhattan Building) topped out at 927 feet. A month later, a three-piece, 185-foot-long stainless steel “vertex” that had been secretly assembled inside the Chrysler Building’s fire tower was erected, elevating its height to nearly 1,048 feet to the tip, which was taller than the Eiffel Tower and, more to the point, surpassing 40 Wall, even higher than the one thousand feet that Raskob had publicly touted as the projected height of his Empire State Building.
But if the competition promised a crown-to-crown photo finish, once Van Alen completed his masterpiece, Raskob had the upper hand. Construction on the Empire State Building had begun on St. Patrick’s Day, March 17, 1930, and proceeded, incredibly, at an average rate of one floor per day.
To outdo Walter Chrysler and the Bank of Manhattan, Raskob had already added ten floors to the seventy-five that the architects and engineers estimated would prove to be the maximum that would make for a profitable building. They persuaded their stubborn patron to finally stop there. As Paul Starrett, who with his brothers formed the eponymous contracting company, later explained, “the height, the beauty of the Empire State Building, rose out of strictly practical considerations.” Even in the late 1920s, constructing a sturdy skyscraper of more than eighty-five stories was well within the ken of contemporary engineers. But only so many elevators could be installed, displacing potentially rentable space, and be operated at high speed economically; the contractors could not keep piggybacking more floors without busting the budget or missing their deadline to complete the job in 1931 by May 1, t
he traditional moving day in New York, so offices would be available to lease for the full 1931–32 year.
The eighty-sixth floor was finished in six months, on September 19, 1930—already surpassing the height of the Chrysler headquarters on East Forty-Second Street and securing the Empire State’s reign as the world’s tallest building, a title it would effortlessly defend for fully four decades. Raskob’s architects affixed a 158-foot windowed column (topped with an ill-conceived mast to moor dirigibles) and proclaimed that their tower would now number 102 stories and soar 1,250 feet high, and would therefore surpass its former rival by an unassailable margin of more than two hundred feet. (The mooring mast, which Lewis Mumford belittled as “a public comfort station for migratory birds,” was used only twice for its intended purpose: on September 16, 1931, by a blimp that docked for three minutes, and two weeks later when a Goodyear dirigible briefly moored to deliver a letter and a stack of newspapers to Governor Smith.)
Among the dignitaries at the grand-opening ceremony was Mayor James J. Walker, who displayed his customary brio despite the hot breath of anticorruption investigators. He thanked the building’s developers for providing “a place higher and further removed than any in the world where some public official might like to come and hide.”
New Yorkers were awestruck by the iconic superstructure, the Empire State (a term attributed to George Washington) also provoked its share of detractors. (Lewis Mumford detested it, but admitted that if “almost looks as if it belongs to a different race of structures from the Lilliputians” who flank it.) Nine decades later, the Empire State is probably the most recognizable building on the planet and, with the Statue of Liberty, the epitome of New York iconography. Its relative isolation on Thirty-Fourth Street means it still monopolizes the midtown skyline single-handedly, an indomitable sentinel surrounded by ample breathing space, indifferent to potentially competitive towers hidden in indistinguishable clusters downtown and midtown and the needle-thin condominiums sprouting across Billionaires’ Row, on Fifty-Seventh Street, whose cloud-shrouded penthouses may be the closest to heaven that oligarchs can hope to get. Its dimensions were so staggering that no other building was analogous. While the Chrysler Building contained 850,000 square feet of rentable space, the Empire State Building offered triple that. That was a mixed blessing. The Empire State would not break even until about midcentury, about the time that John Raskob died (and even now it earns about as much from tickets to its observation deck as it does from office rents).