Bernard Baruch: The Adventures of a Wall Street Legend

by James Grant

  The rise of the McNary-Haugen idea was a consequence of the agricultural depression of the 1920s and specifically of the troubles of the Moline Plow Company. George Peek, president of that enterprise, had made a successful career at Deere & Company before the war and had served on the War Industries Board in 1918 with General Hugh Johnson. In 1919 Johnson and he went to Moline together to rejuvenate what they took to be a promising company. But its customers, the farmers, were in no condition to buy its products and the Moline Plow Company, in any case, was dying. Attending to Washington, Peek and Johnson wrote a tract—“Equality for Agriculture”—which, they hoped, would save the situation by lifting the weight of the surplus.

  Baruch was uncertain. He endorsed the goal of the legislation and also the equalization tax, by which farmers would be bound to cooperate under the involuntary voluntary method. He respected Peek and Johnson. As a low-tariff Democrat, however, he disagreed with their protectionist thinking. After withholding his support for the bill in 1922, he helped it along in 1924, sent $5,000 to the McNary-Haugen forces and helped to write a plank into the Democratic Party platform that called for the “establishment of an export marketing corporation or commission in order that the exportable surplus may not establish the price of the whole crop.” But Calvin Coolidge kept the White House and twice he vetoed McNary-Haugen legislation. Peek’s idea was adopted in part by the Hoover Administration and surfaced again in a very different (and, to Baruch, distasteful) form under Franklin D. Roosevelt.

  When not looking after the commonweal, Baruch sometimes gave himself up to the pleasures and burdens of wealth. As a rule he summered in Europe, sometimes returning in time for the races at Saratoga, at other times playing the horses vicariously through his partner in breeding, Cary Grayson. He was in New York for the autumn and at Hobcaw over Christmas and intermittently through the close of duck and quail season. In the spring he was back in New York again.

  He had definite ideas on traveling. Finding himself increasingly cold-blooded as the years wore on, he liked the sunshine. He wanted plenty of legroom and as much seagoing stability as possible. Thus, aboard ship, he preferred a cabin amidships, where the pitching was minimal, but not the Premier Suite, which was too conspicuous. For the European season of July-September 1924 he lined up a touring automobile and chauffeur with specifications he described to his friend Count René de Rougemont: “I do hope,” said Baruch, “it is a cabriolet that can be opened, because for touring one must be in the sunshine. If it is entirely collapsible, it would be perfectly splendid. Would it be too much trouble for you to see that there is not only a trunk for the rear, but trunks at the sides of the running boards, so that we can avoid putting a lot of bags inside the car?”

  Although castles are conspicuous and notoriously damp, in 1923 he rented one. It was called Fetteresso, and it was on the east coast of Scotland about a mile outside the village of Stonehaven. It had a great hall, dining room, drawing room, smoking room, billiard room, library, fourteen bedrooms, servants’ quarters, seven bathrooms, and one servants’ bathroom. Under the impression (certainly mistaken in Baruch’s case) that every vacationing laird wanted instant communications with the outside world, the proprietor had just installed a telephone. The shootings extended to about ten thousand acres, for which the season rental was $15,000. Cost of board and castle ran to an extra $10,000 or so, which Baruch paid gladly. “I have always wanted a season’s gunning in Scotland or England,” he wrote his London agent, “and have always expected that it would cost quite a little.” On August 11, 1923, $2,600 of the cost was instantly defrayed when a horse of Baruch’s and Grayson’s finished in the money at Saratoga.

  As a rich man with time on his hands and few fixed commitments, Baruch sometimes had difficulty finding friends to play with. “I am hooked up with a castle in Scotland,” he commanded Senator Joseph T. Robinson of Arkansas, a Hobcaw regular, in 1923, “and you are hooked with me. . . . You are going shooting with me, and you need a No. 12 gauge gun. Make no mistake about this.” But Robinson couldn’t get away, and Baruch got Governor Albert C. Ritchie of Maryland. All together, between August 13 and September 8, the Baruch party (as subsequently augmented) bagged a roe, 3 capercaillies, 4 plover, 13 partridge, 216 hares, and 1,662 grouse. Back in New York, Baruch sent Ritchie a $2,500 contribution to his re-election campaign, “because,” as he wrote, “. . . you were a damn good governor and because, as my friend, I love and respect you.”

