Senate Revelations 5:1

The Senate Committee on Banking & Currency last week began the fifth chapter of its own book of revelations, a chapter which impertinent wags called "Mr. Wiggin and the Chase National Cabbage Patch." The particular efforts of Mr. Pecora were first directed to finding out what ravages the blight of Depression had wreaked in the cabbage patch and how many cabbages had constituted Mr. Wiggin's perquisite as head gardener.

When Albert Henry Wiggin sat down, the witness chair held the biggest load of banking ability which it had supported since the days when J. P. Morgan and certain of his partners occupied it. When Mr. Wiggin was a New England boy of 17 he became a bank clerk. When he was 23 he became an assistant bank examiner. When he was 29 he became vice president of a bank in Boston. In 1904 at 36 he joined Manhattan's Chase National as vice president. Seven years later he became its president. At that time it had $5,000,000 capital, $5,000,000 surplus, $100,000,000 deposits. In those days the Chase was a bankers' bank, and George F. Baker's First National owned a controlling interest in it. Two years later Mr. Baker sold this interest--15,000 shares for a price of $11,000,000--to bright young Mr. Wiggin & associates. Thus the Chase became Mr. Wiggin's bank, and it remained so practically until last January.

The formation of the Federal Reserve System in 1914 took away from the Chase some of its job as a bank for bankers, but Mr. Wiggin was already off on a new tack--building up the Chase as a great commercial bank. It grew, partly by merger, to be the biggest bank in the U. S. Mr. Wiggin was never thrown off his great ground-covering stride. His bank was not rated an archly conservative institution-- no bank which grew so fast could be-- but it was an immensely successful (i. e. well run) commercial bank with a finger in many deep-dish pies. Mr. Wiggin (with his family) was its biggest stockholder, he ran it in person, and consequently he rated by some standards at least the title of No. 1 U. S banker.

During the booming 1920's strapping, crisp-haired Charles E. Mitchell enlarged the National City Bank by mergers until, for a short time, it was bigger than the Chase. In 1930 Mr. Wiggin put an end to that by merging the Chase with Equitable Trust in which the Rockefellers were heavy stockholders. Thereafter Mr. Wiggin was no longer the Chase's biggest stockholder*--that title had passed to John D. Rockefeller Jr.--but the Rockefellers were content to leave him in command. At that time Mr. Wiggin ruled a bigger bank than any American before or since: a bank with $148,000,000 each of capital and surplus, with over $2,000,000,000 in deposits. Days of trouble followed. Some of Mr. Wiggin's banking clients (Pynchon & Co., Fox Film, German debtors, etc.) had their share of it. Result: the gossip in the market place was not pleasant for Chase officials to listen to. Time came when the Rockefellers felt apparently that the Chase should be run in a far different way. Winthrop Williams Aldrich, Rockefeller brother-in-law, who had been president of Equitable, became chairman of Chase. Mr. Wiggin retired, aged 64, not broke like some others, but as one who had kept the rewards of his labors, as a very rich man--an achievement which in these days the financial community regards as something of a credit to anyone.

How to Retire Rich. This achievement was last week seized upon by Inquisitor Pecora and laid open for examination of its ethics. During Depression Mr. Wiggin had clamored loudly for wage reductions in industry but his own pay had gone booming along, had actually been raised in 1930 and 1931: 1928--$175,000 plus $100,000 bonus 1929--$175,000 plus $100,000 bonus 1930--$218,750 plus $75,000 bonus 1931--$250,000, no bonus 1932--$220,300, no bonus

At the time of his retirement in 1933, his salary from the bank was at the rate of $202,500. He was voted a pension of $100,000 a year for life. In addition in recent years he also received salaries from: American Locomotive, $300 a month American Sugar Refining, $300 a month Armour & Co. (now nothing), previously $1,000 a month, still earlier $40,000 a year American Express (formerly) $3,000 a year Brooklyn-Manhattan Transit (formerly) $20,000 a year International Paper, about $2,000 Stone & Webster (formerly) $1,500 Underwood Elliott Fisher, about $2,000 Western Union Telegraph, about $3,000 Finance Co. of Great Britain & America (formerly) about $5,000

