by David Nasaw
From childhood, when he put on patriotic pageants in his backyard, through Harvard, where he and his classmates spent as much time as they could at the theater—and with actresses and chorus girls after the theater—to Fore River, where he put together a vaudeville act starring ship’s welders, Kennedy had always, it appears in retrospect, been drawn to show business. He was blessed to have grown up in Boston, a great theater town. It was in Boston that Benjamin Franklin Keith and Edward Albee had opened their first high-class vaudeville theater in 1885 and to Boston that every Broadway show decamped for months in a row.
In the fall of 1917, while working at Fore River, Kennedy had been introduced to Arthur Houghton, the manager of musical comedy star Fred Stone, whose last show, Chin Chin, Joe and Rose had taken in on the first night of their honeymoon in New York City. “It was,” Houghton recalled years later, “in the lobby of the Colonial Theatre in Boston. After the introduction and discovery that we were part of two East Boston families who were close friends . . . we decided to take a stroll and talk over the East Boston family matters. . . . Our walk ended at St. James’ Church where Joe left me to go inside to say some prayers suggested by his mother, and I being the manager of a New York musical show with 24 beautiful chorus girls, decided to take a raincheck on that visit but with a firm promise to meet soon again, which indeed we did, that very night.”13
Kennedy would see a great deal of Houghton and Fred Stone during their frequent trips to Boston in the coming months. Stone, an accomplished song-and-dance man, acrobat, comedian, and tightrope walker, had become one of the highest-paid performers on the musical comedy stage. In the summer of 1918, he had gone to Hollywood and shot three films in ten weeks. The first, The Goat, was released in September 1918 to uniformly bad reviews and minimal box office. The second did just as poorly. The third, released in March 1919 while Stone was performing at the Colonial Theatre in Boston, was also a failure. Stone and Arthur Houghton blamed the bad reviews on the studio that had produced and marketed the films. Kennedy suggested they organize their own production company and produce their own films. He secured financing through Daniel Gurnett, a Boston investor, organized Fred Stone Productions Company, Inc., and made himself treasurer at the healthy weekly salary of $100. When the company ran out of capital after two years, Kennedy arranged for a $150,000 loan from Columbia Trust, backed only by the negatives of two as-yet-unreleased films.14
Kennedy had found the perfect vehicle for his ambitions as a banker and financier, the picture business. In the fall of 1919, he volunteered his services to put Boston’s favorite son, Babe Ruth, in front of moving picture cameras. On September 5, 1919, the same day Ruth broke the major league record for home runs, he signed a movie contract with Henry Taylor, the former owner/manager of the Hollis Street Theatre, who promised him $10,000 to appear in a film to be shot in Boston as soon as the baseball season was finished. Taylor, who had no experience in the picture business, assigned the Ruth contract to Kennedy, who tried to interest the Fox Film Corporation in the project and in a distribution deal for future Fred Stone pictures. Fox turned down both proposals. Ruth refused to do any acting until he had been paid and gave Kennedy three weeks to come up with the money. When the three weeks were up, he pulled out of the agreement.15
Kennedy learned quickly from his misadventures as a producer that, for aspiring businessmen with large ambitions but limited capital, it made more sense to distribute and exhibit moving pictures than to make them. In November 1919, he organized his own film distributing company, Columbia Films, Inc., and secured the franchise to distribute Universal’s films in New England. He paid himself an annual salary of $4,000 to manage the company.16
Although he had decided to concentrate on exhibition, he was not prepared to give up entirely on producing his own pictures. That winter, he tried and failed to finance a film starring Captain Robert Treman, a war hero whose major claim to fame was that he was the second husband of dancer and movie star Irene Castle, whose first husband, Vernon, also a war hero, had died in a plane crash in 1918. Kennedy asked E. B. Dane, the president of Brookline Trust, to contribute $10,000 to produce and distribute Treman’s pictures and got a commitment for the full sum; then, deciding the deal was too risky, he returned the money, and backed out of his agreement with the captain.17
