Where the Kennedy Money Is

It was always Joe Kennedy's emphatic wish that money never be discussed, at the family dinner table or in public. "It's just not an important enough matter to talk over," he said. His assessment was much too modest. Money underlies the family's unique position in American life, although money does not fully explain it. The Kennedy wealth, like the family's political capital, is both large and arcane. TIME asked Richard J. Whalen, Kennedy's biographer (The Founding Father), to take a fresh look at the fortune on the founder's death. His report:

LONG before Joseph Kennedy's death, plans had been completed for the management of his family's holdings in future generations. Only a bare outline of these complex arrangements is likely to be made public through his will. The closely guarded secrets of the Kennedys' finances will remain in the hands of a small group of totally discreet professional managers operating from Suite 3021 in Manhattan's Pan Am Building. The fortune, used in the past with unrivaled success to achieve the power and prestige of the nation's highest offices, will henceforth be deployed according to a long-term strategy. The aim is to consolidate what the tragedy-scarred family possesses--and preserve a base for the rising generation of Kennedys.

The Kennedys are plausibly said to be unaware of exactly what they own and where it is: the income matters, not the capital. Informed estimates of the wealth cluster around $400 million, putting the Kennedys well down on the list of the nation's richest dynasties. The fortune is unusual in several respects. It is one of the few modern American fortunes of such size not derived principally from oil. Well over $100 million came from real estate speculation conducted by astute agents after Joe Kennedy had more or less retired from an active business role. Another substantial portion--perhaps $100 million if the managers have followed the rule of thumb applied in allocating other large fortunes--is in tax-exempt securities. The only corporate entity to which the fortune is intimately tied is the family itself. There is no highly visible family business.

The Golden Touch

In his heyday in Wall Street and Hollywood, Kennedy was an aggressive, though never reckless in-and-out operator. By about 1949, however, he had decided against further risk-taking. Jack was looking beyond his safe seat in Congress, and so was his father. Joe Kennedy told his advisers to keep his money away from "troubled places"--he had moved out of the politically troublesome liquor business in 1946--and he turned down deals that he formerly would have snapped up.

When Joe Kennedy moved from accumulation to preservation of capital, the safest bet seemed to be Manhattan real estate. To his delight, his shrewd broker, John J. Reynolds, the real estate counselor of the archdiocese of New York, made him vastly richer at minimum risk. Gradually, over the past seven or eight years, Ken Industries and the Park Agency, Inc., have disposed of the family's holdings in Manhattan. The golden touch that Kennedy enjoyed in his dealings is illustrated by the largest single transaction in this slow, quiet process of liquidation. In 1943 Kennedy bought the property at 59th Street and Lexington Avenue, on which Alexander's department store now stands, for $1,900,000, with only $100,000 in cash. In the fall of 1963, the property was sold for $6,000,000 in cash.

The largest building block in the Kennedy fortune is Chicago's huge Merchandise Mart, the world's biggest commercial structure. Joe Kennedy acquired it in 1945 for just under $13 million, and turned what seemed a gigantic white elephant into a stupendous profit maker. It is now valued at $75 million.

Kennedy began investing in oil in the late 1940s, principally to gain the tax break supplied by the oil depletion allowance. Kennedy's original partner, Tulsa Petroleum Engineer Raymond F. Kravis, remains a co-investor and an adviser on operations. He describes the Kennedy investment as "a big small company," amounting to some $10 million and producing an annual gross income of about $ 1,000,000.

Precautions for the Children

As early as 1926, Joe Kennedy set up a trust fund for Rose and the children then born. Another was created in 1936, and still another in 1949. The latter trust fund is the vehicle through which Kennedy settled portions of his wealth on his 28 grandchildren. The three trust funds and the Joseph P. Kennedy Jr. Foundation are the chief instruments of capital conservation. At the end of 1968, the foundation had assets of $22.1 million, and it disbursed $1.6 million, almost entirely for research in mental retardation.

When John F. Kennedy became President, it was disclosed that his personal holdings under the family trust funds were $10 million. The $500,000 gross gave him, after taxes, slightly over $100,000 a year to spend. Like the Boston Yankees from whom he learned so much, Joe Kennedy, in creating the trusts for his children, took precautions, stipulating that control over the principal should pass at stated age intervals. Before his death, the President, on his 45th birthday, had received one-half of the principal held in trust for him, with the remaining half under the discretionary control of the trustees. The wills of the brothers made similar provisions for their heirs.

Yet the heirs may sometimes be hard pressed. At his death, Bob Kennedy left campaign debts and expenses of more than $3,000,000, which his estate could not pay. Edward M. Kennedy has raised money to repay these debts, and other members of the family have made contributions. A close friend of Ethel's, recalling the "extravagance of the ebullient life" that she, Bob and the children enjoyed, hints that income and outgo run a neck-and-neck race in her household as in the ordinary American's.

The key man in the day-to-day management of the Kennedy fortune is Thomas J. Walsh, 45, an accountant and tax expert who has been employed by the family since the 1950s. In the hands of skillful men like Walsh, the heirs have no real cause for money worries. There will continue to be, in Joe Kennedy's terse public accounting, "enough." But enough for what? Surely enough to support generations of Kennedys in comfort. But when it comes to maintaining their political ascendancy and using money as effectively as the founder, the future is shadowed by doubt.

The Human Dimension

The singular strength of Joe Kennedy's wealth, as he applied it to satisfying his own and his children's ambitions, was its concentration and independence. He had no firm or board of directors to whom he owed an accounting. Awed associates watched as he closed business deals by writing checks totaling millions of dollars. Now the managers and trustees are bound to spend money cautiously. The interests of grandchildren must be protected. It will not be so easy to plow millions into a particular political cause.

One day not many years ago, an enormously successful businessman who had built a corporation from scratch reflected on the career of his friend Joe Kennedy: "Joe was a pure capitalist, not the Wall Street kind. The Wall Street establishment has a bias on the bull side. Joe didn't. He never took responsibility for building or running anything. But he had money sense. He knew what to use his money for--how to have fun with it. Joe bought all those houses. He made all those movies. He understood about buying himself positions in government--London, for example. And he knew how to use money to push his children along as fast as they could be pushed. Yes, he knew what money was for."

That human dimension is now gone. In the third generation, so critical in the history of great American fortunes, that absence may reduce the Kennedys to a family of nice rich people related to a former President.

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