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Remembering a Famous Banker

February 06, 2008
Warren Boroson

Warren Boroson

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Every Feb. 21, we should celebrate the birthday of a once-illustrious American gentleman who seems to be all but forgotten today. Namely, Albert H. Wiggin, who was born in 1868 — 140 years ago this month.

Al Wiggin was certainly a gentleman. The son of a clergyman, he attended fine schools (Middlebury College, Kenyon, Columbia), then entered the banking business, winding up as the chairman of the mighty Chase Bank.

During his lifetime he became a trustee of Middlebury College, treasurer of the United Hospital Fund of New York, a director of American Express, and treasurer of the Boys Clubs of America. He belonged to the very best clubs: the New York Yacht, the Metropolitan, and the Grolier. He had a home on Park Avenue and a summer home in Greenwich, Conn. He died in 1951 and is buried in Greenwich.

But there’s a lot more to old Al, as I myself discovered when I read John Kenneth Galbraith’s fine book, “The Great Crash.”

In 1929, the year of the crash, Wiggin received $275,000 in compensation from Chase Bank, of which he was variously chairman and president. He also received money from some 59 other corporations of which he was a director, such as the $40,000 he received from Armour and Co. as a member of its finance committee. No doubt it was just a coincidence that these 59 companies that paid Wiggin generous stipends were also clients of and prospective borrowers from Chase Bank.

A busy man! He also ran various private holding companies.

One of these holding companies, named sentimentally for his daughter Marjorie, sold 42,506 shares of Chase stock short before Sept. 23 and Nov. 4, 1929. (When you sell short, you borrow shares and sell them, planning to actually buy the shares when the stock’s price had plummeted.)

And did Chase’s stock ever go down!

Soon it was time for old Al to replace the stock he had borrowed to sell short. So, another of his holding companies, named for daughter Muriel, bought 42,506 shares of Chase stock from an affiliate and financed most of the cost with a big loan from Chase Bank itself.

The short sale led to a profit of $4,008,538, according to Congressional hearings.

So, who enjoyed those millions. Was it Chase Bank? After all, it was Chase’s stock, Chase provided money for the loan, and old Al was an officer of Chase.

Good guess!

Guess again.

Now, short selling has been defended as a way to keep the stock market “efficient”—properly priced. But short selling drives down the price of a stock—selling in general does that. And old Al, despite being an officer of Chase, clearly now had a motive to do everything he could to knock down the price of Chase after selling the stock short. In other words, here was the manager betting against his own team. Not nice. (These days, such behavior is illegal.)

In 1933 old Al decided to retire—at age 62. As he put it, his “heart and energies [had] been concentrated for many years in promoting the growth, welfare, and usefulness of Chase National Bank.”

Galbraith called that a “slight overstatement.”

Chase’s executive committee, “in order to discharge in some measure the obligations of the bank to Mr. Wiggin,” unanimously voted him a life salary of $100,000 a year. To quote Galbraith, “It was later brought out that this gesture of inspired generosity was the impulse of Mr. Wiggin himself.”

A few years later, when old Al’s peculiar activities were brought to light, he renounced the $100,000-a-year pension. But he stoutly defended his short selling, arguing that company officers should be allowed to speculate on their own stock because it helps them develop a greater interest in their own institution.”

This guy Wiggin, clearly, was my kinda guy.

Anyway, every once in a while I think about Al Wiggin, especially come February. Whenever I’m down on myself--because of my cupidity, my envy of friends’ success, my insensitivity, whatever--I say to myself: “Hey, guy, cheer up! At least you’re a better man than Albert Henry Wiggin ever was!”

About the author:

Warren Boroson
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