He worked both independently and as a representative of Hayden, Stone. When Frank Hall, the president of Hallmark Pictures, which produced and distributed low-budget pictures such as The Heart of a Gypsy, A Dangerous Affair, and Impossible Susan, approached Hayden, Stone for financing, Kennedy advised Charles Hayden against putting the firm’s money or name behind the company, but suggested that it “would be a very good gamble for an individual who might care to put some money in . . . realizing that the future of an independent company might be developed into a real proposition.” Six months later, after extended negotiations with Hall, Kennedy followed his own advice and bought one third of the company’s stock. Hallmark would go bankrupt within the year, with debts of over $1 million, including $68,500 owed to Kennedy. Fortunately, he had not put his own money into Hallmark, as he would not into any of his other moving picture ventures.18
—
Kennedy had never intended to stay at Hayden, Stone forever, but the lackluster performance of the stock market through the winter and spring of 1920 reinforced his wish to move on sooner rather than later. In April 1920, when Assistant Secretary of the Treasury Russell Leffingwell announced his intention to resign, Kennedy asked Eddie Moore to organize a word-of-mouth lobbying campaign to get him appointed to the position. Boston mayor Andrew Peters, who had been the assistant secretary until he resigned to run for office in Boston, wrote David Houston, Wilson’s new secretary of the treasury, on Kennedy’s behalf, praising Kennedy as an “active and energetic” thirty-one-year-old Harvard graduate who had “shown marked ability” at Fore River and Hayden, Stone. Peters reminded the new secretary of the treasury that 1920 was a presidential election year, Republican governor Calvin Coolidge was riding high after breaking the police strike, and the appointment of an Irish Catholic native Bostonian might help the Democrats win Massachusetts. Secretary Houston replied politely that he had already chosen someone else for the post.19
Kennedy remained in place at Hayden, Stone as the stock market declined further, buffeted that summer of 1920 by the spectacular fall of Charles Ponzi, the dapper young man in the straw hat who had been jailed for bilking thousands of investors of millions of dollars. The Hanover Trust Bank, which Ponzi had taken over, fell with him.
One of the stocks that declined steadily that summer was Eastern Steamship Lines, a company organized and controlled by Hayden, Stone. As a protégé of Galen Stone, Kennedy had acquired a great deal of insider information on Eastern Steamship, and he had bought large quantities for his own account and for family and friends. Trading on insider information was not illegal—and would not become illegal until Kennedy, as the first chair of the Securities and Exchange Commission (SEC), made it so in 1935—but it was also not failure-proof. In mid-August 1920, Chris Dunphy, a friend from Boston who was currently manager of the Mount Pleasant Hotel in Bretton Woods, New Hampshire, and who, on Kennedy’s recommendation, had purchased Eastern Steamship stock, wrote to confirm that he had secured reservations for “your gang arriving here on September 3,” but joked that if Kennedy didn’t do something to “curb the tactics of Eastern Steamship [and get the price up again], there will be no manager here to receive [you]. What I want to have you do is to give me the real dope on this stuff as I am in good and plenty and the boys are hollering for margin and I have no margin to give them. I am way down now and it will take a depth bomb to bring me back.” He signed his letter, “Yours in desperate straits,” then tacked on as a postscript, “You may rest assured that Miss Edling and Miss Bliss will be well taken care of during their stay at the Mount Pleasant.” We don’t know who the two misses were, though we can be sure Dunphy
wouldn’t have mentioned them had there been no connection to Joe.20
Kennedy responded the very next day. “Eastern may look tough but it’s better than I ever told you it was. Keep up your courage. Some day you will make plenty on that.” Ten days later, he wrote Dunphy that he had decided to leave for vacation on Thursday instead of Friday and wanted him “to kindly find out if they have Mass on First Friday morning, and if so, whether they hear confessions before Mass? I do not suppose you, in your ignorance and lack of religion, know the first thing about this yourself, but perhaps you can get one of those pious girls who go to the mountains to find out.” His reference to Mass and confession in the first sentence, followed by his mention of the “pious” girls—was he referring to Miss Edling and Miss Bliss?—reveals, if ever a single document did, the complexity of the man and the ease with which he had juggled the sacred and the profane.21
—
In late August, just before he departed for his New Hampshire vacation, Kennedy was contacted by Rufus Cole, a partner in Robertson-Cole, an American company financed by London bankers. Robertson-Cole was engaged in two disconnected businesses: making and distributing moving pictures in the United States and exporting to Great Britain and “the Orient” American trucks, pleasure cars, and the “Motalarm,” a $3 device that was attached to a radiator cap and whistled when the water got low.
