The Clusterfuck Nation Chronicle

Commentary on the Flux of Events

History lesson intermission. This is worth reproducing in full because it's so rich. From Rainbow's End, the Crash of 1929 by Maury Klein (Oxford University Press, 2001). [Note that dollar figures might be multiplied by 100 to approximate roughly their value today, based on the fact that you could buy a steak dinner in 1930 for 35 cents.]

While Charley Mitchell [head of National City Bank] labored to repair the damage to his bank and his reputation, Albert Wiggen [head of Chase National] followed an artfully designed and superbly executed path of deceit through these turbulent months. Where Mitchell borrowed heavily in a vain effort to shore up the price of National City Bank stock, Wiggen saw a rare opportunity for profit in selling short the shares of Chase National Bank. That he was chief executive of the institution in which he was dealing seemed to bother him not at all. He began going short in Chase as early as September 23 and continued right through the crash. By November 4, his Shermar Corporation [a front for his personal trading] had sold 42,5096 shares of Chase National stock for nearly $10.6 million, During November and December he borrowed $8 million from Chase National to help cover these short sales even though he and his family had enough shares to have served that purpose.

By the time Wiggen closed out this operation on Dec 11, he had amassed profits exceeding $4 million. Through an elaborate series of transactions utilizing his Canadian as well as American companies, he managed to avoid paying any taxes on this windfall. Some of his sales had been to the bank itself, which had obligingly loaned him both the stock to cover his short sales and then funds to buy the stock. Asked later whether he thought such dealings were sound or ethical, he replied in his wonderfully cryptic way, "I think it is highly desirable that the officers of the bank should be interested in the stock of the bank."

By the way, the foregoing does not mean that I am against capitalism, which I do not regard as an "ism," anyway, but rather a set of natural laws governing the behavior of accumulated value.