Whenever you put 100 people into subgroupings, there will naturally be a few outcasts who don’t quite fit into any one category. The four in this section refused to fit neatly in any of the other 10 chapters, but that fact doesn’t in any way discount their significance. They’re simply Miscellaneous, But Not Extraneous. And each Miscellaneous person—Hetty Green, Patrick Bologna, Cyrus Eaton, and Robert Young—is exceptional in his or her own way and had a distinct impact on the market.

First, there are the legends—Hetty Green and Patrick Bologna. To this day, there are blind references made to both of these rather obscure contributors. To wit, as I picked up the May 23, 1991, San Francisco Chronicle, I read Herb Caen’s column as he talks about a local Hetty Green-like old woman and her personal money foibles.

The legacy of Hetty Green ballooned to legendary proportions primarily because of her phenomenal monetary success and her clearly weird ways. She was a conservative investor content with compounding moderate gains year after year. She was also a notorious social outcast, which suited her just fine. Unlike other successful operators who sought the limelight by wielding their wealth, Green sought to hide it, concealing her securities in her dirty and dated clothing and moving around a lot. She lived more cheaply than the poorest of the poor. And she was so cheap, and that’s the word for her, she cost her son his leg to gangrene when she wouldn’t pay for a doctor’s visit. But as much as any person in this book, her penny-pinching profits were the stuff of legend.

Patrick Bologna had a truly obscure tie to Wall Street—he was its favorite shoeshine boy—yet, in that modest role, he affected the market in more ways than he ever could have imagined! Bologna symbolized the “hot” market tips that were notorious during the 1920s. He heard them from his important, higher-up customers, then spread them to the little guys for quarter tips. He was at the heart of the gossip machine that helped fuel the crowd’s involvement in the stock market in the feverish years preceding the 1929 Crash. His eager involvement tipped off the lonely few who were able to translate his activities into an immediate danger signal and escape from the market before getting wiped out like all the rest.

Then, there are the mavericks, and mavericks typically are people who buck being categorized or labeled. Cyrus Eaton and Robert Young are little-known empire-builders who also bucked the Wall Street lasso when that just wasn’t done. Eaton built an industrial empire and then an investment banking empire in Cleveland. Young boldly took over a previously Wall Street-affiliated railroad empire, and, en route, made the first case for competitive bidding between investment banking houses. Young escaped with his maverick reputation intact, but not his mind. He killed himself in 1958. Being a maverick has its cost.

Green and Bologna were accessible to the little guy as veritable street people. That is, you could get to them. Some wino might not know that the bag lady on the park bench next to him was worth $100 million. And I would have loved to have gotten my shoes shined by Bologna. Either of these characters, and the roles they played, would make movie models I’d pay to see. Not so with the mavericks. They were obscure, inaccessible and relatively bland compared to Green and Bologna, and yet, they made the market, too, in their own ways.

Miscellaneous, But Not Extraneous says it all. Green, Bologna, Eaton, and Young all contributed to today’s financial landscape. And without them, there wouldn’t be 100 Minds That Made The Market—there would be just 96! While I couldn’t fit these four neatly into any other grouping, there aren’t another four who still had such lasting market impact.

HETTY GREEN

THE WITCH’S BREW, OR... IT’S NOT EASY BEING GREEN

How would you picture Wall Street’s first female finagler? It can’t possibly compare with the miserly, eccentric Hetty Green who shrewdly turned a $6 million inheritance into $100 million. Not quite the business-schooled, gray-suit type, Green shrouded herself in foul-smelling black, outdated dresses in which she sewed untold securities. Donned daily in the same attire—complete with grimy black cotton gloves, bonnet, shabby umbrella, and cape—Hetty scurried between raunchy flats and her headquarters, the Chemical National Bank vault, fleeing the money-hungry spirits who “pursued” her. Eating graham crackers, oatmeal, and, on occasion, unwrapped ham sandwiches from the filthy folds of her pockets, Hetty sat cross-legged on the vault floor clipping coupons—stuffing them down her bosom. Within months of her Wall Street arrival, the middle-aged eccentric became known as “the Witch of Wall Street.”

Yet, even a witch must possess an investment strategy—and hers was simple. In a pre-income tax world, she strove to make and keep 6 percent every year. To wit, Green operated under two rules. First, she never aimed for “big hits,” preferring a great many good solid investments with relatively safe returns. Second, Green was stingy.