Like other small and medium-sized film companies, Robertson-Cole suffered from cash flow problems. The company, which had built a solid business distributing independent films, had decided to produce its own and purchased land from the Hollywood Cemetery Corporation to build a studio on Gower Street near Melrose, in the process accumulating some $5 million of debt. Cole contacted Kennedy in the hope that he would, through Hayden, Stone, take on his company as a client, secure new financing, and/or restructure his debt to his London bankers. Kennedy put him off. “I had a talk with Mr. Stone today,” he wrote Cole on August 30, 1920, “with the idea of trying to get over to New York tonight, but it is just as I told you over the telephone, we are frightfully busy, due to a fight for control of the Mathieson Alkali Works—which management we control today, and it is taking all of the time of Mr. Stone and his lieutenants.”22
—
On September 16, during a brief trip to New York for a stockholders meeting of Todd Shipbuilding, one of his Hayden, Stone clients, “he felt a concussion” on exiting the subway “and found himself on the ground. He got up in a dazed and stupefied condition and ran back to Wall St. where he saw clouds of glass flying and men and women with their heads split and blood streaming down their faces. Numbers were crying in agony and fear,” he told a reporter from the Boston Daily Globe, who identified him as the “son-in-law of Ex-Mayor Fitzgerald.” The House of Morgan at 23 Wall Street had been bombed a few seconds after noon, by whom we still do not know, though politicians, police, and the public assumed that it was the work of anarchists, socialists, or some other species of foreign-born radical assassins. Broken glass fell like hail on bankers and brokers at the stock exchange, the Bankers Trust Company, the Morgan offices, and nearby office buildings. The streets filled with smoke and were soon crowded with thousands of onlookers, more curious than frightened by the blast and falling debris. While none of the principals at Morgan were killed or badly wounded, thirty of Wall Street’s “little people”—stenographers, messengers, and porters—were killed on their way to lunch. Another ten would die later of their injuries.
—
Hayden, Stone, probably on Kennedy’s recommendation, decided not to take on Robertson-Cole as a client. The company was overleveraged, the moment inauspicious for throwing new stock on the market, and the industry in the early 1920s “attended by too much uncertainty and hazard.” While a few bankers (who were not coincidentally immigrants)—including Otto Kahn of Kuhn, Loeb and the Giannini brothers of the Bank of Italy in San Francisco and the Bowery and East River National Bank in New York—had begun to invest in moving pictures, they were the exceptions.23
Kennedy concurred with Hayden, Stone’s decision not to do business with Robertson-Cole. Still, he was not about to let go of the opportunity presented by an increasingly desperate Rufus Cole, whom he led on a merry chase in the weeks and months to come. “As to the propositions which you so very kindly offer me,” he responded to Cole’s proposal that he invest in the company or solicit others to do so, “as I told you, my experience in the picture business with my own money, and, in some instances, with that of my friends, has been very disastrous, due, very likely, to our ignorance of the business and our childlike simplicity in taking any stock in anybody in the motion picture business. For that reason, I am very loath to try and interest any of my friends in the picture proposition, except in a small way. . . . At the same time, the banking situation [in the aftermath of the Ponzi scandals] has contributed to make the raising of money just a bit more difficult.”24
He offered Cole a counterproposal. He would take over distribution of Robertson-Cole films in New England. “I have talked with my managers here regarding the possibility of a contract,” he wrote Cole from Boston on November 19, 1920. “They verify, absolutely, every word I say: that we can increase the business and can show you much better return than you are getting today. Won’t you, please, think out some basis on which you would be interested, and drop me a line?” He was, he insisted, doing Cole a favor by going into business with him. “I am spending considerable time with my people here, in order to come to some arrangement . . . that would be satisfactory and profitable to both your concern and mine. . . . Our past record with companies here gives me confidence that we can more than make good to you, and I am sure that I would not be so anxious to obtain this exchange if I did not feel that it would be profitable all round.”25
