by Amy Reading
It turns out that con men were as ruthless about exploiting the new market for swindling stories as Norfleet was. Prior to the twentieth century, virtually the only swindler who published his autobiography was Stephen Burroughs, the New Hampshire impostor and counterfeiter who wrote Memoirs of the Notorious Stephen Burroughs in 1798. Then, in the first three decades of the twentieth century, dozens of con men joined up with journalists, ghostwriters, and sociologists to boast about their deeds and divulge the secret knowledge of their underground caste. Over and over, they spelled out the precise steps by which they ingratiated themselves with marks, told them the tale, and sauntered away with their money. Their stories were serialized in the very same magazines that warned against stock swindles and Spanish prisoners, and ostensibly issued under the very same premise: if you learn the tricks of the trade, you will be inoculated against the disease of susceptibility.
But the swindler autobiographies actually sabotaged this logic, right there on the page for all to see. They informed their readers, in a tone so sly that no one seemed to have picked it up, that revealing their secrets was exactly what paved the way for yet more swindling. The stock swindler George Graham Rice, in his saucy 1913 autobiography, My Adventures with Your Money, wrote, “A little knowledge is a dangerous thing, and the man who thinks he knows it all because he has accumulated much money in his own pet business enterprise is a typical personage on whom the successful modern-day multi-millionaire Wall Street financier trains his batteries.” As the con man William C. Crosby wrote in the memoir he co-authored with Edward H. Smith and serialized in The Saturday Evening Post in 1920, then later reprinted as a book called Confessions of a Confidence Man, “The average professional man possesses that perilous little knowledge of many subjects alien to his immediate calling. He has nearly always some idea of the working of mechanical and electrical devices. He is progressive, informed, sanguine. He feels the kinship of the quasi-scientist with the sciences. But he is seldom well enough equipped to discover the fraud lurking deep in the dark vitals of a new idea. Thus he is an excellent target for the arrows of con.”
Swindlers’ autobiographies cultivate that “perilous little knowledge” in their own readers that will fill them with so much self-confidence that they can afford to give some of the surplus to enterprising strangers. Thus do swindling autobiographies only seem to reveal anything about their profession. One con man anonymously reviewed another swindler’s 1937 testimonial, The Professional Thief, with a great deal of bemusement: “While apparently written in frank and candid form the topics discussed are factual without being really expository. There is little doubt as to the authenticity of this work, yet it can be stated positively that the reader will know very little more about the actual profession of thievery upon his completion of the book.” The swindler autobiographies cannot have been accused of committing deception, but nor did they commit truth.
Those serialized swindler autobiographies were all part of a very big con that played out in the 1920s. The American economic landscape had changed enormously in the previous few decades, but the terms for talking about capitalism had not yet caught up. Only the confidence artists were fluent. Part of the reason why Norfleet’s story gained so much traction was that his quest helped update the discourse about speculation and swindling, markets and morality, that legitimated mainstream economic activity. Everyone was talking about swindling in the 1920s because everyone, for the first time in the nation’s history, had a stake in the financial markets.
Charlie Chaplin was nervous as he waited to go onstage. It was 1918 and he was the nation’s darling, having made movie audiences laugh throughout the grim war years. But this was no quiet film set. He was standing in front of the State, War, and Navy Building in Washington, D.C., beside a hastily constructed platform of boards covered with flags and bunting, and the crowd waiting to hear him speak on behalf of the war effort, alongside Mary Pickford and Douglas Fairbanks, was large and expectant. To ease his nerves, Chaplin turned to the tall young man who stood beside him and confessed that he’d never done this sort of thing before. “There’s nothing to be scared about,” the man told Chaplin. “Just give it to them from the shoulder, tell them to buy their Liberty Bonds; don’t try to be funny.” Chaplin was grateful for the advice, and when it was his turn, he leaped onto the stage and poured his nervous energy into his words, not even stopping to breathe: “The Germans are at your door! We’ve got to stop them! And we will stop them if you buy Liberty Bonds! Remember, each bond you buy will save a soldier’s life—a mother’s son!—and will bring this war to an early victory!” But so forceful were his words that he slipped on the flimsy platform and catapulted onto the handsome young man, who turned out to be the assistant secretary of the navy, Franklin D. Roosevelt.
Charlie Chaplin making his first speech for the Liberty Loan drive in Washington, D.C., on the first anniversary of U.S. entry into the war, April 6, 1918 (photo credit 1.11)
The Liberty Bonds with which the federal government financed World War I hurled the nation into a new phase of capitalism with equal enthusiasm and ineptitude. As Chaplin’s inclusion demonstrated, America’s participation in the war was fostered on the home front with two modern tools: mass media and public debt. The Treasury Department staged four loan drives in 1917 and 1918. When the first, which was intended to raise $5 billion, was undersubscribed, Secretary of the Treasury William Gibbs McAdoo launched an aggressive publicity campaign to market the bonds. Actors, bankers, and even Boy and Girl Scouts exhorted Americans to “capitalize patriotism,” as McAdoo put it, by buying war bonds with yields between 3.5 and 4.5 percent. Veterans toured the nation in railroad cars to spread the word. Chaplin and his colleagues divided up the country between them and went on tour to stage massive rallies. Chaplin financed and starred in The Bond (1918), a series of skits about the bonds of friendship, love, marriage, and, most important, Liberty Bonds. Goldwyn made a silent film whose premise would have been almost blasphemous just a few decades earlier: Stake Uncle Sam to Play Your Hand (1918) depicts a card game in which Italy is losing to Germany until Miss Liberty Loan comes to the rescue.