“There is no secret in fortune making. I believe in getting in at the bottom and out at the top. All you have to do is buy cheap and sell dear, act with thrift and shrewdness, and be persistent. When I see a good thing going cheap because nobody wants it, I buy a lot of it and tuck it away.”

Inherent in Green’s thinking was that most folks consume their investment harvests, but if you spend nothing, you keep it all, and it keeps compounding. If you compound $6 million at 6 percent for 51 years, without spending any of your 6 percents, you get $117 million. And that’s exactly what Green did. She became the richest woman in America, but to accomplish her goal, as you will see, Green was also perhaps the most miserly.

Green bought stock heavily, but only in the depths of financial panics—and then, primarily railroad stocks. Otherwise, she bought real estate mortgages, government and municipal bonds, and other safe, income-oriented investments. Since she spent virtually nothing, she kept reinvesting at 6 percent. Stocks were the icing on her cake. She stepped into the breach of financial panics—her “harvest”—as she reveled at buying stocks from men gone broke. Never a late-bull market buyer, she simply bought in crashes, when no one else would. Considering her confidence and riveting results, one wonders whether she turned to women’s intuition, or, perhaps, insider information. A well known example of her timely luck was her pullout from Knickerbocker Trust shortly before it failed in the 1907 Panic. Her clue? “The men in that bank are too good looking!” She bailed out, leaving her with abundant cash to loan sorry speculators.

Hetty was in the minority as the market’s only woman—and she knew it. “I am willing to leave politics to the men, although I wish women had more rights in business and elsewhere than they now have. I could have succeeded much easier in my career had I been a man. I find men will take advantages of women in business that they would not attempt with men. I found this so in the courts, where I have been fighting men all my life.”

She hit Manhattan after a ghastly childhood and unsatisfying marriage. Born Henrietta Howland Robinson in 1834, Hetty’s father was a determined fortune hunter, who married her mother’s old New England money. While momma had a fairy-tale life in mind for Hetty—princes and the like—Hetty was Daddy’s Girl, and daddy, Edward “Black Hawk” Robinson, was money’s slave. Growing up in the vulgar whaling city of New Bedford, Massachusetts, Hetty watched her father build a shipping empire by exploiting people, forfeiting luxuries, and scrimping on necessities. Following in her father’s footsteps, Hetty, the richest girl in town, was clad in rags and learned “never to give anyone anything, not even a kindness.”

The young ragamuffin scampered the wharves, absorbing dad’s foul language, financial savvy, fierce temper, and frugal ways as her daintiness disintegrated. In 1865, with both mother, father and aunt dead, Hetty inherited nearly $6 million—and a deranged demeanor. Black Hawk’s mission succeeded: Hetty was left as determined and callous as he, primed for Wall Street, with a chartreuse dollar sign for a heart.

Hetty was adept at getting her way. When nagging failed, she went for the tears! When tears failed, she initiated lawsuits. The only thing wrong with lawsuits was the lawyer’s fee: She hated lawyers’ fees more than the men themselves. Regardless, she employed a steady stream of them, refusing to pay each and every one! “I had rather that my daughter should be burned at the stake than to have her suffer what I have gone through with lawyers.” Once, she even paid a $50 registration fee to carry a revolver “mostly to protect myself against lawyers.”

Hetty picked up market tips from her free-spending millionaire husband, Ned Green, who made money in the Philippine tea and silk trade. It’s a wonder she married at all, as she eyed each suitor with suspicion. But, at the start, Ned had the upper hand—dangling Street savvy above Hetty’s head. They were wed in 1867. Some say she married not for love, but for free financial advice—and room and board! Regardless, they had two kids—a boy and a girl—while Hetty made money in American gold bonds, largely due to Green’s speculative skill. When the Panic of 1873 hit, Hetty was caught on the long side, watching her stocks depreciate. En route she learned her lesson well, vowing to always “harvest” panics from then on, and she did.

Ned Green was soon appalled by his wife’s penny-pinching ways, such as replacing their fine china with decrepit, cracked dishes, and haggling local merchants on every penny. But Hetty was as fed up with her husband as he was with her. When his speculative luck failed, Hetty bailed him out at least three times—after the fourth, she washed her hands of him. While they remained married, they never shared their lives again in any form.