  It pleased Baruch that the recipients of his gifts were beholden to him, but for his own protection he did some of his charitable giving anonymously. Sending $25 to an impoverished South Carolina woman via a friend, he asked that the source of the funds not be revealed: “Please do not let her know that I sent it because I have so many requests of this kind that I could use every cent I have, and even as much as people think I have, in this way.” He urgently wired Joe Robinson with similar instructions when the senator threatened to divulge that Baruch was the angel of an Arkansas essay contest (the subject, of course, was agriculture). On the other hand, the newspapermen and politicians who accepted his gifts and hospitality did know whom to thank. In 1920, Garet Garrett, a noted financial journalist; Ralph Pulitzer, publisher of the New York World; and Herbert Bayard Swope, also of the World, were guests at Hobcaw.[38] (It was a rare visit for Swope, who had round-the-clock need of a telephone, one of the few conveniences that Hobcaw didn’t have to offer.) In 1921 came Senator Byron P. (Pat) Harrison of Mississippi and Robinson; in 1922 there were Garrett, Mark Sullivan, Robinson, and Cary Grayson; in 1923, Ralph Pulitzer and his brother, Joseph, publisher of the St. Louis Post-Dispatch, Charles Michelson of the World, Frank Kent of the Baltimore Sun, and Governor Ritchie. Not until Franklin D. Roosevelt paid a visit in 1944 did an American President visit Hobcaw during Baruch’s time, although freshly killed ducks were shipped in a nonpartisan spirit to the White House under Presidents Wilson, Harding, and Coolidge. Twenty-five Hobcaw terrapin were delivered, live, to ex-Premier Georges Clemenceau of France, who said that he found them too amusing to eat. When Andre Tardieu, a protégé of Clemenceau’s, mailed Baruch $19,000 in 1925 with the explanation, “I would like to make them [the dollars] prolific,” Baruch graciously ignored his self-imposed rule against managing other people’s money. There was a recent precedent for this kindness. Since at least 1923 he had been looking after the affairs of General John J. Pershing.

  To newspapermen, who proverbially didn’t have enough money to be managed, Baruch’s fortune stirred the hope that they might one day work on a Baruch paper. David Lawrence sold him a minority interest in his United States Daily, and there was an unsuccessful Baruch bid for the New York Evening Post in 1922. In 1923, Arthur Krock moved to New York from Louisville with his wife and small son, took a temporary job at the Motion Picture Producers’ Association and began writing editorials part-time for the New York World. By 1924, he had become assistant to the publisher of the World and a publicity adviser to Baruch. Krock needed money, Baruch needed a ghostwriter, each man liked the other, and so their friendship blossomed. In March 1926 Baruch subscribed $1,000 to the Evening World’s free-coal fund, because, as he wrote Krock, “you asked me to.” That August a friendly profile of Baruch appeared in The New Yorker under Krock’s signature.

  In late 1925 or early 1926 Baruch unwittingly helped Krock into a jam that made his leaving the World advisable if not inevitable. At the time Dillon, Read & Company was trying to buy the Dodge Brothers Company, and it had commissioned Charles Schwartz and Morton L. Schwartz, brothers and well-known financial and racing figures, to assist. Baruch knew the Schwartzes (at the Turf & Field Club enclosure at Belmont Charles Schwartz had Box 42, Morton had 43, Swope had 44, and Baruch had 45), and he steered them to Krock for publicity work on the deal, which promised to be controversial. Krock agreed to help (as he wrote in his memoirs) “. . . whenever the request in no way infringed on any professional obligation or involved The World.” Walter Lippmann, the editor of the editorial pag
e, however, did find what he thought was an infringement. One day he happened to be walking by Krock’s office when Krock was on the phone with Charles Schwartz. The conversation that Lippmann thought he overheard concerned an editorial. The piece, which Lippmann himself had written but which (as he recalled) had not yet been published, condemned the Dodge acquisition. Lippmann took his suspicions to Pulitzer, who demanded an explanation of Krock. Krock insisted that there had been a misunderstanding and that Lippmann was mistaken, but the episode was disagreeable all around. In 1927 Baruch mentioned to Krock that Adolph S. Ochs, publisher of The New York Times, had an interest in hiring him. Baruch set up a meeting between employer and employee to be, and Krock, on May 1, 1927, joined the Times’s editorial board.

