We turned to our typewriters and worked furiously for a few minutes.
“We ought to be able to get some capital,” I said. “I know lots of bankers.”
By Gregory Clark, February 4, 1928.
Charles turned from the telephone, where he had been carrying on a guarded and excited conversation, and his face was flushed with excitement.
“By George!” he exclaimed.
“What’s up?”
“You know that stock? Kaflooey Gold?”
“Yes?”
“I told you about Eddie getting in on it?”
“Yes!”
“Well it’s up forty points!”
“Yes!”
“Do you see what that means?” Charles was flaming with excitement. “Eddie got it at seven cents a share. He bought seven hundred dollars’ worth. He has just cleaned up four thousand dollars!”
We stared at each other in silence.
“What luck!” I murmured.
“Luck nothing!” cried Charles. “It is courage. Daring. Enterprise. The readiness to seize opportunity when it arises.”
I thought of Eddie, a rather down-at-heel acquaintance of ours. It was hard to visualize Eddie with four thousand dollars1. I could not see him in my mind’s eye at all:
“But here’s the point,” said Charles. “Eddie is pyramiding. He is buying another big block of Kaflooey Gold Mine at 47. He expects to make fifty thousand dollars in a month!”
Again we both stared in stunned silence.
“Where is he getting the money to buy the new lot?” I croaked.
“He is using his present stock to borrow the money on.”
“Lucky devil,” we both said together.
“I wish we had some capital,” said Charles. “At this time.”
“We ought to be able to get it,” I said.
“How?”
“From the banks. I know lots of bankers.”
“Do you own your house?” asked Charles in the practical, business-man tone. “Do you own a single bond? Have you any assets whatever that a bank would look at?”
“Oh, banks don’t always want assets.”
“Do you mean to say,” said Charles, “that you don’t possess a single bond in this age of bond owning, when every stenographer from the Atlantic to the Pacific owns a bond?”
“Well, I said apologetically, “I bought bonds when I was in France, but I had to sell them to buy furniture when I got back home.”
“Furniture!” said Charles coldly.
“But banks don’t want bonds,” I said. “There is orfe thing that bank presidents and bank general managers have always impressed on me. And that is that they would rather have character than security. We have no security, out we’ve got plenty of character between us. I mean what you lack, I’ve got.”
Calling on a Banker
Charles adopted the shrewd, executive expression.
“How well do you know a banker?”
“I go fishing with three or four of them.”
“But I mean bankers who would lend you money.”
“I know one.”
“If we went to see him, what would you say?”
“I would tell him that we had some inside dope on a gold mine and we wanted a couple of thousand dollars apiece.”
“What security could you offer?”
“Character.”
“Whose character?”
“We would give him our notes, and I would endorse your note and you would endorse mine. What more could he want?”
Charles gave me a pitying look and returned to his own desk.
During the morning. he was called to the phone four times, and all he said, in these conversations at the phone, was – “Well!” “You don’t say!” “Isn’t that remarkable!”
After the fourth call, he came over to me and said:
“Up ten points more!”
“Look here,” I exclaimed, “we’ve got to do something!”
“Well!”
“If Eddie can get away with this, what fools we are.”
“Agreed.”
“I’m going to see a banker. Will you come?”
“Yes,” said Charles.
So I phoned a bank manager in one of the biggest downtown banks and he said he would see us.
He was sitting easily in his large office when we came in.
“We wanted to find out if we could borrow some money,” I began. “We want two thousand dollars each.”
“What do you want it for?” asked the manager.
“We have a tip on a gold mine, and we want to buy two thousand dollars’ worth of stock in it, each.”
“You have bonds or some other security?”
“No, we have not. We have no security. But Charles is willing to endorse my note and I will gladly endorse his.”
The bank manager looked curiously at me. I thought I saw Charles wink at him.
“Let me see: what gold mine is this?” asked the manager.
“The Kaflooey Gold Mine.”
“Never heard of it.”
