DUELS FOR MILLIONS

Evening Star, Issue 20056, 22 December 1928, Page 23

DUELS FOR MILLIONS

GO UPS IN WA LL STREET SOME TITANIC STRUGGLES MAKING USE OF PANICS. The history of Wall street abounds in great coups and occasional struggles ol titanic proportions between individuals or groups too much accustomed to dominate to' take defeat easily, and in one instance there occurred what vas very nearly an irresistible force and an immovable object in collision (writes Ward Chance, in the ‘Sunday Dispatch ’) This was the historic Northern Paciiic, corner which brought on the short-lived May panic of 1901, when the clash that took place and the resultant issues at stake were so stupendous that neither side was permitted to win, for it would have meant ruin to half the financial community of New York, and its reverberations ■would have affected Lombard street. BATTLE OF GIANTS

Great railroad mergers were then in the beginning and the Harriman-Kubn Loeb group, owning the Union-South-ern Pacific system, and the Hill-Mor-gan group, owning the Great Northern and Northern Pacific system suddenly found themselves locked in a death grip for possession of Northern Pacific, which Harriman had started to buy in the open market and wrest away from Hill and Morgan. Unlimited buying orders vero poured into the market by both sides, and the shares mounted by leaps .md bounds until, having started from about £3O a share, they suddenly shot up to £l4O a share, and then touched £*2oo, when dealings ceased. Northern Pacific was cornered.

As this battle of the giants came to a deadlock a shiver ran through Wall Street, for it meant impending ruin. Panic ensued, heavy selling took place throughout the list, declines ran from 30 to 80 points, and the tide was stemmed only by the banking interests who rushed big orders into the exchange and raided the market. The panic was over in a day, with losses mostly recovered. RUIN AVERTED. It was found that both sides had bought enough shares on paper t<> control the property, but which, of course, could not be delivered, and it meant that all those who had sold the stock short could be made to pay £2OO a share, or any price demanded, to bo released from their contracts. To have pushed these claims would have meant utter ruin for numerous individuals, bankers, and brokerage houses in America, and the entire financial structure might have come tumbling down. Conferences followed, and largely due to the late Pierpont Morgan’s influence, the shorts were permitted to settle for £3O a share, and the Northern Securities Company was formed by which the two groups held joint control of the Northern Pacific road until eventually other adjustments wore made.

On the day of the panic Mr Morgan was on the ocean returning from abroad, and on his return heard the story in detail. Thinking his partner, the late Robert Bacon, subsequently Ambassador to France, had shown bad judgment in helping to bring tho corner about, he reproved him soundly and boxed Ids ears. RAID ON THE BEARS.

A legitimate and tremendous coup was made by the “Little Wizard,” Edward H. Harriman, the upbuilderof tho great Union and Southern Pacific railway systems. In 1907, without previous notice to anyone, he posted a notice ono 'morning on the Stock Exchange floor that Union Pacific had increased its dividend from. 6 to 10 per cent., and an initial dividend was declared on Southern Pacific of 5 per cent. But this was only incident to Harriraan’s real coup. In those days leading firms in London dealt in put-and-call options in Americans in practically unlimited amounts For months before Harriman had bought heavily of call options on Union Pacific, paying £1 or £1 4s to call the shares in sixty or ninety days at tho then price of around £•3O a share.

The dividend announcement threw tho bears in both the Now York and London markets into a panic, and their urgent buying, together with investment buying, advanced the shares 50 points in a day or two to £4O, and later even higher. Then with Union Pacific around £4O, there was much talk of the'shares going to £SO. Again Harriman bought calls heavily. ' The option dealers, not to be caught this time, not only bought their usual protection of half tho shares on which they had sold call options, but bought the full amount and more for their own account But, strangely enough, the shares declined.

Naturally Harriman did not exercise his call options, and it would appear that Harriman bad lost tho cost of his options. But it was the options dealers who lost heavily, loaded up as they were with huge amounte of Union Pacific shares around £4O, in a falling market. Mr Harriman had been too clever for them a second time, for since his holdings had been too large to sell them to advantage in the open market in the usual way and at the same time not break, the price, his constant buying of calls i London meant that the option dealers were simultaneously buying the shares while ho was supplying them through his brokers unknown to the general market and to London It is true that this method of selling meant a cost to him of about £1 a share, but he must have averaged £3. a share for his holdings London losses were so great that one firm of option dealers had to be reorganised and fresh capital obtained. R crippled the call option business in America for some time. But Harriman’s health was gone. Later he went abroad, and rumours wore heard, until one day the writer had a cablegram from a London friend saving Harriman had cancer. I bis was not yet known in America, but Darnman came home a dying man. Union Pacific shares continued to decline. A

few days before his death he sent for Mr Morgan, and, saying many small investors might be frightened oat of their holdings, ho asked Morgan Ao support the shares in the market. MORGAN, DICTATOR.