Cole signed the distribution deal. Kennedy incorporated yet another new company, the Robertson-Cole Distributing Corporation of New England, issued $100,000 in preferred stock, and purchased $60,000 for himself. The remaining $40,000 remained “unbought” in the “treasury.” He did not put any of his own savings into the project but got $20,000 from Honey Fitz, who borrowed it from the National Shawmut Bank with collateral supplied by Kennedy. He also borrowed $5,000 from his mother’s account, took $5,000 out of his own, and arranged for a sweetheart loan of $20,000 from Columbia Trust. On December 23, 1920, he wrote Ethel Turner, the assistant treasurer of Columbia Trust, who acted as his personal secretary and accountant, outlining the parameters of the deal “so that your records may be clear.” The financial manipulations were so complicated and the terms of the $20,000 loan from Columbia Trust so shaky that he asked Miss Turner to “kindly destroy the letter” after she had read it and executed his instructions.26
In the years to come, Kennedy’s biographers, in attempting to find out how he financed his early ventures, would leap to the conclusion that his investment capital came from bootlegging operations. This, as we shall see later, was not true. Columbia Trust, which the Kennedy family would hold on to until 1945, was his primary source of investment capital in the early years. Kennedy also funded his investments with loans from Shawmut, where Bob Potter was vice president; from Brookline Trust, where E. B. Dane was president; and from Chase National in New York City, where Eugene Thayer had been named president. His initial loan from Chase National was $85,000 for three months, which he renewed every three months for the next year. When Thayer left Chase National in early 1921, after what appears to have been a breakdown of some sort, Kennedy still owed $77,500 on his loan. Thayer visited the loan officer and “asked him to put the soft pedal on for you, and I think they will.” With Thayer’s help, Kennedy got another two months to pay off the three-month loan he had taken out fifteen months earlier.27
Relying on the coffers of Columbia Trust and borrowing from other banks was a risky way to do business—and Kennedy knew it. As long as he was able to juggle collateral and loans, moving paper from one account to another, one
bank to another, he could survive. His experience as an assistant bank examiner was invaluable in this regard. He knew precisely how far he could go without calling attention to himself or his bank.
It was never easy to keep all these balls in the air without dropping one or another, especially in a down market. “I really ought to be ashamed of myself,” Kennedy wrote Chris Dunphy in Palm Beach on New Year’s Eve 1920, “for not acknowledging your great kindness in sending us the grapefruit and oranges, but, to be truthful, I have spent most of the days scheming how to keep my friends and myself out of the hands of the ever watchful creditors. The days have been dark and dreary in more ways than one, but it looks now as if the worst were over. At any rate, we hope it is.”28
One of the sources of cash he had relied on to pay the interest on his loans was the Fore River restaurant concession that as assistant general manager he had subcontracted to a company he owned. After leaving Fore River, he had managed to hold on to the concession and in May 1920 signed a new two-year contract. When, that fall, he was notified that the contract was being canceled, he fought back by asking Eugene Thayer, who was on the Bethlehem Steel board, to intervene on his behalf with Eugene Grace, the president.
On December 30, 1920, Grace wrote Kennedy to apologize. “I have, naturally, heard of your bitter feelings toward Bethlehem, occasioned, I understand, by the manner in which relations with you were severed.” Grace invited Kennedy to meet with him in New York. After a few rounds of negotiation, Kennedy accepted a cash settlement he regarded as reasonable and a new two-year contract for $15,000 a year to provide “the management and the food” at Fore River.29