“No, it’s not listed. It’s a new one, and it la going up at a tremendous rate. Likely to be listed any old time.”
“Suppose this stock does not go up. Suppose it goes down. How would you pay back the two thousand dollars?”
I looked at Charles. He said:
“I suppose we would have to work.”
I thought this was a good time to put in the remark about character.
“It is an old saying amongst bankers,” I said, “that they would rather have character than security.”
That Character Question
“That is true,” said the manager. “You say that if this stock went down instead of up, you would work for the money and pay it back. Save it, in other words.”
“Yes.”
“And you have not saved anything up to the present?”
“Well, we have no surplus just now.”
“I was merely trying to get at an estimate of your character,” said the manager, mildly.
“Then you would not be satisfied with our notes, each endorsed by the other?”
“If it were my own money, I might,” said the manager. “But bank money is not our own money. It is everybody’s money, entrusted to us to conserve and invest. It is rich men’s money and poor men’s money. It is money earned and saved by hard work and foresight, by labor and genius. We have no right to play with it. To risk it. You may risk your own money. Not other people’s.”
“Then you would not take a chance on two young men’s ability?”
“To guess the mining market?”
He had us.
“Now,” said the manager, “if you were two young men in some manufacturing business and had proven yourselves efficient and displayed promise, and you came to me with a proposition, backed with the orders and support of the trade, we would listen with interest to your demand for a loan. In that case, we would be interested more in your character and less in your security.”
It was nice of him to listen to us and to show us so genially to the door.
“It was a wild goose chase,” said Charles, as we walked back to the office. “I knew beforehand that he would say exactly what he did say.”
“A fellow has got to distinguish,” I said, “between what a banker says in his office and what he says in his annual report.”
“Or in after-dinner speeches,” said Charles.
“Or in his autobiography.”
“Easy come, easy go,” said Charles. “If we could have got that money as easily as that, probably Kaflooey Mines would have dropped as soon as we placed our orders.”
“Personally,” I said, “I’m just as glad we didn’t get the money. I have enough to worry about as it is without taking on a bank loan.”
“In fact,” said Charles, “the only reason I went with you was my absolute certainty that we wouldn’t get it. Because it is against my principles to gamble in mining stocks.”
“They certainly are a risky thing. A man shouldn’t touch them except with surplus money he was going to play with anyway. Eddie had nothing to lose. He was always broke. He will probably lose this in a couple of days.”
“Let’s get him to pay back the fives and tens he owes us before he loses it,” said Charles.
At the office, on our return, there was a message to call Eddie.
“You don’t say!” said Charles, at the phone. “Well, well! Isn’t that astonishing!”
He walked slowly over to my desk.
“Eddie bought all he could get at 58 and sold it all just now at 70. He has made $14,0002.”
“$14,000,” repeated Charles.
“Impossible.”
“That’s what he says. And he says he is through with stock gambling forever.”
“No!”
“And he is going to take a trip to Europe on his $14,000.”
“Europe! Oh, man! He’ll see the Strand again, and maybe go for a bicycle ride along the Arras-Bethune road, and see Cambligneul.”
“And Houdain,” said Charles sadly.
“And St. Pol and maybe Poperinghe.”
“I wonder,” asked Charles, “if there isn’t some way a couple of young fellows could make a few thousand dollars?”
“Well, there’s the stock market.”
The phone rang and it was for Charles.
His conversation was inaudible.
“That was Eddie,” he said. “He just phoned to tell me that Kaflooey Gold had suddenly dropped to 40 and was still descending.”
We turned to our typewriters and worked furiously for a few minutes. Then the phone rang again, for Charles.
“Eddie,” said Charles, after a short conversation. “He says Kaflooey is down to 10.”
“A brief and glorious flight.”
“Yes,” said Charles. “It went up like a skyrocket with enough force to shoot one man clean to Europe!”
Editor’s Notes: This is a good representation of the stock market craze before the start of the Great Depression.
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