The day of his death they' struck bottom, for next day Morgan’s buying rallied them up 15 points, and his support continued as long as it was needed. ‘Mr Harriman left £14,000,000, some of it at least made in his_ dramatic coup and in his contest of wits with the London .option brokers. Two great market leaders, contemporary with Harriman and his operations were the late H. H. Rogers and the late William Rockefeller, brother of John D., both at that time ini active control of Standard Oil, Amalgamated Copper, and other faourites. They were always borrowing immense sums against their favourite shares, and when the panic of 1907 created a groat scarcity of money, they made a loan reputed to have been £20,000,000 from a group of London banks, mostly on the collateral of Union Pacific shares. Finally, as money rates increased, the banks notified them that by a certain date they must pay off the loan. Then Rogers and Rockefeller, although rich in assets, made the discovery that there wasn’t any more money in the world to borrow, and the banks had to ;11 out their collateral to repay the loan. Union Pacifi shares made a sensationi ’ decline to £2O a share on this selling, but quickly recovered. The money panic in New York was stopped by the single act of Mr Morgan, who simply telephoned the leading bankers that they must send him funds to be lent on the Stock Exchange, and told each bank now much ho had put them down for. Argument was useless, they all had to meet his demands, and the more announcement on the Stock Exchange that Morgan was lending money was enough to end the panic, and not a dollar was needed. WIDOWS’ FORTUNE. Coming to more modern times, an amazing coup in the motor cor industry was that of the two Dodge widows. Two brotners Dodge, working mechanics, had joined Henry Ford in the early days, getting a stock interest for their skill and for a few thousand dollars invested. With increasing prosperity Ford later bought out _ all his minor partners, who werefew in number, leaving himself, Mrs Ford, and his son Edsel the sole shareholders of the The C D?lgo'brothers took their share of the millions paid, and built their own car and prospered mightily. the height of their prosperity they aiv rived one day at a loading New York hotel and drank some bootleg whisky, the only kind available, it was poisonous, and ono died within a week and the other in a few months. There came offers to buy the prosperous Dodge Motor Car Company, makers of the popular Dodge car. Then entered Charlie Schwartz, who, with his brother Morton, had made a fortune in the New York stock market. When offers poured in on the Dodge widows they, realising their inexperience, gave Charlie Schwartz power of attorney to act for them in disposing of their vast enterprise. Seeking the advice of Barney Baruch, famous in Wall Street annals and a valued aide to President Wilson during the war in charge of purchasing supplies for the Allies, ho sent him to the enterprising firm of Dillon, Read, and Co. Morgan interests sought control of the Dodge Company for General Motors and made an offer of £30,000,000, payable over a period of time. Clarence Dillon, with a Napoleonic gesture, then offered to pay the same sum in cash. The Dodge widows accepted, and a cheque was made out to them for £29,200,000 (they receiving also £BOO,OOO in the treasury of the company), said to be the largest amount ever paid over in one cheque in America. This sum they divided equally. Later ono of the widows bought the splendid Cosden home in Palm Beach, with its art collection and contents, for four million dollars. Hugh Dillman, the agent who put the deal through, cabled a friend of his in London: “ Have sold the Cosden place to Mrs Dodge; coming over to spend my profits.” Ten days later he sent a second cable: “Don’t drop dead. Am marrying Mrs Dodge to-morrow.” Mrs Dodge Dillman settled £200,000 on her new husband. LOCKED ROOM DEAL.

The Dodge Company, however, prospered less under its Wall Street management, and hence when Walter Chrysler, the motor car genius of America, proposed to combine the Dodge Company with his own Chrysler Company Dillon listened favourably. The two men locked themselves up in a New York hotel, worked steadily for a fortnight, and on a certain Monday at midnight closed the deal by which the Chrysler Company took over the Dodge Company at a valuation of £34,000,000, a profit of £4,000£00 having been made by the Dillon-Read interests, not unreasonable after an ownership during a four-year period in which the industry made gigantic strides.

Walter Chrysler in that period had brought the Chrysler Company up from twentieth place to the front rank, incidentally increasing its value by £40,000,000, mostly accruing to himself, Jules Bache, and the Brady brothers. Now, at one stroke, he had brought up the capacity of tho enlarged Chrysler Corporation to an output half that of General Motors, and Chrysler Motors Corporation had become the third largest in the world, with Ford second. Since the Dodge acquisition was secured mostly by an exchange of securities, and the Chrysler Company assumed additional interest payments of only £700,000, while the Dodge Company had not failed for some years to earn a minimum of £1,200,000, the benefit to the Chrysler Company is obvious.