  Among the New York newspapermen of the day only Swope could pretend to financial equality with Baruch and at that it was a parity mainly on the expense side of the ledger. Swope began as a reporter on the New York World in 1909 at $42 a week plus space rates. In 1921, at the age of thirty-nine, he was the paper’s executive editor at $1,000 a week plus a 2 percent share of the World’s and Sunday World’s profits. The salary was large by almost every relevant measure except Swope’s standard of living. After his promotion to executive editor, he and his wife moved into a capacious fifth-floor apartment at 135 West 58th Street. Feeling cramped, they annexed the apartment upstairs to create a duplex of twenty-eight rooms, eight baths, a dozen telephones, and enough closet space to house the roughly seventy-five suits that Swope usually had in commission. In the summer, when Baruch was off to Europe—Swope once asked that he bring back a dozen pair of white wool socks from Paris for him—the Swopes rented a three-story Victorian mansion in Great Neck, on the North Shore of Long Island, overlooking Manhasset Bay. Ring Lardner lived a hundred yards away, but still within easy earshot:

  It is [he related] almost impossible to work at times and still more difficult to sleep. Mr. Swope of the World lives across the way, and he conducts an almost continuous house party. A number of other neighbors do the same; there are guests in large numbers roaming these woods all the time. Apparently they become confused occasionally and forget at whose house they are really stopping, for they wander in at all hours demanding refreshment and entertainment at the place that happens to be nearest at the moment.

  Enough found their way to the Swopes to run the editor’s grocery bill at high season to $1,000 a week, thereby exactly matching his salary.

  Swope’s financial requirements were fully proportional to Swope himself, as Peggy Barton, the writer and cartoonist, sketched him:

  Tall, architectural head like a department store, tomato bisque in color, topped by close, well-groomed frills of blond hair. Narrow forehead with square, jutting bones. Steep, pear-shaped nose, pinched in at the bridge, flanked by an inch of eyebrow, a circle of glass, and a wedge of eye. Scornful nostrils snorting with importance. Long upper lip of an early settler, suspending a mouth like a tailored buttonhole and a truculent chin with a slight dribble of flesh beneath. Big swinging stride: style, Lord of Creation. Voice like a dinner gong. Stuck-up, stiffened, starched, easily rumpled. Self-centered as the last dodo. Breathes fire, brimstone, and Big Business. The spirit of old Gotham.

  To keep in funds, Swope speculated in the stock market, at first indifferently but later with such brio that his pre-Crash portfolio totaled, on paper, $12 million. He bet extravagantly. One of his gaming companions was Arnold Rothstein, a professional gambler of unsavory reputation who was assassinated in 1928 while carrying $6,500 in his pocket (a not unheard-of amount for Rothstein—at times he had $100,000). In February 1923 Swope got into a two-day poker game in the private railcar of Joshua Cosden, the oilman, in Palm Beach, Florida. Cosden, who could afford it, lost $443,100. Leonard Replogle, Baruch’s steel deputy in the War Industries Board, was ahead by a couple of hundred thousand dollars, and Florenz Ziegfeld, owner of the Follies, lost a little more than Replogle had won. In advance Swope had allowed himself losses of $150,000. He wound up winning (although not, to the last cent, collecting) $470,300.

  Swope continued to see Cosden, whom he took to the Dempsey-Tunney rematch in 1927, and also another oil millionaire, Harry F. Sinclair, who had been Swope’s host at the first Dempsey-Tunney bout in 1926. What they told Swope about the market, he passed along to Baruch, and Swope’s information in 1923 was that oil stocks were a good thing. Putting their heads together, Baruch and he bought, but the oils went down. That September, Swope reported that Sinclair was still bullish, and that he (Swope) was still holding on: “I have all my Sinclair and Cosden,” he wrote Baruch. “I have not bought any more, though I was tempted to. For the purpose of straightening out my account, I have sold my holdings on Atchison, Southern Pacific, Mack Truck, common, Mack Truck, preferred, Detroit Edison, and Consolidated Gas. My account, I think, is in fair shape, though of course, it shows a heavy loss.”

