by John Brooks
Despite all this, Saunders, in Memphis, was in a jubilant, expansive mood that Tuesday evening. After all, his paper profits at that moment ran to several million dollars. The hitch, of course, was that he could not realize them, but he seems to have been slow to grasp that fact or to understand the extent to which his position had been undermined. The indications are that he went to bed convinced that, besides having personally brought about a first-class mess on the hated Stock Exchange, he had made himself a bundle and had demonstrated how a poor Southern boy could teach the city slickers a lesson. It all must have added up to a heady sensation. But, like most such sensations, it didn’t last long. By Wednesday evening, when Saunders issued his first public utterance on the Piggly Crisis, his mood had changed to an odd mixture of puzzlement, defiance, and a somewhat muted echo of the crowing triumph of the night before. “A razor to my throat, figuratively speaking, is why I suddenly and without warning kicked the pegs from under Wall Street and its gang of gamblers and market manipulators,” he declared in a press interview. “It was strictly a question of whether I should survive, and likewise my business and the fortunes of my friends, or whether I should be ‘licked’ and pointed to as a boob from Tennessee. And the consequence was that the boastful and supposedly invulnerable Wall Street powers found their methods controverted by well-laid plans and quick action.” Saunders wound up his statement by laying down his terms: the Stock Exchange’s deadline extension notwithstanding, he would expect settlement in full on all short stock by 3 P.M. the next day—Thursday—at $150 a share; thereafter his price would be $250.
On Thursday, to Saunders’ surprise, very few short sellers came forward to settle; presumably those who did couldn’t stand the uncertainty. But then the Governing Committee kicked the pegs from under Saunders by announcing that the stock of Piggly Wiggly was permanently stricken from its trading list and that the short sellers would be given a full five days from the original deadline—that is, until two-fifteen the following Monday—to meet their obligations. In Memphis, Saunders, far removed from the scene though he was, could not miss the import of these moves—he was now on the losing end of things. Nor could he any longer fail to see that the postponement of the short sellers’ deadline was the vital issue. “As I understand it,” he said in another statement, handed to reporters that evening, “the failure of a broker to meet his clearings through the Stock Exchange at the appointed time is the same as a bank that would be unable to meet its clearings, and all of us know what would happen to that kind of a bank.… The bank examiner would have a sign stuck up on the door with the word ‘Closed.’ It is unbelievable to me that the august and all-powerful New York Stock Exchange is a welcher. Therefore I continue to believe that the … shares of stock still due me on contracts … will be settled on the proper basis.” An editorial in the Memphis Commercial Appeal backed up Saunders’ cry of treachery, declaring, “This looks like what gamblers call welching. We hope the home boy beats them to a frazzle.”
That same Thursday, by a coincidence, the annual financial report of Piggly Wiggly Stores, Inc., was made public. It was a highly favorable one—sales, profits, current assets, and all other significant figures were up sharply over the year before—but nobody paid any attention to it. For the moment, the real worth of the company was irrelevant; the point was the game.
ON Friday morning, the Piggly Wiggly bubble burst. It burst because Saunders, who had said his price would rise to $250 a share after 3 P.M. Thursday, made the startling announcement that he would settle for a hundred. E. W. Bradford, Saunders’ New York lawyer, was asked why Saunders had suddenly granted this striking concession. Saunders had done it out of the generosity of his heart, Bradford replied gamely, but the truth was soon obvious: Saunders had made the concession because he’d had to. The postponement granted by the Stock Exchange had given the short sellers and their brokers a chance to scan lists of Piggly Wiggly stockholders, and from these they had been able to smoke out small blocks of shares that Saunders had not cornered. Widows and orphans in Albuquerque and Sioux City, who knew nothing about short sellers and corners, were only too happy, when pressed, to dig into their mattresses or safe-deposit boxes and sell—in the so-called over-the-counter market, since the stock could no longer be traded on the Exchange—their ten or twenty shares of Piggly Wiggly for at least double what they had paid for them. Consequently, instead of having to buy stock from Saunders at his price of $250 and then hand it back to him in settlement of their loans, many of the short sellers were able to buy it in over-the-counter trading at around a hundred dollars, and thus, with bitter pleasure, pay off their Memphis adversary not in cash but in shares of Piggly Wiggly—the very last thing he wanted just then. By nightfall Friday, virtually all the short sellers were in the clear, having redeemed their indebtedness either by these over-the-counter purchases or by paying Saunders cash at his own suddenly deflated rate of a hundred dollars a share.
That evening, Saunders released still another statement, and this one, while still defiant, was unmistakably a howl of anguish. “Wall Street got licked and then called for ‘mamma,’” it read. “Of all the institutions in America, the New York Stock Exchange is the worst menace of all in its power to ruin all who dare to oppose it. A law unto itself … an association of men who claim the right that no king or autocrat ever dared to take: to make a rule that applies one day on contracts and abrogate it the next day to let out a bunch of welchers.… My whole life from this day on will be aimed toward the end of having the public protected from a like occurrence.… I am not afraid. Let Wall Street get me if they can.” But it appeared that Wall Street had got him; his corner was broken, leaving him deeply in debt to the syndicate of Southern bankers and encumbered with a mountain of stock whose immediate future was, to say the least, precarious.
SAUNDEES’ fulminations did not go unheeded on Wall Street, and as a result the Exchange felt compelled to justify itself. On Monday, March 26th, shortly after the Piggly Wiggly short sellers’ deadline had passed and Saunders’ corner was, for all practical purposes, a dead issue, the Exchange offered its apologia, in the form of a lengthy review of the crisis from beginning to end. In presenting its case, the Exchange emphasized the public harm that might have been done if the corner had gone unbroken, explaining, “The enforcement simultaneously of all contracts for the return of the stock would have forced the stock to any price that might be fixed by Mr. Saunders, and competitive bidding for the insufficient supply might have brought about conditions illustrated by other corners, notably the Northern Pacific corner in 1901.” Then, its syntax yielding to its sincerity, the Exchange went on to say that “the demoralizing effects of such a situation are not limited to those directly affected by the contracts but extends to the whole market.” Getting down to the two specific actions it had taken—the suspension of trading in Piggly Wiggly and the extension of the short sellers’ deadline—the Exchange argued that both of them were within the bounds of its own constitution and rules, and therefore irreproachable. Arrogant as this may sound now, the Exchange had a point; in those days its rules were just about the only controls over stock trading.
The question of whether, even by their own rules, the slickers really played fair with the boob is still debated among fiscal antiquarians. There is strong presumptive evidence that the slickers themselves later came to have their doubts. Regarding the right of the Exchange to suspend trading in a stock there can be no argument, since the right was, as the Exchange claimed at the time, specifically granted in its constitution. But the right to postpone the deadline for short sellers to honor their contracts, though also claimed at the time, is another matter. In June, 1925, two years after Saunders’ corner, the Exchange felt constrained to amend its constitution with an article stating that “whenever in the opinion of the Governing Committee a corner has been created in a security listed on the Exchange … the Governing Committee may postpone the time for deliveries on Exchange contracts therein.” By adopting a statute auth
orizing it to do what it had done long before, the Exchange would seem, at the very least, to have exposed a guilty conscience.
THE immediate aftermath of the Piggly Crisis was a wave of sympathy for Saunders. Throughout the hinterland, the public image of him became that of a gallant champion of the underdog who had been ruthlessly crushed. Even in New York, the very lair of the Stock Exchange, the Times conceded in an editorial that in the minds of many people Saunders represented St. George and the Stock Exchange the dragon. That the dragon triumphed in the end, said the Times, was “bad news for a nation at least 66⅔ per cent ‘sucker,’ which had its moment of triumph when it read that a sucker had trimmed the interests and had his foot on Wall Street’s neck while the vicious manipulators gasped their lives away.”
Not a man to ignore such a host of friendly fellow suckers, Saunders went to work to turn them to account. And he needed them, for his position was perilous indeed. His biggest problem was what to do about the ten million dollars that he owed his banker backers—and didn’t have. The basic plan behind his corner—if he had had any plan at all—must have been to make such a killing that he could pay back a big slice of his debt out of the profits, pay back the rest out of the proceeds from his public stock sale, and then walk off with a still huge block of Piggly Wiggly stock free and clear. Even though the cut-rate hundred-dollar settlement had netted him a killing by most men’s standards (just how much of a killing is not known, but it has been reliably estimated at half a million or so), it was not a fraction of what he might have reasonably expected it to be, and because it wasn’t his whole structure became an arch without a keystone.
Having paid his bankers what he had received from the short sellers and from his public stock sale, Saunders found that he still owed them about five million dollars, half of it due September 1, 1923, and the balance on January 1, 1924. His best hope of raising the money lay in selling more of the vast bundle of Piggly Wiggly shares he still had on hand. Since he could no longer sell them on the Exchange, he resorted to his favorite form of self-expression—newspaper advertising, this time supplemented with a mail-order pitch offering Piggly Wiggly again at fifty-five dollars. It soon became evident, though, that public sympathy was one thing and public willingness to translate sympathy into cash was quite another. Everyone, whether in New York, Memphis, or Texarkana, knew about the recent speculative shenanigans in Piggly Wiggly and about the dubious state of the president’s finances. Not even Saunders’ fellow suckers would have any part of his deal now, and the campaign was a bleak failure.
Sadly accepting this fact, Saunders next appealed to the local and regional pride of his Memphis neighbors by turning his remarkable powers of persuasion to the job of convincing them that his financial dilemma was a civic issue. If he should go broke, he argued, it would reflect not only on the character and business acumen of Memphis but on Southern honor in general. “I do not ask for charity,” he wrote in one of the large ads he always seemed able to find the cash for, “and I do not request any flowers for my financial funeral, but I do ask … everybody in Memphis to recognize and know that this is a serious statement made for the purpose of acquainting those who wish to assist in this matter, that they may work with me, and with other friends and believers in my business, in a Memphis campaign to have every man and woman who possibly can in this city become one of the partners of the Piggly Wiggly business, because it is a good investment first, and, second, because it is the right thing to do.” Raising his sights in a second ad, he declared, “For Piggly Wiggly to be ruined would shame the whole South.”
Just which argument proved the clincher in persuading Memphis that it should try to pull Saunders’ chestnuts out of the fire is hard to say, but some part of his line of reasoning clicked, and soon the Memphis Commercial Appeal was urging the town to get behind the embattled local boy. The response of the city’s business leaders was truly inspiring to Saunders. A whirlwind three-day campaign was planned, with the object of selling fifty thousand shares of his stock to the citizens of Memphis at the old magic figure of fifty-five dollars a share; in order to give buyers some degree of assurance that they would not later find themselves alone out on a limb, it was stipulated that unless the whole block was sold within the three days, all sales would be called off. The Chamber of Commerce sponsored the drive; the American Legion, the Civitan Club, and the Exchange Club fell into line; and even the Bowers Stores and the Arrow Stores, both competitors of Piggly Wiggly in Memphis, agreed to plug the worthy cause. Hundreds of civic-minded volunteers signed up to ring doorbells. On May 3rd, five days before the scheduled start of the campaign, 250 Memphis businessmen assembled at the Gayoso Hotel for a kickoff dinner. There were cheers when Saunders, accompanied by his wife, entered the dining room; one of the many after-dinner speakers described him as “the man who has done more for Memphis than any in the last thousand years”—a rousing tribute that put God knew how many Chickasaw chiefs in their place. “Business rivalries and personal differences were swept away like mists before the sun,” a Commercial Appeal reporter wrote of the dinner.
