Archive:Richard Whitney (1888-1974)
Richard Whitney (Aug. 1, 1888 - Dec 5, 1974), banker, investment counselor, and embezzler, was born in Beverly, Mass. He was descended from immigrants who arrived in Massachusetts in 1630. His father, George Whitney, was a leading Boston banker. Whitney graduated from Groton and from Harvard, where he was elected to the prestigious Porcelland Club. He moved to New York City in 1910 and became a member of the New York Stock Exchange in 1912, at the age of twenty-three. Soon afterward he was principal broker for J. P. Morgan and Company, of which his brother, George, was later vice-president. During WWI, Whitney was a dollar-per-year executive for the Food Administration, headed by Herbert Hoover, in Washington, D.C.
In the 1920's Whitney was a member of every major club and organization to which a member of the eastern aristocracy should belong. He was treasurer of the New York Yacht Club. He had large and opulent estates; he bred horses; and he was reputed to spend $5,000 per month on maintenance alone, a huge figure for that time. He was married in 1916 to a young widow, Gertrude Sheldon Sands; they had three children. Whitney took over her father's investment business, Cummings and Markwald, and immediately renamed it Richard Whitney and Company. In 1919 he was elected to the governing board of the New York Stock Exchange.
Whitney epitomized the "old guard" of the New York Stock Exchange, a loose grouping of wealthy individuals who acted as leaders in its affairs. At the height of the panic on Oct. 24, 1929, as representative of this group, he moved onto the floor of the exchange and placed purchase orders in an effort to stem the rush of selling. The story of his arrival at the floor location for transactions in the share of U. S. Steel, and casually placing an order for ten thousand shares at 205, forty points above the market price, elevated him to public fame. He also placed orders that day, acting for the governing consortium, for from fifteen to twenty other blue-chip stocks, in an attempt to stabilize prices. These orders were estimated to amount to $20 million to $20 million during that single afternoon, the largest personal trading episodes of all time. Everyone on the exchange assumed that he was trading in the Morgan intereset, and the effort did help to stabilize trading for the time being, at least in the blue-chip share accounts.
Whitney served on virtually every significant committee of the exchange, including the business conduct committee. At the time of his efforts in 1929, he was vice-president and acting president. He served five terms as president of the exchange beginning in 1930. During this time he was the spokesperson for "the Old Guard," which came increasingly under attack from the newly created Securities and Exchange Commission, a part of the New Deal of Franklin Roosevelt. He appeared as a witness at congressional hearings throughout the period from 1932 to 1935.
Whitney chose not to run again for the presidency of the exchange in 1935, as reform elements, become more active in its affairs, indicated that he would be opposed. He was heavily involved at this time in speculative investments in firms manufacturing apple brandy, peat fertilizer, and marine colloids. In order to keep these companies afloat, he borrowed heavily from friends and acquaintances, using his ties with J.P.Morgan as a sort of collateral. In March 1938, his world collapsed. New and tighter reporting regulations on personal finance revealed that Whitney had been a terrible manager of his own and other people's money. Investigation of his affairs demonstrated that he had been borrowing against funds in his trust since at least 1926.
When the final investigations were made public, it was estimated that Whitney had borrowed over $30 million from his friends, his family, and the accounts in his trust. When he declared bankruptcy, he owed approximately $6.5 million. He was indicated on one count of misuse of funds, from his father-in-law's estate, and pled guilty as charged. He served three years and four months of a five-to-ten-year sentence in Sing Sing. His brother eventually paid all of his debts. When Whitney was released from prison, he moved to a family-owned dairy farm in Barnstable, Mass., where he dropped out of public view. His wife stood by him during his problems, selling all of their assets, except her personal jewelry. Whitney died in Short Hills, N. J.
Much of the reform of the practices of the New York Stock Exchange and other bond and share money markets can be dated to the events of Richard Whitney's life. His activities on the exchange, which had shocked the world of the wealthy--Franklin Roosevelt came close to breaking down when he heard of the defalcations--provided the impetus to reform and reconstruct the money market. In a sense, then, his life ultimately had a substantial positive impact.
(Sources: No collections of papers or biographies are known. Books that have a good deal of information on Whitney's life and his career include Ferdinand Pecora, Wall Street Under Oath (1939); John Nixon Brooks, Once in Golconda (1952); John Kenneth Galbraith, The Great Crash (1954); Cedric B. Cowing, Populists, Plungers and Progressives (1965); and Joel Seligman, The Transformation of Wall Street (1982). ee also Securities and Exchange Commision, In the Matter of Richard Whitney, 2 volumes. (1938); and Securities and Exchange Act of 1934, as Amended to February 5, 1976 (1979) and . . . to 1991 (1991). Contemporary coverage is in the New York Times, Mar 9 and 15, Apr 10 and Oct 25, 1938. An obituary is in the New York Times, Dec 6, 1974.)
[Written by David Smith ]
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