McAdoo’s troops created enormous social pressure to own Liberty Bonds, and by the end of the subscription period the Treasury had raised about $24 billion for a war that eventually cost about $33 billion. Far more important than their effect on their issuer, however, was the Liberty Bonds’ effect on their holders. Before the war, only about half a million people owned securities of any kind. By 1918, that number had ballooned to seventeen million. Many of those were people who had never even stepped inside a commercial bank, much less a brokerage house. The Liberty Loan program arguably had the greatest effect on ethnic communities among the working class. At the height of the bond campaign in 1918, 46.5 percent of all subscribers were foreign born or had foreign parents. One study of six hundred mothers working at unskilled jobs in Chicago packinghouses found that 84 percent of their families owned Liberty Bonds. Because the bonds were available in small denominations and payable in installments, millions of people could participate in the financial market for the first time. The Treasury Department’s Foreign Language Division, in particular, mobilized pastors, priests, and presidents of more than forty thousand ethnic organizations to persuade their members to demonstrate their patriotism to the United States and help free their homelands by buying Liberty Bonds. Later, corporations would use the same strategy to secure their employees’ loyalty, granting workers shares of corporate stock to encourage the middle and working classes to invest in the capitalist system on the terms of the financiers.
The war economy had largely completed the process begun in the previous century by the Erie Canal bond issue, the railroad stocks, the Chicago Board of Trade, and the bucket shops: the slow redefinition of the American adult from a saver to an investor. In the nineteenth century, an ethic of money management that stressed thrift merged with a larger moral ideal of Christian and republican values that were repeatedly sum
med up in the term “character.” To have character, as one reverend explained, was to possess “INTEGRITY … INTELLIGENCE … INDUSTRY … ECONOMY … and FRUGALITY … ENERGY … and TACT.” The middle-class adult was expected to finance his or her household almost solely on cash, saved and hoarded from steady labor; living within one’s means was the imperative. Gradually, it became common to purchase the new, mass-produced consumer items of the industrial era on credit, but this violated the Victorian value system that made a distinction between “productive” credit, which used borrowed money to increase one’s capital, and “consumptive” credit, which merely drained one’s resources and weakened one’s self-control.
The nineteenth-century understanding of the money economy could be precisely mapped onto the reformers’ distinction between speculation and gambling. Productive credit was like speculation that was supposed to lead to greater financial security, and consumptive credit was like gambling, a pure waste. Yet while American culture sought to differentiate speculation from gambling, the opposite trend played out in the value field of money and finance. The two kinds of credit began to blur and combine, enlarging the sectors of the economy in which it was permissible to extend one’s capital. Debt was transformed from a potential route to dissipation into the very tool by which a discerning investor might exercise perfect self-control in the pursuit of profit and productivity. The long inflation from 1897 to 1914 actually rendered the savings account a poor financial instrument for the preservation of wealth. The forced austerity of World War I—in which the government limited the spectrum of shoe colors to white, black, and tan and declared wheatless Mondays, meatless Tuesdays, and pork-less Thursdays and Saturdays—meant that Americans saved more than ever before, at a rate that had reached 9.1 percent by 1917. The war fueled the economy, but for a time the dollars backed up. The stock market began to rev: in 1915 and 1916, General Motors had risen from $55 a share to $114, and American Woolen had jumped from $12 to $50. Jobs were created, real wages rose, and purchasing power skyrocketed as the cost of consumer goods fell; between 1914 and 1926, the amount a dollar could buy grew by 50 percent. When Americans were urged to put their surplus capital into Liberty Bonds, the barrier for entry into the world of finance was at a historic low. They had the money, and the moral strictures against speculation had melted in the heat of the expanding economy.
What happened next was utterly predictable in hindsight. Within the first few months of the war’s end, confidence men had stolen $400 million worth of Liberty Bonds from Midwesterners alone, according to the Treasury Department. The war had pushed the stock market up to unthinkable levels, but the true increase was elsewhere in the nation’s economy; as one con man estimated in The Saturday Evening Post in 1922, “The war and the activities incident to it increased the output of American suckers tenfold.” Even he was a little chagrined at his own success, saying, “I’d hate to know the gross suckerage of this country right now.”
In 1918–19, Louis Guenther’s muckraking series of articles in The World’s Work, “Pirates of Promotion,” revealed exactly how the new market for securities was diverted and siphoned off. A letter would arrive in the mail from a brokerage house such as the Ratner Securities Corporation. “Send us your $100 Liberty Bond—or as many more as possible,” it would begin. “We will loan you the full face value on these bonds, if they are used to purchase good, dividend securities under the Ratner plans.… Do not waste the power of your Liberty Bond. If idle in a safe-deposit vault, it is non-creative. Give your bond the constructive element to which it is entitled. It will do its duty to ‘Uncle Sam’ twice and to you twice.” Why be content with 3 or 4 percent yearly interest, the letter would say, when savvy investors earn four times that much? The brokerage would accept the bonds as collateral for a leveraged purchase of the industrial, mining, or oil stocks it was actively promoting. Its house organ might tell of the Kathodian Bronze Works, for instance, or National Bituminous Coal and Coke Company, or Geyser Oil. It might offer early investors favorable terms for lending their capital to a grand enterprise in its nascent phase—say, a hundred shares for $10, with an option to buy as many as five thousand more shares at ten cents apiece regardless of future price swings. To demonstrate its good faith, the brokerage would guarantee to buy back the original shares in sixty days if they hadn’t increased in price. But sixty days later, the investor would receive another letter crowing about the success of the first issue and explaining that the next issue would now be priced significantly higher because of vigorous trading.
Sometimes the “brokerage” would actually execute the investor’s orders to purchase stock in one of the companies. Sometimes the company in question might have an actual mining lease on some acreage in the West, or an oil rig lazily raising and lowering its arm somewhere in Texas. Sometimes the company’s stock might even appear on the New York Stock Exchange or the Curb outside it, where less regulated trading occurred. But there was never a market for the stocks that these get-rich-quick promoters dealt in; it was never possible to sell them, only to buy more and more of them.
Yet if the stocks could not be sold, the names of the people who bought them were highly fungible. The phony promoters made almost as much money by compiling and selling so-called sucker lists as they did by swindling money from the suckers themselves. Like the commodities on the Chicago Board of Trade, these sucker lists were sorted, graded, and priced with precision: the “sold once” names went for two cents apiece; next in value was the “quick” list of middle-class people who had just inherited money; the list of “selected clergy” was prized because religious leaders invested church money and acted as financial advisers to many families, so it went for four cents a name; at the high end, the clerk at a venerable New England bank pilfered and sold a list of its customers to a name broker for twenty-five cents a name.
“Sold once” did not, alas, mean “twice shy,” as the monthly magazines’ editors and writers learned to their anguish. Guenther’s World’s Work series, as well as George Witten’s articles in Outlook, Edward Jerome Dies’s series “The Fine Art of Catching the ‘Sucker,’ ” also in Outlook, and Albert Atwood’s articles in The Saturday Evening Post, seemingly had little effect in slowing down the steady transfer of wealth from the new population of marks to the ever more resourceful swindlers. Soon, The World’s Work was exposing the “reloaders,” whose genius consisted of approaching the “sold once” and using their worthless stock as the lever by which to extract yet more money from them. A reloader, sitting in a “boiler room” with a telephone and a sucker list, calls a mark and offers to buy his original shares in Kathodian Bronze or National Bituminous at a favorable price, because he has another client who would like to purchase a significant stake in said company. The caller suggests, however, that it would be easier for him to buy the shares if they came bundled into a larger block, and he asks the mark if he’d like to buy more shares at his original price and resell them at the higher price. By the time the mark has purchased new shares, the broker is looking to buy back an even larger bundle, and the mark must spend more money to chase the elusive jackpot.
The swindlers’ term for running a mark into financial ruin was “dynamiting” him, and it happened with demoralizing regularity. One mark estimated that stock swindlers stole an average of $1 billion a year for each year between 1919 and 1929, a number that was surely inflated. But was it? In 1905, the Chicago Tribune tabulated the yearly loss to bucket shops at $100 million. In 1926, the New York attorney general claimed that $500 million was lost every year solely in his state alone. The New York Evening Post, that same year, concurred in setting the national figure at $1 billion. But time and again, columnists insisted that the swindlers stole far more than just money. As a writer in Harper’s put it, “Every dollar so lost makes timid and distrustful a great many other dollars.” The president of the New York Stock Exchange elaborated this point in Collier’s: “The swindler steals money, but he steals something far more valuable—the invest
or’s faith in his own country. He is the enemy of every farmer, every teacher, every worker, every professional man, every law-abiding citizen.”
Between 1880 and 1920, the same forces that prompted the evolution of the big con propelled into being a new phalanx of workers in knowledge trades, the professional-managerial class. The nineteenth-century Industrial Revolution had transformed American business within and without its factory walls. Small, traditional family firms had merged and grown into large, articulated corporations that were distinguished by two deceptively simple innovations: they were made up of many different operating units, and they were managed by a hierarchy of salaried executives. What resulted was managerial capitalism, which prized efficiency above all else. Frederick Winslow Taylor pioneered the study and merciless exploitation of time as a managerial tool in his book The Principles of Scientific Management. By measuring the time it took to perform a given manufacturing task, a manager would set a standard for production that would then determine workers’ rates of pay, thus vastly increasing the output of each employee. Henry Ford pioneered the assembly line, vertical integration, and the $5 day, which effectively doubled the rate of pay for wage workers in 1914 and also spurred production.