The drive got off to a splendid start. On the opening day—May 8th—society women and Boy Scouts paraded the streets of Memphis wearing badges that read, “We’re One Hundred Per Cent for Clarence Saunders and Piggly Wiggly.” Merchants adorned their windows with placards bearing the slogan “A Share of Piggly Wiggly Stock in Every Home.” Telephones and doorbells rang incessantly. In short order, 23,698 of the 50,000 shares had been subscribed for. Yet at the very moment when most of Memphis had become miraculously convinced that the peddling of Piggly Wiggly stock was an activity fully as uplifting as soliciting for the Red Cross or the Community Chest, ugly doubts were brewing, and some vipers in the home nest suddenly demanded that Saunders consent to an immediate spot audit of his company’s books. Saunders, for whatever reasons, refused, but offered to placate the skeptics by stepping down as president of Piggly Wiggly if such a move “would facilitate the stock-selling campaign.” He was not asked to give up the presidency, but on May 9th, the second day of the campaign, a watchdog committee of four—three bankers and a businessman—was appointed by the Piggly Wiggly directors to help him run the company for an interim period, while the dust settled. That same day, Saunders was confronted with another embarrassing situation: why, the campaign leaders wanted to know, was he continuing to build his million-dollar Pink Palace at a time when the whole town was working for him for nothing? He replied hastily that he would have the place boarded up the very next day and that there would be no further construction until his financial future looked bright again.
The confusion attendant on these two issues brought the drive to a standstill. At the end of the third day, the total number of shares subscribed for was still under 25,000, and the sales that had been made were canceled. Saunders had to admit that the drive had been a failure. “Memphis has fizzled,” he reportedly added—although he was at great pains to deny this a few years later, when he needed more of Memphis’ money for a new venture. It would not be surprising, though, if he had made some such imprudent remark, for he was understandably suffering from a case of frazzled nerves, and was showing the strain. Just before the announcement of the campaign’s unhappy end, he went into a closed conference with several Memphis business leaders and came out of it with a bruised cheekbone and a torn collar. None of the other men at the meeting showed any marks of violence. It just wasn’t Saunders’ day.
Although it was never established that Saunders had had his hand improperly in the Piggly Wiggly corporate till during his cornering operation, his first business move after the collapse of his attempt to unload stock suggested that he had at least had good reason to refuse a spot audit of the company’s books. In spite of futile grunts of protest from the watchdog committee, he began selling not Piggly Wiggly stock but Piggly Wiggly stores—partly liquidating the company, that is—and no one knew where he would stop. The Chicago stores went first, and those in Denver and Kansas City soon
followed. His announced intention was to build up the company’s treasury so that it could buy the stock that the public had spurned, but there was some suspicion that the treasury desperately needed a transfusion just then—and not of Piggly Wiggly stock, either. “I’ve got Wall Street and the whole gang licked,” Saunders reported cheerfully in June. But in mid-August, with the September 1st deadline for repayment of two and a half million dollars on his loan staring him in the face and with nothing like that amount of cash either on hand or in prospect, he resigned as president of Piggly Wiggly Stores, Inc., and turned over his assets—his stock in the company, his Pink Palace, and all the rest of his property—to his creditors.
It remained only for the formal stamp of failure to be put on Saunders personally and on Piggly Wiggly under his management. On August 22nd, the New York auction firm of Adrian H. Muller & Son, which dealt in so many next-to-worthless stocks that its salesroom was often called “the securities graveyard,” knocked down fifteen hundred shares of Piggly Wiggly at a dollar a share—the traditional price for securities that have been run into the ground—and the following spring Saunders went through formal bankruptcy proceedings. But these were anticlimaxes. The real low point of Saunders’ career was probably the day he was forced out of his company’s presidency, and it was then that, in the opinion of many of his admirers, he achieved his rhetorical peak. When he emerged, harassed but still defiant, from a directors’ conference and announced his resignation to reporters, a hush fell. Then Saunders added hoarsely, “They have the body of Piggly Wiggly, but they cannot have the soul.”
IF by the soul of Piggly Wiggly Saunders meant himself, then it did remain free—free to go marching on in its own erratic way. He never ventured to play another game of Corner, but his spirit was far from broken. Although officially bankrupt, he managed to find people of truly rocklike faith who were still willing to finance him, and they enabled him to live on a scale only slightly less grand than in the past; reduced to playing golf at the Memphis Country Club rather than on his own private course, he handed out caddy tips that the club governors considered as corrupting as ever. To be sure, he no longer owned the Pink Palace, but this was about the only evidence that served to remind his fellow townsmen of his misfortunes. Eventually, the unfinished pleasure dome came into the hands of the city of Memphis, which appropriated $150,000 to finish it and turn it into a museum of natural history and industrial arts. As such, it continues to sustain the Saunders legend in Memphis.