December 17, 2008

THANKFULLY, OUR MONEY'S SAFE, WE PUT IT ALL INTO SOCIAL SECURITY....:

Pyramid Schemes Are as American as Apple Pie: How President Grant was taken by the Madoff of his day. (JOHN STEELE GORDON, 12/17/08, Wall Street Journal)

Had Ward been a talented speculator he might have made it work. But he was utterly incompetent. By April, 1884, he was desperate. He had borrowed so much money from Marine National Bank that it would fail along with Grant and Ward, possibly setting off a major panic on the Street. So, ever the con man, he told Grant that it was the Marine National Bank that was in trouble and needed $150,000 to avoid failure, possibly bringing down Grant and Ward with it.

Grant went to see William H. Vanderbilt, the richest man in the world, on the evening of May 5. Vanderbilt, anything but naive and never tactful, told Grant that "What I've heard about that firm would not justify me in lending it a dime." But Vanderbilt let him have the money, saying "to you -- to General Grant -- I'm making this loan." He wrote out a check for $150,000.

Grant returned home and turned it over to a waiting Ferdinand Ward. When Grant went downtown the next morning his son told him that Ward -- and the money -- had vanished and that both Marine National and their own firm were bankrupt. Grant spent several hours alone in his office and when he left he passed through the crowd that had gathered outside, without speaking. Everyone in the crowd removed their hats as a sign of respect.

Ward was soon caught and thrown into the Ludlow Street Jail. He spent 10 years in prison for grand larceny. But there was no saving Grant and Ward, which was found to have assets of $67,174 and liabilities of $16,792,640. By June, Grant had only about $200 in cash to his name. The failure, of course, was front-page news and people began sending him checks spontaneously, which he had no option but to accept. One man added a note to his check, "On account of my share for services ending in April, 1865."

Every cloud, of course, has a silver lining, including the failure of Grant and Ward and the embarrassment of a national hero. Desperate to provide for his family, Grant finally agreed to write his memoirs, something he had stoutly resisted for nearly 20 years, thinking he couldn't write. Mark Twain's publishing firm gave him an advance of $25,000 -- a huge sum for that time. Soon after he began work, Grant learned that he had throat cancer and he hurried to finish the book so as not to leave his family destitute. He died three days after he completed the manuscript.

The book was a titanic success, selling over 300,000 copies and earning Grant's heirs half a million in royalties. But the book was more than just a best seller. It was a masterpiece. With his honesty and simple, forthright style, Grant created the finest work of military history of the 19th century. Even today, most historians and literary critics regard Grant's memoirs as equaled in the genre only by Caesar's "Commentaries."

One can only hope that something even half as good and significant can come out of the peculations of Bernard Madoff.


Posted by Orrin Judd at December 17, 2008 11:01 AM
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