About these salaries and bonuses Mr. Pecora began to ask questions: Q. Who had fixed the amount of Mr. Wiggin's compensation? A. His fellow officers. "And I helped to fix theirs,'' added Mr. Wiggin. ". . . We all sat together." Q. Who had fixed the bonuses paid by the bank to officers? A. Mr. Wiggin had fixed the bonuses, his own bonus excepted. "What usually happened was that my associates suggested the amount, and I cut it down." Q. He had not been charged when the bank lost money--the bonus system only worked one way? A. (Mr. Wiggin smiling faintly) "Yes." Q. How had his retirement pension of $100,000 been fixed? A. It had been voted by the executive committee and approved by the board of directors in a resolution proposed by Frederick H. Ecker (president of Metropolitan Life Insurance Co.) "to discharge in some measure the obligation of the bank" and because Mr. Wiggin's advice would continue to be available to the bank's officers. Mr. Wiggin had suggested the amount. Q. Had his proposal aroused opposition? A. "On the contrary, enthusiasm." Q. Had he advised the dissolution of the bank's security affiliate and dropping the securities business? A. He had not been consulted. He had approved the action by proxy. "I am absolutely in favor of backing up the management of the bank. . . . Very probably if I were still senior officer of the bank I might have done just what Mr. Aldrich has recommended. I do not know. Up to the time I left the bank I did not think that it was necessary. . . ." Q. What services had Mr. Wiggin rendered for his $100,000 retirement salary? A. "I think I am a direct influence in holding a very large business for the bank." He always had the interest of the bank "very much to the front.'' and partly due to his efforts the Chase's assets tied up in Germany had been reduced from $100,000,000 to less than $40,000,000. Q. Was he aware that the time when his $100,000 a year salary was voted that the Chase bank and its securities affiliate had had hundreds of millions of dollars in losses. A. "I know that the losses have been very large . . . but I cannot give the figure off-hand."

Arithmetic for Stockholders. Mr. Wiggin, good-natured, sure that he had not been overpaid, lost some of his good humor when questioned about Chase Securities Corp. Mr. Pecora made him admit figure by figure that the company (which sold $6,000,000,000 of securities, 5.68% of which went into default) had to reserve for losses 77% ($120,000,000) of its aggregate capital and earnings since 1917. To Mr. Pecora's charge that the company's reports to stockholders* had hidden losses Mr. Wiggin entered denials. Mr. Pecora gave him the company's reports for 1930 and 1931, asked him to calculate upon the spot. His face growing red, Mr. Wiggin calculated. His answer was wrong by $1,000,000.

Pools. Most reddening to Mr. Wiggin's face were Mr. Pecora's inquiries about pools in Chase's stock. Half a dozen pools, operated by a subsidiary of Chase Securities Corp. and various brokers in the years from 1927 to 1930, had traded in hundreds of thousands of shares of Chase Bank stock. During one pool the shares rose from $483 to $800. "Was that not a scheme for 'churning the market?' " demanded Mr. Pecora. Mr. Wiggin: I think the market was a God-given market. Senator Couzens: That is a new one. Senator Adams: Are you sure as to the source? Mr. Wiggin: No sir. One pool, run in the God-given market of the summer of 1929, was used jointly by the securities company's subsudiary abd by Shermar Corp., /- the Wiggin family holding company, to sell holdings of Chase stock. It sold over 50,000 shares of the Wiggin family's stock at boom prices and besides had a cash profit of $1,452,000 from operations. No crime did the investigators attempt to fasten on Mr. Wiggin but the committee's efforts seemed bent on accusing him of a deadly sin: greed.

Cuba. Most of the investigation's fifth chapter of revelations was about Mr. Wiggin rather than his bank, but the bank --and Mr. Aldrich--came into it strongly on the subject of loans to Cuba. In a secret session of the committee Mr. Aldrich, who was not a Chase official when the loans were made, strongly urged that the subject be pigeonholed in view of the seething Cuban situation. It might lead to more bloodshed. His request leaked out and a Washington newspaper reported that ''Wall Street influences" were trying to keep the Senators from their work. Mr. Aldrich, visibly agitated, demanded a prompt and thoroughgoing investigation of all Chase's Cuban deals, to clear the air. He demanded so insistently that Senator Fletcher banged the table with his fist: "We will do as we please about it, Mr. Aldrich." Flustered Mr. Aldrich murmured: "I'm sure you will."

But Mr. Aldrich managed to say that of the $80,000,000 loaned by Chase to Cuba nearly $20,000,000 had been repaid and interest was being paid on the rest. Every bit of $80,000,000 had been paid to contractors (for construction of the new Cuban Capitol and of a highway the length of the island) on work certificates approved by the Secretary of Public Works. Not a cent had been paid to ex-President Machado or other officials. Later Chase Vice President Shepard Morgan admitted that General Enoch Crowder, then U. S. Ambassador to Cuba, had given "a horseback opinion that the $100,000,000 project would be in violation of the Platt Amendment" and that he had "threatened immediate protest to the State Department.'' This particular loan was never made, but not long afterwards while ex-President Machado's son-in-law was a Chase new-business man in Havana on a salary of $19,000 a year, other loans were made. It was also learned that a former business associate of ex-President Machado had been paid $55,000 for his services in connection with Chase loans.

* Mr. Wiggin testified that he now holds 67,000 shares of the bank's stock, his family 50,000 shares additional--a total once worth $33,000,000.

* Stock of the bank and the securities company was held share for share by the same stockholders. At one time stock certificates of both companies were both printed on the same sheet of paper.

/- Named for Mr. Wiggin's daughter Marjorie and her husband Sherburne Prescott. Other Wiggin family holding companies: Murlyn (named for Mr. Wiggin's other daughter, Muriel, and her husband Lynde Selden), Medfield (for the Massachusetts town where Mr. Wiggin was born), Greenwich (for his summer home at Greenwich, Conn.), Selcott (for the last names of his two sons-in-law).

This file is automatically generated by a robot program, so reader's discretion is required.