The Unseen Wall Street of 1969-1975: And Its Significance for Today

By Alec Benn | Go to book overview

1
How Members of The New York Stock Exchange Gained the Right to Sell Shares in Their Firms to the General Public Despite the Opposition of a Majority of the Members

In 1969, most of the 1,366 members of The New York Stock Exchange were partners in a firm. Some operated as individuals. And some were officers in a corporation, but only people working for a member firm could own common stock in that firm.

If an official of The New York Stock Exchange were asked, "Why are member firms forbidden to sell stock in their firms to the general public?" the official usually replied, "To prevent criminals from obtaining control of a member firm."

This was nonsense. The rules that prevented people with bad reputations from controlling a partnership or a partnership-like corporation could have just as effectively been applied to officers of publicly owned firms. More likely, I believe, the purpose of the rule was to maintain the control of many firms, not by the most competent, but by the most wealthy and their personal friends.1

Each super-rich family in the United States tended to have its own brokerage firm -- one which family members used to buy and sell securities as well as to underwrite securities of companies in which the family had an important interest. The firm was usually controlled by a member of the family. The Henry Fords had McDonnell & Co.; the managing partner was Henry Ford II's brother-in-law. The patriachs of the R. J. Reynolds tobacco people put a man who had married into their family in charge of the brokerage firm they founded. The Harrimans (big in railroads) owned much of Harriman, Ripley & Co. The Peabodys (big in coal) had Kidder, Peabody & Co. The Bradys had Dillon, Read. The Astors had close ties to Kuhn, Loeb & Co. The family that owned Marshal

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