Hetty’s only real love was money. By 1900, she was reputedly worth $100 million, earning $20,000 per day. With money piling up faster than she could put it to work, she feverishly bought railroads, such as the Ohio and Mississippi in 1887, but not before being completely informed of her investment and rethinking it overnight. And, if it didn’t yield 6 percent, forget about it! In 1892, she formed the Texas Midland road, combining the smaller lines Waco & Northwestern—for which she had her son outbid a bitter enemy. For Hetty, the roads were not only an income source, but a source of employment for her son, Ned.

Hetty groomed Ned as her successor, even paying his college tuition—only after securing his promise to stay single for 20 years after graduation. Ned was a momma’s boy to the bone—as a kid, he resold his mother’s newspaper each morning after she finished. Ned started as a clerk for her Connecticut River road, then graduated to overseeing her $5 million of Chicago real estate. As he raked in $40,000 per month for his mom, she paid him $3 per day—“training.” Hetty, a proud mother, had aspirations for him—why, he could be another Jay Gould! But even with Ned, her love of money came first. When 14 years old, Ned injured his knee sledding downhill. Hetty fetched her shabbiest dress and waited unsuccessfully in line at a free medical clinic, after applying her useless treatment of hot sand and tobacco leaf poultices. When Ned’s father learned of his son’s unimproved condition, he sought a doctor without Hetty’s consent, and paid $5,000 to have Ned’s leg amputated—gangrene had set in.

Strive to get something for nothing—that was Hetty’s motto. Following a stroke brought on by a fierce argument with a friend’s cook, Green died in 1916 leaving behind a fortune—entirely in liquid assets—that she had acquired and protected ferociously. Attempting to keep her fortune within the confines of her immediate family—knowing that she couldn’t take it with her—Green had constructed a restrictive will and prenuptial agreements to prevent in-laws from inheriting. Since her son and daughter had no children, her millions were eventually passed to more than 100 beneficiaries who never even knew Green.

Hetty teaches a lot of investment lessons. While her miserliness stands out as negative, her compounding success teaches us that frugality, when combined with reinvestment, is a powerful mechanism if even moderate rates of return can be achieved. Likewise, her insistence on safe 6 percent returns, while slightly low by modern standards, clearly points to the power of compound interest and the fact that most folks will do better getting a good safe return than gambling on a few risky and dramatic plays. If you happen to have $50,000 now in a tax-free retirement plan and could compound it at 15 percent per year for 50 years, as Hetty did her 6 percents, you would end up with more than $50 million. The power of compound interest—the witch’s brew.

PATRICK BOLOGNA

THE EASY MONEY—ISN’T

When America was consumed with playing the stock market back in the late ’20s, “hot” tips could be heard wafting through subway cars, hair salons, taxicabs, supermarkets, dance halls, and restaurants. As Wall Street figured out, after the fact, this wild fascination with the stock market was the hottest tip-off to the impending 1929 Crash—but few saw it in time.

Whether he knew it or not, Patrick Bologna symbolized the public’s fervor to a handful of insightful Wall Street operators. The self-appointed “Bootblack to Wall Street” regularly gave his customers more than a 10-cent shine from his booth at 60 Wall Street. He put forth a stream of hot tips and relayed inside information from customer to customer while shining shoes. He had important regulars like Charles Mitchell, “Sell ’Em Ben” Smith, and William Crapo Durant, and, if they really ever gave him any worthwhile information, Bologna spoiled it all by passing it along to the next guy. But what he got out of passing the buck was exactly that, a buck or sometimes a quarter if the news was stale. The money added up—sometimes he could make more money in an hour playing investment advisor than he could shining shoes all day! Then, Bologna used his tips to play the stock market—the same hot tips he’d been passing around all along. “My money never leaves the Street. It’s the best place in the world for it to be,” he said before the Crash.

Legend has it one of those tips sparked Joe Kennedy into selling out his position months—some accounts say days—before the market crashed. One morning, while walking up Wall Street, Kennedy noticed Bologna was momentarily without customers and reading the Wall Street Journal. So, he climbed aboard the wooden chair and dug his heels into the footrests while Bologna put the paper down and picked up his brushes. The usual hellos had been exchanged when Bologna asked, “You wanna tip?” Kennedy said, “Sure” and listened to what his friend had to say.

Pat confided in Kennedy, “Buy oils and rails. They’re gonna hit the sky. Had a guy here today with inside knowledge.” Kennedy thanked his informer, pressed a quarter in his hand and chuckled to himself. If a shoeshine boy is predicting the market, he thought, this market must really be out of control. That night he told his wife he was getting out—and fast. Kennedy survived the Crash with his fortune intact, and, in fact, he magnified it by selling short as prices fell sharply lower. Bernard Baruch had a similar experience and supposedly decided to get out and then short. Baruch’s comment on the subject is telling. “When beggars and shoeshine boys, barbers and beauticians can tell you how to get rich it is time to remind yourself that there is no more dangerous illusion than the belief that one can get something for nothing.”

Meanwhile, Bologna had his entire savings wiped out—about $8,000 invested, or, as he said in a 1982 Forbes interview, $100,000 in today’s purchasing power. “What did I do when I lost all that money? I was 21. What else would I do? I went out and got drunk!” Fully invested on margin, Bologna remembers Black Thursday well. At 10 A.M., he recalled, “People just stood there, stopped talking and looked towards the Stock Exchange. It was like the silence before the off at a big race.” At 10:50 A.M., Bologna elbowed his way into a nearby brokerage house’s customers’ room that had previously welcomed his business. He sought advice about his margin and stocks, but help was nowhere to be found. Instead the room was jam-packed with nervous people like him trying to either sell out their positions or cover their margins.

Bologna retreated to his shoeshine stand with his holdings intact, remembering these words from his idol, Charles Mitchell: “A wise man never sells out at the first sign of trouble. That’s for the pikers.” Coincidentally, Bologna’s holdings were in Mitchell’s National City Bank.

By Monday, Bologna remembered most people on the subway ride into the city to be in a lighter mood than on Friday’s depressing trip home. Most of the papers predicted a bankers’ bail-out, and folks were joking and laughing at rich men suddenly gone broke. But when he reached Wall Street, Bologna found quite a different story. It was like a funeral parlor on the Street. On Tuesday “people who had battled through Thursday’s Crash, who had been hit again by Monday’s break, looked like they couldn’t take it anymore. They were at the end of their resistance.” That was the day Bologna finally surrendered, cashing in his thousands in National City stock for a mere $1,700.

Born Gennaro Pasquale Bologna in 1907 in Manhattan’s Lower East side, the short and well-built Bologna was to remain a bootblack for the rest of his life. Business wasn’t so bad during the Depression. “People realized they couldn’t be buying new shoes all the time, so they took better care of all the old ones. You could support a family of four on $40 a week back in those days.” And so he did, even putting his son through college and his daughter through secretarial school. And when the kids grew up and moved upstate to Suffern, Pat and his wife were able to follow, though he still commuted to his stand for a few hours each day.

Humbled by the Crash, Bologna didn’t quit the market. In fact, he became something of an enigma to the next few generations of Wall Streeters, writing and distributing a tongue-in-cheek newsletter to his executive clientele from the 1940s to the 1980s. Even Forbes mentioned his stock market antics in 1982. Not exactly a literary genius, Bologna wrote rhythmic commentary that sometimes rhymed, and sometimes was seen as “startlingly shrewd.” For example, in March 1966, before the Federal Reserve began manipulating our economy via the money supply, he wrote, “For if you want to stay ahead, keep one eye on the Fed.”

Regarding his own investments, he said, “I’m too conservative. I only invest in good, dividend-paying blue chips. I’m still not even with 1929, counting in purchasing power, but that’s all right. I’m not in a hurry.”

Bologna was the personification of the hot tip. And the tip is the crowd, and the crowd is always wrong at the market’s turning points and right in the middle of the move—and a loser overall. There has never been a tipster who made such an impact as Pat Bologna and, yet, who has been so unknown by name. All kinds of people know Kennedy and Baruch were contrarily influenced by a shoeshine boy. Almost no one knows it was Bologna. There is probably no better quote on the subject than that cited above from Baruch. But in a nutshell Bologna teaches us the easy money—isn’t.

ROBERT R. YOUNG

AND IT’S NEVER BEEN THE SAME SINCE

Robert Young took control of a $3 billion railroad empire with about $250,000 of his own cash—and a lot of guts. He flipped Wall Street on its back, grabbed power from the few dominant firms—and en route, revolutionized railroad financing. Although he thought of himself as a great reformer, he wasn’t. Young’s reforms came as a by-product of his colorful populist publicity stunts, but regardless, his reforms stuck and made history. Sadly, he killed himself in a 1958 money crunch.

The railroad empire that vaulted ambitious, aggressive Young to fame was built by the Van Swearingen Brothers during the 1920s. Their huge but jumbled corporate structure—strung together with elaborate holding companies, pyramid style—collapsed during the Crash when money, its most precious resource, became scarce.

In building their kingdom, the Van Swearingens leveraged buyouts, used past purchases as collateral—and faithfully returned to the House of Morgan, and sometimes Kuhn, Loeb for financing. Enter Robert Young. Small, prematurely gray, and otherwise looking like a dour Mickey Rooney, Young took control of the empire but incurred the wrath of the House of Morgan when he threatened to take the empire’s financing business away from Morgan and offer it to whomever would complete bond financings at the lowest competitive bid. Morgan, of course, didn’t like this. It just wasn’t the way you did things in the Wall Street club where all roads led to Morgan—because the concept threatened the absolute dominance of Morgan in railroad finance. Young’s move did, in fact, initiate Morgan’s slide from dominance.

What frustrated Wall Street insiders was that the “daring young man from Texas” wasn’t their kind. More like a 19th-century pioneering financier, he appeared out of practically nowhere. Born in 1897, the University of Virginia drop-out married at 19, then worked cutting rifle powder during World War I. Good timing and math skills landed him a job first at duPont, and then at General Motors’ financial offices, where he learned enough to start his own investment firm with a million-dollar clientele, among them the legendary Alfred P. Sloan.

During the 1929 Crash, at 33, he made a killing selling short, then started picking up bargains among the ruins, including his diamond-in-the-rough—the debt-ridden Van Swearingen empire. Its $100 par stock had been selling for under $1 after the Crash! By 1937, Young had seized control of its top holding company, Alleghany Corporation, via two million shares from temporary owner George A. Ball for under $7 million—$4 million in cash, largely borrowed, and the rest in notes payable. He put up only $250,000 of his own. That’s not so easy to do, so he must have been a heck of a salesman. Young, 40 at the time, took charge, knowing nothing about railroads!

But neither did most, so he appealed to the people, starting a proxy and publicity campaign. He started by calling the first of many press conferences—and allying himself with the New Deal, securities reform, and opposition to the classic Wall Street club’s views. Some people maintain he had no problem adapting to securities regulation because, as a new entrant into the financial world, he wasn’t entrenched in a career based on pre-regulatory ways.

At his first press conference, Young announced in his strong, confident voice he would “snap the old Van Swearingen chain” via fiscal independence and reinstate dividends for all the “Aunt Janes” of the investing public. But while he sounded confident, he must have been fearful inside, because later that year, in a fit of depression that would presage his eventual successful suicide, Young tried to kill himself in his summer estate—saved only by a neighbor who happened to drop by and pulled the revolver from his distraught hand. It took Young three months to regain his composure. Lesson 384: Never back someone financially who shows signs of mental problems. Some folks forget this simplest of lessons, otherwise Young’s career would have been over almost immediately But people do silly things when it comes to money that they would never do with any other part of their lives.

What pressures could be so great as to make a man want to kill himself? Well, in those days, you just didn’t take business away from the House of Morgan, and that’s exactly what Young attempted to do. Meanwhile, the House of Morgan engaged Young in a never-ending, exhausting power play that was to last his entire career. Young’s most powerful weapon was publicity.

Fashioning himself the leader of a small-stockholders’ army battling rich Wall Street bigwigs, he suggested that, instead of relying on Morgan, Alleghany and all of its underlings rely on competitive bidding to choose its backers! Young didn’t devise competitive bidding, but he was the first to apply it to railroads. The true test came when Alleghany’s only money-making line needed a bond issue and the predominantly Morgan-affiliated board of directors insisted on Morgan’s underwriting—even though Young’s choice of bankers offered a better deal! No problem. The persistent Young pranced around the board room, repeatedly chanting “Morgan will not get this business!” Then he threatened suit if the board didn’t choose the better deal! They did.

Young remained under fire from Morgan and its affiliates until his death in 1958. Whereas takeover wars and bouts for control had once been fought in the market arena, Young brought the fight out in the open—and in the newspapers. While taking over the New York Central—not being able to buy the necessary amount of stock—he went after proxies! He courted stockholders, large and small, implementing the novel practice of sending doorbell ringers, brochures, and telemarketers to voice his cause and get their votes! And he won, taking control of the railroad. This major contribution to Wall Street methodology is today common practice, but it was only possible in a post-New Deal era that created the regulatory framework that outlawed pre-1929 stock-watering deals.

You might say Young bucked the system and survived, but he didn’t. In another fit of depression, he succeeded where he had previously failed—by killing himself—in 1958. After sitting in a funk in the library of his Palm Beach, Florida mansion, he went downstairs to the billiard room in his basement and blew off his head with a shotgun. (I guess somebody told him you weren’t supposed to make noise in a library.)

What brought on this depression? You can’t really know what goes on in the mind of a suicide victim just before he ends it. There had been a recession that caused his New York Central Railroad to slide and angry stockholders to sue. In addition, his only child, a daughter, had died in a plane crash a few years before. Rumors had been spreading that doubted his financial stability. But these things happen to people. (I, myself, have had a daughter die and all kinds of problems, but I’ve never felt like ending the greatest game God gave to earth—life.) Most folks who have tough times recoil for a while and go on and recover without giving into depression. Young didn’t. Wall Street is a place with tremendous inherent pressure. If you can’t take the heat, get off the Street. Nobody’s financial problems or image could be worth dying over.

Lessons from Young’s life? Well, obviously, don’t take yourself too seriously. But a simple and pragmatic tool is the power of the press, and the public, over any corporation. Young’s use of this tool on Wall Street bucked the past clubby nature of Wall Street financing and corporate governance, and it’s never been the same since.

CYRUS S. EATON

QUIET, FLEXIBLE, AND RICH

Most folks have never heard of Cyrus Eaton even though he left some $200 million upon his death in 1979 (the very least of his achievements, by the way). The reason for it is simple—he made his fortune without Wall Street’s help. In fact, he ignored America’s financial mecca, the supposed judge of who makes it and who doesn’t. Although he dealt in the Street’s roots—securities and investment banking—it had absolutely no say in Eaton’s business. Morgan couldn’t control him, Kuhn, Loeb lost business to him and New York banks were shunned by him. That angered plenty of people, but Eaton escaped their wrath unscathed, emerging as “perhaps as hardened a capitalist as the world contains.”

Eaton never cared for Wall Street in the slightest. In fact, he had hoped to make his adopted hometown, Cleveland, a financial center that, along with Detroit, could rival New York. Though it never came to be, Eaton gave it his best shot, moving in on industries such as steel, railroads, investment banking, banking, iron ore and electric utilities ordinarily controlled by finance’s biggest Wall Street-endorsed names. It was once said Eaton bought and sold entire industries—he certainly wielded the power and money to do so.

Born in Nova Scotia in 1883, Eaton had beginnings different from the typical Wall Street executive. At 17, he was intent on becoming a Baptist minister! So to Cleveland he went, where his uncle had his own congregation, which interestingly enough included John D. Rockefeller. While studying with his uncle, Rockefeller hired Eaton and later tried to dissuade him from the collar saying, “You’ve got what it takes to be successful in business.” Eaton didn’t listen at first, but later joined Rockefeller after graduating from college.

His very first start in business, spurred by Rockefeller, made Eaton a millionaire by 30. He was sent to Manitoba, Canada, to acquire franchises for a proposed series of power plants. When the deal was called off, Eaton, foreseeing tremendous opportunity, raised money from Canadian banks and built his own plants. Through consolidation, he set up Continental Gas and Electric Company extending throughout western Canada and the Midwest. In 1913, worth $2 million, Eaton returned to Cleveland and acquired a partnership in the established investment banking firm, Otis and Company.

With Otis and Company, Eaton pulled off spectacular coups against Wall Street. In 1925, he invaded the steel industry, and five years later had the third largest steel concern, rivaling Morgan’s U.S. Steel and Schwab’s Bethlehem Steel! Eaton found a debt-ridden Ohio steel firm, offered the exact amount of its indebtedness—$18 million—and took control. He took over several other firms, combining them into the $331 million Republic Steel Corporation in 1930.

In 1929, he began buying up public utility rival Sam Insull’s securities at the same time Morgan interests made it clear they wanted in on Sam Insull’s empire. Whether it was to undermine Insull or, more probably, to tick off Wall Street, Eaton sold Insull his 160,000 shares for $56 million—about $6 million above market price—one of the first examples of what we would today call greenmail. This gave Eaton a tidy profit, assured Insull control of his pyramid-structured corporation (though not for long), and thus infuriated Morgan interests who had been intent on building their own public utilities empire by gaining control of Insull’s.

Alongside glorious victory, however, came tremendous losses in 1929. The Crash took over $100 million from Eaton, and the Nation reported, “It was the final curtain in the grandiose empire-building of Cyrus S. Eaton.” Left with almost no cash, he was forced to go into debt to ward off Bethlehem Steel’s attempted takeover of Republic Steel. By 1931, he had won the challenge, but at the cost of most of his remaining personal fortune. Eaton spent most of the mid-1930s trying to put his leveraged empire on solid footing—with little progress—but no further setbacks. It was in 1938, after almost a decade of difficulty, that Eaton really made sparks fly. He aided a group aimed at fighting a Morgan and Kuhn, Loeb consortium for control of Alleghany Corporation and its trophy property-centerpiece, the Chesapeake and Ohio Railroad.

Morgan and Kuhn interests already sat on Allegheny’s board, and the custom of the day routinely called for equity and bond issues to be handled by the firms of board members. So, when it came time for Alleghany to issue a $30 million bond issue, the houses of Morgan and Kuhn, Loeb presumed the offering would be theirs to handle. But Eaton led a group offering an outsiders’ low-ball bid to do the offering cheaper (at a lower net interest rate to Alleghany) which would save the company $1.35 million. That was a huge discrepancy in pricing for the service of underwriting and provided a pricing wedge that simply demanded consideration.

The Morgan and Kuhn, Loeb interests tried to stampede the board into overlooking the Eaton offer on the grounds that he was unreliable. But the Eaton consortium threatened litigation against the whole board, charging that they weren’t fulfilling their fiduciary obligation to their shareholders. Whether insecure in their ability to win the litigation, or simply not wanting the hassle, the board capitulated and accepted Eaton’s offer—thus marking the birth of competitive bidding! By 1942, the SEC made competitive bidding mandatory, chalking up another victory for Eaton and another aggravating defeat for Wall Street! This phenomenon alone ensured Young and Eaton a prime spot in financial history.

Eaton kept going strong from this point on, creating a $2.6 billion empire by his death at 95. No more busts—strictly various and diverse booms that rebuilt his $200 million fortune. He was a director of some 40 firms, including Fisher Body, Detroit Steel and the Chesapeake and Ohio until he was 90! He had extensive public utility holdings worldwide, including ones in Tokyo, Berlin and Brazil, making him one of the first Americans to invest overseas, and particularly one of the first to invest overseas in lesser developed nations. He practically owned the rubber industry including Goodyear Tire and Rubber. He bought control of Sherwin-Williams paint firm and owned Cleveland Cliffs Iron Mining. Financial management of his concerns always centered in Cleveland.

Eaton’s personal life was equally diverse. Married for almost 30 years, Eaton had seven kids, two of whom died young. He divorced in 1933 and remarried in 1957 at the age of 74. A staunch Republican until nearly 50, Eaton swung to the Democrats’ side in 1930, feeling Herbert Hoover couldn’t lift America out from under the Depression. At that point, he put his energies into supporting Franklin Roosevelt.

Later, he grew still more liberal in his politics, becoming an early advocate of American-Communist bloc relations. Nicknamed the “Kremlin’s favorite capitalist,” he was denounced as a traitor during the cold war and initiated the first Pugwash conference on nuclear weapons in 1957 at his home in Pugwash, Nova Scotia. Defending his patriotism, Eaton said he believed “a nation’s social and economic system is its own affair. I wouldn’t want Communism here, but if the Russians want it, that’s up to them.”

Eaton was one of those rare birds on the financial scene who worked unobtrusively and disliked all sorts of hoopla. Yet in his hometown, Cleveland, he was a beloved personality supported by the people. In fact, a good part of Cleveland’s population supported him by buying into Eaton enterprises. One writer once said, “If he should fall, so would most of Cleveland.” Eaton had sort of a grass-roots effort behind him, and as we saw in A.P. Giannini’s case, that’s the strongest form of support anyone can have, far stronger than Wall Street ties.

As a person, perhaps his most amazing quality was his ability to remain flexible into the later years of his life. Most folks get kind of rigid and set in their ways as they age, but whether it was getting wiped out and rebuilding his wealth, his political swings, his marital status which yo-yoed between ages 50 and 74, this was a man who could bend with the breeze and bounce off a fall. He brought life to old age.