  Writing comprehensively, the editor included a report on the season at Saratoga, news of a mission to Russia by Sinclair to look for oil, “inside dope” on the oil-stock situation, word that Frank Munsey wanted to sell the New York Herald (“We might keep our ears to the ground and see what happens”), a guess on the initials of the young lady with whom Baruch had allegedly had a shipboard tiff (B.G., married name H. : “nothing escapes me”), and the flattering information that any number of stock-market jobs were Baruch’s for the asking, although, Swope added, he felt sure that Baruch would not be interested. Also enclosed was a clipping from the World headed “B. M. Baruch Condemns Defiance of League,” which contained a statement deploring Mussolini’s action against Greece. This Swope had solicited from Baruch at Fetteresso.

  There was an undercurrent of dunning in Swope’s letter, and Baruch, sensing it, wrote back to offer help. He asked that

  the responsibility for the three thousand shares of Sinclair . . . in your account be taken over from yours to mine. There is a loss of some $12,000 in it, and in addition it requires $10,000 or $12,000 more for margin. Thus, it relieves your account to that extent. I am taking the stock over because of what I said at the time, and also because it may teach me a lesson not to go to sleep with even the tip of my finger in anybody’s mouth. When it did not materialize at the time the stock was around 22 or 23 [the price had fallen to 18⅝], we should have ducked. This is what I had in mind when I told Miss Boyle to sell the stock, and get rid of a thousand at 24⅞. I do not know enough about oil stocks to do anything in them, but I do know enough to keep out of them.

  New losses seven months later brought more assurances from Baruch and additional thanks from Swope.

  Inasmuch as Baruch was a friend of the World’s publisher and a virtual banker to its executive editor, it was natural to suppose that he enjoyed some special influence over its news columns. E. J. Kahn Jr., Swope’s biographer, however, decided not:

  As for Baruch [Kahn wrote], while there was no question in anyone’s mind that any public statement he cared to make would find a refuge in the World’s columns, Swope extended himself not much beyond sending a memorandum to an assistant in the spring of 1926 that went, “Please tell the Sports Department in referring to Mr. Baruch never to call him ‘Barney.’ His name is Bernard M. Baruch, and he is to be referred to in that way, or as B. M. Baruch.”

  When William G. McAdoo, Baruch’s candidate for the 1924 Democratic presidential nomination, chafed at the unfriendly treatment he was getting in the World, he asked Baruch to intercede on his behalf with Swope. Whatever Baruch may or may not have told Swope (he told Mark Sullivan that there was nothing he could or would do), the World never let up on McAdoo.

  For not much more than the cost of maintaining Swope, Baruch might have made a down payment on a medium-sized daily, but as Garet Garrett pointed out there was no reason to buy a paper when he could so easily get on the front page of everybody else’s. Getting on was easy, but making it seem spontaneous was sometimes a challenge. Prodigious efforts of stage setting were required in 1925, for example, when Baruc
h gave $250,000 to the Walter Hines Page School of International Relations at Johns Hopkins University to endow research into the idea of “taking the profit out of war.” This was, Baruch liked to point out, his idea. He thought that war might be avoided if corporations were denied extraordinary profits for the duration of the emergency. Alternately, if hostilities did erupt, the central ordering of the economy along the lines pioneered by the War Industries Board would help to speed victory. His friend General Pershing agreed to endorse the scheme and Krock was retained for publicity. A letter that was evidently written or edited by Krock but signed by Owen D. Young, president of the school’s board of trustees, and addressed to Baruch went as follows:

  My Dear Mr. Baruch:

  In closing Chapter 6 of your report to the President as Chairman of the War Industries Board (March 3, 1921) you said: “One is led to the thought that, in a similar emergency, there ought to be not alone a mobilization of manpower, but of things and dollars.”

  That is the first crystallization in words of the definite system of industrial preparedness and management in time of war which was already in practical operation under the War Industries Board when the great war ended in 1918 and which experience has taught us must necessarily exist in complete form before another war comes, if the nation is to reach its full effectiveness. To this thought you have many times since added these two points: